Good morning. And welcome to The J. M. Smucker Company’s Fiscal 2019 Fourth Quarter Earnings Conference Call. This conference call is being recorded and all participants are in a listen-only mode. At the request of the company, we will open the conference up for questions-and-answers after the prepared remarks. Please limit yourself to two questions during the Q&A session and re-queue if you have additional questions. I will now turn the conference call over to Aaron Broholm, Vice President, Investor Relations. Please go ahead, sir.

Good morning. And thank you for joining us for our fiscal 2019 fourth quarter earnings conference call. Mark Smucker, President and CEO; and Mark Belgya, Vice Chair and CFO, will provide our prepared comments. Also participating in the Q&A are Tina Floyd, Senior Vice President and General Manager, Consumer Foods; Dave Lemmon, President, Pet Food and Pet Snacks; and Joe Stanziano, Senior Vice President and General Manager, Coffee. During today’s call, we will make forward-looking statements that reflect the company’s current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. I encourage you to read the full disclosure concerning forward-looking statements in this morning’s press release, which is located on our corporate website at jmsmucker.com. Additionally, please note the company uses non-GAAP results to evaluate performance internally as detailed in the press release. We have posted a supplementary slide deck summarizing the quarterly results and fiscal 2020 full year outlook. The slides can be accessed on our website and will be archived there along with a replay of this call. If you have additional questions after today’s call, please contact me. I will now turn the call over to Mark Smucker.

Thank you, Aaron. Good morning, everyone, and thank you for joining us. I want to begin with the progress we have made over the past fiscal year before moving to our fourth quarter results. Fiscal 2019 was another successful year for the company, as we executed against our three growth imperatives, leading in the best categories, building brands consumers love and being everywhere, and continued to undergo significant transformation aimed at better aligning our portfolio and products towards consumer trends and preferences, while positioning our company for sustainable long-term growth. This was done in several ways over the past year. First, we continued to reshape our portfolio including the successful acquisition and integration of Ainsworth Pet Nutrition, which achieved year-over-year sales growth of 20% and the divestiture of our U.S. baking business, allowing us to increase our focus and resources on higher growth categories. Second, our strengthened approach to innovation delivered $420 million of net sales from products launched in the last three years, including contributions from 1850 coffee and Jif Power Ups, as both platforms ranked in the top quartile of all food product launches this past year. Third, we improved our organization’s operating model by consolidating our geographic footprint, unlocking cost savings and significant capability enhancement as our teams are now more agile. Fourth, we implemented our Power of One marketing model, which aims to improve the quality of our consumer engagement and increase productivity, while yielding cost reductions that will fund new investments and future growth. Fifth, we achieved our cost management goals, including the first full year of our right spend program, which delivered $30 million of savings. And finally, we continued to take intentional steps in developing our people and culture, and are committed to fostering a unique environment where our employees can thrive and…

Thank you, Mark, and good morning, everyone. Let me begin by providing further detail on the impairment noted in our press release this morning. In conjunction with our annual impairment review, our fourth quarter GAAP results included a non-cash charge of $98 million related to the full write-off of the goodwill of the Natural Foods business, which is included within our U.S. Retail Consumer Foods Reportable segment. The impairment was primarily driven by a reduction in our long-term net sales and profitability projections for the beverage and ancient grain categories reflecting our strategic focus on higher growth categories. Our long-term growth projection for the Consumer Foods Reportable segment remained unchanged due to anticipated growth of snacking platforms such as Uncrustables, Jif Power Ups, Sahale Snacks and Future Innovation. With that, let me now provide an overview of fourth quarter results and then provide details on our financial outlook for fiscal 2020. Net sales increased 7% driven by the acquisition of Ainsworth, which contributed $200 million in net sales, partially offset by $75 million of sales related to the divested baking business incurred in the prior year. Excluding the non-comparable transactions and FX, sales were flat to the prior year. This included a 1% headwind from the planned exit of certain business within the Pet Foods segment. Favorable volume/mix contributed 3% to the net sales growth and was offset by lower net price realization. Adjusted gross profit increased $47 million from the prior year due to the Ainsworth contribution. Excluding Ainsworth and the divested U.S. baking business, gross profit was comparable to the prior year as lower net price realization was mostly offset by volume/mix and favorable input costs. Adjusted operating income was also comparable to the prior year as SD&A expenses increased $46 million or 14% compared to 2018, primarily…

Thank you. [Operator Instructions] Our first question comes from David Driscoll of Citi Research. Please state your question.

Great. Thank you and good morning.

Good morning, David.

Good morning.

I had two questions for you. The first one was on the organic revenue guidance of 2% plus for the next fiscal year. If peanut butter pricing is down and that carries into ‘20, coffee pricing is down that carries into ‘20, it would seem like pricing for the entire company is down or at best flat in fiscal ‘20. So to achieve the organic sales number of 2% or better, it’s all volume related, 2 points of earning’s a lot. Can you first verify that this is correct? And then, second, can you guys just talk about the sources of volume growth, and Mark, I am particularly sensitive to your assessment on the risk here on this. It’s just a really important number and then I have a follow-up?

Hey, David. This is Mark Belgya. Thank you for your questions. So just a couple comments. First of all, everything that you suggested has been thoroughly considered as we put together our plan and thus our guidance for fiscal ‘20. So, you are right, the majority of that topline growth is going to be volume driven. I will direct you to the fact that you really need to look, although, we talked about our growth brands and our base brands, you really need to think about it from across portfolio perspective and we are delivering exactly what we are planning. Certainly the growth is going to come from the growth brands, a lot of it is innovation driven. But we have delivered consistently since we introduced that subject in October of double-digit growth in those brands. So we feel confident in that area. We feel also confident and you will see much more as we deliver on our new media later this summer and fall that we feel that the base business, which is important to drive that as well is, we can kind of deliver that as sort of that flat amount year-over-year and if you just do the math of that that’s 1.5% to 2% is achievable.

Okay. And then the follow-up question just relates to Pet Snacks and the new product innovation. Can you tell us how much of a benefit was in the fourth quarter related to the shift in of the new Pet Snacks products? And then, do you expect incremental sales to be $100 million from the new Pet Snacks innovations and did you bring in shelf space or did some of these new products simply replace existing Smucker’s Pet Snacks brands?

Yeah. David, this is Dave Lemmon. We feel really good about our innovation and progress against the $100 million. The $100 million, I will -- just to frame it in, it’s a full year run rate, so -- which is important to note. So it won’t all come next fiscal or this fiscal, we have secured our expected PODs that I spoke of on the last call, that’s about 3% incremental. The timing, however, was shifted due to retailer mod sets us, I also spoke to on the last call and it -- they were shifted from early in Q4 to later in Q4 or we are starting to learn now even summer still sort of extending out into Q1. Our innovation was across our portfolio, I would remind you, so it’s not just on Pet Snacks. It’s anchored in treats across Milk-Bone, Nature’s Recipe and Nutrish, but we have a lot of innovation coming behind our food brands, Nutrish, Nature’s Recipe, Kibbles ‘n Bits and cat. We still have yet to come and it will launch in June, July period of this fiscal.

All right. Thanks, guys. I will pass it along. Nice progress.

Thanks, Dave.

Thank you.

Thank you. Our next question comes from the line of Ken Goldman of J.P. Morgan. Please state your question.

My first question is on the Pet business in general. I think it’s fair to say both the legacy business and Ainsworth came in below street expectations. I am just curious how they performed versus your own internal forecasts? And I really think some of the softness was unexpected given with management’s recent tone about this business. You did highlight increased competitive noise within Pet, was competition just greater than you expected, I just wanted to get a general sense of what’s happening in this business or what happened in the fourth quarter?

Ken, it’s Mark Smucker. Thanks for the question. So let me just back up a little bit and just to frame in the Pet category. I would just point to the fact that this combination of Ainsworth and our existing Pet business is an incredibly powerful one. Just in the sense of really being able to meet consumer needs across the entire portfolio and that is also an opportunity for us to meet customer needs. So given that we have such a broad portfolio and the Pet category itself is such a broad and both wide and deep category, we just feel incredibly optimistic about our ability to continue to win in Pet. I would say also that there is going to be noise. Clearly, there’s competition, but because the breadth of the category, there is plenty of room for all of these brands to play and even as you look at across some of the competitive activity that we have all been focused on this last quarter, as we have seen some of that new product come into the market, we have fared much better than rest of market in terms of maintaining our shelf presence. And so just overall, we just continue to feel very, very confident, obviously, Ainsworth continues to grow at high, around 20% with Nutrish, so we had double-digit growth there. And then if you look at the last two quarters, as you back out the noise and the acquisitions of both some of the planned exits, the Pet business grew in aggregate for the year and the fourth quarter. So we don’t really see any reason to be pessimistic about the business. We think it’s got an incredible amount of potential.

That’s helpful. But I guess I will direct my follow-up to your answer. I don’t disagree with you at all. I think that everyone thinks that there’s a lot of possibility with Pet and that you have built up a higher end business that is going to work or at least most people feel that way. But my question was really about the fourth quarter and what happened and you did mention there’s always noise. So I just wanted to get a better sense of which brands disappointed you versus your expectations and why that happened, not because I am skeptical of the business as a whole, but just because I want to get a better understanding of what the particulars were, if I could.

Yeah. This is Dave Lemmon, Ken. And I would just say that it’s all timing related, as we planned out our fourth quarter originally, we had thought that we would get all of this innovation, this new white space on the Nutrish brand contributing to our sales in the fourth quarter and that really has shifted to the last month of the fourth quarter and into the first quarter. So really that’s the primary reason for the step down, I would say, in guidance with regard to [inaudible]…

Okay.

…and our business.

Great. Thank you so much. That’s helpful.

Thanks, Ken.

Thanks, Ken.

Thank you. Our next question comes from the line of Andrew Lazar of Barclays. Please state your question.

I would say the guidance range for EPS growth in fiscal ‘20 is a bit wider, I think, when you provided the preliminary range at CAGNY which admittedly was early and so maybe it’s just splitting hairs. But I am curious if there’s any broader message there in the range of 2% to 4% growth versus, I think, what was 3% to 4% at CAGNY.

Hey, Andrew. It’s Mark Belgya. Thanks for the question. The -- no, the answer is there’s no underlying. Typically we do give a guidance range that’s sort of that, I will call it, $0.20 or a couple percentage points of EPS. We -- as we always plan, we consider what could be the upside and the downside to give the investor some sense. Obviously, the downside is going to be there’s still some uncertainty around the tariffs world and some other costs that could happen and then on the upside, obviously, if this -- if innovation takes off even stronger. But we feel pretty good about the middle of the range which is about the 3%. I think the other thing I’d want to remind everyone is we are building off a much stronger ‘19 finish, so at the end of the day, EPS wise we are much higher than we thought we were going to be in February. So -- but long answer to your question, no fundamental difference from what we said at CAGNY.

Got it. Thanks for that. And then, perhaps, maybe you can just give even just a broader or directional view around how we should think about the sort of individual segments as we think about the year around sort of sales and profitability. I think you gave a little bit of that for Coffee, but just as you report your segments, whatever you can provide on that front would be really helpful? Thanks.

Okay. It’s Mark again. So I will probably not, well, I am not going to give specific percentages, but let me just sort of systematically talk about kind of where cost and where we see. So in Coffee, as I said in my scripted comments, we continue to see green coffee in a good position. We have passed that through the pricing, but that has benefited. And so, profitability there will sort of continue to be good growth. In Dave’s business, certainly, we get some benefits from the synergies. You will recall last year when we bought the APN business we had an opening balance sheet charge that we took that obviously is non-recurring, so that will add and then just sort of normal in some of the base business earnings growth that we typically talked about. A couple pricing and then, again, I said the synergies, most of the synergies do direct themselves through Dave’s business a little bit the rest of the company. And then in Tina’s area, she’s probably the one that’s got the muddy most, because you obviously have to adjust for the segment profit. But we are going to be negatively impacted as we said last quarter by the net price cost associated with peanut butter. And again, as I said, I think, in my comments, we really did get the delivery out of the volume. We had double-digit growth in peanut butter. So -- but we are going to see a cost hit particularly in the first half of the year on that and then the Longmont startup. Again, what I would -- I’d estimated about a $0.15 hit to call it $20 million or so and that really just has to do with the fact that we have a plant that’s basically up but won’t start putting volume out until later in the calendar year, so a lot of under absorbed overhead. So if you sort of start with what we had said publicly and then kind of put the puts and takes based on that conversation that might help you get directionally to the right place.

Great. Thanks so much.

Thank you. Our next question comes from the line of Chris Growe with Stifel. Please state your question.

Hi. Good morning.

Good morning, Chris.

Hi. I just wanted to ask a question in relation to, you discussed, I think, it was at CAGNY about an incremental marketing behind the business, not just this year, but for the next few years and that could be a bit of a weight on your EBIT growth. Is that something that is sort of built into the plan, is that reflecting a lot of the white space you have been discussing, some of the new products, is that rate of spending kind of built in the model for fiscal ‘20 is my question?

Yeah. Chris, it’s Mark Smucker. So, yes, and as you know, we have already stepped up marketing and so we have talked really in terms of percent of net sales, we talked about a range of 6% to 8%. We ended the year around 7% and we are targeting 6.5% to 7% next year. So essentially I would think about it as we are maintaining that step up in marketing, which is obviously significantly more than where we had been a few years ago. I think the other key point to remember is just, again, going back to these three growth imperatives, we really feel like they are working. Considering that we have seen, again, backing out the noise in -- on sort of an apples-to-apples basis, we saw growth in all three of our U.S. Retail businesses during the quarter, all three of the U.S. Retail businesses grew for the full year and so that is obviously giving us some confidence. And so if you think about just the totality of our portfolio and the fact that, again, that we play in very broadly in these categories. That -- and that we understand the categories and how these brands fit together and how we can leverage the combination of those brands, that really cohesive whole gives us a lot of confidence in our ability to continue that growth. It gives us confidence that our strategy is right that really investing in marketing and ensuring that we have the absolute best creative out there, which you guys will start to see in the next three to four months. And then, again, filling the white space in terms of being everywhere, we just feel that there’s enough opportunity out there for us to continue to compete and win. So I think that’s really what gives us the confidence going forward.

Okay. Thank you for that. I had a more specific question around Pet and Natural Balance there was a comment about pricing being down for that brand. I am curious how that brand performed, and then maybe more broadly how the Pet Specialty channel performed, given the strength you have had in Nutrish and measured channels. I am just curious how that channel and that brand performed?

Yeah. Natural Balance, as I said on previous calls, we are not happy with the performance on Natural Balance. It was down 8% for the quarter, which is pretty much consistent for the year. We will continue to be consumer led brand and as such we will continue to have it sold through Pet Specialty and e-com channels, and I think, our portfolio allows us to do exactly that. And as I have also said, we are retooling with a new strategy behind the brand that will be launching this fiscal. The main elements of that being the re-launch of Ultra, which has happened at the tail end of last month. The refocus on e-com, building out our capability in that area, which Mark spoke to in his opening remarks. We have a new brand communication strategy that you will see coming later in the year and we are focused on in-store, a program that focuses on regaining in-store recommendations in the independent trade and then promotion programs that bring the focus to the brand such as our 30th year anniversary and the re0launch of Ultra and LID.

Okay. Great. I appreciate your time. Thank you.

Thanks, Chris.

Thank you. Our next question comes from the line of Robert Moskow with Credit Suisse. Please state your question.

Hi. Going into the call, the risks I thought that were maybe the biggest for fiscal ‘20 would be you have a falling commodity cost environment for coffee, so there’s a risk that private label might cut price from here. And then, secondly, I thought that your competitors in Pet Food in mainstream had raised price and that you had followed. And I thought that that might be a risk because we have seen mainstream prices roll back, especially in an environment like this where they are losing distribution. So would you highlight those two, would you think that’s correct, first of all, and then, secondly, maybe you could talk more about why pricing for Pet was neutral in the quarter after you had announced some price increases earlier? Thanks.

Thanks, Rob. It’s Mark Smucker. I am just going to start and then Mark Belgya’s going to speak to a little bit about the Pet question. But just specifically on coffee. Coffee prices you said have been coming down. I would change that to say coffee prices have been down and they have been at 30-year lows for 12 months. So because there’s been a relative amount of stability in coffee pricing at a relatively low levels, we view that the go-forward on coffee is basically the same. It’s status quo. And even of late you have seen some coffee pricing increase and at least in the commodity, but that has really been some volatility in terms of we -- what we have seen is some short covering and just the U.S. weather has actually impacted some of those prices. So we are in a period of time between harvests on coffee. So I wouldn’t read too much into the market. I think the key message is coffee pricing has been consistently low and so we expect more or less the status quo going forward.

Hey, Rob. It’s Mark Belgya. I guess before just specific on to Pet pricing, what I would say is that, in our topline guidance we obviously for all the factors you mentioned on the call. We factored in the coffee and the peanut butter and the Pet, and it’s not a dramatic impact one way or the other for the reasons we said. But in terms of Pet, we are going to see a benefit that’s going to be more reflected in fiscal ‘20 than we saw, we certainly moved on price, but we are going to see the benefit as we move forward. I think we called out time and time again. We are not the lead in Pet. We follow. But we have factored in the chances or likelihood that there would need to be some sort of adjustment and we feel pretty comfortable with the pricing effect that will reflect in our topline growth for Pet in ‘20.

Is Pet going to grow faster than the 2% for the overall company?

Yes.

Okay. Great. Thank you.

Thank you. Our next question comes from the line of Jason English of Goldman Sachs. Please state your question.

Hey. Good morning, folks. Thanks for…

Good morning.

Thanks for slotting me in. I guess, I want to come back to Pet real quick, a couple quick questions on that one. First, profitability of Ainsworth, it’s had a nice sort of healthy ramp throughout the year as we decompose the contribution on sales and EBIT. What’s driven that, is it sustainable in this exit rate of roughly 17% EBIT margins, is it reasonable to underwrite that going forward?

Hey, Jason. It’s Mark Belgya. You are right. We have seen growth. I think, Dave, actually, had called that out in Q2 a year ago. But what we are seeing is that obviously as Nutrish grows and just when you look at the APN portfolio, it’s a higher profitability, so it’s a mixed play there. We are getting synergies as I said just a little while ago. We got $30 million of APN synergies coming. Those are mostly going to flow through Pet, obviously, APN. So we do think that that’s going to continue and then, I think, just as we continue to just look at our footprint, maybe, Dave, you can comment on this, but just a greater Pet from a cost management perspective should add to that.

Yeah. I agree totally.

Well, flipping to the base business, it was -- the profitability’s been a bit less robust and it looks you like margins have fallen further again this year. I think you finished this quarter, what base profitability down 5% and down around 6% for the year on Pet. Can you enlighten us what are some of the drivers are there as we look out to ‘19 and it probably relates to your answer to the last question of pricing coming in. What should we expect for base profitability there?

Yeah. I would -- this is Dave Lemmon here, Jason. And I would say that we saw cost increase from last fiscal and we priced for that accordingly and we will see our sort of margin expansion on our business as we move into Q1 and through Q -- through fiscal year ‘20.

And any reason to be concerned about rising protein costs that we are seeing more holistically, I know feeds in the Pet industry is a little bit unique. Maybe you can just touch on what you are seeing there?

I would just say that we have a lot of levers that we pull to manage margin on the business. One of them is pricing, but the others being aggressive cost, takeout programs, synergy capture that Mark spoke to, et cetera. So we feel really good about our plan next year and feel confident in our ability to deliver.

Yeah. Jason, it’s Mark again. I do bring it back to just the strategy and the combination of the brands in the portfolio, just putting us in a strong position to continue to be partners with our customers, obviously, bring insights to the category, and ultimately, drive aggregate growth for our business and support the category. Now I mentioned earlier that we fared very well in some of the recent resets in terms of maintaining shelf presence and so that just, obviously, is another little feather in our cap that we point to to give us confidence that our total aggregate strategy is working.

Good stuff. Thank you, guys.

Thank you. Our next question comes from the line of Rob Dickerson with Deutsche Bank. Please state your question.

Great. Thank you. So just broadly on the promotional side, maybe Mark -- Mark and Mark, you could comment on just current view, state of promotional activity kind of within U.S. Food. We have seen other larger companies so far this year step in a bit, some haven’t. It seems like its category dependent, obviously, dependent on private label pricing, coffee and maybe less so on Pet. We have seen you step in a bit more into the promotional side. So while we understand coffee costs have been lower, like you said, over a long period of time, we are also seeing your promotional activity increase a bit more than it has been over time, while coffee costs have remained low. So, just trying to get a kind of general idea as to activity all-in within the categories that you play? Thanks.

Hey, Rob. It’s Mark Smucker. I think quite frankly the promotional activity’s been very normal. I mean, it’s been very -- pretty typical. The way that we have been interacting with our customers, whether that be in all of the channels has been relatively positive. We have very strong relationships with our customers, obviously, as I mentioned in the last question, we bring a lot of know-how and insights to the categories and we just have not seen anything out of the ordinary, I -- again, I would say that the environment is pretty typical as it has been over the past few quarters.

Okay. Perfect. And then, just with respect to Pet one last one. I know there have been a lot of questions on Pet so far. But very simplistically we did see, let’s say, a little bit of share loss relative to the category and other players within FDM, not much, just a little bit, but you are still growing within tracked channels, right? So it’s not as if we were seeing that decline that you posted on the volume side and reported. So I know you kind of already walked through the drivers of those and say what we -- some innovation has been pushed, but maybe if we could just revisit it to say, well, you are still growing at least from what we can all see in the retail data, maybe slightly lower rate, but not that much lower. And then you have also stepped into the Pet specialty channel and it seems like you might be exiting still some of the private label product. So I am just trying to right-size why are we seeing some growth in tracked and then reported or not, it leads me to think of shipments going into next year were delayed, but is there an inventory reduction on some products, what have you? That’s it. Thanks.

Yeah. I’d just say our strategy is playing out. This is Dave Lemmon by the way, Rob. Our strategy is playing out. We had strong momentum in the fourth quarter and for the year. Fourth quarter was up 20% on Nutrish. I assume you are speaking specifically to Nutrish and for the year we were up 25%. And in terms of maintaining our momentum and what’s giving us confidence is we have all the innovation that we have just brought to market. We have incremental innovation that we will bring to market this fiscal. So that’s one positive thing. And the second is that we have closed a number of areas of white space that you referenced and we will see the full year wrap or full year benefit associated with that moving forward.

Okay. Super. Thank you.

Thank you. Our next question comes from the line of Pamela Kaufman of Morgan Stanley. Please state your question.

Hi. Thanks for taking my question. I was wondering if you can elaborate on the cadence of your innovation launches in fiscal 2020 and I guess what do you expect the topline contribution to be from innovation across all categories. I know you quantified the run rate for Pet but was wondering if you can provide something similar for all of your categories?

Yeah. This is Mark Belgya. We really won’t. I mean I had it in my scripted comments. We are introducing -- we have talked through sort of the litany of the areas both on the call and at CAGNY and so forth. They will just continue to launch here in the fiscal. The topline, as I said, is being driven by innovation, so you can sort of suspect as you see quarter-to-quarter growth that will be mostly of the innovation, whether it’s Power Ups, 1850, things coming in in Dave’s area, Dunkin’, throughout the course of the years. Unlike last year, where we were more specific to say 1850 and Power Ups was very early on in the fiscal and Pet was in the latter part, we are not really bifurcating our innovation that way.

Okay. And then you have said that you haven’t really seen any impact from Blue Buffalo’s expansion into Walmart. But was wondering if there’s any change in your view on that competitive dynamic?

No. Pamela, this is Mark Smucker again. I think as we said, we -- again, the category is very broad. It is a huge category. It’s growing significantly and given where all of our brands play we feel pretty confident about everybody. There’s room for us. There’s room for them. We continue to compete in sort of different pricing tiers. And again, I think, just the breadth of our brands and the strength of our position in the category is going to allow us to continue to compete effectively. There will always be noise. But I quite frankly, I think, we obviously remain confident in our strategy and our ability to continue to grow our Pet business.

Thank you.

Thank you. Our next question comes from the line of John Baumgartner of Wells Fargo. Please state your question.

Good morning. Thanks for the question. Maybe just one more for Dave on Pet, if we look at Nutrish, dig into some of the flanker brands, the Just Six, Zero Grain, The Dish, I mean, those are 20%, 25% of the Nutrish portfolio in measured channels. And the sales have been down, double digits consistently going back to late 2017. So, I mean, can you just help square that, what’s driving those declines in those flanker brands and I guess tying it back to the questions on competition, what’s the read across for Nutrish’s capacity to maybe expand outward from that core over time? Thank you.

I would say that -- John, this is Dave Lemmon. We manage Nutrish as a brand, as a portfolio within the brand and it’s -- what is it doing in total. In total we had a great year on Nutrish, grew 25% and we expect that momentum to continue. Again, we closed a number of white space opportunities. That will extend the brand both in cat and treats and strengthen the portfolio in dog. Our innovation across dog, cat and treats is just coming to market and we are going to bolster that brand with additional innovation in the years or the -- in the months ahead. And finally, I would say that, we are just -- we are going to be stepping up our marketing behind Nutrish next year to support the brand moving forward.

Great. Thank you.

Thank you. Our next question comes from the line of Alexia Howard with Bernstein. Please state your question.

Good morning, everyone. I am…

Good morning.

You have got some guidance on the topline for next year that’s a little bit better than we have seen other companies and maybe a little bit better than you have seen yourselves in recent years. And you talked about the stepping up in the pace of innovation. I assume that that means incremental SKUs and also the idea of being everywhere, I think, that means incremental points of distribution. How do you make sure that you don’t proliferate the SKUs or point of distribution to the point where your velocity is starting to be hit on average and you are not really making money on some of those extra pushes on the distribution and the innovation front? I am just curious to hear about what your processes and criteria are for how you maintain discipline around both of those dimensions over time? Thank you and I will pass it on.

Hi, Alexia. It was a little grainy, but I think you were asking about the volume growth, make sure we are not proliferating SKUs. Let me just start and where appropriate, I will ask the business leads to dive in. So I think it’s important that you step back couple years ago when we started this shift in our innovation thinking and we brought this concept around platform innovation, which was a change from our historic, what I will call loosely line extension. I think under a line extension approach, I could see where you would have a concern around SKU proliferation, because you are just swapping out one flavor of jelly for another. Our platform is built upon the fact that you are going to have multiple facets of category offerings within that platform. So, maybe I will ask Tina to maybe just go a dive deeper as to what she’s bringing as a best example of what a platform does that should show you there really isn’t SKU proliferation.

Yeah. This is Tina. Again, just commenting on Mark’s comments, if you take a look at our snacking portfolio with Jif Power Ups, for example, snacking’s a brand new category for us. So we are finding our space within that category and continuing to grow. We are expanding the platform in this fiscal year by adding new items such as stacked bars and soft baked bars. So we are going to continue to see those platforms grow as we look throughout the balance of the year.

Yeah. Alexia, this is Mark Smucker. I would just add, again, as category leaders, we have a responsibility to continue to manage our portfolio in totality and that includes as we have conversations with our retail customers, we proactively will prune our own portfolio, I mean, that’s part of being a responsible partner with our customers. So just in a leadership position, we have got to do that, we have -- we always are looking at our portfolio and how we can best maximize category growth, category profitability, both for our customers and for us, and then just maximize our own growth. So we are focused on it and we continue to manage it proactively throughout the year.

Thank you very much. I will pass it on.

Thank you. Our next question comes from the line of Rebecca Scheuneman of Morningstar. Please state your question.

Good morning. So this question was touched on a little bit earlier but I think I will come about it maybe more directly. We are starting to see higher protein prices and it’s expected to continue and possibly accelerate given what’s happening in China. And I was just wondering if you are already starting to see increase in your raw material costs there and also are you seeing any competitors starting to push through price increases, and if not, do you expect to see that?

Hi, Rebecca. This is Mark Belgya. I would say that, our guidance reflects our best perspective of our cost structure. I think you are aware that we have a fairly detailed hedging program across the majority of our commodity products, so we have a good look at and we will, obviously, being monitoring the market as things transpire. But right now we feel comfortable with our guidance range that at least where cost is today we have addressed them.

Okay. Thanks. And my last question is on 1850. I believe it was last quarter you had mentioned that while repurchases were coming in a little better than expected, trial was a little bit weaker than what you were looking for and you were going to tweak some marketing. I was just looking for an update on how that brand is progressing and if it’s meeting your objectives?

Hi, Rebecca. This is Joe. Yeah. That’s correct. We did say that and happy to report we did. We put a little more focus on trial. We did up that as we ended this fiscal year and going to next year. As Mark mentioned in the script, we are very pleased with year one. The number one new coffee item in the category in the top quartile, I think, number 11 in total new food and beverage launches. So we are very pleased and we are looking for another solid year or two as we start fiscal ‘20.

Okay. Great. Thank you so much.

Thank you. This concludes today’s question-and-answer session. I will now turn the conference call back to management to conclude.

Thank you all for joining us today. This is Mark Smucker. Just to reinforce, obviously, our growth imperatives are really where we are focused, being in great categories that are growing. They are up 25% over the last several years in aggregate. So clearly we feel that we are in the right categories and the breadth of where we play is very strong. And then, again, focusing on building our brands, leveraging our new agency relationship and the agile capabilities we have built, and finally, making sure that our brands are present everywhere that the consumer wants them. So we feel very encouraged by the last couple quarters. We are seeing growth across all of our key businesses and we -- this is a strategy that we are committed to and that we have confidence we will continue to build sustainable long-term growth and so that’s where we will continue to focus over the next couple years. So thank you for your support. Thank you for listening in. Thank you to our incredibly dedicated employees that have really made all of this possible and have a good day and weekend. Thank you.

Ladies and gentlemen, this concludes our conference call for today. Thank you all for participating and have a nice day. All parties may disconnect.