Greetings, and welcome to the 4th Quarter Fiscal 2020 Earnings Call. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session.
As a
reminder, this conference is being recorded on Wednesday, July 1, 2020. Now, I would like to turn the call over to Mr. Jeff Siemon. Please go ahead.
Thank you, Tommy, and good morning, everyone. Thanks for joining us for our Q and A session on our Q4 results and full year results this morning. I hope everyone had time to review our press release, listen to our prepared remarks and view our presentation materials, which are available on our Investor Relations section. It's also important to note that in our Q and A session this morning, we may make forward looking statements that are based on management's current views and assumptions, including facts and assumptions related to the impact of the COVID-nineteen pandemic on our fiscal 'twenty one outlook. Please refer to this morning's press release for factors that could impact forward looking statements and for reconciliations of non GAAP information, which may be discussed on today's call.
I'm here virtually with Jeff Harmening, our Chairman and CEO Kofi Bruce, our CFO and John Nudi, Group President of North America Retail. We're holding this call from different locations, so hopefully our technology cooperates and everything goes smoothly. With that, let's go ahead and get to the first question. Tommy, can you please get us started?
Absolutely. Thank you. And we'll proceed with our first question on the line from the line of Andrew Lazar with Barclays. Go right ahead.
Good morning, everybody, and thanks very much for all the change in the earnings release format this morning, very helpful.
Good morning, Andrew. Good morning, Andrew.
Maybe to start, I was hoping to focus on sort of the underlying business momentum, if I could. And I know it's a little harder to get at now, obviously, given everything that's going on. But I think on the Q3 call, the General Mills had said that excluding the pandemic impact, it would be at the low end of its full year organic sales growth range of 1% to 2%. And I think that Blue Buffalo coming into the base adds about a point. So I guess underlying business trends at least as of 3Q roughly call it flattish your expectation for the year.
I think my question was again excluding the pandemic, I guess would General Mills have been considering fiscal 2021 to kind of still be somewhat of an incremental reinvestment year to really shore up sort of organic growth and build on the recent improvements you've seen in
I've said before, we try to stay in the middle of the boat. And one of the ways we do that is by continuing to reinvest in our business. And you see the results in the Q4 included a pretty significant step up on our marketing spending. And actually we think our strength at the beginning of June, especially in North America retail due to the fact that we are spending money on marketing because our promotion levels are actually down in June and our growth is still double digits. And so we believe in investment and marketing and you saw that in the Q4 and you'll see that again in fiscal 2021.
You'll also see investments for us in capabilities, particularly on the data and analytics side to drive both our sales growth through things like e commerce and strategic revenue management as well as cost savings projects like procurement. And so whether COVID or not, we had planned to reinvest some of the growth back into sustained top line sales growth and that is our plan going into next year currently.
And then, I guess lastly, it's really on inventory, specifically at the consumer pantry level. I think in today's release, you mentioned that there is the potential for sort of pantry inventory draw downs moving forward. And I'm curious if this is simply a pet food comment, which I think would make sense or a broader portfolio comment. Because to me, I guess it seems that consumers have been both consuming and replenishing a lot of your center store products rather than stocking up. So I'm just curious if that's something that you're already starting to see or anticipate in fiscal 2021 or more of a broader just, hey, at some point, just given how strong shipments have been, we should just keep an eye out for this if you get what I'm asking?
Yes. So Andrew, let me answer broadly and then specifically on Pet and then I'll have John Nudi answer more specifically on North America retail. Broadly, as you can see in the strength in the Nielsen data on the human food side month to month to month, while there certainly was a stock up in March and you can see that in the data, consumers are clearly still buying and eating through the stock that they have on hand. And so that is consistent with what we thought would happen at the beginning of the quarter when we saw the stock up and in fact it happened throughout the quarter and again it continues into June with some double digit growth on the human food side of the business. On pet food, we saw something different and again consistent with what we expected which is given that pets don't eat a tremendous amount at restaurants, we thought that there would be when we saw the stock up in March, people were asking us is this because there is a lot of dogs coming out of shelters and the answer is no, people are just stocking up and we expect that to reverse in April May and largely it has reversed in April May.
There may be a little bit more to unwind as we begin our new fiscal year in the pet food category, but a lot of that has unwound already. And so what we see in pet is different than what we see in the human food side, which both of which we expected. And John, Newdy, anything specific you'd like to add on that?
Yes. Thanks, Jeff. And good morning, Andrew. So maybe, I'll touch on consumer inventory levels or potential levels. And I'm sure a question on many people's minds too are customer inventory levels, so maybe I'll go there as well.
So from a consumer standpoint, at least in North America, we believe that the majority of the product that we've moved consumers has been consumed. We do believe that consumers are keeping slightly higher levels of inventory in their pantries, but we do expect that to continue. Obviously, as it's a really dynamic environment with the pandemic still raging across the country. From a customer standpoint, we did see a drawdown in customer inventories over Q4. I guess just to quantify it, so for Q4 and our organic growth was 28%.
Our movement was higher though in the U. S. It was up 37%, in Canada it was up 20%. And really that difference was all driven by retailers pulling down inventories, obviously trying to keep products on the shelf. We would expect that to come back at some point in fiscal 2021.
At this point, we don't have a great idea of when and to what extent it will come back. But definitely, we saw retailers pull down inventories during Q4.
Great. Thanks so much for that everybody.
Thank you.
We'll get to our next question on the line. It's from the line of Ken Goldman with JPMorgan. Go ahead with your question.
Hi, good morning. Thank you. And I second Andrew's comments. I do like this format. So hopefully we'll keep it going ahead.
I did want to ask 2 questions if I can. First, you mentioned some headwinds to your operating margin in fiscal 2021. You talked about some higher input costs, supply chain costs, spending on brands and capabilities and COVID related costs. Is it possible to sort of bucket or rank order these just so we kind of get a sense of which are going to be the bigger headwinds and which are going to be maybe some of the smaller ones?
Kofi, do you want to field that one?
Absolutely. So I think great question and good morning. As you look at these, we would reference first as we are coming out of our Q4. We did see higher operating costs as well as COVID related costs. The split between those two is roughly we had about $100,000,000 in higher sort of COVID related costs, I would say.
The split between those 2 is 2 thirds, 1 third, with 2 thirds being comprised of the operating costs, things such as accruing, external supply chain, trucking premiums. And then on the other side, the wellness costs, everything policies. So we would expect that to be a continued headwind as we step in F 'twenty one. As a portion of those costs will continue. Obviously, we can quantify that because a lot of that will be tied to the pandemic, the pace of the virus spread, and obviously, the pace of demand to the extent that the operating costs are directly tied to our ability to source product.
Seth, did I get your question?
Yes, that's perfect. I'll follow-up with more details later, but that's helpful. For a quick follow-up, we've heard some rumblings in the industry that maybe some retailers will get a little bit more aggressive on pricing in the back half of the calendar year, just to help out some of the consumers that may start to struggle more as unemployment lasts longer and perhaps some of the stimulus checks fade. And I'm just curious if you're hearing anything similar. It doesn't necessarily make sense for me for retailers to be pulling down prices right now.
I'm not sure in an environment where there's out of stock, that's the most logical maneuver. But I'm just curious if you're hearing anything along those lines that you can share with us or whether that's misguided?
So John Nudi, you want to field that?
Sure. So good morning, Ken. In terms of promotional support, obviously in Q4, we saw the retailers pull back and promotion as the focus was on keeping products at stock. As we moved into May early June, we saw our promotional levels get back to our normal levels in most of the categories. And as we look to plan through the rest of the year, we're planning on normal levels.
So we have not really been faced with any ask for deep discounts or deep promotional pricing. The one thing I would add is, I mean, there are certain categories that we are constrained from a supply chain standpoint, a capacity standpoint. So even if there was a desire to go huddle from a promotional standpoint, we just don't have the capacity to do that. So I think that's going to be a limiting factor across many of our categories. So I guess to answer your question specifically, we have not had those discussions and even if they come again, I think we're going to be limited with what we can do.
Great. Thanks, everyone.
Thank you very much. We'll get to our next question on the line. It's from Chris Growe with Stifel. Go right ahead with your question.
Hi, good morning.
And I will
third that, if that's the right word for appreciating the new format. So thank you for that as well. I do want to ask in terms of the decision not to provide guidance for the year. You've given a lot of components and things that help us get there, if you will. But and I know that there's a lot of volatility in the business, no doubt.
As I think about giving an indication of roughly a flat operating margin for the year, I'm just curious as you look at the volatility in the business sort of where you get that confidence? Is it that the way you're going to manage the business this year? Is it that you have a good sense of kind of where sales will shake out and therefore you've been able to give the confidence in that operating margin outlook for the year? Just curious how you think about that?
Yes. Thanks, Chris. This is Jeff Harmening. I'm glad you asked that. First, I guess I'd like to start by saying the fact that we didn't issue formal financial guidance is not a reflection of conservatism and is not a reflection of lack of confidence.
It's actually an understanding that a big determinant how much we grow this coming year will be how the pandemic plays out and that is highly uncertain as it relates to the duration and depth of the pandemic. So I don't want anyone on the call to read into it that it's a lack of confidence or actually conservatism. In fact, we think our business will grow over the first 3 quarters relative to what it was pre pandemic levels. And that's because now we're in a period where people are still staying at home, they're working from home, many restaurants are either closed or people don't want to visit. And to a question that Ken Goldman asked earlier, we think that will be followed by a recession.
And if you look back to the last recession, General Mills performed quite well. And so we think there will be an environment where we'll be able to grow for the 1st 3 quarters followed by a 4th quarter comparison. Obviously, that will be very, very difficult. The other thing I guess to highlight is that our confidence stems from the fact that we've executed really well. We're confident that we will emerge from the pandemic in the last few months as a stronger company.
And as witnessed by our share growth in 9 of our top 10 categories in the U. S. By being the 3rd fastest grower in Europe and leading share growth in
our categories in Europe and growing
in our categories in Brazil and growing Wanchai Ferry double digits in China. So I think hopefully what you hear is a company that is confident that the things that we can control we have a good visibility to. And I would say on top of that, our marketing is particularly good right now, whether it's North America retail and honey things like Honey Nut Cheerios or we're very bullish on pet and continue to be bullish on pet after posting another year of double digit retail sales growth and 18% reported net sales growth in the year. So that's kind of where we stand and the reason we didn't provide guidance was because the environment is so unpredictable with the pandemic. That's why.
That's a good answer. Thank you for that. Just a quick follow on to that. So the you've talked about generating efficiencies to incrementally invest in the business in fiscal 2021. You have savings coming through around 4% of cost of goods sold.
You've got inflation around 3%. Is that the gap that you part of which you hope to reinvest? And is it if we think about generating efficiencies, is that incremental to what you expect for right now? You hope to have even more savings to invest. Just wanted to see if I can kind of frame that opportunity?
So Kofi, why don't I leave that to you?
Sure. Absolutely. Hey, Chris, how are you? We are expecting to reinvest a portion of that gap in capabilities. But as you can imagine to my earlier question, again, I think the challenge in operating in this environment is that demand and demand for at home food is probably the single hardest thing to predict.
And so we will be focused on managing the middle of our P and L, so that we can deal with the potentially higher operating costs. And so as we think right now, we have that balanced. We think the capabilities investments will help us advance our long term goals. I don't want to quantify those for competitive reasons, but they are meaningful enough for us to continue to make progress on our capabilities. So I hope that gets at your question.
It does. Thanks so much for that color.
You bet. Thank you very much. We get to our next question on the line from Alexia Howard with Bernstein. Go ahead.
Good morning, everyone. Good morning.
Good morning, Alexia.
Hi. Good morning. So 2 from firstly, on the incentive compensation, I assume that was a fairly big step up this quarter given the strength. I was wondering if you were able to roughly quantify how much that inflated the SG and A line this time around? And then thinking out through fiscal 2021, how does incentive compensation work for next fiscal year if there's no guidance and no formal sort of goals at this point?
And then my follow-up question is, you mentioned as one of your goals, the desire to reduce leverage further to increase financial flexibility. Does that mean that your M and A pipeline is or that you are actively out there looking for potential deals? And if so, in which areas EU are perhaps looking most closely to do that? Thank you.
So Kofi, let me I will have you field those series of questions from Alexia.
Okay. Thanks. Hi, Alexia. How are you doing? So I would say, let me start first with incentives.
And I would say, it is a big driver, obviously, in the quarter in our SG and A line. So it is obviously a tailwind this year or excuse me, a headwind this year and we would expect it to be a tailwind next year. Obviously, I can't go into a tremendous amount of detail, but just know that we will be effectively setting our targets based upon a dynamic environment. And all companies are dealing with this, but we would expect based on everything we know right now for this to be a tailwind. All things being equal on leverage, we're pleased with the progress we've made on debt leverage.
I think at the start of the Blue Buffalo acquisition about 2 years ago, we had a target to get down to 3.5x. By the end of this fiscal year, we are at 3.2x. So we are pleased to be slightly ahead of schedule and on pace to get to our long term goal of 3x. I think at that point then we will start to look at resuming our normal capital allocation policies with the first priority being focused on increasing the dividend rate.
Alexia, this is Jeff Siemon. I would just add a quick color on the incentive piece. We always plan versus our internal plan and incentive at the beginning of the year would be 100 payout. If we beat our plan, that's a headwind in the year, but obviously good news for our shareholders as we would have exceeded our goals. That's what played out in 2020.
We have an internal plan for fiscal 2021. And so assuming we deliver that plan, we'd be paying out less than we did in 2020. But obviously, if we beat our plan, that could change.
Great. Thank you very much. I'll pass it on.
Thank you. We'll get our next question on the line from Dara Mohsenian with Morgan Stanley. Go right ahead. Hey, good morning guys. Hope all is well.
So,
Jeff or maybe John, obviously a large step up in consumer demand in any retail post COVID. There's obviously some increased trial there. Can you spend some time discussing how much of the higher demand was due to new trial of your products based on your consumer survey work and bringing new customers in? And as you look going forward longer term, your ability to potentially hold on to those customers and what the strategies would be to do so? Thanks.
So let me start with this question and then I'm going to pass it over to John Nudi to provide some added detail. One of the things I'm most proud of our company over the last 3 months, especially in North America retail is that we have gained penetration across all of our categories. And if you look at 52 weeks, which is even better way to look at it, all but maybe one category, we've increased household penetration, which is the highest correlation of growth. And so, I'm really pleased with what our team has been able to do. Obviously, it varies by category.
So John, do you want to provide any color or any insights?
Yes, absolutely. So I guess when you look at penetration, we do believe it's important to take a longer view. So as Jeff mentioned, when you look over 52 weeks versus pre pandemic levels, we grew penetration at majority of our categories. Importantly too, we outpaced our categories in terms of our performance and the penetration we are growing. The highest growth in penetration in our areas in our meals and baking areas, so things like soup, Pillsbury refrigerated baked goods, desserts and flour.
And we saw some significant gains. And for us, two points of penetration equals about 2,500,000 U. S. Households. So again, it's significant.
And importantly too, I mean, it's when you look at it a year ago, we grew penetration in 7 of our top 10 categories. So again, it's not just prior to pandemic versus a year ago, we're growing overall in the majority of our categories. We're starting to look at repeat. I'd say it's still early days and again, we need a bit more time to really understand that. But repeat in most our new households is strongest and really outpacing our categories as well.
And what's exciting to us, again, our highest repeat rates are in things like Cheerios, the franchise, Cheerios franchise, Pillsbury RBG, desserts, Annie's Mac and Cheese and Old El Paso. So we worked hard over the last decade frankly to really improve our products whether that's improving the ingredient deck, making sure that they tasted the best they possibly could. And we think that many consumers are trying our products for the first time or coming back after many years and finding a better experience. We think that bode well for us as we move into fiscal 2021 and beyond.
And I would like to add on to John's comments that everything that John said about North America retail is all true for all of our categories in Europe as well as our Wansai Ferry business in China, which saw significant penetration gains, as well as our at home business in Brazil, which is the vast majority of our Brazilian business. And so whether you look at North America retail or Europe or China or Brazil, our major markets, we've experienced strong penetration gains in all of our at home businesses.
Okay, great. And then
can you also touch on e commerce performance in the quarter and the changes you've made in that business to take advantage of higher channel growth online from a category perspective going forward?
Well, if we yes, sure. If we look at e commerce broadly across the company, it's roughly 9% of our sales as we enter as we exit the Q4 with a significant increase. And in all of our geographies and the vast majority of our categories, we over index online versus bricks and mortar. And there are two reasons for that. One is that, we've been investing in e commerce for a number of years.
And the second is that we have really good brands and we have a lot of the biggest brands. And when you're shopping online, those are the brands that tend to do well. And so for both of those reasons, we have seen outsized growth in e commerce over this period as we look globally. It's been particularly acute in the U. S.
And John Nudi, you want to comment a little bit on what we've seen in terms of U. S. Growth in e commerce?
Yes, sure, Jeff. So specifically for the U. S, we saw a 2 50% increase in our e commerce business in Q4. Importantly, now almost 50% of all U. S.
Households have purchased food and beverage products over the last year. So again, that's a significant step up of about 7 points versus the prior year from a penetration standpoint. And probably the biggest limiter in terms of why the growth couldn't have been even higher is just retailers and their capacity to really deliver to consumers' homes and even click and collect the number of slots that they had. So we're working with our retail partners to make sure that we optimize our e commerce business with them, increasingly really connecting into their data and making sure that we take an omni channel approach to making sure whether a consumer wants to shop in the store or shop online, they're seeing consistent campaigns. And then really working from the supply chain standpoint as well to make sure that we can deliver products to our consumers, to our customers who will ultimately get it to our consumers.
So we're excited about e commerce. And as Jeff mentioned, we've been working on this for multiple years and really paying off in the U. S. Alone. We have a 110 index to bricks and mortar.
So again, to the extent we sell more online, that's good for us.
Great. Thanks guys. Appreciate it.
Thank you very much. And we'll get to our next question on the line is from John Baumgartner with Wells Fargo. Go right ahead.
Good morning. Thanks for the question.
Good morning, John.
Jeff or maybe John, I wanted to ask about product mix. You had the drag in Q4 from the comp at Buff and the composition of the tonnage at NAR. But if you step back and think more structurally, one of the things we hear from investors that there isn't any pricing power in food. But to the extent that the innovation is on trend, you're margining up already with new products at Buff and in snacks and yogurt. How do you think about your capacity to capture stronger mix on a consistent basis across your portfolio in a COVID world, even if the flexibility to move list prices may not be ideal?
So as we think about it as a company, what you saw is positive price mix in the Q4 because we sold a lot more through North America retail and we sold a lot more through pet food. And so to the extent that we keep growing pet and we certainly plan to do that and we see elevated demand in North America retail that actually bodes pretty well for price mix as we think about it on a company level. It gets more complicated when you look within a geography. But let me have John Nudi answer how it has played out in North America retail over the last quarter because it's important, but it's complicated when you look at it.
Yes. Thanks, Jeff, and good morning, John. When you look at price mix, we look at it in 2 ways. 1, in the P and L, which is done on a per pound basis, and then also in Nielsen, which is on a per unit basis. And you saw some very different things in Q4 if you look at those different ways.
So from a P and L standpoint, through the 1st three quarters, our price mix was actually flat. And again, that's on a per pound basis. On Q4, to your point, it was down 7 points. So it was a significant drag, but it was 100% driven by mix as we sold heavier products. So things like soup, desserts and flour, as well as larger size packs as consumers really moved that way.
When you look at Nielsen though on a per unit basis, we actually saw an increase in price mix in Q4, really driven by less promotion and favorable customer mix. So we feel like there is some pricing power out there. And one of the things, again, we've worked hard at over the last few years is strategic revenue management, really building a toolbox that allows us some different levers to pull given the environment. So I think as we look towards fiscal 2021, you'll likely see less list pricing just as inflation won't warrant it and there'll be obviously a competitive environment and value will matter. But things like price pack architecture and mix will be things that we focus on.
The good news again, having been out this a while, we've got a pipeline of ideas in our toolbox that we'll be able to execute again. So we continue to expect to drive price mix in fiscal '21 or probably just look a little different than how we drove it in fiscal 'twenty.
And I guess just to build on that, I mean maybe come back to Jeff, thinking about Buffalo, I mean some of the price per pound premiums on the new products in wet and treats, they're pretty sizable versus the base portfolio. Is there anything you're seeing out there where there's an elasticity for consumers or kind of a put back on pricing? Or do you feel as though there's still a runway to go with the mix premiumization as long as the innovation is on trend?
Yes. With regard to pet, I mean, we think there's a ways to go. And if you look at the growth of the pet category, first of all, the pet category is growing mid single digits and primarily on pricing. And the part of the category that's growing the fastest is the premium part of the category. So we certainly think there is a play to play there and Blue Buffalo, we believe, is the best equity in that premium space.
And I think our growth over the last couple of years would add some credence to that. We also know that people care deeply about their pets and especially in a time of high anxiety, which I think under any circumstance you could qualify this as a time of high anxiety. People rely on their pets and the last thing they want to do is cheat their pets and the source of comfort. So, what we see in the marketplace whether it's through recession or whether it's through a time like this is that one of the last things that people are interested in skimping on are their pets. And so they don't do that and we see that being played out in the market right now.
We'll get our next question on the line from Jason English with Goldman Sachs. Go right ahead.
Hi, good morning folks. Congrats to you and your teams for navigating this very turbulent situation, especially kudos to your supply chain. I've got to believe this is very challenging for them. My questions, I guess we just closed on PES, so maybe we could take it back up there. There's obviously a lot of noise in reported results this quarter because of what you're comping and the extra days.
Can you give us a beat on how retail sales are tracking across all channels in the quarter and what you're seeing so far as we roll into the new fiscal year?
Yes. So thanks, Jason, and appreciate the support for how we have executed the last quarter. We feel really good
about it. As you said, our supply
chain has held up remarkably well. And we've driven that those supply chain gains all the way through our sales organization to our customers and feel very good about how we've serviced the business and service demand in a time when people really need it. When we look at Blue Buffalo, let me take a step back. For the year, we grew reported net sales 18% through 3 quarters, we were up 11%. And in the last quarter of the year, we believe that our retail sales were up somewhere in the high single digit range.
And so for the year, we had guided 8% to 10% like for like growth and we're confident we exceeded that somewhere about the 12% range. So for the year, we over delivered on what we said we did. So we feel great about that. In the Q4, you're right, there is a ton of noise. The retail sales look like they're up high single digits.
And again, that's still share leading growth for the category, a category that's up mid single digits. So we're really pleased even amongst the noise with our performance on Blue Buffalo in the 4th quarter.
That's super helpful information. Thank you for that. And turning back to your North America retail portfolio, as we look at the Nielsen data, your TDDs are down a lot. Your average items or store are down a lot as they are across the industry. And we've heard from a lot of different companies about SKU rationalization, streamlining sustain?
Or when, if at all, do you think you're going to start to layer back on sustain or when, if at all, do you think you're going to start to layer back on those products?
So, John Nudi, why don't you take that and maybe touch on not only the streamlining of distribution, but maybe a couple other actions we've taken to help make our supply chain more efficient.
So good morning, Jason. Yes, obviously if you look at distribution Nielsen, it's a bit of a wild picture right now as there's out of stocks and other things happening as well. I guess if you think about our business and we compete across 25 different categories and the majority of our categories from a capacity standpoint and a service standpoint, we're in pretty good shape at this point. Our supply chain has done a terrific job keeping our plants running and keeping them safe, important for our employees and obviously for our consumers with the food. So the majority of our categories were back up to pretty healthy service levels and haven't seen a significant decrease from a distribution standpoint with our retailers.
There was a trend prior to the pandemic with retailers really cutting back on the number of skews and categories, giving more facings to higher churning skews and that was really driven by e commerce and click and collect and obviously having the shelf capacity to service that business. So we expect to see that continue. Now we have a few categories that we have capacity constraints, soup being one of them, desserts being another one. And we've temporarily withdrawn a significant number of items. So in soup, progressive soup, we pre pandemic had something like 80 items and now we're down to somewhere around 50.
We expect to face start facing some of those back in as we move through the first half of the year. And frankly, some of them probably won't come So again, I think we will take the opportunity to make sure that we have an efficient portfolio and one that works for us and works for our consumers. Variety is important though, when you think about soup, everyone's got their favorite soup flavors. So again, we're going to have to work through that as well. So we feel good about where we are from a distribution standpoint.
One of the things that with the metric that we look at is share of distribution, because again, we do expect total distribution points to decrease as we move throughout the year. We exited the year really improving from a total share of distribution standpoint and that's what we'll continue to stay focused on as we move through fiscal 2021.
Good stuff. Thank you, gentlemen. Be well.
Thank you.
Thank you very much. Our next question on the line is from the line of David Palmer with Evercore ISI. Go right ahead with your question.
Thanks. Just want to follow-up on what we're maybe seeing in the scanner data lately. It looks like the part that is audited by some of these scanner data companies is showing a reduction in display activity, but some of that might be the fact that they're not auditing that as much. And then I'm wondering if we're seeing some noise in that percent sold on discount because it looks like within cereal specifically that there's been some increase in percent sold on price discounting, which would seem to run against the times that you wouldn't need to be doing that. So are you seeing some price reductions going on out there?
Is there more competitive activity in cereal? Or is there noise? And then I'll have a quick follow-up.
John Nudi, why don't you field that one?
Good morning, David. I would say the short answer is probably noise more than anything. Many of the auditing groups are not going into stores at this point or if they are, it's inconsistent in terms of what we're seeing. So we're not looking too closely at display facts and some of the pricing gets really confusing as well. What I would tell you though, in general, we're not seeing anything out of ordinary in terms of pricing on cereal.
In fact, we pulled back some of our promotions in Q4, particularly on our cereals franchise where we're a bit tight for capacity standpoint. So again, we're not seeing anything abnormal. And I think from a data standpoint, again, the total movement and it's something to look at and something that may cause. I think when you start getting into some of the facts below that, I wouldn't put a whole lot of stock in it at this point, at least we're not.
Got it. Thank you. And just a follow-up on the incentives, you talked about how you did above plan this last fiscal year because of 4th quarter and probably caused some truing in what you were doing in terms of pay for performance. But I'm wondering, are you making adjustments to your annual targets and how you pay people, the Board doing that for you and you down to the division levels? And how are you making those adjustments because this has to be viewed as an extraordinary period not just because of Blue and those acquisitions and other counter effects but because of this virus and passing that through the Python, any help on that would be helpful?
So David, the Board sets our compensation targets as well as ranges for compensation and I'm not going to go into the depths of that only to say that it is based on our sales performance and our operating performance and our profitability performance and weighted equally among those measures and we pass those kind of things down to our segments. And you're right, it is a dynamic environment which requires us to be dynamic in our assessment. And certainly one of the things we look at as we assess the performance of our businesses is how competitive are they in the marketplace and how efficient were they in being competitive. And that's why I say we're really proud of our performance. And even in areas like convenience and food service, which was down quite a bit in the Q4, they actually grew share in the majority of their categories.
And so they performed well in the Q4 even in an environment that was really, really difficult. And so that's the way we will continue to incent people. Again, it helps us stay in the middle of the boat in driving sales growth, but not at all costs and making sure we are efficient while we do it.
Okay. Thank you.
Thank you very much. We'll get to our next question on the phone line from Robert Moskow from Credit Suisse. Go ahead.
Hi, thanks for the question. I guess I have 2. The one is on the breakfast cereal category. If I look at the data, I'd say it looks good, but not great. Retail sales were up about 6% in the past 4 week period.
Had been up double digit. John and Jeff, are you surprised that the category is not growing faster in an environment like this where we're all kind of stuck at home, we're not eating breakfast on the go, we have the luxury of time in our homes to prepare longer breakfast for ourselves? Or is this pretty much what you would expect? And the second question is, is on Q1,
I
understand not giving guidance for the year, but can you give us a sense of the maybe just North America retail sales? It looks like overall your sales are still up double digit and probably could stay that way for the next 3 months in the retail data. Is that a fair assessment for Q1 trends, John? Thanks. So
let me answer the question on the Q1 trends and to say that the reason we don't give quarterly guidance is because we've never given quarterly guidance and we're not going to start now. You're right, Rob, and I'm glad you pointed out our retail sales, if you look at Nielsen are off to a great start in North America retail. So it gets back to a question I answered earlier, I think it was from Chris Growe about the confidence we have. So it's not a lack of confidence that we're not providing guidance. It's really a matter of for the year uncertainty and for the the quarter the fact that we just don't provide quarterly guidance.
On the question of cereal, I'll let John answer that in detail. But I want you to know I am thrilled that you're asking your question about the cereal category being good and not great when it's growing at 6%. So with that John Nudi why don't you elaborate on that a little bit?
Yes, sure. Good morning, Rob. So we feel good about the cereal category and frankly even better about our performance. So in Q4, the cereal category grew at 26 percent. We grew at a similar level and for the full year, the category grew at 5%.
When you go back to even the year prior, we think when you add in non measured channels, it grew that year as well. So I think the category was heading in the right direction. We like our performance. We've grown share in 11 of the last 12 quarters with a clear share leader in the category. We're doing that by strong having strong marketing campaigns.
In fact, prior to the pandemic, we were having the best year from a share standpoint on cereals in over a decade. As we've gotten back to the heart health messaging that works really well, we actually for the first time ever changed the shape of the product to a heart for a limited time. That worked incredibly well. And then our innovation is working as well. We had 3 of the top 5 new products in the category last year.
So we feel good about the category. We feel good about our performance and we think we'll continue to grow nicely in fiscal 2021.
Okay. I mean the market share gains, no doubt, stunning. So congrats on that and we'll see how the category does. Thank you. Okay.
Tommy, I think we're going to wrap things here. I know we weren't able to get to everyone, but we want to make sure that we respect everyone's time and length on the call. So, thank you everybody for your time and attention this morning. Appreciate the interest in General Mills and look forward to continuing to keep you updated on how we go from here. If you have follow-up questions today, please feel free to reach out to me and we'll make sure we get to you.
So thanks again.
Thank you very much. Thank you everyone. That does conclude the conference call for today. We thank you for your participation. You may disconnect your lines.
Have a good day, everyone.