Good morning. Thank you for joining us to hear our prepared remarks on General Mills’ Fourth Quarter Fiscal 2020 Earnings. Later this morning, we will hold a separate live question-and-answer session on today’s results, which you can hear via webcast on our Investor Relations website. In a moment, I’ll turn the call over to Jeff Harmening, our Chairman and CEO; and Kofi Bruce, our CFO, but before I do let me first touch on a few items up front. On our website you will find our press release on fourth quarter results that went out earlier this morning, along with a copy of the presentation. It’s important to note that our remarks will include forward-looking statements that are based on management’s current views and assumptions, including facts and assumptions Jeff and Kofi will share related to the potential impact of the COVID-19 pandemic on our results in fiscal ‘21. The second slide in today’s presentation lists several factors, among them the impact of the pandemic that could cause our future results to be different than our current estimates. And with that, I’ll turn you over to my colleagues, beginning with Jeff.

Thanks, Jeff, and good morning everyone. Before we get into our results, I’d like to take a moment to touch on two topics that are top of mind for many of us right now. First, I want to voice General Mills’ strong support for the inspiring movement for social and racial justice that was tragically elevated by the horrible killing of George Floyd here in our hometown of Minneapolis a month ago. While Minnesota is a focal point, we know this is not just one community’s problem. It’s clear from George Floyd’s death, and the many that preceded it, that systemic injustice and racism still exist in our country and in societies around the world. We have a lot of work to do to start the healing, to help our communities rebuild, to emphasize that Black Lives Matter, and to help drive lasting change for social and racial justice. The events of the last month reinforce the importance of our ongoing work to build a culture of belonging at General Mills. Our people are the true heart of the company, and we are focused on creating an environment where all employees feel they can share their unique perspectives and ideas and know they will be treated with respect. That begins with a commitment to foster courageous conversations and to take courageous actions. We stand united against acts of racism and are committed to humbly learning and finding authentic ways to be a part of the solution. The second topic I want to address is the impact the COVID-19 pandemic has had on our employees and our communities. In this time of uncertainty regarding personal health, the economic outlook, and access to food, General Mills, more than ever, is dedicated to making food the world loves and needs. I offer my…

Thanks, Jeff, and hello everyone. Let’s start with our fourth quarter financial results on slide 15. Net sales of $5 billion were up 21%, including a roughly 10-point benefit to reported net sales from calendar differences in Q4, including the 53rd week and the extra month of results in our Pet segment. Organic net sales grew 16% in the quarter, including the impact of elevated consumer demand driven by the COVID-19 pandemic as well as the extra month for Pet. Adjusted operating profit increased 24% in constant currency, primarily driven by higher net sales, partly offset by higher SG&A expenses, including a 39% increase in media investment. Adjusted diluted earnings per share totaled $1.10 in the quarter and grew 33% in constant currency, driven by higher adjusted operating profit, higher after-tax earnings from joint ventures, and a lower adjusted effective tax rate, partly offset by higher diluted shares outstanding. Slide 16 summarizes the components of our net sales growth in the quarter. Organic net sales were up 16%, with 12% growth in organic pound volume and 3 points of favorable organic price mix. Foreign exchange was a 2-point drag in the quarter, and the 53rd week contributed 7 points to net sales growth. Now, let’s turn to segment results, beginning with North America Retail on slide 17. Fourth quarter organic net sales were up 28%, with growth in all five operating units led by U.S. Meals and Baking and U.S. Cereal. For the full year, organic net sales were up 6%. As Jeff mentioned, we competed effectively in-market in Q4, with share gains in 9 of our top 10 U.S. categories. Fourth quarter U.S. retail sales increased 37%, which was ahead of organic sales growth driven by a reduction in customer inventory as our retail partners worked to fulfill elevated…

Thanks, Kofi. Let me reiterate our key priorities for fiscal ‘21 outlined on slide 29. First, while consumer demand will depend largely on external factors, we will focus on what we can control: namely, to compete effectively everywhere we play. We expect that continuing to demonstrate superior execution will lead to increased brand penetration, competitive service levels, strengthened customer partnerships, and market share gains in our key categories. Second, we will drive efficiency to fuel investment, leveraging our HMM initiatives and volume leverage to fund increased spending on our brands and capabilities, higher costs to service demand, and higher ongoing health and safety expenses. Finally, we will reduce our leverage to increase our financial flexibility. To achieve our fiscal ‘21 priorities, we will need to focus across the enterprise in several key areas including brand building, innovation, and strategic capabilities. Bold brand-building is the lifeblood of a consumer products company, and we have plans in fiscal ‘21 to advance our efforts to meet consumers where they are with purpose-driven brands. For example, we will build on our successful Cheerios Hearts campaign, which features the Heart Healthy benefits of Cheerios through compelling marketing and in-store merchandising. On Pillsbury refrigerated cookie dough, we’re renovating the entire line to be safe to eat raw. We’ll drive consumer awareness of this exciting news through media and in-store support, starting this summer. In Pet, we will continue to invest behind our BLUE brand to drive increased household penetration through compare and decide advertising, and we’re launching new advertising to strengthen awareness for our treat portfolio. In our Haagen-Dazs, our newest global Don’t Hold Back campaign is designed to encourage consumers to create a new kind of extraordinary moment by letting go and being truly present while enjoying the premium quality of Haagen-Dazs ice cream. Turning…

Greetings, and welcome to the Fourth Quarter Fiscal 2020 Earnings Call. Through the presentation all participants are in listen only mode. Afterwards we’ll conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Wednesday, July 1, 2020. Now, I would like to turn the conference over to Mr. Jeff Siemon. Please go right ahead.

Thank you, Tommy and good morning, everyone. Thanks for joining us for our Q&A session on our fourth quarter results and full year results this morning. I hope everyone had time to review our press release, listen to our prepared remarks and view our presentation materials, which are available on our Investor Relations website. It’s also important to note that in our Q&A session this morning, we may make forward-looking statements that are based on management’s current views and assumptions, including facts and assumptions related to the impact of the COVID-19 pandemic on our fiscal ‘21 outlook. Please refer to this morning’s press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information, which may be discussed on today’s call. I’m here virtually with Jeff Harmening, our Chairman and CEO; Kofi Bruce, our CFO and Jon Nudi, Group President of North America Retail. We’re holding this call from different locations. So, hopefully our technology cooperates and everything goes smoothly. With that let’s go ahead and get to the first question. Tommy, can you please get us started?

Absolutely. Thank you. [Operator Instructions] And we’ll proceed with our first question on the line, it’s from the line of Andrew Lazar with Barclays.

Good morning everybody. And thanks very much for all the change in the earnings release format this morning, very helpful.

Good morning, Andrew.

Maybe to start, I was hoping to focus on sort of the underlying business momentum, if I could, and I know it’s a little harder to get at now, obviously, given everything that’s going on. But, I think on the third quarter call, the General Mills had said that excluding the pandemic impact, it would be at the low end of its full year organic sales growth range of 1% to 2%, and I think that Blue Buffalo coming into the base adds about a point. So, I guess underlying business trends, at least as of 3Q roughly call it flattish your expectation for the year. So, my question was, again, excluding the pandemic, I guess, would General Mills have been considering fiscal ‘21 to kind of still be somewhat of an incremental reinvestment year to really shore up sort of organic growth and build on the recent improvements you’ve seen in categories like snack bars and yogurt and things like that.

Yes. Andrew, your math is right on that. And as I said before, we try to stay in the middle of both, and one of the ways we do that is by continuing to reinvest in our business. And you see the results in the fourth quarter included a pretty significant step up on our marketing spending. And actually we think our strength at the beginning of June, especially in North America Retail is due to the fact that we are spending money on marketing because our promotion levels were actually down in June and our growth is still double digits. And so, we believe in investment and marketing and you saw that in the fourth quarter, and you’ll see that again in fiscal ‘21. You’ll also see investments for us and capabilities, particularly on the data and analytics side to drive both, our sales growth, things like ecommerce and strategic revenue management as well as cost savings projects like procurement. And so, whether COVID or not, we had planned to reinvest some of the earnings growth back into sustained top line sales growth, and that is our plan going into next year, currently.

And then, I guess, lastly, it’s really on inventory, specifically at the consumer pantry level. I think in today’s release, you mentioned that there is the potential for sort of pantry inventory draw-downs moving forward. And I’m curious if this is simply a pet food comment, which I think would make a very good -- make sense, or a broader portfolio comment. Because to me, because it seems that consumers have been both, consuming and replenishing, a lot of your center store products rather than stocking up. So, I’m just curious if that’s something that you’re already starting to see or anticipate in fiscal ‘21 or more of a broader just, “hey at some point, just given how strong shipments have been, we should just keep an eye on for this,” if you get what I’m asking?

Yes. So Andrew, let me answer broadly and then -- specifically on Pet, and then I’ll have Jon Nudi answer more specifically on North America Retail. Broadly, as you can see in the strength of the Nielsen data on the human food side, month to month to month, while there certainly was a stock up in March, and you can see that in the data, consumers are clearly still buying and eating through the stock that they have on hand. And so, that is consistent with what we thought would happen at the beginning of the quarter when we saw the stock up, and in fact, it happened throughout the quarter and again, continues into June with some double-digit growth on the human food side of the business. On pet food, we saw something different. And again, consistent with what we expected, which is given that pets don’t eat a tremendous amount at restaurants, we thought that there would be -- when we saw the stock up in March, people were asking us, is this because there is a lot of dogs coming out of shelters? And the answer is no, people are just stocking up. And we expect that to reverse in April and May, and largely it has reversed in April and May. There may be a little bit more to unwind as we begin our new fiscal year in the pet food category. But, a lot of that has unwound already. And so, what we see in pet is different than what we see in the human food side, which -- both of which we expected. And Jon Nudi, anything specific you’d like to add on that?

Yes. Thanks, Jeff. Good morning, Andrew. So, maybe I’ll touch on consumer inventory levels or pantry levels. I’m sure a question on many people’s minds too, just customer inventory levels, and maybe I’ll go there as well. So, from a consumer standpoint, at least in North America, we believe that the majority of the product that we’ve moved to consumers has been consumed. We do believe that consumers are keeping slightly higher levels of inventory in their pantry, but we do expect that to continue. Obviously, as it’s a really dynamic environment with a pandemic still raging across the country. From a customer standpoint, we did see a drawdown in customer inventories over Q4. I guess just to quantify it, so for Q4 our organic growth was 28%. Our movement was higher though in the U.S., so it was up 37% and Canada was up 20%. And really, that difference was all driven by retailers pulling down inventories, obviously trying to keep products on the shelf. We would expect that to come back at some point in fiscal ‘21. At this point, we don’t have a great idea of when or to what extent it will come back, but definitely we saw retailers pull down inventories during Q4.

Thank you. We’ll take our next question from the line of Ken Goldman with JP Morgan. Go right ahead with your question.

Hi. Good morning. Thank you. And I second Andrew’s comments. I do like this format. So, hopefully we’ll keep it going ahead. I did want to ask two questions if I can. First, you mentioned some headwinds to your operating margin in fiscal ‘21. You talked about some higher input costs, supply chain costs, spending on brands and capabilities and COVID-related costs. Is it possible to sort of bucket or rank order these just so we kind of get a sense of which are going to be the bigger headwinds and which are going to be maybe some of the smaller ones?

Kofi, do you want to field that one.

Yes, absolutely. So, I think a great question and good morning. As you look at these, we would reference, first is we’re coming out of our Q4. We did see higher operating costs as well as COVID related costs. The split between those two is roughly we had about a $100 million in higher sort of COVID related costs, I would say. The split between those two is two-thirds, one-third, with two-thirds being comprised of the operating costs, things such as accruing external supply chain, trucking premiums, and then on the other side, the wellness costs, everything from personal protective equipment, wellness policies. So, we would expect that to be a continued headwind as we step into F21, as a portion of those costs will continue. Obviously, we can’t quantify that because a lot of that will be tied to the pandemic, the pace of the virus spread and obviously the pace of demand to the extent that the operating costs are directly tied to our ability to source product. Does that get at your question?

Yes. That’s perfect. I’ll follow up with more details later, but that’s helpful. For a quick follow-up, we’ve heard some rumblings in the industry that maybe some retailers will get a little bit more aggressive on pricing in the back half of the calendar year, just to help out some of the consumers that may start to struggle more as unemployment lasts longer and perhaps some of the stimulus checks fade. And I’m just curious, if you’re hearing anything similar. It doesn’t necessarily make sense for me, for retailers to be pulling down prices right now. I’m not sure in an environment where there’s out of stock, that’s the most logical maneuver, but I’m just curious if you’re hearing anything along those lines that you can share with us or whether that’s misguided.

So, Jon Nudi, do you want to field that?

Sure. So, good morning, Ken. In terms of promotional support, obviously, in Q4 we saw retailers pull back in promotion as the focus was on keeping products in stock. As we moved into May and early June, we saw our proportional levels get back to more normal levels in most of our categories. And as we look to plan through the rest of the year, we’re planning on normal levels. So, we have not really been faced with any asks for deep discounts or deep promotional pricing. The one thing I would add is, I mean, there are certain categories that we are constrained from a supply chain standpoint and capacity standpoint. So, even if there was a desire to go harder from a promotional standpoint, we just don’t have the capacity to do that. So, I think that’s the main limiting factor across many of our categories. So, I guess to answer your question specifically, we have not had those discussions and even if they come, we’re going to be limited with what we can do.

Great. Thanks, everyone.

Thank you very much. We’ll get to our next question on the line. It’s from Chris Growe from Stifel. Go right ahead with your question.

Hi. Good morning. And I will third that, if that’s the right word for appreciating the new format. So, thank you for that as well. I do want to ask in terms of the decision not to provide guidance for the year. You have given a lot of components and things that help us get there, if you will. But -- and I know that there’s a lot of volatility in the business, no doubt. As I think about giving an indication of roughly a flat operating margin for the year, I’m just curious, as you look at the volatility of the business sort of where you get that confidence? Is that the way you’re going to manage the business this year? Is that you have a good sense of kind of where sales will shake out and therefore you’ve been able to give the confidence in that operating margin outlook for the year? Just curious how you think about that?

Yes. Thanks, Chris. This is Jeff Harmening. I’m glad you asked that. First, I guess, I’d like to start by saying, the fact that we didn’t issue formal financial guidance is not a reflection of conservatism and is not a reflection of lack of confidence. It’s actually an understanding that a big determinant of how much we grow this coming year will be how the pandemic plays out, and that is highly uncertain as it relates to the duration and depth of the pandemic. So, I don’t want anyone on the call to read into it that it’s a lack of confidence or actually conservatism. In fact, we think our business will grow over the first three quarters relative to what it was pre-pandemic levels. And that’s because now we’re in a period where people are still staying at home, they’re working from home, many restaurants are either closed or people don’t want to visit. And to a question that Ken Goldman asked earlier, we think that’ll be followed by a recession. And if you look back to the last recession, General Mills performed quite well. And so, we think there’ll be an environment where we’ll be able to grow for the first three quarters followed by a fourth quarter comparison. Obviously, that’ll be very, very difficult. The other thing I guess to highlight is that our confidence stems from the fact that we’ve executed really well. We are -- we’re confident that we will emerge from the pandemic in the last few months as a stronger company. And as witnessed by our share growth in 9 of our top 10 categories in the U.S. by being the third fastest grower in Europe and leading share growth in our categories in Europe and growing in our categories in Brazil, and growing Wanchai Ferry double digits in China. So, I think -- hopefully what’ll hear is a company that is confident that the things that we can control we have a good visibility to. And I would say on top of that our marketing is particularly good right now, whether it’s North America Retail and anything like Honey Nut Cheerios, or we were very bullish on Pet and continue to be bullish on Pet after posting another year of double digit retail sales growth, and 18% reported net sales growth in the year. So that’s kind of where we -- that’s where we stand. The reason we didn’t provide guidance was because the environment is so unpredictable with the pandemic. That’s why.

That’s a good answer. Thank you for that. Just a quick follow on to that. So, you talked about generating efficiencies to incrementally invest in the business in fiscal ‘21. You have H&M savings coming through around 4% of cost of goods sold. You got inflation around 3%. Is that the gap that you hope or part of what you hope to reinvest? And is it -- if we think about generating efficiencies, is that incremental to what you expect for H&M right now? You hope to have even more savings to reinvest? Just want to see if you can kind of frame that opportunity?

So, Kofi, why don’t I leave that one to you?

Sure, absolutely. Hey, Chris. How are you? We are expecting to reinvest a portion of that gap in capabilities. But, as you can imagine, and to my earlier question to Ken, I think the challenging operating in this environment is that demand, and demand for at-home food is probably the single hardest thing to predict. And so, we will be focused on managing the middle of our P&L, so that we can deal with the potentially higher operating costs. And so, as -- we think right now we have that balanced, we think the capabilities investment will help us advance our long-term goals. I don’t want to quantify those for competitive reasons, but they’re meaningful enough for us to continue to make progress on our capabilities. So, I hope that gets at your question.

It does. Thanks so much for that color.

Next question on the line from Alexia Howard with Bernstein.

Firstly, on the incentive compensation, I assume that was a fairly big step up this quarter given the strength. I was wondering if you were able to roughly quantify how much that inflated the SG&A line this time around. And then, thinking out through fiscal ‘21, how does incentive compensation work for next fiscal year, if there’s no guidance and no formal sort of goals at this point? And then, my follow-up question is you mentioned as one of your goals, the desire to reduce leverage further to increase financial flexibility. Does that mean that your M&A pipeline is that -- or you’re actively out there looking for potential deals? And if so, in which areas are you perhaps looking most closely to do that? Thank you.

So, Kofi, let me -- I’ll have you field those series of questions from Alexia.

I would say -- let me start first with incentive. And I would say, it is a big driver obviously in the quarter in our SG&A line. So, it is obviously tailwind this year -- excuse me, headwind this year, and we would expect it to be a tailwind next year. Obviously, I can’t go into a tremendous amount of detail, but just know that we will be effectively setting our targets based upon a dynamic environment and all companies are dealing with this, but we would expect based on everything we know right now for this to be a tailwind. All things being equal on leverage, we’re pleased with the progress we’ve made on debt leverage. I think, at the start of the Blue Buffalo acquisition about two years ago, we had a target to get down to 3.5 times. By the end of this fiscal year, we are at 3.2 times. So, we’re pleased to be slightly ahead of schedule and on pace to get to our long-term goal of three times. I think at that point, then we will start to look at resuming our normal capital allocation policies with the first priority being focused on increasing the dividend rate.

Alexia, this is Jeff Siemon. I’ll just add a quick color on the incentive piece. We always plan versus our internal plan and incentive at the beginning of the year would be 100 payout. If we beat our plan, that’s a headwind in the in the year, but obviously good news for our shareholders as we would have exceeded our goals. That’s what played out in ‘20. We have an internal plan for fiscal ‘21. And so assuming we deliver that plan, we’d be paying out less than we did in ‘20. But, obviously, if we beat our plan, that could change.

We’ll go to our next question on the line from Dara Mohsenian with Morgan Stanley.

So, Jeff or may be Jon, obviously, a large step up in consumer demand in any retail post-COVID. There’s obviously some increased trial there. Can you spend some time discussing how much of the higher demand was due to new trial of your products based on your consumer survey work and bring new customers in? And as you look going forward longer term, your ability to potentially hold on to those customers and what the strategies would be do so?

So, let me start with this question and then I’ll pass it over to Jon Nudi to provide some added detail. One of the things I’m most proud of our company over the last three months, especially in North America Retail is that we have gained penetration across all of our categories. And if you look at 52 weeks, which is even a better way to look at it, all but maybe one category, we’ve increased household penetration, which has a highest correlation to growth. And so, I’m really pleased with what our team’s been able to do. Obviously, it varies by category. So, Jon Nudi, do you want to provide any color or any insights?

Yes, absolutely. So, I guess when you look at penetration, we do believe it’s important to take a longer view. So, as Jeff mentioned, we look over 52 weeks versus pre-pandemic levels. We grew penetration at the majority of our categories. Importantly too, we outpaced our categories in terms of our performance and the penetration we are growing. The highest growth in penetration were in areas -- in our meals and baking areas or things like Soup, Pillsbury Refrigerated Baked Goods, desserts and flours. And we saw some significant gains. And for us 2 points of penetration equals about 2.5 million U.S. households. So, again, it’s significant. And importantly too, it’s -- when you look at it a year ago, we grew penetration in 7 of our top 10 categories. So, again, it’s not just prior to the pandemic. Versus a year ago, we’re growing overall in majority of our categories. And we’re starting to look at repeat, I’d say still early days, and again, we need a bit more time to really understand that. But repeat amongst our new households is strongest and really outpacing the categories as well. And what’s exciting to us again, our highest repeat rates are in things like Cheerios, the franchise -- Cheerios franchise, Pillsbury RBG, desserts, Annie’s Mac and Cheese; and Old El Paso. So, we worked hard over the last decade frankly to really improve our products, whether that’s improving ingredient deck, making sure that they tasted the best way possible it could. And we think that new consumers are trying out for the first time are coming back after many years, and finding a better experience. We think that’ll bode well for us as we move into fiscal ‘21 and beyond.

And I would like to add on to Jon’s comments. So, everything that Jon said about North America Retail is also true for all of our categories in Europe, as well as our Wanchai Ferry business in China. We saw significant penetration and gains, as well as our at-home business in Brazil, which is the vast majority of our Brazilian business. And so, whether you look at North America Retail or Europe or China or Brazil, our major markets, we’ve experienced, strong penetration gains in all of our at-home businesses.

And then, can you also touch on ecommerce performance in the quarter and the changes you’ve made in that business to take advantage of higher channel growth online from a category perspective going forward?

Well if we -- sure. If we look at ecommerce broadly across the Company, it’s roughly 9% of our sales. As we enter -- as we exit the fourth quarter with a significant increase. And in all of our geographies, and the vast majority of our categories, we over index online versus bricks-and-mortar. And there are two reasons for that. One is that, we’ve been investing in ecommerce for a number of years. And the second is that we have really good brands and we have a lot of the biggest brands. And when you’re shopping online, those are the brands that tend to do well. And so, for both of those reasons, we have seen outsized growth in e-commerce over this period as we look globally. It’s been particularly acute in the U.S. And Jon Nudi, do you want to comment a little bit on what we’ve seen in terms of U.S growth in ecommerce?

Yes. Sure, Jeff. So, specifically for the U.S., we saw a 250% increase in our ecommerce business in Q4. Importantly, now almost 50% of all U.S., households have purchased food and beverage products over the last year. So, again, that’s a significant step up over about seven points versus prior year from a penetration standpoint. Probably the biggest limiter in terms of why the growth couldn’t have been even higher is just retailers and their capacity to really deliver to consumers’ homes, and even click and collect the number of slots that they had. So we’re working with our retail partners to make sure that we optimize our ecommerce business with them, increasingly really connecting into their data and making sure that we take an omni-channel approach to making sure whether the customer wants to shop in the store or shop online, we’re seeing consistent campaigns and then really working from a supply chain standpoint as well and make sure that we can deliver products to our consumers -- to our customers, ultimately get it to our consumers. So, we’re exciting about ecommerce. And as Jeff mentioned we’ve been working on this for multiple years, and it’s really paying off. In the U.S. alone, we have a 1 ton index to bricks-and-mortar. So again, to the extent we sell more online, that’s good for us.

Thank you very much. We’ll get to our next question on the line from John Baumgartner with Wells Fargo. Go right ahead.

Jeff or maybe Jon, I wanted to ask about product mix. You had a drag in Q4 from the comp at Buff and the composition of a tonnage at NAR. But, if you step back and think more structurally, one of the things we hear from investors that there isn’t any pricing power in food. But, to the extent that the innovation is on trend, you’re margining up already with new products at Buff, and in Snacks Yogurt, how do you think about your capacity to capture stronger mix on a consistent basis across your portfolio in a COVID world, even if you have the flexibility to move list prices may not be ideal?

So, as we think about as a company, what you saw is positive price mix in the fourth quarter, because we sold a lot more through North America Retail, and we sold a lot more through pet food. And so, to the extent that we keep growing in Pet and we certainly plan to do that, and we see elevated demand in North America Retail, that actually bodes pretty well for price mix as we think about it on a Company level. It gets more complicated when you look within a geography. But let me have John Nudi answer how it has played out in North America Retail over the last quarter, because it’s important, but it’s complicated when you look at it.

When you look at price mix, we look at it in two pays, one in the P&L, which is done on a per pound basis, and then also in Nielsen, which is on a per unit basis and saw some very different things in Q4, if you look at those different ways. So from a P&L standpoint, for the first three quarters, our price mix is actually flat. And again, that’s on a per pound basis. In Q4, to your point, it was down 7 points. So, it was a significant drag, but it was 100% driven by mix as we sold heavier products, so things like soup, desserts and flour, as well as larger size packs as consumers really moved that way. When you look at Nielsen, though, on a per unit basis, we actually saw an increase in price mix in Q4, really driven by less promotion and favorable customer mix. So, we feel like there is some pricing power out there. And one of the things again we worked hard at over the last few years is strategic revenue management, really building a toolbox that allows us to have a different levers to pull given the environment. So, I think as we look towards fiscal ‘21, you likely see less list pricing, just as inflation won’t warrant, it will be obviously competitive environment and value will matter. But things like price pack architecture and mix will be things that we focus on. And the good news again, having that out this a while, we got a pipeline of our ideas and our toolbox that we’ll be able to execute against. So we continue to expect to drive pricing mix in fiscal ‘21. It’ll probably just look a little different than how we drove in fiscal ‘20.

I guess just to build on that and maybe come back to Jeff, thinking about Blue Buffalo. I mean some of the price per pound premiums on the new products in wet and treats have been pretty sizable versus the base portfolio. Is there anything you’re seeing out there where there’s an elasticity for consumers or kind of a pushback on pricing, or do you feel though, there’s still runway to go with the next premiumization as long as the innovation is on trend.

With regard to pet, I mean, we think there’s a ways to go. And if you look at the growth of the pet category -- first of all, the pet category is growing mid-single digits and is primarily on pricing. And the part of the category that’s growing the fastest is the premium part of the category. So, we certainly think there is a place to play there. And Blue Buffalo we believe is the best equity in that premium space. And I think our growth over the last couple of years would add some credence to that. We also know that people care deeply about their pets, and especially in a time of high anxiety, which I think under any circumstance you could qualify this as a time of high anxiety. People rely on the pets and the last thing I want to do is cheat their pets and the source of comfort. So, what we see in the marketplace, whether it’s through recession or whether it’s through a time like this is that one of the last things that people are interested in skimping on are their pets. And so, they don’t do that. And we see that being played on the market right now.

Thank you very much. We’ll get to next question on the line from Jason English with Goldman Sachs. Go right ahead.

Hi. Good morning, folks. Thank you for sliding me in. And congrats to you and your team for navigating this very turbulent situation, especially kudos to your supply chain. I believe this is very challenging for them. My questions, I guess we just closed on pets. So, maybe we could pick it back up there. There’s obviously a lot of noise in reported results this quarter because of what you’re comping and the extra days. Can you give us a beat on how retail sales are tracking across all channels in the quarter? And what you’re seeing so far as we roll into the new fiscal year?

Yes. So, thanks Jason. And I appreciate the support for how we’ve executed the last quarter. We feel really good about it. As you said, our supply chain has held up remarkably well. And we’ve driven those supply chain gains all the way through our sales organization to our customers and feel very good about how we’ve service the business and service demand in the time when people really need it. When we look at Blue Buffalo, let me take a step back. For the year, we reported net sales 18%. Through three quarters, we were up 11%. And in the last quarter of the year, we believe that our retail sales were up somewhere in the high single digit range. And so, for the year, we had guided 8% to 10% like for like growth and we’re confident we exceeded that somewhere about the 12% range. So, for the year, we over-delivered on what we said we would. We feel great about that. In the fourth quarter, you’re right, there is a ton of noise. The retail sales look like they’re up high-single-digits. And again, that’s still share leading growth for the category, a category that’s mid-single-digit. So, we’re really pleased, even amongst the noise, with our performance on Blue Buffalo in the fourth quarter.

And turning back to your North America Retail portfolio, as we look at the Nielsen data, your TDPs are down a lot. Your average items per store are down a lot as they are across the industry. And we’ve heard from a lot of different companies about SKU rationalization, streamlining portfolios to really maximize capacity. Can you touch on how much streamlining you’ve accomplished? And how much of that streamline you think you’d be able to sustain or when, if at all, do you think you’re going to start to layer back on those products?

So, Jon Nudi, why don’t you take that and maybe touch on, not only the streamlining of distribution, but maybe a couple other actions we’ve taken to help make our supply chain more efficient?

Yes. Obviously, if you look at distribution in Nielsen, it’s a bit of a wild picture right now. There is out of stocks and other things happening as well. I guess, if you think about our business and we compete across 24 different categories. The majority of our categories from a capacity standpoint and a service standpoint, we’re in a pretty good shape at this point. Our supply chain has done a terrific job, keeping our plants running and keeping it safe importantly for our employees, and obviously for our consumers with the food. So, the majority of our categories, we’re back up to pretty healthy service levels and haven’t seen a decrease from a distribution standpoint with our retailers. There was a trend prior to pandemic with retailers really cutting back on the number of SKUs and categories, giving more facings to higher churning SKUs, and that was really driven by ecommerce, and click and collect, and obviously having shelf capacity to service that business. We expect to see that continue. Now, we have a few categories that we have capacity constraints, soup being one of them, desserts being another one. And we’ve temporarily withdrawn a significant number of items. So, in soup, progressive soup, we pre-pandemic had something like 80 items, and now we’re down to somewhere around 50. We to expect phase -- start phasing some of those back in as we move through the first half of the year. And frankly, some of them probably won’t come back. So, again, I think we will take the opportunity to make sure that we have an efficient portfolio and one that works for us and works for our consumers. Variety is important though, when you think about soup, everyone’s got their favorite soup flavors. So, again we have to work through that as well. So, we feel good about where we are from a distribution standpoint, one of the things that -- the metric that we look at is shared distribution, because again, we do expect total distribution points to decrease as we throughout the year. And we exited the year really improving from a total share of distribution standpoint, and that’s what we’re continuously focused on as we moved through fiscal ‘21.

Our next question on the line is from the line of David Palmer with Evercore ISI.

Just want to follow up on what we’re maybe seeing in the scanner data lately. It looks like the part that is audited by some of these scanner data companies is showing a reduction in display activity, but some of that might be the fact that they’re not auditing that as much. And then, I’m wondering, if we’re seeing some noise in that percent sold on discount, because it looks like within cereal specifically that there’s been some increase in percent sold on price discounting, which would seem to run against the times that you wouldn’t need to be doing that. So are you seeing some price reductions going on out there? Is there more competitive activity in cereal, or is there noise? And then, I’ll have a quick follow-up.

Jon Nudi, why don’t you field that one?

I would say, the short answer is probably noise more than anything. Many of the auditing groups are not going into stores at this point, or if they are, it’s inconsistent in terms of what we’re seeing. So, we’re not looking too closely at display facts. And some of the pricing gets really confusing as well. What I would tell you though, in general, we’re not seeing anything how the ordinary in terms of pricing in cereal. In fact, we pulled back some of our promotions in Q4, particularly in our cereal’s franchise where we are a bit tight from capacity standpoint. So again, we’re not seeing anything abnormal. And I think from a data standpoint, again, the total movement is something to look at and something that makes sense, I think when you start getting into some of the facts below that, I wouldn’t put a whole lot of stock in it at this point, at least we’re not.

And just to follow-up on the incentives, you talked about how you did about planning with last fiscal year because of fourth quarter and probably caused some truing up in what you were doing in terms of pay for performance. But, I’m wondering, are you making adjustments to your annual targets and how you pay people, is the Board doing that for you, and you down to the division levels? And how are you making those adjustments? Because this has to be viewed as an extraordinary period, not just because of Blue and those acquisitions and other counter effects, but because of this virus and passing that through the Python? Any help on that would be helpful.

So, David, the Board sets our compensation targets as well as ranges for compensation. And I’m not going to go into the depths of that, only to say that it is based on our sales performance and our operating performance and our profitability performance, and weighted equally among those measures. And we passed those kind of things down to our segments. And you’re right, it is a dynamic environment, which requires us to be dynamic in our assessment. And certainly, one of the things we look at is we assess the performance of our businesses and how competitive are they in the marketplace and how efficient were they in being competitive. And that’s why, I’d say we’re really proud of our performance. And even in areas like convenience and food service, which was down quite a bit in the fourth quarter, they actually grew share in the majority of their categories. And so, they performed well in the fourth quarter, even in an environment that was really, really difficult. And so, that’s the way you will continue to incent people. Again, it helps us stay in the middle of boat and driving sales growth, but not at all costs, and making sure we’re efficient while we do it.

We’ll go to our next question on the phone line from Robert Moskow from Credit Suisse.

I guess I have two. The one is on the breakfast cereal category. If I look at the data, I’d say it looks good, but not great. Retail sales were up about 6% in the past four-week period. It had been up double-digit. Jon and Jeff, are you surprised that the category is not growing faster in environment like this where we’re all kind of stuck at home, we’re not eating breakfast on the go, we have the luxury of time in our homes to prepare for breakfast for ourselves, or is this pretty much what you’d expect? And the second question is on first quarter. I understand not giving guidance for the year, but can you give us a sense of maybe just North America Retail sales? It look like overall, your sales are still double-digit, and probably can stay that way for the next three marks in the retail data. Is that a fair assessment for first quarter trends, Jon? Thanks.

So, let me answer the question on the first quarter trends. And to say that -- the reason we don’t give quarterly guidance is because we’ve never given quarterly guidance and we’re not going to start now. You’re right, Rob, and I’m glad you pointed out, our retail sales, if you look at Nielsen, we’re off to a great start in North America Retail. So, it gets back to a question answer that I answered earlier, I think it was from Chris Growe about the confidence we have. So it’s not a lack of confidence that we’re not providing guidance. It’s really a matter of, for the year uncertainty, and for the quarter, the fact that we just don’t provide quarterly guidance. On the question on cereal, I’ll let Jon answer that in detail, but I want you to know, I am thrilled that you’re asking your question about the cereal category being good and not great when it’s growing at 6%. So with that, Jon Nudi, why don’t you elaborate on that a little bit.

So, we feel good about cereal category and frankly even better about our performance. So, in Q4, the cereal category grew at 26%, we grew at a similar level. And for the full year, the category grew at 5%. When you go back to even your prior, we think when you add in non-measured channels, it grew that year as well. So, we think the category was heading in the right direction. We like our performance. We’ve grown share in 11 of the last 12 quarters. We’re the clear share leader in the category. We’re doing that by strong -- having strong marketing campaigns. In fact, prior to pandemic, we were having the best year from a shares standpoint in cereals in over a decade as we’ve gotten back to the Heart Health messaging that works really well. We actually, for the first time ever changed the shape of the product to a heart for a limited time. That worked incredibly well. And our innovation is working as well. We had three of the top five new products in the category last year. So, we feel good about the category. We feel good about our performance and we think we’ll continue to grow nicely for fiscal ‘21.

Okay. I mean, the market share gain is, no doubt, stunning. So congrats on that. And we’ll see how the category does. Thank you.

Okay. Tommy, I think we’re going to wrap things here. I know, we weren’t able to get to everyone, but we want to make sure that we respect everyone’s time and length on the call. So, thank you everybody for your time and attention this morning. I appreciate the interest in General Mills. And we look forward to continuing to keep you updated on how we go from here. If you have a follow-up question today, please feel free to reach out to me and we’ll make sure we get to you. So, thanks again.

Thank you very much. Thank you everyone. That does conclude the conference call for today. We thank you for your participation as you disconnect your lines. Have a good day everyone.