Greetings, welcome to the fourth 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. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, press star followed by the zero. As a reminder, this conference is being recorded Wednesday, July 1st, 2020. I would like to turn the call over to Mr. Jeff Siemon. Please go right ahead.
Thank you, Tommy. Good morning, everyone. Thanks for joining us for our Q&A session on our fourth quarter results and full-year results this morning. I hope everyone had the time to review our press release, listen to our prepared remarks, and view our presentation materials, which are available on our investor relations site. It's also important to note that in our Q&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-19 pandemic on our fiscal 2021 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 Jon 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. Once again, before we start, as a reminder to register for a question, it is the one followed by the four on your telephone, and you'll hear a two-tone prompt to acknowledge your request. If a question has been asked or you would like to withdraw your registration, it is a one followed by the three. We'll proceed with our first question on the line. It's from the line of Andrew Lazar with Barclays. Go right ahead.
Good morning, everybody. Thanks very much for all the change in the earnings release format this morning. Very helpful.
Morning, Andrew.
Morning, Andrew.
Great. Maybe to start, I was hoping to focus on sort of the underlying business momentum, if I could. I know it's a little harder to get at now, obviously, given everything that's going on. I think on the 3Q call, 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%-2%. I think that Blue Buffalo coming into the base adds about 1 point. 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 categories like snack bars and yogurt and things like that?
Yes, Andrew, your math is right on that. As 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. You see the results in the fourth quarter included a pretty significant step-up on our marketing spending. Actually, we think our strength at the beginning of June, especially in North America Retail, is 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. We believe in investment in marketing, and you saw that in the fourth quarter, 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. Whether COVID or not, we had planned to reinvest some of the earnings growth back into sustained top-line sales growth, and that is our plan going into next year currently.
I guess lastly, it's really on inventory, specifically at the consumer pantry level. I think in today's release, you mentioned that there's the potential for sort of pantry inventory drawdowns moving forward. I'm curious if this is simply a pet food comment, which I think would make sense, or a broader portfolio comment. 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. 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.
Yeah. Andrew, let me answer broadly and then specifically on pet, and then I'll have Jon 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, as you can see that in the data, consumers are clearly still buying and eating through the stock that they have on hand. That is consistent with what we thought would happen at the beginning of the quarter when we saw the stock-up, in fact, it happened throughout the quarter. Again, it continues into June with some double-digit growth on the human foods 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 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?" The answer is no, people are just stocking up, and we expect that to reverse in April and May. Largely, it has reversed in April and May. There may be a little bit more to unwind as we begin our new fiscal year in the pet food category, a lot of that has unwound already. What we see in pet is different than what we see in the human food side, both of which we expected. Jon Nudi, anything specific you'd like to add on that?
Thanks, Jeff, and good morning, Andrew. Maybe I'll touch on consumer inventory levels or pantry levels. I'm sure a question on many people's minds too, are customer inventory levels. Maybe I'll go there as well. From a consumer standpoint, at least in North America, we believe that the majority of the product that we've moved to consumers has been consumed. We do believe that consumers are keeping slightly higher levels of inventory in their pantries, 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, 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%.
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, one, to what extent it will come back. 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 JP Morgan. Go right ahead with your question.
Hi, good morning. Thank you. I second Andrew's comments. I do like this format, so hopefully we'll keep it going ahead.
Great.
I did want to ask two 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-19 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. I think, great question and good morning. As you look at these, we would reference first as we're coming out of our Q4, we did see higher operating costs as well as COVID-19 related costs. The split between those two is roughly, we had about $100 million in higher sort of COVID-19 related costs, I would say. The split between those two is two-thirds, one-third, with two-thirds being comprised of the operating costs, things such as crewing, external supply chain, trucking premiums. On the other side, the wellness costs, everything from personal protective equipment, wellness policies. We would expect that to be a continued headwind as we step into FY 2021, as a portion of those costs will continue.
Obviously, we can't 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. Does that get at your question?
Yeah, 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. 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. I'm just curious if you're hearing anything along those lines that you can share with us or whether that's misguided.
Jon Nudi, you want to field that? Sure. Good morning, Ken. In terms of promotional support, obviously in Q4, we saw retailers pull back in promotion as the focus was on keeping products in stock. As we moved into May and early June, we saw our promotional levels get back to more normal levels in most of our categories. As we look to plan through the rest of the year, we're planning on normal levels. We have not really been faced with any asks for deep discounts or deep promotional pricing. The one thing I would add is, there's certain categories that we are constrained from a supply chain standpoint, a capacity standpoint. Even if there was a desire to go hotter from a promotional standpoint, we just don't have the capacity to do that.
I think that's going to be a limiting factor across many of our categories. I guess to answer your question specifically, we have not had those discussions. 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.
Morning, Chris.
I will third that, if that's the right word, for appreciating the new format. Thank you for that as well. I did want to ask in terms of the decision not to provide guidance for the year. You have given a lot of components and things on how to help us get there, if you will. 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 where sales will shake out, and therefore you've been able to give the confidence in that operating margin outlook for the year? I'm just curious how you think about that.
Yeah. 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 of 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. 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 three quarters relative to what it was pre-pandemic levels. 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. To a question that Ken Goldman asked earlier, we think that'll be followed by a recession, and if you look back to the last recession, General Mills performed quite well.
We think there will be an environment where we'll be able to grow for the first three quarters, followed by a fourth quarter comparison. Obviously, that'll be 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 and the last few months as a stronger company. As witnessed by our share growth in nine of our top 10 categories in the U.S., by being the third 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. 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.
I would say on top of that, our marketing is particularly good right now, whether it's North America Retail and new 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. That's where we stand. 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. You've talked about generating efficiencies to incrementally invest in the business in fiscal 2021. You have HMM savings coming through around 4% of cost of goods sold. You got inflation around 3%. Is that the gap or part of which you hope to reinvest? Is it, if we think about generating efficiencies, is that incremental to what you expect for HMM right now? You hope to have even more savings to invest? Just want to see if I can frame that opportunity.
Kofi, why don't I leave that one to you?
Sure, absolutely. Hey, Chris, how are you?
Hi.
Yeah, we are expecting to reinvest a portion of that gap in capabilities. As you can imagine, and 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. We will be focused on managing the middle of our P&L so that we can deal with the potentially higher operating costs. 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're meaningful enough for us to continue to make progress on our capabilities. I hope that gets at your question.
It does. Thanks so much for that color.
You bet.
Thank you very much. Get to our next question on the line from Alexia Howard with Bernstein. Go right ahead.
Good morning, everyone.
Morning.
Morning, Alexia.
Morning.
Hi. Two from me. 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&A line this time around. 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? 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&A pipeline is that, or that you're actively out there looking for potential deals? If so, in which areas are you perhaps looking most closely to do that? Thank you.
Kofi, I'll have you field those series of questions from Alexia.
Okay, thanks. Hi, Alexia. How are you doing? I would say, let me start first with incentive. I would say it is a big driver, obviously, in the quarter in our SG&A line. It is obviously tailwind this year. Excuse me, headwind this year, and we would expect it to be a tailwind next year. I can't go into a tremendous amount of detail, just know that we will be effectively setting our targets based upon a dynamic environment and all companies are dealing with this, 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.
At the start of the Blue Buffalo acquisition about 2 years ago, we had a target to get down to 3.5 times. By the end of this fiscal year, we are at 3.2 times. We're pleased to be slightly ahead of schedule and on pace to get to our long-term goal of 3 times. At that point, 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. Obviously, if we beat our plan, that could change.
Great. Thank you very much. I'll pass it on.
Thank you. We'll get to our next question on the line from Dara Mohsenian with Morgan Stanley. Go right ahead.
Hey, good morning, guys. Hope all is well. Jeff or maybe Jon, 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? 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.
Let me start with this question and then I'm going to pass it over to Jon 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. If you look at 52 weeks, which is an even better way to look at it, all but maybe one category, we've increased household penetration, which is the highest correlation to growth. I'm really pleased with what our team's been able to do. Obviously, it varies by category. Jon, maybe you want to provide any color or any insights?
Yeah, absolutely. I guess when you look at penetration, we do believe it's important to take a longer view. As Jeff mentioned, when you look over 52 weeks versus pre-pandemic levels, we grew penetration in the 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 were areas in our meals and baking areas, things like soup, Pillsbury refrigerated baked goods, desserts, and flour. We saw some significant gains. For us, two points in penetration equals about 2.5 million U.S. households. Again, it's significant. Importantly, too, when you look at a year ago, we grew penetration in seven of our top 10 categories. Again, it's not just prior to the 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. Repeat amongst our new households is strongest and really outpacing our categories as well. 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. 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. 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'll bode well for us as we move into fiscal 2021 and beyond.
I would like to add on to.
Okay, that's very helpful.
I'd like to add on to Jon's comments that everything that Jon said about North America Retail is also true for all of our categories in Europe, as well as our Wanchai Ferry business in China. We saw significant penetration gains as well as our at-home business in Brazil, which is the vast majority of our Brazilian business. 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. 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?
Sure. If we look at e-commerce broadly across the company, it's roughly 9% of our sales as we exit the fourth quarter. It was a significant increase. 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. When you're shopping online, those are the brands that tend to do well. 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 Jon, maybe you want to comment a little bit on what we've seen in terms of U.S. growth in e-commerce.
Yeah, sure, Jeff. Specifically for the U.S., we saw a 250% 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. Again, that's a significant step up of about seven points versus the prior year from a penetration standpoint. Probably the biggest limiter in terms of why the growth couldn't have been even higher is just our retailers and their capacity to really deliver to consumers' homes and even click and collect the number of slots that they had. We're working with our retail partners to make sure that we optimize our e-commerce business with them, increasingly we're really connecting into their data and making sure that we take an omni-channel approach to making sure whether the consumer wants to shop in the store or shop online, they're seeing consistent campaigns.
Really working from the supply chain standpoint as well to make sure that we can deliver products to our consumers, deliver to our customers who will ultimately get it to our consumers. We're excited about e-commerce, and as Jeff mentioned, we've been working on this for multiple years, and it's really paying off. In the U.S. alone, we have a 110 index to bricks and mortar. Again, to the extent we sell more online, that's good for us.
Great. Thanks, guys. Appreciate it.
Thank you very much. Now we'll get to our next question on the line from John Baumgartner with Wells Fargo. Go right ahead.
Good morning. Thanks for the question.
Good morning, John.
Jeff, or maybe Jon, 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. If you step back and think more structurally, one of the things we hear from investors is that there isn't any pricing power in food. 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?
As we think about it as a company, what you saw is positive price mix in the fourth quarter because we sold a lot more through North America Retail, and we sold a lot more through pet food. 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. Let me have Jon 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.
Thanks, Jeff, and good morning, John. When you look at price mix, we look at it in two ways. One in the P&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. From a P&L standpoint, through the first three quarters, our price mix was actually flat. Again, that's on a per pound basis. On Q4, to your point, it was down seven points, so it was a significant drag, but it was 100% driven by mix as we sold heavier products. 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. I feel like there is some pricing power out there. 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 to have different levers to pull given the environment. 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. Things like price pack architecture and mix will be things that we focus on. The good news, again, having been at this a while, we've got a pipeline of ideas in our toolbox that we'll be able to execute against.
We continue to expect to drive price mix in fiscal 2021. It'll probably just look a little different than how we drove it in fiscal 2020.
I guess just to build on that, maybe to come back to Jeff, thinking about Buffalo, 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 a pushback 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?
Yeah, with regard to pet, we think there's a ways to go. If you look at the growth of the pet category, first of all, the pet category is growing mid-single digits. It's primarily on pricing. The part of the category that's growing the fastest is the premium part of the category. We certainly think there is a place to play there. Blue Buffalo, we believe, is the best equity in that premium space. 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. 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. 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. They don't do that, and we see that being played out in the market right now.
Great. Thank you.
Yeah.
Thank you very much. We'll get to our next question on the line from Jason English with Goldman Sachs. Go right ahead.
Hey, good morning, folks. Thank you for slotting me in.
Thank you.
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 pets, so maybe we could pick 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?
Thanks, Jason, and appreciate the support for how we've 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 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 serviced 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 reported net sales 18%. Through three quarters, we were up 11%. In the last quarter of the year, we believe that our retail sales were up somewhere in the high single-digit range. For the year, we had guided 8%-10% like-for-like growth, and we're confident we exceeded that somewhere about the 12% range.
For the year, we over-delivered on what we said we did, so we feel great about that. In the fourth quarter, you're right, there is a ton of noise. The retail sales look like they're up high single digits. That's still share leading growth for the category, a category that's up mid single digits. We're really pleased even amongst the noise with our performance on Blue Buffalo in the fourth quarter.
That's super helpful information. Thank you for that. Turning back to your North America Retail portfolio, as we look at the Nielsen data, your TDPs are down a lot. Your average items per store are down a lot, as they are across the industry. We've heard from a lot of different companies about SKU rationalization, streamlining portfolios to really maximize capacity. Can you touch on how much streamlining you've accomplished, and how much of that streamlining you think you'll be able to sustain? When, if at all, do you think you're going to start to layer back on those products?
Jon 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.
Yeah, absolutely. Good morning, Jason. Obviously, if you look at distribution in 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. In 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's done a terrific job keeping our plants running, and keeping them safe, importantly for our employees and obviously for our consumers with the food. The majority of our categories, we're 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 SKUs and categories, giving more facings to higher churning SKUs, and that was really driven by e-commerce and click and collect and obviously having the shelf capacity to service that business. 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. In soup, Progresso Soup, we pre-pandemic had something like 80 items, and now we're down to somewhere around 50. We expect to start phasing some of those back in as we move through the first half of the year. Frankly, some of them probably won't come back.
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 flavor. Again, we're going to have to work through that as well. We feel good about where we are from a distribution standpoint. One of the things that, 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. I'm wondering if we're seeing some noise in that % sold on discount, because it looks like within cereal specifically, that there's been some increase in % sold on price discounting, which would seem to run against the times that you wouldn't need to be doing that. Are you seeing some price reductions going on out there? Is there more competitive activity in cereal, or is there noise? I'll have a quick follow-up.
Jon 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. 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 extraordinary in terms of pricing of cereal. We pulled back some of our promotions in Q4, particularly on our Cheerios franchise, where we're a bit tight from a capacity standpoint. Again, we're not seeing anything abnormal. I think from a data standpoint, again, the total movement and is something to look at and something that makes sense.
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. Just to follow up on the incentives, you talked about how you did above plan this last fiscal year because of the fourth quarter and probably caused some true in what you were doing in terms of pay for performance. 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.
David, the board sets our compensation targets as well as ranges for compensation. 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, weighted equally among those measures. We pass those kind of things down to our segments. You're right, it is a dynamic environment, which requires us to be dynamic in our assessment. 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. That's why I say we're really proud of our performance.
Even in areas like convenience and food service, which was down quite a bit in the fourth quarter, they actually grew share in the majority of their categories. They performed well in the fourth quarter, even in an environment that was really difficult. That's the way we'll continue to incent people. Again, it helps us stay in the middle of a boat in driving sales growth, but not at all costs and making sure we're 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 right ahead.
Hi. Thanks for the question. I guess I have two. One is on the breakfast cereal category. I look at the data, I'd say it looks good, but not great. Retail sales were up about 6% in the past four-week period. It had been up double digit. Jon 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 breakfasts for ourselves, or is this pretty much what you would expect? The second question is on first quarter. I understand not giving guidance for the year, but can you give us a sense of maybe just North America Retail sales?
It looks like overall your sales are still up double-digit and probably can stay that way for the next three months in the retail data. Is that a fair assessment for first quarter trends, John? Thanks.
Let me answer the question on the first quarter 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, we're off to a great start in North America Retail. It gets back to a question I answered earlier, I think it was from Chris Growe, about the confidence we have. 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 quarter, the fact that we just don't provide quarterly guidance.
On the question of cereal, I'll let John answer that in detail. I want you to know I am thrilled that you're asking a question about the cereal category being good and not great when it's growing at 6%. With that, Jon Nudi, why don't you elaborate on that a little bit?
Yeah, sure. Good morning, Rob. We feel good about the cereal category and frankly, even better about our performance. In Q4, the cereal category grew at 26%. 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. We think the category was heading in the right direction. We like our performance. We've grown share in 11 of the last 12 quarters. We're the clear share leader in the category. We're doing that by 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. Our innovation's working as well. We had three of the top five new products in the category last year. 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. The market share gain's, no doubt, stunning. 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. We want to make sure that we respect everyone's time and length on the call. 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. Thanks again.
Thank you very much. Thank you, everyone. That does conclude the conference call for today. We thank you for your participation as we disconnect your lines. Have a good day, everyone.