Kofi Bruce: Yeah. So, you’re correct in noting, Rob, that we were up double-digits in the first quarter on our media spend. I would expect for the balance of the year, based on everything we see right now, we would expect our media spend to grow at least in-line with sales. In this environment, I think it’s important for us to put support — brand support behind quality ideas still, and especially so as we see the environment stabilize.
Robert Moskow: Okay. Can I ask a follow-up? Your snacking business has improved in the quarter. It had some ups and downs. And in the press, you have mentioned as being interested in a major snacking company. As you look at your M&A objectives, is snacking a key area in which you want to expand and possibly through M&A?
Jeff Harmening: Yeah, Rob, so this Jeff. Clearly, we’re not going to comment today on rumors or what has or hasn’t transpired in the marketplace, no matter whose transaction it is. What I will tell you is that, for us, our objectives with M&A really haven’t changed. I mean, we’ve been very consistent, maybe boring over the last couple of years. And then, we will look to add about 50 basis points of growth if we can through both acquisitions and divestitures. There are things that will be bolt-on in nature, by which I mean, we can use our current capabilities and our knowledge of channels and technology in order to generate more sales growth and some synergies. And we do have the balance sheet in order to be able to do that. What I will also remind you is that, we’ve also said we’ve been disciplined, and we are discipline.
And so, to the extent we see something that we like on acquisitions, we will certainly do that, but only if pricing that makes sense for our investors. And so, I want you to know that no matter what’s transpired over the last little while in M&A, our position hasn’t really changed. And that includes — I’ve also read a commentary, our food company is looking at M&A now because their volumes are down, the answer is no. I mean, we don’t play the short-term game when it comes to M&A. We go get brands we like. We hold them for a long time. We grow them. We’ve been doing that for 165 years, and we’ll continue to do that. And so, what isn’t going to be the case is that we see volumes going in a certain direction, therefore we have to make up that gap, that’s really not part of our plan.
Robert Moskow: Got it. Makes sense. Thanks, Jeff.
Jeff Harmening: Yeah, thank you, Rob.
Operator: Our next question comes from Andrew Lazar with Barclays. Please proceed.
Andrew Lazar: Great, thanks very much. I guess with a slower result expected in Pet sales for the year versus initial expectations as you’ve talked about, I’m curious if this impacts your sort of Pet capacity expansion plans in any way. You, obviously, got a lot of work underway in trying to get capacity going and bringing a lot of that in-house over the period — or the course of the next year or two. Does that get any impact — does that get impacted in any way? And I guess, another way of asking it is, do you still see sort of Pet as a sort of high-single-digit type of sales growth driver over time for the overall portfolio?
Kofi Bruce: Sure. Appreciate the question, Andrew. This is Kofi. Look, I think — I’ll start with the back end of your question first. I think we’re still bullish on the long-term prospects for the Pet category. As a reminder, it’s a $44 billion category. It’s supported by 1% to 1.5% pet population growth. And we do think the prevailing trend over the long term will be humanization, which will drive growth, and in particular, benefit premium brands like Blue Buffalo. I think in the short term, we aren’t making dramatic changes to our capacity expansion plans on dry dog food. I think it’s important as we think about that capacity coming online late this year, we won’t — like, we won’t see the benefits this year. We would expect that it will give us longer-term benefits and at a minimum being able to steer more production to internal capacity, which will also help with margin reconstruction on this business over the near — intermediate term.
So, we still feel good. We’re still bullish and a net investor on this business and on capacity, and certainly for the long-term strategically.
Andrew Lazar: Got it. And then, Jeff, I know you and others are certainly talking about the expectation to see improving sequentially volume trends as we go forward just as the industry gets back to maybe a more normal cadence of sort of marketing and merchandising expanding now that service levels are back in a better place and such, which — it seems logical certainly. But what I still don’t, I guess, have a lot of clarity on and maybe because it’s the lot of little things that add up, why do you think that broadly industry volumes are still sort of where they are even as pricing is starting to lap? And maybe it’s just a matter of timing and these things don’t always line-up perfectly in a linear way. But I know there’s been lots of different reasons, people were traveling, now they are back at home or back to school, or people hunkering down a little bit. I’m just curious if what you’re most sort of up-to-date thinking on that might be. Thank you.
Jeff Harmening: Yeah, sure, Andrew. We spent quite a bit of time on this and it’s very clear to us that there are three broad reasons. And so, there’s not one thing. I mean, there are kind of three broad reasons for what we see in the marketplace now, especially as one looks at Nielsen trend. The first, we touched upon this a little bit earlier, but we do see quite a bit of growth in non-measured channels. We’re up double-digits in NAR in the first quarter in non-measured channel, for example. And so that is certainly a piece of why you see Nielsen data as it is. The second would be that food away-from-home, not necessarily in restaurant, restaurant traffic has been pretty flat, in fact, quick-service restaurant traffic has been up, so there is a move toward value in restaurants, but that traffic has remained relatively flat.
What has changed is that we’ve seen a reversion back to people being mobile and more education and healthcare and hotels and lodging and that sort of thing, which I think is logical. In fact, if you look at the movement data through airports, it’s up year-over-year. Now it’s only back to pre-pandemic levels, but it’s quite a bit year-over-year. So that would kind of corroborate that thinking. So that’s the second reason. And the third is, there’s probably as we’ve seen another kind of recession — we’re at a consumer recessionary period, even though technically we’re not in a recession, consumer behavior trying to economize, and so that may be going into smaller sizes and things like that, which in the very short-term, [detox] (ph) a pantry, but people aren’t eating less, and we don’t anticipate that they will eat less.
In fact, what I would say is, as consumers start to get squeezed, what generally happens is people move more at home. And now the cost of eating out is roughly four times what it is eating at home and so as consumers get more squeezed and as people get into their normal routines in the fall, we would think that at-home eating would probably pick up a little bit. We’ll find out. But that’s what we think and those are the three factors that is very clear to us are driving the current environment.
Andrew Lazar: All right. Thanks so much.
Jeff Harmening: Thank you.
Operator: Our next question comes from Jason English with Goldman Sachs. Please proceed.
Jason English: Hey, good morning, folks. Thanks for slotting me in. I have another question on Pet, but not top-line, instead looking at margins. Input costs have been stubbornly onerous for you in Pet, not just you, it seems like the industry at large. The rate of inflation has been a lot higher and for a lot longer. What’s driving them? And what’s the forward? Like at what point do we start to get some relief there and get to a point where maybe you can get some margin recovery? And the second part of my margin question, I know you expanded treat capacity coming into this year with a third-party vendor. Obviously, you don’t need it, and with what’s happening with treats, is that a take or pay agreement? And is that also a contributing factor to your margins? And if so, how big and how long will that headwind persist? Thank you.
Kofi Bruce: Sure. Thanks for the question, Jason. Just a couple of thoughts. So, I think on the first, as you sort of take the frame on the year, given all of the challenges, the mix of business, we don’t expect the operating profit margins to improve this year. As you think about the structure of inflation, some of the same trends that are driving stickiness in human food inputs are there and present, and probably more so on some of the pet inputs, in particular, the conversion costs, which are heavily factored labor, and in particular in the inputs in pet food. So that — until we start to see that trend come off, I wouldn’t expect to see any near-term relief on the inflationary pressures on our input basket for pet food. I think on supply chain, our external suppliers, we generally have a pretty flexible structure.
