Good morning, everyone, and welcome to The Hershey Company's Fourth Quarter 2017 Results Conference Call. My name is Erica, and I will be your conference operator today. [Operator Instructions]. Please note, this call may be recorded. Thank you. Mr. Mark Pogharian, you may begin your conference.

Thank you, Erica. Good morning, ladies and gentlemen. Welcome to The Hershey Company's Fourth Quarter 2017 Conference Call. Michele Buck, President and CEO; and Patricia Little, Senior Vice President and CFO, will provide you with an overview of results, which will then be followed by a Q&A session. Let me remind everyone listening that today's conference call may contain statements, which are forward-looking. These statements are based on current expectations, which are subject to risk and uncertainty. Actual results may vary materially from those contained in the forward-looking statements because of factors such as those listed in this morning's press release and in our 10-K for 2016 filed with the SEC. If you have not seen the press release, a copy is posted on our corporate website in the Investor Relations section. Included in the press release is a consolidated balance sheet and a summary of consolidated statements of income prepared in accordance with GAAP. Within the Notes section of the press release, we have provided adjusted pro forma reconciliations of select income statement line items quantitatively reconciled to GAAP. The company uses these non-GAAP measures as key metrics for evaluating performance internally. These non-GAAP measures are not intended to replace the presentation of financial results in accordance with GAAP. Rather, the company believes that presentation of earnings, excluding items, provides additional information to investors to facilitate the comparison of past and present operations. As a result, we will discuss fourth quarter results of 2017, excluding net charges of $0.18 per share diluted related to business realignment activity, derivative mark-to-market gains, non-service-related pension expense and an estimated impact of a onetime mandatory tax on the previously deferred earnings on non-U.S. subsidiaries. These net charges are defined in the appendix of this morning's earnings release, which is available on our website at www.thehersheycompany.com. Our discussion of any future projections will also exclude the impact of these net charges. And with all that out of the way, let me turn the call over to Michele Buck.

Thanks, Mark. Good morning to all of you on the phone and webcast, and a special welcome to the many Hershey employees, including our new Amplify colleagues who are listening in. As I step back and review 2017, we had a solid year, making good [indiscernible] strategic plan that strengthens our business model and positions the company for future growth. Looking back, I'm pleased that we drove our core chocolate brands with mid-single-digit growth, expanded our snacks portfolio with the acquisition of Amplify, delivered EBIT margin expansion and strong EPS growth and maintained our market share in a competitive environment. And we did this while continuing to transform the business to a position that we believe will enable us to achieve our long-term sales target during our strategic planning cycle. I'm less satisfied with our momentum slowing as we ended the year. Importantly, we understand where opportunities exist and have plans to improve upon our performance. Let me now provide you with some further color. We are fortunate to operate in a profitable and growing category in our core U.S. market. For the year ended 2017, our CMG - that's candy, mint and gum, and snacks retail takeaway increased plus 1.6%. Most of you scrutinize the IRI or Nielsen-measured channel marketplace data on a regular basis, so I don't need to tell you how choppy CPG trends continue to be from quad-to-quad. In this environment, we were able to maintain our market share while transforming the business. And being a company focused on growth as well as growth and EBIT margin expansion, I was happy that in 2017, we delivered sales growth of 1%, increased our EBIT margin by 30 basis points to 20.7% and grew EPS about 8%. And after the last several years of evaluating snack assets, I…

Thank you, Michele. Good morning to everyone on the phone and on the webcast. As anticipated, fourth quarter net sales of $1.9 billion declined 1.6% versus last year, including a 0.4 point benefit from favorable foreign currency translation. Volume was up 2.3 points, and net price realization was a 0.3 point benefit. As previously discussed, the expected decline in net sales was partially due to the timing of shipments last quarter and the launch of Hershey's Cookie Layer Crunch in the year-ago period. For the full year 2017, net sales increased 1%, including an FX benefit of 0.2 points. Adjusted earnings per share diluted came in at $1.03, a decline of about 12% versus last year, primarily due to lower year-over-year sales. Versus our outlook last quarter, note that corporate costs related to merger and acquisition due diligence initiatives were greater than our estimate. Excluding this, we would've delivered full year EPS growth closer to the guidance we provided in October, as we were able to offset the lower volume and the gross margin softness with SG&A savings. By segment, Q4 North America net sales declined 0.9% versus the same period last year, including favorable foreign currency translation of 0.4 points. Volume was up 0.6 points and net price realization was a 0.3 point benefit. The decline was partially due to the timing of shipments discussed last quarter as well as the tough comp in the year-ago period. Total International and Other segment net sales for the fourth quarter declined 5.4% versus last year, including a 1.2 point benefit from foreign currency exchange. Volume was up 6.6 points in line with our estimates, driven by planned decline from China. Turning to margins. Adjusted gross margin - adjusted gross profit declined 5.6% resulting in adjusted gross margin of 42.7%, a decline…

[Operator Instructions]. We'll go first to the line of Robert Moskow from Crédit Suisse.

So I guess, the theme of the call here is reinvestment, and I guess higher costs also. When I think about just your core guidance for 2018, just on the core confectionery business, is it fair to say that you're guiding here to kind of flat operating income growth just for the core business? And is that because of the headwinds you're kind of talking about? Reinvesting a portion of the tax benefit, the higher freight cost and then also the shorter Easter and the SKU optimization? And then maybe you could help me understand, if weren't for those Easter and SKU things, do you think you would be closer to your normal algorithm for the core business or not?

I'm going to let Patricia handle that one.

Yes. So thanks. On the margin side, I think it'll be - I think you have a good take on it. But I will point out that that's not going to translate into income, because obviously, with the growth that we do expect in our core category, that will drive higher dollar income for us.

Relative to your question on shorter Easter and SKU rep, I assume, Rob, you're asking the impact on the top line. And certainly, those do create some pressure as we look at the delivery on the top line. Certainly, a longer Easter benefits not only our total takeaway as well as our share. As we look at our plans for '18, what we're really focused on [indiscernible] growth we've seen on the core brand that is low to mid-single digits, really start to activate part of the portfolio around some of our variety brands, which we have not been doing. So we're going to optimize our spending to activate those. And we started doing that in Q4 and started to see nice results in a lot of the brands that we activated. And then a real focus on stabilizing some of where the leaks have been, particularly around the emerging brands. But the combination of Easter and the SKU definitely creates about a one point headwind for us.

And can I ask a follow-up? A lot of us have seen data that shows that your biggest competitor in the U.S., Mars, has regained a lot of market share. I found it hard to determine whether that was just a comparison issue versus a year ago when you had the Cookie Layer Crunch launch. What are you seeing differently from your biggest competitor? And has that factored into your plans for '18 at all?

Yes. So I'd start by saying, hey, it's always our goal to gain share and we're pleased that we were able to maintain share despite heavy competitive activity. Certainly, I feel better about the first part of the year where, you're right, Cookie Layer Crunch was a big driver for us in terms of helping really to generate the share gains we saw in that part of the year. As much as we'd like our performance to be consistent on a quarter-to-quarter basis based in our programming and competitive programming, it doesn't always shake out that way. So what we always focus back on is the key levers that drive the category are those same levers that I think all the competitors need to focus on, which is do we have the right activation of our brands from an advertising and consumer marketing, do we have the right invest - innovation to drive each piece of the portfolio and superior execution to really drive displays and especially focusing at winning with the customers who are winning trips. So that's really our focus, and I think that's probably our competitors' focus as well.

We'll go next to the line of John Baumgartner with Wells Fargo.

Michele, just in terms of the packaging change. You mentioned that it's a long-term investment, but it's also a drag on gross margin. So is there a way to think about how far along you are in making these packaging conversions? Is it still an appreciable drag in 2019 and beyond? And have you seen any real benefits thus far in terms of shelf placement at retail or in-store to sell through?

Yes. So that's a great question. So the way I would think about packaging is packaging is a lever that we are focused on improving in the marketplace. And we certainly believe the upgrade we did in packaging created some nice momentum for us versus the lay-down packaging that we had on shelf. However, we really view the packaging as an evolution. And what you're going to see is us continue to improve upon that packaging to make it even stronger [indiscernible] out of it. And as we do that, really, try to optimize the total P&L impact around that [indiscernible]. So it is out there, but you'll see more to come from us. Certainly, it is a drag right now on gross margin.

Okay. And just a follow-up on ad spend. Hershey's ad spend peaked in 2013, both in absolute dollars and relative to sales. And it's also coincided with the 20% increase in trade promotion over that period. So it seems like the trends here is pretty clear. As you think about how the category is evolving, how do you strike that balance between promo and ad spend? I mean, promo does kind of increase structurally, does that just kind of place a ceiling on gross margin over time?

I think we're always striving to get that right balance between advertising and trade, and we think both are critical. So we're doing a lot of work on trying to optimize marketing mix. As you look at 2018, what you're going to see is we're going to optimize our spending on DMEs even more. You'll see us probably be about flat in terms of our advertising support on our core, but really optimizing our lines across the rest of the portfolio; investing in the variety of brands, which are highly profitable; and kind of rightsizing the investment on some of the smaller emerging brands and rebalancing between DMEs and SG&A. So for example, some of the emerging snack brands, feet on the street to build displays on some of those brands, we're going to get more from that than advertising. On trade, we're - we really look at the benefit based on everything that we've seen on trade. As much as we can drive display, it's really just display that drives that activity. So we try to make sure that we are being nimble and constantly optimizing through strategic revenue management to get a price that's appropriate to drive display but not to be giving away product and creating a deflationary pressure that doesn't - that just subsidize an already planned purchase. So that's the way to balance there.

We'll go next to the line of Andrew Lazar with Barclays.

I think Hershey laid out the Margin for Growth targets at your Investor Day last year, and it was, I think, 200 basis points of operating margin improvement by 2019. And I think it was expected to be pretty evenly split at the time between cost of goods and SG&A, with much of it coming in the years of '18 and '19. So in the context, I guess, of the flat gross margin expectation for '18, I'm just trying to get a sense of are those benchmarks still right? And if so, I guess, given the gross margin piece, what's sort of making up the difference, if you will, to get those 200 basis points by '19?

Andrew, I'll start with just one comment, and I'm going to turn it over to Patricia to really dig into those numbers. I will tell you that as we look at our performance for Margin for Growth, we have over delivered on the SG&A component of our expectations. We thought that was going to be a difficult piece of the work. And as we really did some - made some tough decisions, we actually found we were able to [indiscernible] a culture that enabled us to really deliver even more than we expected there. But I'll let Patricia do a step-back to talk a little bit more holistically about it.

Yes. So, you're right, we expect the savings to come both through the cost of goods as well as SG&A. A lot of the improvement in the International piece you see coming through the cost of goods, although there's an SG&A piece of that as well. In U.S. business, I think it's a little more weighted to SG&A, especially as we look at both the corporate functions as well as our commercial functions. In general, I would say that, as we look forward, it is a - we really do need the sales that we're driving investment against to help us deliver that leverage looking forward.

We'll go next to the line of Steven Strycula from UBS.

I'll start with a question on Cadbury license, actually. I wanted to see, you guys have put some - a little bit of money here over the brand over like the last 12 to 18 months. Wanted to see what do you think the brand awareness of that is in, call it, the mass premium market? And what is opportunity for - to scale that in the U.S. longer term? And if it doesn't make sense, how do you think about monetizing it? Then I have a follow-up.

I mean, I'd tell you that the strongest piece of that Cadbury business for us is the seasonal component. The Cadbury Eggs are a phenomenal piece of our seasonal portfolio, whether it's at Halloween or Easter, they're unique in the marketplace. And so our focus is really there. We are not prioritizing building the everyday mass premium nature of that brand. But there's tremendous value in the seasonal piece, so we believe that's the right focus.

Okay. And then to just follow-up on Andrew's question. For the 2019 margin targets, should we think about, just given what's happened in the industry since you've announced - held your Analyst Day, that the reinvestment pressures are just a little bit higher so maybe the net effect of it all is just a little bit more muted than maybe it was last spring.

I think that's fair. I mean, I think we see a path of getting to the range that we laid out in March. But we do think that it might take us just a bit longer to get there. We see a path to the low end of the range. And yes, we're going to make those constant decisions of balancing getting there with making the right decisions on the business.

Yes, Steve. I think, I mean, we've been very good over time of maintaining and increasing EBIT margin, it's certainly always been a focus and a hallmark of the company. So I think we'll continue to make progress. We'll continue to make progress there. But as Patricia alluded to earlier, certainly sales in 2017 being a little bit lighter, lost a little bit of leverage there. But there's still a path to get there, and I think we'll talk a little bit more about that in CAGNY.

Right. And our goal is still industry-leading EBIT margin. And we feel confident we'll be there.

We'll go next to the line of David Palmer with RBC Capital Markets.

Just a couple of times in the earnings release you mentioned unfavorable sales mix in regard to the quarter, but also 2018. Could you give a little detail on this? How much of a drag is - are you talking about this with regard to margins or revenue per volume, and the degrees that it comes from category channel or pack type?

So the biggest drivers on that would be certainly the snacks portfolio, which is lower margin than our core. And then as instant consumables, particularly in the second half of the year as we were lapping - had weaker instant consumable innovation than we did the prior year.

And just to follow up on the previous comments about brand building reinvestment. You said that was included in your EPS guidance. But I was unclear about how much of that is going to be an offset to your tax rate benefit from an EPS perspective in '18?

Yes. I mean, we didn't disclose that, Dave, for competitive reasons. But I mean, if you're trying to put everything on an apples-to-apples basis, I mean, I would certainly start with - look, the base business, we're always looking to get to 6% to 8% EPS growth. So use whatever tax rate you want from last year to kind of normalize it, and you'll get back into it and get a sensitivity that way.

Yes.

We'll go next to the line of David Driscoll from Citi.

On the fourth quarter, the revenue trends ended weak. Organic, minus two. Can you just talk about the first quarter? And does that fourth quarter trend kind of give us a little guidance here that Q1 is also going to be soft and that really sales growth guidance is weighted to the second half of 2018?

Yes. So we expect that we'll see some sequential improvement versus Q4 as we get into the year. But I think it's very fair to say that the strongest performance will be in the back half of the year. Certainly, the first half of the year will be lapping the long Easter, which that alone creates a differential in terms of the first half, second half performance. And then the pacing of our innovation. We've got gold that'll be coming out the blocks pretty strong; and then the Reese's Outrageous, which is our other innovation, is really more midyear. So I think the way you're thinking about it is accurate.

And then, Michele, on the long term revenue objective of 2% to 4% organic, in light of the '18 guidance, do you still think that long-term objective is valid?

I do. We are in the process of transforming the business model to respond to the changes we're seeing in the marketplace. I feel like we're making really good progress on some of those capabilities that are going to be big enablers around building our digital commerce business where we've brought in some really - a really strong leader, experienced leader in that space. That's going to help us tremendously. We have key investments in capacity, and we've been a bit constrained over the past 18 months with some of the demand on our core brands butting up against capacity. We're making investments, we have a Reese line that just came online now [indiscernible] that comes online later on the year. We've got Amplify that we have a lot of confidence in. So we continue to feel good about our ability to get to that long-term sales guidance over our strategic planning horizon.

Yes. Patricia, two quick follow-ups for you just to clean up a couple of items. On the tax reform, so you're saying that some of the tax reform benefit was reinvested back into brand building. But I just want to be clear. I believe the plan laid out at Analyst Day was always for reinvestment in advertising. So are you saying that there is even greater advertising reinvestments because of the benefits of tax reform? That's kind of the first one. And the second one is just Margin for Growth, $60 million in '18. That literally has to go against the higher costs, so we're going to see flat EBIT margins. Do I have that part right?

Yes. You do have that part right. And on the tax reform piece, I would say that our focus is really more around capabilities, things like investment in the e-commerce that Michele mentioned, focusing on those capacity improvements, some technology improvements that we want to give to our sales and marketing areas. And that's really where we see the opportunity, as tax reform comes in, to evaluate good ideas and potentially pull them ahead. Less around direct advertising is just the one thing I would make sure you're clear on.

We'll go next to Bryan Spillane from Bank of America.

Just a couple of quick ones from me. First, I just want to make sure I was clear. In terms of the earnings growth build for 2018, share repurchases are not part of the EPS build, is that correct?

Patricia, do you want to cover that?

Yes, we make assumption as we look at our EPS build of a share repurchase program that's really normalized. If you look at the past several years, we have sort of an assumption that we make around sort of our standard share repurchase as a nominal planning piece. It's not a big driver of our EPS. And I'll remind you that we also always repurchase shares related to option programs and other equity grants.

Okay. And then, I mean, I don't know if I missed it. But did you give 2018 depreciation and amortization?

We don't give that. We give the CapEx piece. You're welcome to give Mark a call and - if you need more details on that.

Okay. And then just the last one. In terms of the decision to reinvest or spend more this year because you've had some tax savings. Would you have made these same investments if you didn't have the tax savings? It just sounds like the things you're spending on are sort of needs in the business. And I'm just curious to know if you're actually executing these things because you had the savings or you would've done this anyway?

I think that these are important investments in the business. And really, the way we're looking at it is it gives us an opportunity to accelerate enacting them, and therefore, accelerate our project progress to our strategic goals.

And we'll go next to the line of Alexia Howard from Bernstein.

Can I ask about the China business and the International outlook in general for 2018. It looks as though things deteriorated profit wise at the back end of the year in 2017. So I'm wondering if you can just give us some color about when - whether we expect that whole business, China in particular, to get back to at least breakeven during the course of 2018. And I'll pass it on.

Yes. So that deterioration was largely due to some of the trade spending associated with the Chinese New Year. So I wouldn't look at that as a trend carrying forward. We feel really good about the profitability improvements that we've made in that sector across all of International. As we mentioned, we've really hit kind of a high mark here in terms of what we're able to deliver with that $11 million of OI last year. And we're expecting significant OI improvement this year that, as we said, we think we'll eclipse the 2014 previous high that we've had in terms of operating income for that sector.

And we'll go next to the line of Rob Dickerson from Deutsche Bank.

I just had a question on strategy on the core brands relative to the noncore brands. We could kind of in the data set that - and what your referenced this morning, the core brands continue to do fairly well within chocolate. So that would - if they're growing, let's say, at the same rate as the category or above the category, they might even be taking some shares, especially what we've seen out of Reese's. But then you also have all your other brands within chocolate, and they seem to be more of a drag. So I'm just curious, as we look out in a few years, if you say - let's say, in '18, then probably more of the spending or marketing would go to higher ROI brands that are perhaps larger, you'd get a better lift. Like how are you thinking about your other kind of non-power brands within U.S. chocolate?

Yes, I'm glad you brought up the question because we actually see that as one of our key priorities in 2018. So we absolutely grew share on all of those core chocolate brands throughout the year. So we're really pleased with the performance we've seen there. And you're right, the investments on those brands are easy because the ROIs are so big because of the scale of the brand. But we're really excited and think we have tremendous opportunity for select variety brands, brands like Twizzlers, Almond Joy, where we have a unique product in the marketplace that really owns a certain space. And we believe that we have an opportunity to better balance our DME spending. And so as you look in 2018, that's absolutely where we're going to have a focus. And if you look into the future, it's continuing to have some level of support against some of those variety brands. That benefits us not only from the lift you get from advertising, but there's a holistic package of where you advertise and then you drag velocity, you actually get greater distribution or avoid distribution losses. And we think that's an opportunity for us that we haven't fully taken advantage of because we do have that breadth of portfolio. So that's definitely a focus for us in '18. Continue the growth in the core, activate variety and then stabilize those emerging brands, which actually had been declining.

Okay, great. And then just a quick question. Obviously, you didn't - I'm not sure if you did or not, but you obviously didn't show it, to not purchase the Nestle assets. Just any thought around what you saw and you didn't see in them, kind of how that progressed, et cetera.

So obviously, we can't talk about what we - any activity that we've done or not done in the M&A space. I would say, we've competed versus those brands in the marketplace over the life of the company, and so I think we're well familiar with that portfolio. And as we always focus on how we drive our business and also looking at what might happen in the marketplace, we do that every year, and this will be no different. So we will continue to run our playbook in terms of driving our own business.

And we'll go next to the line of Matthew Grainger.

I guess, two quick follow-ups. Patricia, I might be asking for more detail here than you want to give, so please feel free to shoot me down. But I guess, with respect to the flat gross margin expectation, there's a lot of moving parts, and I think both we and investors have tried to decompose this, but you have positive productivity, input cost deflation and then the offset from negative mix and higher packaging costs. Is there any, I guess, directionals there? I guess, any assistance you can give us in trying to dimensionalize those puts and takes in terms of where gross margin might be solely on the basis of productivity flow-through and input cost deflation if you weren't also working through these packaging costs and mixed headwinds.

Yes, I probably won't get into numbers, but I can certainly help you with the pieces a little bit. Over the long run, we expect supply chain productivity to equal, I'll say, offset base inflation, excluding commodities, or beat it. So that would be our goal every year. We don't hit that every year. I'll say that this year and looking forward to next year, we have had some headwinds. And let me just talk about them a little bit. You mentioned two of them in terms of the packaging and mix. But I'll also say that we are seeing the same sort of pressures on freight that many people in the industry are having as we - and I'll also say that as we strive to hit ever-higher service delivery goals, we will prioritize that, getting the product onto the shelf even if that means some extra cost in either our manufacturing or distribution network. So that's a piece of that. And we also, I think, have an opportunity - and it's been a little bit of a hit on us on planning because we have seen, as actual takeaway or sales deviate from our plans, the effect can also drive some pressure in terms of our manufacturing or distribution network. Michele mentioned, and I think this is really importantly, on the opposite side of that, we are adding this new capacity, we've been very tight on capacity and that's been one of the issues. And we're also working to manage our complexity better. And I think that those are better improvements that will help us in the full year '18. And when you add all that together, our best estimate is that we'll be about flat.

Okay, great. And I guess, I'll leave it at one more follow-up. But from a freight cost perspective specifically, clearly, it's not getting better yet, so unclear how worse maybe the cost issues there could ultimately be. Can you give us a sense, just as a percent of cost of goods sold, a rough range? Just what percent of your operating costs or your cost of goods are - sort of fall specifically into that bucket of transportation and shipping?

Yes, Matt. We don't give that specific breakdowns of the pieces of our cost of goods sold.

Yes, Matt. There was a slide on March for - that kind of give a little bit of pie chart or breakdown of materials and packaging, and then I think there was a little distribution and overhead in there. So take a look at that pie chart and it may help you out a little bit.

And we'll take our next question from the line of Jonathan Feeney from Consumer Edge.

Two questions, please. On SKU rationalization, I think a few of us have been through at least one cycle of just the natural kind of expansion and contraction of SKUs around the edges. So I guess I'm wondering, how much is total SKU count up at Hershey, roughly, just, say, over past couple of years? And within that, how much what you're doing right now as far you taking the opportunity to make - improve your velocity, get that assortment right, is a result of things going on at the retailers level, things they want? And how much of it is just kind of the age-old balance you're always trying to find between optimizing that revenue? What's new that's causing you to rationalize SKUs? And my second question is, just trying to get a sense so we can understand this, what kind of tax rate were you planning on for 2018 as of early December after your planning process but before you knew what Congress was going to do?

Patricia, do you want to talk a little bit about tax? I can throw out a few comments around SKUs, and then I'll ask Patricia to comment on that as well. As we are prioritizing customer service, we are really trying to make sure that we're being very focused on [indiscernible] of the entire business and the productivity of these SKUs. And so as you think about SKUs, what you should think about is not just how do we take out the less - lower velocity SKUs but also we're looking at merchandising vehicles that create complexity and how we really simplify those. And you should also think about that happening both in our U.S. business but also in our International business. So in both areas of the business, there's a real focus on that to maximize efficiency and make sure that we're really then able to develop and deliver even greater customer service. So I'd say that, hey, over time, you rationalize SKUs and then SKUs work their way back into the system, and I think it's a constant process that you really need to clean up. And I think part of it is just making sure that we're tighter about what we are willing to do on customer-by-customer, each-by-each basis because sometimes you become a little too accommodating. Patricia, anything you'd add to that?

No, I think that's right. We really are thinking about it as managing the SKU count and managing our complexity that it drives. I think that's the important takeaway. On tax, we've always set the model at 27% to 28% tax number long term. We've tended to beat that. I have to say that I think we might've beat it '18 as well, but honestly, tax reform came along and got us focused on that instead of figuring out more tax planning strategies. So that quickly became our focus in the last part of last year.

And we'll go next to the line of Fintan Ryan with Berenberg.

Just a few questions, please. Firstly, on the environment you're seeing with deflationary raw materials - the sugar, cocoa, should be a benefit. But are you seeing any signs of increase of competitors, potentially putting down pricing or any softness or increased promotional activity as a result of those lower input costs? And then secondly, I think you did mention weakness in sugar confectionery and gum, and one of your competitors has also mentioned that quite recently. But just from your perspective, what can be done to get those sugar and gum confectioneries back to growth? This - do you think this is more of a cyclical downturn? Or is it more sort of structural change of consumer preferences, ultimately?

I mean, I'd start with relative to big competitors using any kind of deflationary raw material cost to increase promotion, I would tell you that, over time, in this category, that's not usually a behavior that we tend to see. I would say we've seen it more a little bit here or there, particularly maybe with some of the smaller competitors in the sweet, sugar area of the category over time. But that's not something that we generally see. So I'm not seeing any more changes there than we do any year in terms of promotional changes.

And also just add that, well, some of our input costs are down, others are up. And what we said is that we don't see that deflation for next year.

What was your second question, I'm sorry?

Just what visibility do you have on the improvement of the sugar confectionery and gum categories? And is this cyclical sort of softness in the category? Or do you think there's more sort of structural factors at play?

I would say on sugar confectionery, we've seen pretty strong performance on that segment of the category. And as we look at gum, our own business, we've done exceptionally well in the marketplace and have gained share. So I think it tend - those segments, like chocolate, tend to just be about having the right innovation in the category, having the right new news. And I think, for each of those segments, the years when that happens, you'd tend to see [indiscernible] and a strengthening of that segment. And I think the segment - the brands within those segments that have done that are seeing a lot of growth.

Great. Thank you for your time today, and we will see all of you in CAGNY in a few weeks.

We'd like to thank everybody for their participation on today's conference tell. Please feel free to disconnect at any time.