Good morning and welcome to The J. M. Smucker Company’s Fiscal 2020 Fourth Quarter Earnings Conference Call. This conference is being recorded and all participants are in a listen-only mode. We will open the conference up for question 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 over to Aaron Broholm, Vice President, Investor Relations. Mr. Broholm, please go ahead.

Good morning and thank you for joining us for our fiscal 2020 fourth quarter earnings conference call. After this brief introduction, Mark Smucker, President and CEO will give an overview of the quarter’s results and an update on our strategic initiatives. Tucker Marshall, CFO, will then provide detailed analysis of the financial results and our fiscal 2021 outlook. 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, including additional information regarding net sales by segment and cost of products sold for fiscal 2020. 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 would like to begin by acknowledging the challenging times we all continue to live through as a result of the COVID-19 pandemic. At Smucker, we are united in our commitment to support those most impacted. We are focused on maintaining employee wellness and supporting our communities, retaining our high-quality and safety manufacturing standards and partnering closely with our suppliers and retailers to ensure we can deliver food for consumers and their pets. I am extremely proud and thankful for our employees who have fully embraced our Thriving Together philosophy, which define success as driving business growth while also helping those associated with our company thrive. This approach means we take an active role in helping our consumers, supply chains, communities and the planet. Our teams adapted to a rapidly changing environment by drawing on the strength of our production capabilities and responding quickly to customer and consumer needs. Our fourth quarter results, including record net sales and adjusted earnings per share performance, are a direct reflection of the dedication and agility of our teams. The quarter’s net sales increased by 10% versus the prior year driven by the change in consumption patterns due to COVID-19. Adjusted earnings per share was $2.57, an increase of 24% benefiting from increased sales, improved profit margins related to mix and operating leverage and reduced marketing expense partially offset by increased costs related to COVID-19. For the full year, net sales were flat to the prior year at $7.8 billion, which on an organic basis, was an increase of 1%. Adjusted earnings per share, was $8.76, an increase of 6% and free cash flow was $986 million, an increase of 26%. Through February, fourth quarter results were tracking in line with our…

Thank you, Mark. Good morning, everyone. Let me begin by giving an overview of our fourth quarter results before providing more details on our financial outlook for fiscal 2021. Net sales increased 10% driven by the consumer demand from COVID-19, which we estimate contributed 10 percentage points to growth for the quarter. Favorable vol mix contributed 11 percentage points to net sales growth and was slightly offset by lower net price realization. Adjusted gross profit increased $85 million or 12% from the prior year driven by the increased contribution from vol mix and reduced input costs partially offset by lower net pricing. Adjusted operating income increased $78 million as the increased gross profit more than offset the $4 million increase for SG&A expenses. Within SG&A, distribution expense increased $10 million attributable to increased volume and expenses related to the consolidation of distribution centers for the pet business. Marketing expense decreased $7 million as COVID related shutdowns impacted the ability to complete certain initiatives. G&A expenses increased $2 million as incremental expenses related to COVID-19 more than offset benefits from synergies and cost management programs. The additional expenses incurred from COVID-19 totaled $12 million in G&A. Below operating income interest expense decreased $4 million driven by a reduction in outstanding debt from repayments made over the prior 12 months. The adjusted effective income tax rate was 23.4%. Factoring all this in, fourth quarter adjusted earnings per share was $2.57 compared to $2.08 in 2019, an increase of 24%. Let me now turn to segment results, beginning with pet foods. Net sales increased 6% with estimated sales related to COVID-19 contributing 8 percentage points to growth. Cat food continued its strong trends with Meow Mix and 9Lives both growing approximately 20%. Dog treats grew 12%, led by Milk-Bone and Pup-Peroni. Dog food…

Thank you. The question-and-answer session will begin at this time. [Operator Instructions] Our first question today is coming from Andrew Lazar from Barclays. Your line is now live.

Thank you very much. Good morning, everybody.

Good morning, Andrew.

Good morning.

Thanks. As you talked about, I think excluding COVID-related sales impacts in fiscal ‘21 and the fiscal 4Q last that you talked about, the company is looking for I guess anywhere between a 2% and 3% rise in organic sales in fiscal ‘21. You put some parameters around that and I appreciate it and I understand of course we are in a very dynamic environment to begin with but given that I guess underlying organic, excluding the COVID benefit in 4Q for the year last year, I think it was still negative, trying to get a sense of your level of comfort around that type of again underlying acceleration in sales growth as we go through this year. And then I have got – particularly giving given some of the current market share challenges in pet? And then I have just got a follow-up. Thank you.

Andrew, it’s Mark. I will start and perhaps Tucker will add on here. But first of all, I think what we have seen through the COVID situation is obviously first and foremost we had to make sure that we are doing the right things for our customers and consumers, because clearly in a crisis of this magnitude we have an obligation to consumers, the citizens of North America where we do business to make sure that we supply safe and consistent food supply. And what we have seen through that is a first of all we are in resilient categories and strategically, our three growth imperatives are right. In other words, we have demonstrated that we were able to lead in these categories to continue to support the health and building up the brand and then of course making sure that our products could and brands could be everywhere. So, given that and given that consumers have, we have seen a return to a number of trusted brands that and a host of other things gives us confidence that we can maintain some of this momentum going into this next fiscal year despite the headwinds that we are facing.

Andrew, this is Tucker. To further address your question, we do see underlying growth in the business absent COVID as we said largely driven by double-digit growth for Smucker’s Uncrustables, continued momentum in the coffee business lead by Dunkin’ and Café Bustelo, obviously strength around our dog snack and cat portfolio and then continued improvement in the Nutrish brand. And as we have shared before in order to translate that top line growth into bottom line growth we continue to advance our margin management programs in order to ensure both profitability and earnings growth over time. This commentary absent COVID is pretty consistent with what we shared at CAGNY. Obviously, a pandemic has since occurred, so new news.

And then the follow-up would be one of the four key priorities, Mark, that you talked about for fiscal ‘21 was that new margin management program and I think as part of it, you specifically said some potential changes in the – I guess sort of sounded like pricing architecture to be more consistent with where some of your costs might be your key inputs and I was trying to get a better sense of – if there is more color you can put around that? I was intrigued by, but still unclear exactly what that was. Thank you.

Yes. There are two separate things to be honest. But to answer your question specifically, Andrew, on margin management, we have been every year we have a continuous improvement mindset, so we continue to look at cost discipline across all of our business and functions every year. This is basically an evolution of those efforts making sure that as we continue to challenge our cost structure that we are making decisions that essentially would be permanent decisions. These are not temporary exercises, but ensuring that our cost structure is right for the company that we are and wish to become. Pricing, it was in the script, we are seeing increased costs on peanuts and on coffee. There is a number of components, particularly in the coffee, in terms of how we get to a total delivered cost. So to the extent, obviously we are very cautious in monitoring all of the various price gouging laws that are out there, but we do expect to be able to recover in a prudent and very well justified way, those cost increases throughout the year.

Thank you. Our next question today is coming from Ken Goldman from JPMorgan. Your line is now live.

Hi. Thank you everybody. Appreciate all the details as always. Tucker, your gross margin guidance of 37.5% for next year, that would be the lowest in six years for the company. I appreciate the headwinds you have highlighted. You talked about higher bean costs, higher peanut costs, some fixed cost de-leverage, pet stock de-stocking, etcetera or pet food de-stocking, but I might have thought that maybe a bit more of the fixed cost leverage would flow through? And I know your total sales number will be down. So I think that’s probably the main answer here. But to get to the point why will this be the lowest gross margin this company has had since 2015? It just feels like that is slightly conservative, given that you had down sales years in the past, when the gross margin hadn’t gone that low. So maybe if you can, walk us through maybe rank order what the biggest drivers of that would be? That would be helpful for us.

Yes, I can. Thank you. And yes, you are correct we have anticipated the gross profit margin to be down year-over-year, largely I would say first of all, you have to factor in the away from home impact of lost volume coming through the respective facilities, and that is having a significant impact on absorption. And so that is a key driver. So as away from home volume does return at some point that should help the gross profit margin. The second observation that I would make is, to Mark’s point, we need to continue to recover traditional commodity cost increases over time, and we are doing that. The other observation that I would share too is, is that we’re stepping into the next phase of our Longmont expansion, in order to ensure capacity for that growing business. And so, as we begin to normalize around these costs over time, we should see an enhancement to that margin.

Okay, thank you. So I’m never going to ask a company about the guidance for 2022 at this point. But I’m imagining what you’re suggesting is the 37.5%, hopefully will be a low watermark for the business, all things equal? Is that a fair way of thinking about it?

Yes, I would not align on what the outcome is going to be for the future. We obviously remain committed to ensuring profitability over time. And so right now, we are working through those elements that I just shared with you.

And then follow-up for Mark, you have a new COO, new CFO, new head of your biggest segment. You’ve changed some other high-level people’s titles and maybe some responsibilities as well within the last year. So I’m sure there’s a lot of new ideas and suggestions for changes in direction that you are hearing. Obviously, you’ve talked about how we shouldn’t expect major deviations, but sometimes voices can get louder, once they are actually in the room. So I am just curious, as you think about some of the conversations you have with your new senior leadership team, how have they changed recently? And are you hearing any bigger strategic debates within the company, that could inform us about how Smucker is thinking about the modern world, I guess?

Ken thank you for the question. I would start by just highlighting that – a couple of things. The team itself, in terms of the people is one of the strongest teams or maybe the strongest team we have ever had, with incredible CPG experience. I would highlight as well, particularly not only the new members of the team, but even those who have been promoted within, have a strong track record of delivering results. And so I couldn’t be happier with the team itself. The structure as you know was hiring a COO and John coming in had been contemplated for some time. So, I think I may have said this before is that when I became CEO, I wanted to stay closer to the businesses, but had a pretty clear sense that a COO would be required down the road. And I am very pleased in terms of the way that this leadership team has been structured. It’s a little more streamlined. It’s going to help drive accountability. And then more specifically to answer your questions, I will tell you the dialogue in the room is as rich as it’s ever been. There have been a number of – there is always differing opinions. I will say the conversations always take place with a tremendous amount of mutual respect. And we always get to a place of alignment. Ultimately though, strategy is my responsibility and so this structure will allow me to more consistently focus on the strategy of the company, the fundamentals of that strategy which you already now we believe still are the right fundamentals. And this particular structure will allow for a greater degree of agility and execution of that strategy.

Thank you. Our next question today is coming from David Driscoll from DD Research. Your line is now live.

Great, thank you. Good morning, everybody.

Good morning, David.

Great. Wanted to just to go back to the outlook, I have kind of two questions I would like to ask on the outlook it’s really just one big long question effectively. But can you just tell us, what are some of the key assumptions on – do you make assumptions on what you think happens on the virus and then eating at home when we get to the fall, do you think there is a resurgence in the virus, those are helpful pieces to understand. I certainly try to think about that when I think on how to model the winter quarters for different companies, I am curious what you thought about in giving this guidance? And then I just had a big picture question on guidance, how do you feel about your confidence level in this particular guidance versus previous years when you have given guidance at this time? I ask because I think people will put an incredible amount of weight on the numbers you guys have put out there, but I just wonder if in a normal year you are 90% confident in the guidance, but today, it’s – I would suspect you are not as confident, because this future outlook just for any of what seems to be more uncertain than ever, but would like to hear your opinion on that? Thank you.

David, as it relates to some of the key assumptions that we considered in building our guidance, we will first say that the tremendous impact that we saw positive impact in March and April and continued momentum in May as well. We don’t believe that we are going to lapse the fourth quarter. So just big picture, that’s the first observation. The second observation is that we see significant and extended decline in our away from home business throughout the fiscal year. And then as it relates to our retail businesses, we have anticipated that pet will have de-stock in the first quarter, that’s what we are anticipating. And then furthermore as is that we will see continued momentum in coffee and consumer at elevated levels in Q1, but then begin to moderate in Q2, Q3 and Q4. And that’s kind of how we have modeled out the year. We have recognized there are lot of events and uncertainty in this dynamic time, but that’s also why to your second point we put a wide guidance range so that we have some flexibility to achieve the numbers that we have put out there, but also recognized that we need to narrow the range over time as we get more certainty in finishing the fiscal year.

David, it’s Mark. Thanks for the question. I think if I could just make one broad generalization and then maybe give you a little bit of color on the away from home business to provide a bit of confidence there. The generalization is that if you think about some of the assumptions that we have made around COVID, basically we are assuming a prolonged and gradual return to normal. I would just leave it at that. Obviously, we know things can change and so forth, but that is – the numbers that we have given and the breadth of the range are really intended to provide you guys with some degree of transparency, given that it is down from where we finished this year and we felt that it was important to provide that to you all. The second piece, just on the away-from-home business, just to give you a sense, because we really don’t talk a lot about the away-from-home business, it had been projected to be just shy of about $600 million business, it essentially consists of coffee, branded tabletop products that you would see in restaurants and hotels, like the little portion controls of jams and peanut butters, and Uncrustables. In Coffee, it consists of a roast and ground business, much of which is in offices, and then a liquid coffee business that is dispensed through equipment that we distribute with the product, is basically concentrated coffee that is dispensed in customized drinks or high volumes. So what I would like to leave you with is that the underlying trends of that business are very strong. pre-COVID, we had been gaining share across all of those segments and even during COVID, even though the sales are down significantly, we have also continued to see some share growth in those segments. Uncrustables as a segment is still – we anticipate is going to do okay and the healthcare channel of course is going to continue to do okay. But it’s the coffee and sort of those tabletop businesses that we would anticipate to be down. So I know that we don’t talk about the away-from-home business a lot, and I think it was – I just wanted to give you guys a little bit of sense what’s in there. And obviously just acknowledging, our away from home team has been fantastic and the yeoman’s work in terms of what they’ve been doing these last several months, so just wanted to acknowledge them.

One super-fast follow-up on Jif, are you adding capacity, when do you get off allocation? Thank you and I’ll pass it on.

So first of all, we have two plans on Jif. You know, we anticipated this question might come up. So first of all I just want to say, we are not apologizing for the performance on Jif, it has been fantastic. We’re lapping a huge Q4 of last year that we did not think that we could beat. And I will tell you that the Jif performance is one of the things that I am most proud of during this time. The latest 12 takeaway is about 26%, and we had been gaining share in the prior three quarters, the second, third and fourth quarters. We are clearly the leader. We’re in a much larger base. None of the other players in the category have sold as much peanut butter as we have in the last few months, and we tended to be the brand that would first sell out in the stores. So we quickly pivoted to full capacity at both of our plants. We streamlined the product offerings to the most productive SKUs, and so some of those flanker items have not been on shelves for months. But I will tell you that we are working to get a close to full assortment back on shelf in the next few months, and we will be launching some innovation as well. So we are very confident. I will tell you we are selling everything that we can make, and that has been the discipline around making sure that we get peanut butter to the various customers in a fair and equitable way has really been our focus. And just really part of the proud of the work there and you will see, we believe have confidence that our shared numbers will return to growth, as we get the assortment and the innovation up back up and running.

Thank you. Our next question today is coming from Faiza Alwy from Deutsche Bank. Your line is now live.

Yes, hi. Good morning. I just wanted to dig a little bit deeper on your outlook for the pet business? So I guess in the short term, you’ve talked about a little bit of de-stocking. But I’m wondering if anything has changed from a longer-term perspective, especially given that; one, during this pandemic there seems to be anecdotal evidence of increased pet adoption? And secondly, I wonder if during recessionary times you are expecting a shift in demand from more sort of premium pet food, especially on the dog food side towards some of the more – some of your mass brands like Kibbles 'n Bits etcetera? Thank you.

Thank you for the question. This is Mark. So, just a couple of foundational things about the pet category, yes, we saw spike in March that was really related to just stock up, a little bit of panic buying and then the subsequent de-load. I think the fundamental thing to remember is that pets always eat at home, right. So pets are not eating at home more than they used to. They always eat at home. And so the pet category, particularly the pet food segment of the category is relatively immune to the effects of the pandemic and the stock up buying. That’s why our projections for the pet business have been relatively consistent even through the dynamic of the pandemic. We have seen some additional good performance on snacks, pet snacks, because humans are at home more and they are giving their pets more treat, so we have seen some increase there and we have seen as you pointed out very strong performance in mainstream brands as consumers are watching their wallets a little more. There is probably a little bit less money in their pockets across the board. We have seen very strong performance in our cat portfolio as well as Kibbles 'n Bits we commented in the prepared remarks and so those mainstream both cat and dog food brands are doing very well.

Great, thank you.

Thank you. Next question today is coming from Chris Growe from Stifel. Your line is now live.

Hi, good morning.

Good morning.

Good morning, Chris.

Hi. I just had a quick question for you if I could from a high level and I wanted to dig into one of the divisions. I guess I am curious, the degree of conservatism that you built into your guidance for the year. You have a wide range and that seems to account for varying scenarios. But I was thinking about, for example, the risk at least in the recessionary environment of private label gain shares, an example – are there other factors you are trying to incorporate into this outlook very early in the year given you are giving guidance for a year out from now?

Yes. Chris, I think the objective here with respect to guidance was around visibility and transparency as what we know regarding the current environments specific to COVID-19 and then also the underlying performance of our business. So, really our scripted comments have kind of highlighted where we are see both the headwinds and tailwinds to the business. What I would simply say is, is that we see the dollar year-over-year impact due to COVID-19 and then the ability to come up about $0.34 to the midpoint of the guidance range is largely driven by the underlying growth that we have discussed across coffee and consumer and some return in momentum in pet and then continued advancement of our margin management programs that Mark spoke to earlier.

Okay, thank you. And then just to understand how you are approaching promotional, I think advertising is going to be down a little bit of the year, but from a promotional standpoint you are scaling back on that, have you also altered new product launches and new product programs for the year given the environment that we are in?

Chris, it’s Mark. Second part of your question, I will answer first. We did delay the launches of a few new products, but it’s pretty much minimal. So we have actually gotten those launches back in the pipeline and we are scheduled to launch them with – in the most cases probably a few months delay. So we have gotten those things back on track and the first part of your question, marketing, so we will continue to spend against our brands. We have been very successful in becoming more efficient from a marketing perspective in terms of finding ways to strip out non-working marketing dollars as the dollars that we are spending are very effective and efficient. We will continue to prioritize those marketing investments against those brands that we think have the most upside. So, for example, Nutrish and Uncrustables being two notable ones, so again, just making sure that we are as effective as we can with our marketing dollars.

Thank you. Your next question is coming from Rob Dickerson from Jefferies. Your line is now live.

Hi, good morning. It’s Matt Fishbein on for Rob. Thanks for the question. Just to follow up on the marketing piece for a second. I know, some of your peers are continuing to keep their foot on the marketing pedal so to speak, despite some of the out-of-stocks that they’re seeing, because for them it’s more about building brand equity over the next couple of months and really trying to capitalize on the household penetration uptick. And like you were saying, with advertising coming down, what’s kind of the philosophy behind marketing spend in 2021? And does that have anything to do with just going back to Mr. Driscoll’s question regarding the allocation of products. Does that have anything to do with perhaps the customers still being on allocation for things like peanut butter or Uncrustables or coffee? Can you give us a little bit – this is my second question, can you give us a little bit of an update on maybe the allocation for those for those three categories, maybe at the end of Q4, if you are more comfortable with that, only because just from an investor standpoint, this kind of takes away from the upside that Smucker’s would – we would think that the company would have, given your exposure to these categories that would fit well in this at-home consumption situation? Can you help us kind of bridge the gap there between the lower marketing spend and the allocation for products? Thanks.

Rob, thanks. So this Mark again. That was a lot, but I will do my best to answer it. First of all on marketing, couple of things; our brands are performing. You mentioned promotions in there and we have pulled back on promotions, on things like peanut butter and coffee, in part because the customers have asked us to do that, and also because there isn’t a need to promote as much, because consumers, those products are in very high demand. And similarly, the marketing dollars that we have out there, some of those brands don’t need as much marketing support in this current environment, because the brands are selling themselves. In some cases, we have actually pulled certain advertising campaigns off air, because we felt that the themes in those advertising campaigns were not appropriate for the current environment. So for example, Jif and Dunkin’ both had advertising that sort of had an apocalypse theme, we have pulled those. So that’s just one example. Moving forward, as we have obviously engaged with consumers a lot over these past few months, there is a lot more data available and so it affords us the opportunity to tailor our marketing efforts, more specifically to different tribes of consumers or what have you. So I would not say in any way that we are taking our foot off the gas. We still launched 10 new campaigns this past year and we’re going to keep pushing against almost every one of those. We are just going to be laser focused on which brands, as I said earlier, are going to get the most resources and really make sure that we’re tailoring those efforts. As to your question about allocations, I would say the worst of it is over, at least given the spike you know, we mentioned in the script, the peanut butter and Uncrustables both experienced some allocations, and as I already said, we are getting our fuller assortment back on shelves. So from an allocation standpoint, I would tell you, we believe that we are past the biggest constraint period.

Thank you. Our next question today is coming from Alexia Howard from Bernstein. Your line is now live.

Good morning everyone.

Good morning.

Hi, there. So actually just following up on the previous question, you have got – I know you just talked about some of your allocation and everything should be fairly smooth sailing from here. But you have got a number of categories where volume growth has been incredibly harsh over the last few last few months, obviously, single-serve coffee, the oil business, the jams and jellies and the frozen sandwiches. If the demand continues at its current pace, do you have enough supply? I mean, can you keep the production levels at this kind of level without having more inventory problems going down the road? And then I have a follow-up.

Alexia, the short answer is yes. In almost everywhere we really do have the requisite capacity, the highest demand products, again peanut butter and Uncrustables have been very high, obviously, coffee as well, but we do have enough capacity to service what we are viewing the demand will be over the next several quarters.

Great. And then the follow-up is just around this idea of seeing everywhere, I mean, in an environment like this, where distribution channels are shifting so rapidly, I mean, little bit more targeted approach that focuses on the fastest growing channel is the most profitable market where your products have returned to be really viable. Does it actually make sense to be pushing your distribution as far as you possibly can on incenting your sales people to be pushing volumes wherever you can or would it be better to be able to be a bit more focused in this environment? Thank you. And I will pass it on.

Yes. Alexia, I think I understand your question, our sales team is incented to obviously sell profitably. And so we are focused on making sure that we are really getting the products where they need to be. If you think about e-commerce, what was interesting about this quarter was that we did see a large increase in click and collect sales, which tend to have profitability more in line with brick-and-mortar. I will also say that even our e-commerce, our pure-play e-commerce sales which are up significantly notably on smaller brands like 1850, we are making progress to ensuring that our profitability across all channels is relatively in line.

Thank you. Our next question is coming from Jason English from Goldman Sachs. Your line is now live.

You there, Jason?

Perhaps, your phone is on mute sir.

Yes, hi. Can you hear me now?

Yes. Good morning, Jason. Good morning.

Hey, good morning guys. Thanks for slotting me in. Sorry about that. So, I appreciate all the volatility, especially some of the year-on-year noise, but if we rewind to sort of CAGNY before all the stuff set in and look at your expectations then and compare them to what you are expecting now? You are forecasting a sales level talking about year-on-year, but sales level next year that’s lower than what you would have expected at CAGNY and at earnings level, that’s lower also. And I appreciate that you got like 6.5% of your business that’s under pressure, but you have got about 50% of your business that has some consumption tailwinds right now. So if anything, I would step back and think that the baseline now should be higher for next year. What’s the offset? Where is the net softness if you think about fiscal 2021 relative to what you were expecting just a couple of months ago?

Thanks for the question. I will tell you I am not sure that we aligned to the premise that what we have shared at CAGNY is not happening absent the impact of the COVID-19 pandemic. We are based on our analyses looking and seeing that we are seeing some top line growth at a total company level. We have communicated on our scripted comments what those were around Smucker’s Uncrustables, growth by Dunkin’ and Café Bustelo brands within the coffee segment, obviously continued growth in cat food and dog snacks, along with improvement in the Nutrish brand as well within the dog food area. And so that also is translating down to the bottom line in terms of demonstrating bottom line growth as well, not only from those incremental sales, but more importantly also through our ongoing margin management program. So, I am not sure that there is a vacuum or a hole like you have said. I think the reality of it is, is that we do see growth in our business both top and bottom line through the COVID situation.

Okay. I’ll try to walk through that offline with you guys later, just so I can fully wrap my head around it, but just switching topics now kind of back to your pet food business. You are looking at what we see in consumption data. We obviously saw the big growth in March and the de-stock in April from a consumer perspective. But it looks like may has kind of come back to normal consumption. So I guess my question is, what’s driving your anticipation of the de-stock hitting you guys in May? Is it just the shipment timing thing? And then secondly on pet, you were talking throughout the year of private label wins beginning in the fourth quarter, planned private label wins? But now you’re talking about planned private label losses being in the second quarter. What’s changed on the private label side?

Jason, it’s Mark. The easy answer to your first question about the de-stock, it is just timing and it’s just the way that as – what we’re seeing from consumer takeaway would indicate to us that folks, as they stocked up in March, is just taking a little bit time through this quarter, for them to get through the product that’s in their pantries.

Yes, Mark. And I guess in support of the private label question, there is a private label headwind impact, just due to some discontinued business in the fiscal year.

Thank you. The next question is coming from Robert Moskow from Credit Suisse. Your line is now live.

Hi, thanks. I was hoping to understand the – it’s a $170 million headwind in away-from-home in fiscal ‘21. But when I look at your fourth quarter results, it was a little hard to tease out, how it could be that date, because what the press release says, is that COVID decreased sales by 1%, reflecting a 21% decrease in away-from-home. So if a 21% decrease in away from home will only hurt your top line by 1% in that division, I guess the big question is, how big is away from home and what kind of a total decline are you expecting for the year on a percentage basis?

Yes. So, Rob, the way that we have thought about the $170 million, is that that is the year-over-year impact of a) not being able to lap what occurred in the fourth quarter for away-from-home, along with the extended decline over a 12-month period for away from home. And so that is what’s happening in that $170 million number, that’s having both – away-from-home actually had a good couple of months, before it saw the decline in April, and then it seemed the decline over the 12-month period. So it’s lapping that kind of fourth quarter, little bit of a sales benefit, and then seeing the full impact starting in April over that 13-month period. So that’s the first thing, as it relates to away from home. I think Mark said in his comments earlier, the away-from-home business is about $550 million to $600 million business.

Okay. So – alright, well I guess I will walk through the math with you later.

Sounds great.

Alright. I’ll hop off. Thank you.

Thank you. Our next question today is coming from John Baumgartner from Wells Fargo. Your line is now live.

Good morning. Thanks for the question.

Thanks, John.

Mark, just looking big picture, if you go back to the Investor Day 18 months ago, there was a lot of focus on seven or eight fast growth brands that were guided to high-single digit growth in your framework. And flash forward to the present, Power Ups discontinued, 1850 has not really scaled yet. We are aware of the struggles at Nutrish, so if you reframe that growth discussion for us now, like what’s – I mean, are you assuming a new wave of innovation come through here? Are you more inclined to just set the lower contribution from the growth brands? And then just down shift or concentrate in your brand investment accordingly, how do you think about the puts and takes in that business?

John thank you for asking that question. If you rewind the clock, we did put a lot of focus on just a couple of brands in our portfolio. Notably, Jif and our Jif Power Ups and 1850. As, we have made a difficult, but correct decision on Power Ups, given the profit trajectory of that brand. We don’t view it as a failed launch, but I think it required a bit more discipline on the profitability side. As it relates to 1850 and then I will answer your question more broadly, we are not giving up on 1850. It does have upside. In fact, it is doing exceptionally well online and we are able to just recently secure some additional brick-and-mortar distribution for that brand. So, we still feel that 1850 has runway. It’s never going to be a $0.5 billion brand, but it does play a role in our portfolio. But I would point out to you that in the fiscal year that we just finished as we look at all new products in aggregate and the way we measure that, as many companies do, is products launched in the last 3 years and accumulate – or in a rolling fashion are those that we consider new products. Those new products in totality contribute about $360 million to our top line during the year. So I would submit to you that although we were shining the spotlight on a few brands when you look across our portfolio more broadly, innovation is still incredibly important and we will continue to drive innovation, notable innovations that we will be seeing this year would be on Jif and Nutrish among others. So, it still plays a key role in our portfolio.

Thanks Mark.

Thank you. Our next question today is coming from Pamela Kaufman from Morgan Stanley. Your line is now live.

Hi, good morning.

Good morning, Pam.

You highlighted in the prepared comments that leading brands are benefiting from the current environment? I guess based on your conversations with customers, what do you see as the implications for shelf space for your product over the coming quarters? And do you expect to see any changes to retailer strategy when it comes to managing your key categories?

You know, that’s a difficult one to answer. I would say that a couple of things that are important to highlight is what has come to light is that our brands do matter to consumers and many – our stated strategic vision is to inspire and delight consumers. And I will tell you that if you look at Folgers, how many new households that we penetrated with Folgers that many consumers have sort of rediscovered their delight for our brands and that is the key thing that we really must leverage as we move forward with our marketing efforts to make sure that those feelings, those sensations about our brands truly do stick. As it relates to customers, it’s a little early to really give a sense there. And I do think customers will think – this will cause customers to think differently about how they merchandise in their store. But I am hopeful and cautiously optimistic that we will see a return to or a greater support of some of these leading brands, which maybe – heretofore were considered slightly lackluster. So even with a brand like Folgers which we saw tremendous growth and tremendous improvement in household penetration we will continue to reinvigorate to think about how we market those brands in a new and more contemporary way.

Thanks. And what is your view on the impact of the macro environment on the consumer and any views on potential for down-trading in your categories as a result? I guess how are you thinking about private label trends going forward? And in the past, what kind of performance did you see across your portfolio during challenging economic times?

Well, traditionally our brands and categories tend to perform reasonably well during times which are economically challenged. And I guess I would just leave it at that.

Thank you. We have reached the end of our question-and-answer session. I would like to turn the floor back over to management for any further or closing comments.

Yes, I just first of all wanted to thank each and every one of you for tuning in today. I know it was bit of a longer call, but we felt that it was important to try to get as much information out there as we could and just thank you for your patience and your attention. Most importantly though, I would like to thank our employees who have truly risen to the occasion to serve our nation and I could not be prouder of the work that we have done considering that we have been working virtually now for several months and the pivot to agility and focus has been noticeable and phenomenal, so just wanted to take a moment to acknowledge our employees and thank you all for listening.

Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.