Good morning, everybody. Wonderful to have you all here. It is 9:30 A.M., and we are all set at the New York Stock Exchange. The webcast is live. We'll go ahead and get going. I'm Jeff Siemon, and on behalf of General Mills Management and the entire investor relations team, I am very excited, and thank you for joining us, and appreciate your interest in General Mills and GIS. I'll cover a couple housekeeping items before we start. First, please see me, Jack, or Anna, if we can help you with anything here during the meeting. Second, when we get to Q&A, please wait for a microphone so our webcast listeners can hear you clearly. Third, for those of you on the webcast, we'll be playing a few ads and videos, so you'll enjoy some nice music. Bear with us as we go through that.
Finally, I'll remind you that our remarks today will include forward-looking statements that are based on management's current views and assumptions, and the slide behind me lists factors that could cause our actual results to differ from our estimates. With that, it's my pleasure to turn the podium over to Jeff Harmening, Chairman and CEO, to get us started this morning.
Thank you, Jeff, and good morning, everybody. Welcome to everyone who is here at the New York Stock Exchange and everybody who's listening around the country and around the world. We're pleased to be here and share with you in some depth today our fiscal 2019 plans. That's what we intend to do this morning. I don't think that it is a newsflash that we are operating in a dynamic environment, yet it doesn't make it any less true. When you look at consumer values and how they have changed and how they continue to evolve, or you look at the digital landscape, whether that's the media landscape or the use of artificial intelligence or how retailers are changing, and whether it's Amazon and Whole Foods or Tesco and Carrefour or Kroger and Ocado, what you see is a dynamic landscape.
We've talked a lot about freight and what's going on with logistics here in the U.S., and every day, including this morning, you wake up and you read something more about trades and tariffs. I'm pleased to say that at least to this point, what we have read and seen doesn't have a material effect on our business. It's hard to ignore that it's a dynamic marketplace, and that has implications for us, and I think they are twofold. The first is that we really need to be more attuned to our external environment than we ever have been. At the same time, it really can become an echo chamber, and the key for us is to be attuned to the external environment, but then to be acutely focused on what we need to do in order to win. For me, that's the trick.
Understanding what we have to do in order to win is key. That really hasn't changed much. Our purpose is to make food people love, not tolerate, not like a little bit, but food that people love. When we do that, it leads to market-leading growth. There are a lot of levers that create value for our shareholders, but sales growth is the most important lever for us. We do that through a relentless focus on our consumer. When we talk about consumer first, people have asked me, "Is consumer first more relevant?" I will tell you, it is more relevant than ever. Because despite what happens with trade or logistics or what's going on with retailers, when we satisfy our consumers, we never lose, ever. We don't lose. We win for our shareholders, we win for our employees, we win for our communities.
Satisfy our consumers, giving them what they want, where they want it, and how they want it, is not necessarily easy, but it's what we do. As we've looked at the improvement in our business this last year and what we intend to do this coming year, the key to our improvement in our top-line performance this past year and what we see coming up is going to be delighting our consumers better than we ever have, whether those are human consumers or whether those are some of our new furry friends. Our framework for shareholder growth is familiar to you. We have four levers for shareholder growth. They are all important. We use all of these levers. The most important one for us for driving long-term shareholder value is really sales growth.
I'll spend the majority of our time talking about sales growth and what we intend to do to get back to low single-digit performance and sales growth. It doesn't mean the other levers aren't important. In fact, Don Mulligan will largely hit on those. For us, the first piece of the flywheel in getting back to our shareholder model that we believe is in the long-term interest of our shareholders really is accelerating sales growth and doing it in a way that is as efficient as we can do it. We have three priorities for growing globally. The first of those is competing effectively. The second is to accelerate on certain platforms, which represent about 25% of our business. Those platforms include Häagen-Dazs and Old El Paso and Natural & Organic and bars.
Reshaping our portfolio for growth, the most important piece of which is Blue Buffalo. I will tell you, in fiscal 2018, we did the first one of these a lot better, which is why our performance improved in the top line. We competed more effectively in most geographies across most of our platforms. We have just begun to accelerate our differentiated platforms, and the growth and reshaping our portfolio is in front of us. As we look to fiscal 2019, the next step in our growth after competing effectively is the and. We need to compete effectively, and we need to start to accelerate growth in some of our growth platforms, and we need to continue to reshape our portfolio, of which Blue Buffalo is the most important piece.
what today we're going to do is talk to you in depth about what that means. You'll hear from each of our segment leaders what that means. The how really is about new product innovation, about brand investment in capabilities like strategic revenue management and e-commerce, again, in portfolio shaping. The first thing that will be differential on fiscal 2019 versus fiscal 2018, because I get a lot of questions about, "What's going to drive your growth? Okay, you got back to flat this past year, and we like the improvement, but boy, the comps were easy, and how are you going to build on that?" I've heard that once or twice, and it's a fair question.
The first key is that although we are pleased with our step up in new product performance in fiscal 2018, we're going to get to historic levels of new product growth in fiscal 2019. Our new product, whether that's in the U.S. or whether that's in Europe or in Asia or Convenience and Foodservice, we have got a terrific lineup of new products that's even better than the one we had in fiscal 2018. Our segment leaders will come and talk to you in details about that. The second is it's very clear to us that consumer first design has really yielded strong results for us and will continue to pay dividends, and we'll talk a little bit more about that. Finally, as you look across this portfolio, the innovation we have is really broad. It's not limited to one category.
It's not limited to one geography. That has us most pleased and tell us that this consumer-first journey that we've been on is really taking hold because the innovation that we're seeing now is across product platforms, across channels, and across categories. We talk a lot about building brands, and there's been a lot of focus on media and how much media there is in the marketplace, and certainly media is an important element of building a brand, but it's not the only important element. I'm going to give you a couple of examples here, but you're going to hear a lot more this morning about brand building and our brand building efforts. If you look at the slide that's in front of you here, winning at the point of sale is important, but it's not exclusive of building brands.
I would argue that what we are doing on Old El Paso in store is brand building as well as being good at point of sale. When you look at the freezers that we're putting in for Häagen-Dazs and stick bars, that is equity building, and neither one of those shows up on the media line. Some of our best marketing this past year, which drove growth for us, happened in yogurt. The container of yogurt, the glass jar, was the best marketing element for that new product launch, as was the packaging design we have that we rolled out on Häagen-Dazs across the world. In addition to that, we have sponsorships like we're doing at Wimbledon right now or what we have done with Cheerios. While media is important, it is not the only element of brand investment.
What you're going to hear from the segment leaders today as they come up and talk, they'll talk about what we're doing on the advertising front. They'll show you some of that work, but they'll also talk about the other ways in which we're building our brands. We're very pleased with our capabilities. We're investing in our capabilities to drive growth in this coming year. In particular, we're investing in our strategic revenue management capabilities and e-commerce. In a world where we're seeing high inflation, the first line of defense has always become more efficient. When you see about 5% inflation, which we're looking at this year, you can't do it only through efficiency, we've significantly improved our strategic revenue management capabilities, and we're going to use all the tools at our disposal.
When people think of price, the first thing they think of is list price. We really think of it in terms of net price realization, and that can come in product mix, that can come in trade optimization, that can come in price pack architecture, and sometimes list pricing. We really think about it in terms of net price realization, and we've brought in resources from the outside that are experts in this area. We're pleased with what we see and combine those with General Mills experts and have really improved our ability in this area over the last year. E-commerce, we're really pleased with what we have seen, and we told you a year ago that we would get to $1 billion in sales in e-commerce by 2021. We are now highly confident that we'll get to $1 billion in e-commerce sales by fiscal 2020.
We grew our e-commerce sales by 50% globally last year, almost 70% here in the U.S. As importantly as those numbers are, because you can get lost in the law of big numbers, we over-index online to what we do in bricks and mortar, and that's true in the U.K., it's true in France, it's true in China, it's true in Korea, and it is true in the United States. Yes, we're going to sell a lot through e-commerce, but importantly, our shares over-index online where they do in bricks and mortar. As we hear about e-commerce and frankly, a lot of doom and gloom about what's going to happen to food companies when things go online, we see a lot of growth in our business and we like the growth that we see, and we see that continuing in the next fiscal year.
Certainly, reshaping our portfolio growth is a big priority. For us, it's an and. We're going to improve our base business, and we're going to grow our business through reshaping our portfolio. By far, the most important thing that we can do in this coming year in reshaping is the successful transition of Blue Buffalo, and I am more confident than I have ever been that we can do this successfully. Blue Buffalo is a great brand. It has terrific leaders, and we like the way that expansion is going. Billy Bishop will come and talk to you more about that. Divestitures are also important, and we'll look to divest roughly 5% of our portfolio. The key for us, though, is to make sure we do that in a way that we can execute the growth on our base business and transition Blue Buffalo.
What we understand is that execution in this is important, we're still dedicated to divestitures as a way to reshape our portfolio. Make no mistake, the next most important thing we have to do in reshaping is make the Blue Buffalo transition successful. Sales growth is the most important driver, but it's not the only one, it's not growth at all costs. I think many of you have listened to our Q4 announcement, said we need to get to the middle of the boat, and part of getting to the middle of the boat is making sure that we're growing, but also becoming more efficient as we do it. I'm very proud of what we're doing with Holistic Margin Management. We'll have about $450 million in Holistic Margin Management savings this year. Which is about $50 million more than we did a year ago.
As we are growing, we are continuing to become more efficient. We'll continue to use Strategic Revenue Management to drive our mix and net price realization. Jon Nudi will talk to you a little bit later about what we're doing with our logistics network and optimizing our distribution. We're really pleased with the progress we're making on that. Making sure that we're spending smartly behind our brands, and whether that's at point of sale or through packaging or for media, measuring what we do. While sales growth is the most important lever in returning to our long-term shareholder model, it's not the only lever. We intend to become even more efficient as we continue to improve our sales growth. In terms of our fiscal 2019 priorities, I hope these are not surprising. The first is to grow the core.
When we bought Blue Buffalo, it was not to grow at the expense of what we're doing in our core. We want to grow our core, and we want to successfully transition Blue Buffalo. As I said, in fiscal 2019, you'll hear some plans for that. It's competing effectively, also start to accelerate some of our growth platforms. You'll hear more from particularly Bethany Quam in Europe and Christina Law in Asia and Latin America about our plans to do that. Transition Blue Buffalo successfully. We like what we have seen so far, Billy Bishop will tell you more about that. Finally, we're acutely aware that as we're growing, we need to deliver on the financial commitments we've already set forth. Don Mulligan will wrap up our conversation this morning and talk more about that.
Our fiscal 2019 targets are well-known. We look to grow net sales 9%-10%, which includes organic sales flat to up 1%. Adjusted operating profit up 6%-9%, and adjusted EPS flat to -3%, while continuing to generate strong free cash flow. This morning, we're going to take this in two bites. The first is that after my opening remarks in just a second, I'm going to introduce Jon Nudi, who will talk about our North America Retail plans, Shawn O'Grady will come and talk about our Convenience Stores & Foodservice plans. We'll do a quick Q&A following those two presentations, we'll welcome Bethany, Christina, Billy, and Don to the stage, they will talk about their segments, Don will wrap it up with a financial overview, we'll follow with some more Q&A.
Again, thank you all for coming this morning. What I'd like to do to share more in more depth about our plans are some of our segment leaders, and we'll start with Jon Nudi, our Group President for North America Retail.
Well, good morning. I'm glad to be here today to provide some details on North America Retail plans for fiscal 2019. The number one priority for this business over the past year has been to restore top-line momentum and improve our competitiveness. I'm proud of the team for driving such a significant and broad-based turnaround in such a short amount of time. At the same time, we know we need to act aggressively to protect margins and drive profit growth. Our focus in fiscal 2019 is clear. Build on our top-line momentum while driving improved margin and profit results. Let me tell you about our plan to do just that. I'll start first with a quick overview of our segment, which generated $10 billion in net sales last year. We operate in two markets and have a broad, diverse portfolio across more than 25 categories.
We hold leading share positions in our categories, and our goal is to be competitive, meaning we hold or grow share everywhere we compete. We serve millions of consumers every day. In fact, our products are enjoyed by more than 95% of households in the U.S. and Canada each year. Our number one goal last year was to be more competitive in market, particularly in the U.S., where we struggled in several of our categories in fiscal 2017. I'm incredibly proud of the results our team delivered. Our market share results improved considerably as we moved through fiscal 2018, and in the second half, our U.S. share was down just 10 basis points in aggregate. We held or grew share in eight of our top ten categories, including growth in our two largest categories in cereal and snack bars.
Although we didn't get all the way back to share growth in refrigerated baked goods, our results improved considerably from the prior year. In yogurt, our share results improved as we moved throughout fiscal 2018, and we returned to share growth in the fourth quarter. We have terrific brands, and I'm confident we can continue to win in market and improve our top-line growth. We have two priorities for fiscal 2019. First, we plan to continue to accelerate our sales growth. A healthy business starts with a healthy top line, and we'll build on the improved momentum we generated in fiscal 2018. That starts with ensuring we're competitive everywhere we play. I'll show you how that will come to life across our businesses in fiscal 2019 through innovation, in-store execution, and consumer engagement. I'll give you some specific examples in cereal and yogurt.
Accelerating our differential growth platforms is also key to driving the top line. I'll highlight our fiscal 2019 plans across the three accelerate platforms that are part of our segment. Our second priority is to translate our top-line results into improved profitability. We fell short on this objective in fiscal 2018, and we're committed to acting aggressively to reduce costs and protect our margins this year. I'll share some examples of actions we're taking in this area in just a few minutes. Innovation plays a key role in driving growth across all of our categories. After declining for a few years, the % of our net sales driven by new products increased in fiscal 2018.
In fiscal 2019, we expect to return to our historic levels of innovation with items launched in the past year representing roughly 6% of net sales across our portfolio, with some categories well above that average. I'll share more about some of these items later in my comments today. In addition to launching great new items, we must win where consumers are shopping, at the point of sale. After several years of declining distribution, driven in part by our SKU reduction efforts, we are now cycling our most recent distribution declines. With a strong slate of new items hitting shelves this year, we expect distribution to be a modest tailwind for us in fiscal 2019. While winning on grocery sales remains critical, we also must win wherever consumers shop, and they're increasingly shopping online.
In fiscal 2018, our e-commerce sales increased nearly 70%, delivering about a point of top-line growth for the segment. We've built an advantage position in e-commerce over the past several years with our online market share representing a 120 index to our market share in the physical stores. We're accelerating our investment in the space by bringing solutions like What's for Dinner, Taco Night, or Lunchbox Favorites, continuing to strengthen our retailer partnerships to optimize how our categories and brands are shopped online. We're also increasing investment in our customer-focused funds, in some cases, shifting $ away from traditional media to create unique plans with key retailers to build our brands and drive our sales.
The right side of this slide shows a few examples of how we partner with retailers to drive trial and new items, including our YQ launch at Publix, our EPIC launch at Target, and Cheerios Oat Crunch at Walmart. Consumer first is at the core of everything we do, finding ways to connect with our consumers means that we strive to build our brands with ideas that enable them to be more relevant in our consumers' lives. To do this, we need breakthrough creative platforms and ideas for our brands that tap into what's happening in culture so they are seen and remembered by consumers. This allows our brands to engage consumers in new and more modern ways. We think about the entire experience consumers have with our brands.
As we think about that, we're expanding the nature of our brand investment well beyond traditional media investments to other vehicles. Jeff just shared some examples of this across our company. For our segment specifically, we're investing behind packaging forms, like the glass container for a Oui by Yoplait yogurt, or unique ingredients, as we are doing across many of our Natural & Organic brands. We're also investing more in-store and online, as I highlighted a minute ago. Many of these new vehicles don't show up in the media line of our P&L. While this means that our brand investment is harder for investors to read, we believe these vehicles represent more effective ways for us to connect with consumers and drive growth for our brands. Take a look at a few examples of how this broader brand investment approach comes to life on our cereal business.
One, two, what you doing? I've been jumping through some hoops. Wanna get my body loose. Wanna tell you, tell you what to do. I've been running up a path like an animal tripling. Looking for a diamond. I'm trying. I'm fighting, riding with the wind blowing. I just wanna stay up all night with you. I just wanna stay up all night with you. Knowing said I had enough for trying. I just wanna stay up all night with you. Give me a second. Don't wait enough. Enough, enough. Got to make some noise.
Innovation, winning in store, investing to build our brands are key to being competitive everywhere we play. I'd like to now briefly highlight a few more specific examples across our key categories, including cereal. We had a great year in cereal in fiscal 2018, delivering retail sales growth in pounds and dollars, and strengthening our competitive share position. Most of our growth last year was behind news on our base business across a broad set of retailers, and we drove increased penetration across the demographics we invested in. Campaigns such as Cheerios Good Goes Around resonated with consumers, and we had a terrific partnership with Ellen DeGeneres to drive 1 million acts of good across the country. Our strong base growth was helped by category-leading innovation, including the launch of Chocolate Peanut Butter Cheerios, Lucky Charms Frosted Flakes, and Chex.
We won in store, leveraging our news and innovation to drive better quality merchandising, including a high single-digit increase in display, a critical sales driver for cereal. We led the category to improve performance last year, and we're looking to build on that result in fiscal 2019. Our cereal plan starts with strong news on Cheerios, the biggest brand in the category. We'll continue our partnership with Ellen DeGeneres and evolve the Good Goes Around campaign with increased focus on Honey Nut Cheerios. We'll launch a new Good Goes Around heart health campaign focused against the growing boomer demographic to remind consumers of the heart healthy benefits of oats. We're introducing a new Cheerios Oat Crunch product that brings a new taste and texture to the Cheerios line with a simple benefit of oats on oats.
We'll continue to partner with retailers to bring these ideas to life in store, including the Ellen Acts of Good promotion. Here's an example of the new Good Goes Around Honey Nut Cheerios campaign. Please take a look.
Hey, bee to the hive to the comb. Combing that honey into some gold. Take that gold and making it know. Good goes around and around and around. Hey, bee to the hive to the O. Oat from the farm, it's the yum in your bowl. Putting the good, and the good will grow. Good goes around and around and around. Hey, good goes around and around and around.
On our taste brands, Cinnamon Toast Crunch will continue to expand its appeal by focusing on new occasions, snacking, and new consumers, Hispanic families. Look for new campaigns featuring the iconic Crazy Squares with a heavy focus on social and digital media. In the back half, we'll bring exciting new snackable products to the Cinnamon Toast Crunch franchise. After its biggest year ever, Lucky Charms will continue to deliver exciting marshmallow events throughout the year, with a focus on in-store visibility. Reese's Puffs will accelerate its growth with young adults, partnering with the number one sports game, NBA 2K, for in-game media and on-pack promotion. We also have a great lineup of product news and innovation across the portfolio. Over 20% of our portfolio will have improved taste news, which is a proven growth driver.
We'll continue to launch compelling innovation, including Cheerios Oat Crunch, as well as two new seasonal Dippin' Dots SKUs that feature popular ice cream flavors over the summer period. Cereal remains a very competitive category, and with a plan built on big growth ideas and strong fundamentals, I'm optimistic about our outlook for the fiscal year ahead. Turning to the U.S. yogurt category, our job here is clear, restore growth to our business and help drive the category back to growth. Our momentum improved quarter by quarter through fiscal 2018, and we returned to share growth in the fourth quarter. Consumer-first innovation drove that improvement, and we're bringing more innovation in fiscal 2019. We'll start by building on the successful launch of Oui by Yoplait. Oui will reach $100 million in retail sales in the first year, with plenty of growth potential ahead.
We'll continue to build awareness of the brand in year 2 with marketing support, and we'll work with retailers to improve the shelf set to ensure that the Simply Better set is visible and we have the right products on shelves. We'll also extend the Oui brand into snacking occasions with the introduction of Oui Petite Pots, including indulgent flavors like sea salt caramel and dark chocolate raspberry. In addition to expanding Oui, we're introducing YQ, a new yogurt brand made with ultra-filtered milk, that delivers what modern consumers are looking for today, high protein, less sugar, simple ingredients, and great taste. YQ launched just a few weeks ago with a unique approach targeting key health influencers. The initial response has been terrific, and I hope those of you here with us today had a chance to try the product this morning.
I look forward to sharing updates with you on these great new yogurt items as we move through fiscal 2019. Let's shift to our accelerate platforms, starting with snack bars. General Mills is a leader in the bars category, and we just wrapped up a very strong year in fiscal 2018. This $5 billion category returned to growth last year as retail sales growth in the nutrition segment continued, and trends improved in the more traditional grain segment. The soft spot in the category is adult grain bars, where we compete with Fiber One. We're working to stabilize our business there as we extend the brand to Protein One, offering a mainstream product that delivers high protein and low sugar. In addition to stabilizing Fiber One, our focus for bars in 2019 is to continue to drive growth on Nature Valley and LÄRABAR.
Let me tell you about what we have planned on those brands. We plan to accelerate growth on Nature Valley, the leading brand in the category. Winning in this category requires strong innovation. We have a great lineup of new items in fiscal 2019. In the first half, we'll introduce new granola bites, nut butter coated in chocolate and granola. We'll add a new flavor to our recently launched layered bars, and we'll bring flavor news to our crunchy and protein lines. Our consumer messaging will center around our Be a Powerful Force campaign, where we'll highlight the benefits Nature Valley brings to your life and our commitment to helping the national parks thrive. This campaign will be featured across TV, radio, digital, high-impact partnerships, and in-store activations. Here's what you'll see this summer.
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Beyond Nature Valley, expanding our nutrition bar presence is key to our growth. We've driven tremendous growth for LÄRABAR, with retail sales nearly doubling in the past two years to $170 million in Nielsen measured outlets. In addition to LÄRABAR's significant presence in non-measured channels. We'll continue to let consumers know about this great product with our Food Made From Food campaign that highlights the few simple ingredients in LÄRABAR. We'll also build the brand by delivering new benefits to consumers. We'll introduce LÄRABAR Kids, entering the rapidly growing nutrition segment for kids. We'll renovate our nut and seed bar, which will combine a unique crunchy texture with grain-free and paleo benefits many consumers are looking for. Beyond LÄRABAR, we're expanding our presence in the nutrition bar space with the launch of two new brands.
First, we're launching EPIC Performance Bar, a whole food protein bar made with five to six simple non-GMO ingredients. Every bar contains 12 grams of protein, which comes from cage-free egg whites and nuts without any added sugar. We're also expanding our GoodBelly bar, the first snack bar to offer probiotic benefits. We saw great results with the launch of this product in the natural channel last year, and we're excited to expand distribution on this terrific product in fiscal 2019. Expanding our presence in Natural & Organic is a priority across our segment, not just in bars. We have a large and growing portfolio here today. In fact, we're the second largest Natural & Organic food company in the U.S. Our portfolio generates more than $1 billion in net sales today, and we're targeting strong growth in fiscal 2019.
Annie's is our largest Natural & Organic brand and will continue to be a significant driver of our growth. Our fiscal 2019 plan for Annie's starts with growing the core. Mac & Cheese is the foundation of our Annie's portfolio. It's the way many consumers are introduced to our brand. We have a terrific taste improvement on our blue box Mac & Cheese rolling into market this summer. Our organic cheddar bunnies are also yummier than ever, now more cheesy and crispy. We'll continue to engage new households, sharing the appeal of our great tasting products. Annie's is now the clear power brand leader with customers for Natural & Organic events. Living our mission is at the core of everything that we do on Annie's, and we remain committed to bringing meaningful news to the brand. In fiscal 2019, we're introducing several items that are leading in the regenerative agriculture space.
These limited edition Mac & Cheese and bunny graham varieties are driving incredible media response, as well as in-store displays at customers like Sprouts. Finally, we'll introduce some great new items like gluten-free cheddar bunnies and sour fruit snacks to bring new benefits and great-tasting products for consumers. Beyond Annie's, we have many terrific brands in our Natural & Organic portfolio, including Cascadian Farm and EPIC, among others. Let me share a few highlights on those. Cascadian Farm was a pioneer in the organic movement when it was introduced in 1972. In addition to improving the taste in some of our cereal and bar items and bringing great new items to market, like Cascadian Farm granola, we're returning to our roots on this fantastic brand. We partnered with farmers to bring Kernza to market this fiscal year.
Kernza is a long-rooted perennial, which helps with sustainability because it reduces tilling and drives more carbon into the earth. We'll launch a new Kernza Honey Crunch cereal in January, but this product has already earned us coverage in everything from National Geographic to Food & Wine Magazine. EPIC has grown tremendously since we added it to our portfolio in 2016. We'll continue to expand the brand in fiscal 2019, ensuring the core bars and strips are available in key channels, and we'll innovate with new items, including premium jerky in beef, pork, and chicken varieties. Our final accelerated platform is Mexican. The category is large, with $3 billion in retail sales and growing. Americans love tacos. Tacos are now eaten as often as spaghetti at home. Old El Paso is the clear leader in this category. We're three times the size of our next brand and competitor.
The brand will celebrate its 80th birthday in October, and it's still going strong. In fact, we grew share by more than a point over the last two years. Our goal in FY 2019 is to keep that trend going. It starts by winning in store. We are laser-focused on getting our products to the front of the store with taco truck display units. Consumers are more likely to buy Mexican if they're prompted in the first 15 feet of the store before they pass by the produce section. Retailers love the category, since shopping baskets that contain Mexican foods are 19% bigger than the average basket. The Talking Tacos and our Anything Goes in Old El Paso campaign remind consumers that tacos are easy to customize. The campaign is in its third year and continues to drive great results.
Finally, with Americans eating tacos on average every other week, we need to continue to bring them variety. This year, we'll build on our leadership in shells with two new items, the crispy flour tortilla shell that launched a few months ago, and a new head-of-line standard stuffed shell rolling out now. We're also launching new crispy seasoning, perfect for chicken and fish, and adding a mini kit to our innovative tortilla bowl line. Continuing to improve our top-line momentum is critical, and it's imperative that we translate top-line growth into a strong bottom line. We're taking actions in FY 2019 to drive efficiency and protect our margins. Like many in our industry, we're seeing increased inflation driven by factors across our cost base, from ingredients to transportation costs to wages.
Offsetting those costs requires continued work to drive non-value-added costs out of our business and to do things differently, continuing our strong tradition of Holistic Margin Management. Let me give you a few examples. In sourcing, we're leveraging our global sourcing team and using HMM sprint weeks that bring together cross-functional teams, including some of our suppliers, to eliminate non-value-added costs. For example, a recent packaging material sprint showed our order patterns and lead times with suppliers were too short, causing numerous changeovers on our suppliers' large presses. Changing this order pattern will generate millions of dollars of savings over the next few years. On logistics, we recently kicked off a project to restructure the flow of products from our plants to the customers' shelves. The transportation environment and our customers' requirements for reliable delivery have never been more challenging.
We're restructuring our physical and information flow while developing new capabilities that will unlock merchandising and e-commerce opportunities. This effort will drive both efficiency and effectiveness by lowering inventory, reducing miles products travel, and increasing on-time deliveries. We also know that the level of inflation we're seeing in FY 2019 requires us to find smart ways to generate net price realization on our business. While we can't provide specific examples for competitive reasons, rest assured we're highly confident that we can leverage our enhanced strategic revenue management capability to generate positive price mix in FY 2019 using all of the levers in the SRM toolbox, including sizing changes, trade efficiency, mix improvement, and list price increases. That's our plan. We're starting from a better place with momentum on our side. The task ahead is clear.
We must continue to strengthen our top line while acting aggressively to protect margins and improve profit. I'll close by thanking our North America Retail team. They've driven a critical first step in our turnaround this past year. We have an incredibly talented and committed team who wants to win. I look forward to sharing more on our progress in the year ahead, and I'll turn it over to Shawn. Thanks, Shawn.
All right. Good morning, and thanks, Jon. It's good to see everybody here. For those of you I haven't met over the years, my name's Shawn O'Grady, and I have the privilege of running our Convenience and Foodservice business. I also have leadership for our revenue development practice, which is our global e-commerce and global strategic revenue management portions of our capabilities. Since Jeff gave you a touch on both e-commerce and SRM, and my colleagues as we go through the operating sections will talk to you about SRM and e-commerce, I'm going to focus on Convenience and Foodservice and the growth that we see ahead of us. Jon just took you through The at-home portion of the $1.5 trillion marketplace for food and beverage.
I'm going to cover the other half, so the away from home portion and the growth that we see available to us there. The good news is that on that side of the pie, there's good and healthy growth ahead. I have to tell you, I like the opportunities that we have as a company over there. For our group, it all starts with our mission, and our mission is to serve solutions everywhere across the vast array of operators in this space. Just like our focus on consumer first over on the retail side of the business, for us, we're focused on consumer first, but what that really means in our business is being operator first and understanding their growth aspirations, but also their pain points. Excuse me. Bringing solutions to unlock growth and to delight their consumers.
We're fortunate to be able to do this with an advantaged business model. We're able to leverage the products and brands and capabilities that Jon just took you through. We put a unique twist on it by using innovation to both deliver growth, but also to address the pain points that our operators have. Then we drive demand by putting it in the hands of one of the best direct selling organizations in the food service industry. This has really been a competitive advantage for us in the space. If you took a step back and you looked at the journey that we've been on with our convenience store and food service business, over the decade, you can see that our top line of $2 billion in net sales has basically been constant. Where we've really been focused on is our journey on margin.
You can see 10 years ago, our margins were 8% at the operating profit level. We have worked hard on those margins over the decade to get them up to 20%. That's really come through smart optimization of our business, both with customers and channels, but also with products. In fact, we've reduced our SKU count by over a third in that period of time. That's put us in a position now where we like our margins, and it puts our business in a position where we can invest and grow the top line as we did here in fiscal 2018 by growing 3%. One of the keys to success has been the priority that we've given to our Focus 6 platforms. We have strong brands and technical capabilities in all six of these platforms.
The three that you see on the top, cereal, yogurt, and snacks, those are businesses that are well aligned with the businesses that Jon just talked to you about, and they tend to show up more front of house with the branding making it all the way through to the consumer. The other three platforms are branded to the operator and are largely sold for back of house usage. We really like the strength of the Pillsbury brand because it gives us credibility here and an advantage in the frozen space. We like the frozen space because it's moved further up the convenience continuum. As you can see, we have leading positions in most of these categories. You may notice that we changed one of our platforms from what it was last year.
One of our platforms last year was baking mixes, and we have traded that out for our frozen baked goods platform because we believe that there's more opportunities for growth going forward. They had about the same RNS, but again, we see more opportunity for growth with our frozen baked goods platform. As we head into fiscal 2019 and continue on our focus of profitably growing the top line, I thought it would be helpful to give you a sense for the growth opportunities and what they look like by channel. The first channel I want to talk to you about is schools. Our kindergarten through 12th grade schools is a significant business for us. We're the cereal market share leader in K12 schools, and we grew our cereal sales and our share in the past year.
The secret here really is to help operators increase the participation in school meal programs. We continue to have success with schools by expanding our gluten-free opportunities as students express more dietary restrictions. We'll be growing our portable pouch cereal options as kids increasingly eat on the go as they head to class. This also opens up cereal to snacking opportunities in other day parts later in the day. On the yogurt front, we grew our share last year in schools by offering innovative usage opportunities like yogurt smoothies. This year, we're excited by the number of schools that are partnering with us on a simple and easy-to-prepare recipe for yogurt coffee cooler that is not only a kid favorite, but it also meets two dairy equivalents for students.
This helps middle school and high school operators compete with the beverages that kids are buying before they get to school. We'll build on the success of our Yoplait GoBig yogurt tubes, which grew over 25% for us this past year with the addition of a blueberry option, which was the top request of both students and school meal coordinators. On the snacks front, it's not unusual for consumers to experience our products for the very first time in one of the away from home locations, places like airports, convenience stores, hotels, and health clubs. This is especially true with our snack bar offerings. We're partnering even more with Jon and his team in North America Retail to make sure that we have strong plans for these products to be in all of those locations.
With the expansions of LÄRABAR, EPIC, and GoodBelly, this is by far the strongest bar lineup that we've had to work with in a very long time. On the salty snacks front, our focus has been on bringing the flavor variety that c-store patrons demand. We're already off to a really good start with the Churro Bugles offering and a Honey Barbecue Chex Mix variety. Across convenience stores, we see a significant opportunity on the food service side of the business as they continue to compete with QSR restaurants. Last year, we entered the category with the Pillsbury stuffed waffle at 7-Eleven stores, which continues to be one of their top turning breakfast items. We recently expanded our stuffed waffle offering nationally.
We'll build on this success with the introduction of a Pillsbury stuffed meatball and pepperoni sub at 7-Eleven stores this fall, which will get us into the lunch and dinner day parts. I'm just as excited about our first major push to offer the on-the-go package of our Totino's Pizza Rolls in convenience stores nationwide. As you know, this is a really strong business for us in our grocery retail business, so it's great to have an opportunity to have an on-the-go offering now in c-stores. Overall, I have to say, I really like the opportunities to deliver innovation, operator-delivered solutions here in convenience stores, and to dial up the focus as we deliver high-quality hot food items. I mentioned to you that we shifted one of our Focus 6 platforms from baking mixes to frozen baked goods.
That's because as we look at the marketplace, we see significant growth and demand for baked goods at breakfast across food service channels, and we believe that we have some of the very best and highest quality items in the industry. The frozen format really does solve a pain point for operators now as they're facing a pinch on labor in the back of the house. We already have a very strong frozen biscuit business, and in the second quarter, we'll be launching and expanding our full line of breakfast bakery items for commercial restaurants. This is a big move for us and one that will be a multi-year growth opportunity as we go forward.
One of the areas I don't talk about a lot is that in addition to the products that we offer broadly, we also partner more specifically with key commercial players to design unique and innovative products, especially for their breakfast menus. These items range from cinnamon rolls and biscuits to yogurt parfaits and Go-Gurt. As we enter fiscal 2019, we see really good opportunities for growth here with strong collaboration with our partners. I thought I'd give you a 90-second peek into what the collaboration looks like. I picked one between us on Einstein Bagels and our Annie's brand. If you have a chance, let's roll the video.
We're at Einstein's here in the Twin Cities today to talk about the new Annie's Mac & Cheese Bagel Sandwiches. It's a limited time offer that runs from May through the end of August. It'll be available in over 700 stores nationwide.
The business teams took a look at the landscape. They saw an opportunity. Why not marry that great brand of Annie's with the organic requirements they have, with the food service pouch mac & cheese? What we try to do is create a sauce that was nice and thick, clung to the noodle. The noodle was al dente, had nice bite to it.
Actually, we were presenting it to have as a kids' mac & cheese in the marketplace, served in a bowl traditionally, what you might find on any kids' meal. Once we met with the Einstein's culinary team, their creative juices just started to flow. They wondered out loud, "What would it taste like if we put the macaroni and cheese on a bagel?
When they bake it into the bagel, it becomes part of the bagel itself. That pasta comes in the back end, and it kind of adds a little bit of excitement and kind of a wow factor to it.
Using the Annie's brand in store on signage, as well as digital material, has really helped create a lot of buzz about the product. What could be better than macaroni on a bagel?
That's if you already had your stuffed waffle this morning, you can go there next. We're excited about the top-line growth opportunities ahead of us. It's equally important that we continue to drive efficiency in a way that will help us deliver our bottom-line growth aspirations as well. With inflation continuing to come our way in fiscal 2019, it's important that we battle back with smart moves to reduce cost and eliminate waste. We've identified opportunities in the coming year to internalize key platforms of established and stable businesses while improving their consistency and quality. We continue to be persistent in our efforts to reduce or eliminate unnecessary costs, especially in packaging, as we will with our salty snacks business in c-stores this year.
This is a great project in that it reduces cost and eliminates packaging waste, but also cuts out a labor step for our operators, so they're happy to adopt it. I've had the chance to lead our Convenience Stores & Foodservice business now for the past 18 months, and I have to tell you, it is a gem of a business. We've had a decade of delivering consistent profit growth, and now we're in a position to really deliver profit growth on the bottom line and on the top line, which I'm confident that we'll do in the year ahead. There's growth available to us when you look at the away-from-home space. We have an advantaged business model with a terrific sales force.
I really like the news and innovation that I've had to share with you this morning, especially the news that we have on our Focus Six, which drives our profitability. We have strong plans to protect our margins in the face of elevated inflation in the year ahead. Thanks for listening, and I'll turn it back over here to Jeff Siemon.
All right. We'll go ahead and open for Q&A, so microphones coming from the back of the room. We'll start Andrew here with Barclays, please.
Thank you. Jon, in yogurt, in fiscal 2018, you were still battling some of the declines in Greek and Yoplait Light, which sort of was enough to offset some of the gains you saw with the better innovation. As you go into fiscal 2019 and you start to lap some of those declines, you've got even more innovation that seems even increasingly relevant. Would your expectation be that yogurt is a contributor to growth in fiscal 2019? If you could talk a little bit about just the category dynamics in yogurt in the U.S. as well.
Yep, great. Maybe I'll start with the category. It has really decelerated really over the last year and 18 months and really being led by Greek. The yogurt category in the U.S. was down 3% in our fiscal 2018, and Greek was down 6%. Again, really driving that decline. In our Q4, March through May, the category was down 5% and Greek was down 10%. We are not a big player in Greek today, and actually that's working for us. Where we're seeing the growth is in the Simply Better segment, which are things like Oui by Yoplait and new Siggi's, and that's where YQ is going to play as well. We feel really good about how we're positioned in the category. We expect the category to remain a challenge in the coming year.
We expect to grow share over the course of fiscal 2019. Whether we get back to absolute growth or not, we'll see. I think we're going to be close. What I can tell you is we're going to be a lot better than we were in fiscal 2018. If you remember this time last year through Q1, we were actually down over 20% on yogurt. Again, we feel like we're in a much better place, which will help our entire business in NAR.
How about we go Chris Growe here in the front?
Thank you. I just had a question for you, Jon, on U.S. retail, kind of putting aside the overall company's pricing expectations for the year, you've got a lot of inflation in your business as well.
Sure.
I'm just curious, you talked about strategic revenue management, obviously mix management within that pricing. I'm just curious, when you think about the gross margin for U.S. retail, can that grow this year? What are the key components of that given the heavy inflation that you're facing this year?
Yeah. I don't think we're giving guidance at the segment level on margins.
Right.
What I can tell you is again, price mix will increase where it was actually down in the year prior. We've got lots of initiatives underway, our HMM will actually be at record levels this coming year. This initiative in our plants is incremental year-over-year, we've got a major logistics initiative as well, which we think will really contribute. We are in a very different place than even a year ago with strategic revenue management and our capabilities. We spent the last year laying the tracks to make sure that we can execute in market. You're going to see really all the levers of SRM pulled from trade efficiency to mix to pack price architecture, also some list price increases as well.
We feel like we've got a good handle category by category in terms of what pricing is available to us and then the right tactics to do it in the way that makes sense for our consumers as well as our customers.
Yeah. Great. Let's maybe go back of the room. Jason?
Hey, good morning. Thank you for the question. A question on your Natural & Organic portfolio. It's obviously been a source of strength for a number of years. In the measured channels, Annie's has become a bit of a headwind for you guys, declining now roughly mid-single digits, and I know there's some distribution falling out. Even on velocity, it's kind of flat-lined right now despite the inherent growth in that overall segment. Can you talk a little bit more about what are some of the challenges that affect you in that business?
Yeah, absolutely. I'm very bullish on Annie's overall. What I would tell you in fiscal 2018, we saw 2 things happen. One, our core Annie's business, so that's Mac & Cheese, Cheddar Bunnies, and Grams actually grew mid-single digits. We feel really good about that. In fiscal 2017, we actually moved into some new categories with Annie's, things like yogurt and soup, we're seeing that that didn't play out the way we had hoped, and that distribution's actually starting to go away. In Q4, we actually turned negative, to your point, on Annie's, that was really driven by some promotional timing and lapping of some promotions the year prior. Again, some of this distribution falling away. In the month of June, we turned positive again overall in Annie's, our core Annie's business again is growing mid-single digits.
With some of the initiatives I showed you earlier, we feel very confident that we'll grow Annie's overall. The core business, which increasingly is what we're going to focus on, we believe there's a lot of runway ahead of us.
Great. David Palmer over here on the left.
Thank you. On the strategic revenue management, I know that's always the insides of every company, and it's pretty critical for you going forward. You talked about improving some people power there.
Yeah
Also some other capabilities. Could you talk about that and maybe give some examples of the types of wins you're seeing lately to give us an idea of how you're truly turning the corner there? On the points of distribution, is that largely around Blue Buffalo? Maybe you can give us some color there.
Yeah. I'll quickly answer the distribution question, then Shawn's actually heading up our global capability on SRM, so I'll let him answer that. Our segment does not include Blue Buffalo, so again, that distribution is ex Blue Buffalo.
Yeah, on SRM, we did build that. We really invested a lot in that capability over the past year. It became clear to us that that was going to be a tool that we needed to be better at. We brought in external talent, really. It was not a capability that we had in-house. We brought in some talent from the beverage industry to help us build out a team there. Overly simplify it a little bit, but there are really two big pieces to SRM. One is data and visualization, and the other is in-market execution. You'll get to hear from each of the operators on the in-market execution.
On the capability piece, it really is about being able to pull in the right pieces of data and then be able to turn those into visualized insights. That's a capability we didn't have. When we were faced with inflation, frankly, we weren't able to leverage all of our tools. We were only really able to look at pricing and trade efficiency. What the visualization has helped us do is get down to the SKU level and the customer level and allow us to use a full set of levers, including price pack architecture and mix and premiumization. We know that there'll be periods of time that inflation will be low, and there'll be periods of time when inflation will be high.
As we enter a period here where inflation has come back up, we feel much more equipped to deal with it now and know where we want to go with our pricing.
Great. How about Bryan Spillane up here in the front?
Thank you. Shawn, maybe a follow-up to that question.
Yeah, sure.
with SRM. I guess as you've seen what's happened in the beverage industry as they've applied it, one of the things that's happened is it's created a little bit more complexity, right? You've got more pack types, more pack sizes, and in some ways trying to avoid maybe channel conflict, right? That you see one price point in a convenience store and it should be different from what you see maybe in a grocery store. I guess as you're implementing the tool and you're looking at those other levers, would we expect to see maybe more complexity, you'll see more pack types? And if you could talk a little about just how you're thinking about channel conflict.
Yeah. First of all, thanks for the question. It's a really good question because as you look at our overall footprint, complexity is always a question. The simple answer is there's good complexity and bad complexity. Over the years we've seen the diminishing returns of bad complexity. Where you do see good complexity, especially from a strategic revenue front, is being able to find exactly the right size and the right pricing for a specific channel. The nice thing about our portfolio is it's a very broad portfolio, so we have capabilities to do things that maybe were available to us before, but that we weren't doing. I would expect to see us be able to play more flexibly across sizes and packages and prices across different channels. E-commerce, I have both of those capabilities.
E-commerce as well is guiding us down that path because it requires some of the similar tools. Yeah.
Great. How about Pablo in the back?
Thanks. Just two questions. In the case of snacks, can you help us frame the strategy in snacks? A lot of companies entering the category remind us of what are the main buckets there. Is it mostly about bars or just more specifics in terms of the strategy overall. In the case of the logistics program, obviously you were caught by a higher freight cost. Can you give us again, more color in terms of what you're doing? Are you bringing more contracts, more in-house transport, more trucks? What are you doing specifically? Thanks.
Yeah, let me talk about it in general, then Jon can talk about it more specifically. In general, when it comes to snacking, it really is energy on the go, snack bars are our accelerate portfolio. You've heard a couple of examples from Jon. You saw the big pie chart with Nature Valley and how big that is in the U.S. In a few minutes you'll also hear about Europe and Australia and a little bit about India and maybe even China, where we're also growing snack bars. When we think about snacking, snack bars is the biggest driver overall of growth, it is our biggest platform within snacking. Having said that, we also have a pretty good fruit snack business here in the U.S. and a pretty good salty snack business.
Yeah, exactly. The fruit snack business, interestingly, grew high single digits last year. It was a great business for us. By, again, understanding who our consumer is and giving them what they want, we've seen a lot of growth. In terms of logistics, one of the things we're really trying to do is simplify our logistics footprint, really it's on our dry side of the business. We have nine distribution centers for dry, I can guarantee you that we have every SKU that a customer might want at any given time, it's usually not in the right place. Actually by simplifying and reducing the number of distribution centers, we can take out inventory and actually have better service to our customers. We're also leveraging data better as well.
We actually get more lead time from our customers than we actually leverage today from a system standpoint. We're getting smarter about taking the data that we have and leveraging it to get better distribution and logistics savings as we move forward.
Great. Okay. Michael Lavery here in the middle.
Thank you. You mentioned the expected distribution growth. You just touched on the category declines in yogurt and obviously cereal. That's been the case for many years. Where do you expect to get those gains and how much does category pressure factor in? Do you expect to gain distribution in those two categories? Is it coming from somewhere else? Is it broad? Where should we look to see that?
As I mentioned earlier, we saw broad-based share growth this past year, and that really helps us by having momentum in our categories. We're able to paint a picture to say we're the ones that are productive in driving your category. We expect distribution gains to be broad-based. The other thing that's contributing is innovation. As I mentioned, we'll be back to historical levels. We'll expect a full 1 point of growth coming from innovation versus fiscal 2018 incremental growth, and that's going to really help our distribution points as well. I would say it's going to be broad based across the majority of our categories.
Even in something like cereal and yogurt?
Yeah, cereal. We grew cereal last year, both from an RNS, just a little bit, but we'll take it right now. We grew cereal from an RNS and a movement standpoint, so we feel really good. We grew a tremendous amount of share, and we're bringing good innovation. We do expect to grow in cereal. Yogurt, again, we're bringing great innovation, so we expect to have better trends there, too.
Alexia, same table here in the middle.
Hi there. I've just got a general question around the pace of innovation. It sounds as though it's stepping up quite meaningfully this year. Your overall organic sales growth is still expected to be relatively flat to in the low single digits. Your underlying EBIT numbers, I think, when you strip out Blue Buffalo, are down low to mid-single digits, so it feels like an investment year. Is that pace of innovation sustainable, and will you be able to get back pretty quickly into positive underlying EBIT growth? May it take a little bit of time to gear up to a more positive, virtuous circle on the profit side?
Well, it's a fair question. I risk giving FY 2020 guidance if I answer it too specifically, I don't want to do that today. Only to say that we made progress in the top line on FY 2018, we'll make more progress in FY 2019 and a little bit more on the bottom line. We hope to do the same thing as we look ahead. We are investing some in growth this year. That is true, whether it's in capabilities or investments in distribution or accelerators. We expect to see the benefits of that. We'll make sure that the investments that we make, the ones that really work, we'll double down on, the ones that don't work as well, we'll cut back on. With that learning, we hope to improve our performance again in FY 2020.
Great. Robert Moskow here in the front.
Hi, thank you. I don't think you're giving segment guidance, you do have a slide, Jon, that says that you have balanced top-line and bottom-line growth. When I try to add that up to the broader guidance for operating profit for the company to be down, it just doesn't quite match up. Should I take this at face value that it'll be top-line and bottom-line growth for North America Retail?
I think we can maybe come back to that question when Don comes up. Some of the elements that drive down our operating profit growth will be on the corporate line, including incentive and some other items. Segment level will be better than the overall company's adjusted operating profit growth.
Okay, is it still positive for North America Retail?
Well, we're not giving specific even positive, negative on the bottom line for the segment level.
I'll follow up later. Thank you.
Ken Goldman, right? Same table.
Thank you. I wanted to follow up on Jason English's question about Annie's, because when Annie's was bought, one of the arguments for General Mills being the perfect fit was General Mills already had production capacity distribution for some of the categories that it felt Annie's could really thrive in. I think that's been true to some extent, but clearly with soup and cereal, I think you mentioned were the two of them, if I heard you correctly, that didn't necessarily work out quite as planned. I wanted to dig a little bit deeper into what happened there that was disappointing, and if there are larger lessons that you guys have taken away for future M&A or any kind of brands migrating into other categories. I'm looking at EPIC bars here, for example, going into non-meat.
How do we think about General Mills' ability to take these brands and move them into other categories? It's a lot, I know.
The first thing I'd say, the exciting thing about Annie's, it still only has 20% household penetration. 80% of American households don't have Annie's in it. There is still tremendous upside for us on the brand that we're excited about. One of the things we've become smarter about is where to extend the brand to. We have the best success when you go into a category that mom doesn't feel great about giving it to her kids, and you provide a better alternative, so a cleaner ingredient deck. If you think about yogurt, there already were alternatives there that were pretty clean, Stonyfield and other players like that.
Again, we're best when we move into a category that mom doesn't feel great about providing a cleaner, unjunked version of it. We still believe there's lots of category expansion space for us on Annie's as we move forward.
I would say that, let's step back on Annie's. We've more than doubled that business in three years. Not all innovation works. If every piece of innovation you have works, you're actually not doing enough, because some things are not going to be successful. The key is to make sure that you keep innovating, and if you fail fast and call it and move on, and make sure that you don't denigrate the brand in the process. Even if the Annie's yogurt didn't work exactly the way we wanted, it was a great yogurt product. It was organic. It didn't denigrate the brand at all. For me, if you have innovation that doesn't work once in a while, that's okay.
We got to keep our eye on the big picture, which is we've more than doubled the Annie's business in the time that we've had it. We've made the equity terrific. We've tripled the household penetration, and we're growing the core. We'll have innovations on things sometimes that don't work, and whether that's EPIC or Annie's or maybe even Blue Buffalo, but the vast majority of what we've done on Annie's has worked. The fact that the core is growing and strong, we feel great about.
All right. I think we're going to take a pause here on that Q&A. Thanks, everybody. We'll shift gears here and bring up our second group. In order to stay on time, we're going to go ahead and kick off the second half. Bethany Quam, who leads our Europe & Australia business, will kick off for us.
Good morning. I'm Bethany Quam, and pleasure to be with you here today to talk about our Europe & Australia business.
Our segment is $2 billion in net sales last year and returned to top-line growth. We're tightly focused on four global platforms, yogurt, Mexican foods, ice cream, and snack bars, which together represent almost 80% of our portfolio. We see tremendous opportunity for growth in Europe and Australia. We often refer to ourselves as an emerging company operating in developed markets. Our four key platforms compete in categories that are well-known and loved by consumers. They are large categories that have high levels of household penetration. That said, our brand penetration within these categories is still relatively low. We're focused on continuing to close those gaps by leveraging our global scale, marketing capabilities, and proven innovation from around the world. Those efforts helped us to grow our brand penetration in ice cream, snack bars, and Mexican in fiscal 2018.
In addition, three-quarters of our net sales is generated in just three markets, France, the U.K., and Australia. Although these are large countries, they only represent 20% of our segment population. There is significant opportunity for both geographic expansion as we look forward. To bring that opportunity to life within our organization, we every day talk about how can we serve more consumers by creating more love for our brands in more places. To deliver more love in more places, we're investing behind integrated marketing, delivering differential innovation, and expanding the availability of our brands across markets as well as channels. We've outlined three key priorities for our segment in fiscal 2019. First, we will compete more effectively in our largest business, yogurt.
We've improved our performance on this business over the last 18 months. We know we need to do more to ensure that we win in this large and dynamic category. Our second priority is to accelerate our growth on our Old El Paso, Häagen-Dazs, and snack bar platforms. These are highly attractive categories, which we have great brands, strong momentum, and attractive margins. Finally, we will create the fuel for investment and expand our operating margins by delivering HMM and SRM. I'll share some highlights of our FY 2019 plans starting with yogurt, which represents roughly 40% of our net sales in Europe and Australia. Our yogurt business is primarily concentrated in two markets, France, which is the home of Yoplait, and the U.K. Our portfolio in France is broad, with brands in a variety of segments, including everyday family, kid, and simple indulgence.
Our portfolio in the U.K. is much more concentrated, with a leading position in kids' yogurt behind brands like Petits Filous and Frubes. I mentioned that we've driven meaningful improvements on this business over the last 18 months. We had a tough fiscal 2017 with our retail sales impacted by a challenging category and a difficult integration of our Yoplait and General Mills Europe sales team. In fiscal 2018, with our integration issues behind us, we significantly improved our performance through increased innovation and in-market execution. Our branded business in France grew low single digits during the year. Ensuring a strong and healthy core was critical to competing more effectively in fiscal 2018. While we have many wonderful brands within the Yoplait portfolio, there are seven that make up the core of our business, representing roughly 65% of our yogurt sales and a higher percentage of our profits.
We'll support these brands in fiscal 2019 with integrated consumer execution, including a full lineup of innovation, renovation, and communication. Take a look at an example from our leading kids brand, Petits Filous. In addition to driving our core seven brands in their existing segments, we're innovating in fiscal 2019 to bring them into more premium, faster-growing segments of the category. For example, we're launching Liberté pots into the simple indulgence segment in the U.K. This is drafting off of Oui by Yoplait platform and bringing it to the U.K. consumer. We'll invest to remind French consumers about the simple indulgence of Perle de Lait. We're also expanding into the fast-growing organic yogurt segment with new launches on Petits Filous as well as Panier de Yoplait. We think these efforts will help to position our yogurt business for growth in a dynamic and evolving category.
Onto our first accelerator platform, it all starts with Mexican. Old El Paso is the leading Mexican food brand in Europe. We serve consumers' varying needs across the category with meal kits, tortillas, and carriers, as well as the ingredients and sides needed to complete your meal. There's lots of growth ahead for this category and for Old El Paso in Europe. While consumers in the U.S. and Europe are similarly open to Mexican, the category penetration in our markets is far behind that of the U.S. Given that we have a leading market position, when we bring new consumers to the category, we drive growth for Old El Paso. Consumers tell us that their number one barrier to purchase Mexican food is that they just don't think about the category.
The key to converting consumers' openness into increased category penetration is driving category and brand awareness throughout the path to purchase, from our advertising to our online presence, all the way to our in-store placement. As Jon mentioned earlier, displays in the produce section drive sales for both Old El Paso and our retailers' fresh items. This is a strategy we are implementing around the world. In addition to driving visibility in our core business, we will continue to drive growth by meeting consumers' evolving needs in areas such as gluten-free, where we've recently launched both a meal kit and a tortilla, as well as Mexican snacking behind expansion of our tortilla chips and dip. Transitioning to our second accelerate platform, super premium ice cream. Häagen-Dazs is a fantastic global brand with premium positioning and unmatched product quality.
Over the past two years, we've driven innovation in market activation and distribution expansion to generate 12% compound growth in Häagen-Dazs retail sales, more than double the rate of the category. Häagen-Dazs appeals to variety-seeking premium ice cream consumers. We're focused on delivering a steady stream of news and innovation across the portfolio. In 2019, we're launching new flavors such as Peanut Butter Crunch pints and stick bars, and the expansion of our Mini Cup. We're also continuing to roll out our refreshed packaging across the region, which is generating terrific consumer response to date. Building premium brands to reach millennial consumers requires differential activation. That's why they established great partnership with events like a Sunday at the Movies in Paris, or our great partnership going on right now at Wimbledon and then the Australian Open in January. Distribution expansion is another key growth driver for Häagen-Dazs.
In fiscal 2017, we launched the brand in Australia, which has one of the highest per capita rates of ice cream consumption in the world. We've expanded our presence and driven tremendous growth in the U.K. in recent years through the expansion of our stick bar and Mini Cup platform, and we're still in the early days of rolling out to new cities in Italy. These three markets alone have combined category sales of approximate $3 billion, and all are growing double-digit on Häagen-Dazs in the past 52 weeks. Our last accelerate platform, which has terrific growth, is the snack bars platform behind both Nature Valley and Fiber One. We're building up strong momentum we've established in snack bars in the segment. Nature Valley and Fiber One have combined to generate 30% retail sales growth over the past two years.
With just 9% market share compared to our high 20% share position in North America, there's plenty of growth ahead for us in this category. Our growth history in bars has been driven largely by distribution and innovation. While both will continue to be key growth drivers in fiscal 2019, we're adding more fuel to our business by doubling down on expanded consumer investment. We'll invest in multiple levers to drive brand awareness, TV, sponsorships, and sampling. We're learning from investments we made last year. For example, we put both Fiber One and Nature Valley on TV in Australia and saw both businesses respond positively. We're doubling the number of weeks we're on air in fiscal 2019. With global realignment, we're sharing ideas across geographies better than ever.
In Europe, our Nature Valley innovation pipeline continues to draw from our products that have proven successful in North America. In fiscal 2017, we launched Nature Valley protein bars. In fiscal 2018, we launched Nature Valley Biscuits, and fiscal 2019, we'll introduce Nature Valley Granola Cups, which has been a top performer in the U.S. We'll also continue to expand our Fiber One brand in fiscal 2019 with the launch of Fiber One Popcorn Bars and Fiber One Cake Bars, further showcasing our ability to deliver remarkable tasting products with only 90 calories. Our final priority for fiscal 2019 is to create the fuel for investments and deliver margin expansion.
We're continuing to operate in an inflationary environment where we see the prices of commodities such as dairy, vanilla, and eggs continue to rise, which reinforces the need for us to continue to drive strong levels of HMM and to accelerate our SRM initiative to deliver net price realization in the marketplace. We also need to deliver efficient spending behind our brands in 2019. This means delivering integrated consumer executions that allow our TV, digital, social PR, and in-store efforts to work in concert and maximize our ROIs. In summary of my comments today, our Europe and Australia segment has a ton of opportunity, and we're very focused on driving more love for our brands in more places. We like our plans to compete effectively and improve our performance in yogurts. We're excited about our prospects to accelerate growth on Old El Paso, Häagen-Dazs, and snack bars.
We're focused on continuing to drive efficiency with HMM, SRM, and smart consumer investments that will translate into operating margin expansion in fiscal 2019. I'd like to thank you for your time this morning and turn over the podium to Christina Law to talk to you about Asia and Latin America.
Thanks, Bethany, hello everyone. I'm happy to be here again this year to share with you our plans for General Mills' Asia & Latin America segment. Our segment was formed in early 2017 as part of our global realignment and covers all of Asia, Middle East, Africa, and Latin America. This represents 150 countries and 6 billion people, which is more than 80% of the world's population. These countries drove nearly 65% of the world's packaged food sales growth over the last five years, there are clear opportunities for our continued growth in this segment. Our largest market is China, followed by Brazil and India. These three markets generate roughly two-thirds of our segments, posting $1.7 billion in total sales in the overall segment.
We are focused on four of our company's global platforms, including Häagen-Dazs ice cream, Yoplait yogurt, Nature Valley, Yoki, and Pillsbury snacks , and a variety of brands in our convenient meals platform, including Wanchai Ferry in China, Kitano and Yoki in Brazil. The growth outlook for our business in Asia continues to be positive, we saw improvement in Latin America in the second half of fiscal 2018. We see the middle class driving much of the growth as they seek superior quality and experiences. We're meeting that middle class needs by accelerating growth in the core General Mills categories that are relevant and appealing to them. This is also the region where technology is rapidly leapfrogging, compared to their developed market counterpart, consumers are much faster to adopt e-commerce or advanced food solutions such as meal delivery service with a click.
I'll talk more about each of these areas in a minute. For fiscal 2019, we're focused on a few key priorities to drive growth in Asia and Latin America. We plan to accelerate growth on our Häagen-Dazs and snacking platforms. We'll compete more effectively on our key regional businesses, we'll take actions to drive margin expansion. Now let me provide additional context on our fiscal 2019 plans to bring each of these priorities to life, starting with ice cream. The ice cream category in Asia & Latin America has generated impressive growth in recent years, reaching over $31 billion in retail sales in 2017. Euromonitor expects the category to grow at a 7% compound rate over the next five years.
Häagen-Dazs represents roughly half of our net sales in Asia region through a combination of shops, retail outlets like hypermarkets, supermarkets, food service channels, and a growing e-commerce business. The brand is performing well in Asia, generating mid-single-digit retail sales growth in fiscal 2018, with double-digit growth in the fourth quarter. While Häagen-Dazs is the smaller piece of our Latin America business, it is nonetheless one of our fastest-growing platforms in that region as well. As we look to accelerate Häagen-Dazs growth in fiscal 2019, we're focusing on three key areas: extraordinary innovation, a unified consumer activation plan, and aggressive channel development. I'll share examples of our plans in each of these areas with a focus on Asia, which is our largest Häagen-Dazs region. Our innovation strategy with Häagen-Dazs is to delight our consumers with a steady flow of new flavors and consumer experiences.
Our consumers seek variety and appreciate premium, one-of-a-kind offerings. We're coming off a strong year of innovation in fiscal 2018, including pints and Mini Cups that were customized to address regional tastes in Asia, such as a limited-edition fruit and flower line, I think I've mentioned before, mochi, which is really exciting dessert items in Asia. We've learned from these launches that remarkable flavor news is a powerful sales tool. In fact, our limited-edition offerings were a key contributor to sales growth in fiscal 2018, often sold out well ahead of plan in both our shops and retail outlets. Our plan calls for even stronger levels of innovation in fiscal 2019.
We're launching exciting new flavors on a quarterly basis, including white and peach raspberry in the first quarter, followed by peanut butter crunch in the second quarter, we'll have new mochi flavors, which I won't disclose as yet, and flower flavors coming in the back half of the fiscal year. We'll also expand, interestingly, a gifting range in fiscal 2019. For more than 20 years, Häagen-Dazs festive mooncakes have been a key part of the Mid-Autumn Festival in China and other regions in Asia. This year, we're building on fiscal 2018's strong mooncake season by adding a new gifting range focused on the key time frames of Christmas and Chinese New Year. We'll also be expanding our ice cream cakes range and venturing into adjacent categories such as premium chocolates to complement the holiday offerings.
Finally, we're focusing heavily on the continued rollout of our new stick bar flavors to extend our portfolio in the fast-growing handheld segment. In fiscal 2019, we'll capitalize on this growth opportunity by launching cookies and cream and peanut butter flavored stick bars across the region. With the global realignment, Asia has become one unified geography that operates as one and leverages the power of scale. We've transformed to a unified always-on engagement model to pursue number 1 share ambitions across Asia, building on successes we've achieved in markets like Hong Kong, Taiwan, and Korea. This one Asia marketing model delivers impactful reach through digital, social, PR, and eye-catching events, including collaborations with millennial social influencers. Two campaigns that will leverage this 360-degree approach include our first quarter Let's Peach Party and Nutty Autumn activations in the first half of fiscal 2019.
Let me share a video with you to show you how we're bringing our activation plans to life.
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Well, as you saw in the video, we're approaching channel development opportunities from multiple angles to drive growth and solidify our premium positioning. Our strategy focus on three key channels, retail, e-commerce, and shops. Häagen-Dazs branded freezers are a key selling tool to drive brand awareness in retail locations. It's getting more difficult to stand out in store, and we're making significant investments in our freezers to increase our visibility and better convey our premium quality. We expect our investment in freezers to drive incremental distribution in retail channels this year and enable further channel expansion in the years to come. We see tremendous opportunities to grow our Häagen-Dazs e-commerce presence in key markets across Asia, where e-commerce food solutions are highly developed compared to the U.S. For example, nearly 20% of grocery sales in South Korea are through e-commerce platforms.
In China, e-commerce accounts for roughly 6% of total grocery sales, where the dominant model is home delivery, leveraging mobile technology. Just recently, General Mills signed a joint business plan with the Alibaba Group, the largest e-commerce platform in China, to capitalize on advanced data solutions for consumer insights, which will lead to marketing and sales innovation. We support our premium positioning by continuing to modernize our shops. We'll refresh more than 50 shops in Asia this year to a contemporary luxury concept that was inspired by our millennial target. We're also elevating the shop experience with shareable creations. For example, fun do-it-yourself cones that play into the millennial trend of personalization. These unique creations are designed to be Instagram worthy to encourage social sharing. In addition to generating excitement, this also helps to drive improved revenue, given consumers' willingness to pay for a personalized experience.
snacks is one of our global accelerate platforms. We exceeded fiscal 2018 with very strong momentum as we extended our global footprint on brands like Pillsbury, Betty Crocker, and Nature Valley. One of the brightest spots has been our Better For You indulgent cookie cakes and pastry cakes in India, which we've also taken to the Middle East. I'm proud to say that we nearly doubled distribution of these products last year, adding them to more than 100,000 retail stores. We're also winning in e-commerce as one of Amazon's best sellers in cookies and cakes. Given our recent success, we're expanding our retail presence of our Pillsbury snack to another 130,000 retail outlets across India and Middle East in the fiscal 2019. We're launching these products also in select Latin American markets under the Betty Crocker branding.
We'll also accelerate our profitable sweet snacking mixes through year-round activation, with a focus on our exciting launch of Betty Crocker Mug Treats. These products recently debuted in North America, and these are being introduced at the same time to many markets around the world. This is another great example of leveraging global ideas, sharing to quickly bring compelling innovations to markets around the world. For Nature Valley, we're investing in proven winners to grow distribution at the right consumer value. We're leveraging key learnings from our Nature Valley advertising campaign in other markets to drive awareness and build trial with young, active adults through our digital-led campaign on core crunchy bars. We're expanding our portfolio by introducing 100% whole grain offerings in the cookie aisle in markets like Mexico and Puerto Rico.
in addition to our acceleration plans across our global platforms, we're focusing also to ensure our key regional businesses continue to thrive with new portfolio strategies and investments. For our Yoki business in Latin America, we're focusing our fiscal 2019 investment in a product category we call Trusted Basics. They include everyday affordable staples that beat local players in quality, service, and execution. Our new Live Your Roots Yoki brand campaign is a great example of this strategy in action. We're innovating our pack designs to showcase product attributes and improve the first moment of truth. We're also supporting the campaign with social media and public relations initiatives to further advance our reputation for trusted quality. We'll be executing major point-of-sales event during key seasonal windows to drive consumer trial. We're also competing more effectively in China with a business model transformation on our Wanchai Ferry business.
Wanchai Ferry delivered double-digit growth in fiscal 2018, we will build on that exciting momentum with innovation on core dumplings and a continuation of our innovative partnership with Ele.me. It is an online app service that delivers cooked Wanchai Ferry dumplings to your door in just 30 minutes. Food delivery service is rapidly growing with time-strapped middle-class consumers in China, over 90% of e-commerce grocery purchases are made through mobile devices. We see clear opportunity and growth potential with this partnership here. For our Kitano business in Latin America, we'll leverage value-added core renovation to be more competitive on shelf, we'll expand our pure-as-its-flavor positioning by reducing 30%-50% of the sodium content of our products, such as our soup offerings. Finally, our key segment priority is also to step up our margin improvement and performance.
We will continue to drive HMM cost savings initiatives. For example, this year, we are automating numerous filling and packaging systems across our meals and snacks platforms in Latin America to reduce operating costs while enhancing our manufacturing capabilities. As others have mentioned, our segment would enjoy increased HMM savings also from the company's global sourcing initiative. We are driving positive net price realization across the segment by pulling various levers in our SRM toolbox as well, including price spec architecture, trade efficiencies, and price list harmonization. We are optimizing our supply chain network, especially in China and Brazil, and we are transforming our go-to-market capabilities to drive margin improvement beyond fiscal 2019. In summary, our Asia and LatAm segment exceeded fiscal 2018 with positive top-line momentum, and we will build on that in fiscal 2019 by investing to accelerate Häagen-Dazs and snacks and by competing effectively on key regional businesses.
We have actions in place to drive margin expansion in fiscal 2019 and beyond. I thank you for the time today, and now as a pet parent myself, I am excited to turn the microphone over to Billy Bishop to talk to you about our pet segment.
Good job, Christina. Thank you, Christina. Hello, everybody. My name is Billy Bishop. I am happy to be here for my first investor event with the new General Mills family and excited to share with you our Blue Buffalo story. For some of you who are not as familiar with the brand, I figured we would start at the very beginning with the furry guy that really started it all for the Bishop family. This is our family dog, Blue. He was a major part of our family. He actually was the ring bearer in my wedding, big responsibility there for him. What really happened is he had several bouts with cancer at a very young age. That is what got us really interested in getting into the pet space. Really, there were three things, in talking to a holistic veterinarian, that impact pets' health.
The first was genetics, clearly, obviously. Second, environmental toxins, things like carpet cleaners, lawn fertilizers, things obviously that dogs and cats have very close proximity to. Finally, diet. As we started to look at the pet food space, we had never, ever, as a pet parent, read a pet food label before. Actually, it is true today. A lot of pet parents think they are feeding a wholesome, natural product, but they really have not taken the time to read an ingredient label. A lot of the big name brands or legacy brands out there today have great pictures on their packaging. When you look at their ingredients, they really do not add up to pet parent expectation. Most people, when they read them, actually feel fooled. That gave us an opportunity, my father, my brother, and I, to start Blue Buffalo.
We built it really on one simple, true blue promise formula philosophy. Only use the finest natural ingredients, because we love our pets like family, why not feed them like family? We love the pet food category, and we really love the position that Blue Buffalo plays in it today. We are the leader, by far, in the wholesome natural category, which is driving the premiumization of the pet space. We have built our brand by investing over $900 million in pet specialty, driving awareness and education for our brand. That's brought us to the number one brand in pet specialty as well as the number one pet food brand online. The pet food category is highly attractive. Humanization, as I said, is driving the premiumization in pet, and I feel like we're in the early innings of driving this transformation.
There's low private level penetration, and the ordering pattern is very similar to the subscription-like model, which I think also helps us accelerate our growth online. As I said earlier, Blue Buffalo has a lot of white space out there ahead of us to go after and paint blue. From a strategy standpoint, we have a clear strategy that we're focused in on, and really it's all about reaching more pet parents and feeding more pets. It all starts in the U.S. Our primary focus is going to be how do we continue to drive awareness and drive share for the brand as we continue to reach more younger pet parents and younger pets as we over-index with both of those groups. We want to make Blue obviously more available. I've talked about that in the past.
That's something that we're continuing to do by expanding our distribution across the U.S. We want to accelerate our penetration and growth in wet foods and treats, which is a great opportunity for us. We do have some select international opportunities. As we know, the international market is a large market, but we're only taking a select approach on some markets that we're in today so we can really learn and lay down that right foundation for future growth opportunities. For fiscal 2019, we have five priorities. First is to grow our business in the food, drug, and mass market, as we call it, FDM. Continue to maximize our opportunity with the e-commerce channel. We are the number one pet brand there. Continue to support our pet specialty partners, which is important to us as, again, we are the leader in the pet specialty channels.
We have two new plants that we have to commission and ramp up. That's going to take place through FY 2019 and into early FY 2020. We're going to continue to leverage General Mills to create value, which I'm very excited about. First off, give you a little bit of a snapshot of how we're doing from an FDM distribution standpoint. We have continued to increase our distribution within FDM since we've launched last August, with only a subset of our largest and broadest product line, our Life Protection Formula product line. We've tweaked some package sizes, and we've adjusted some price to maximize our opportunity there as that's what pet parents are looking for. As we sit here today, our distribution has increased to about 30%. As far as how we're doing, I feel good about our performance so far.
We do have a long way to go, but right now, we're sitting at a total 6% share with the accounts that we're in. As you can see down the other side of the spectrum there, we've achieved high single-digit, low double-digit share targets in some of the accounts that we've been in for a longer period of time. We're going to continue to expand selectively throughout FY 2019. As far as our go-to-market model, it's not going to change dramatically. We are going to keep relearning and refining our FDM plan, but we're really going to maximize our in-store execution. Some of you may have seen some of this in some of the stores that we're in today, but I think it's important that we continue to let pet parents know that Blue now is in the FDM channel.
That includes things like permanent overhead signage, maximizing Blue point of sale, and continuing with our communication of "Love them like family and feed them like family." As far as generating trial and conversion, we're going to continue to execute our go-to-market model, which is all built around education, innovation, and communication. Finally, we're continuing to develop and refine our supply chain, and that's really where we're getting a lot of help from our new family at General Mills, which is going to allow us to service the business that we're continuing to develop. As far as e-commerce goes, it's hard to believe, just a few years ago, I think some of you know, our e-commerce business was roughly about 4% of sales. As we sit here today, it's 25% of our business and still growing.
We have a strong brand with high velocities across all of our e-commerce platforms. Really, it's our go-to-market model that drives pet parent awareness and interest in Blue Buffalo that really feeds our growth. Given our premium pricing, as I think you've heard me mention before, it allows retailers to handle the cost of free shipping. We continue to drive our e-commerce business and widen our gap as the leader in this important channel. As far as our pet specialty partners are concerned, obviously, they play a big role in Blue Buffalo, and we're continuing to support them in various ways. One of those ways, first and foremost, is exclusive innovation.
As you see here, we have some new Wilderness cat products that will be exclusive to our pet specialty partners this year, our new Denali Dinner and Flatlands Feast, Wilderness exotic recipes, which will go well in, again, continuing to drive that humanization and premiumization of pet food. Continuing our efforts with our Pet Detectives, which is unique to Blue. Again, they do a great job of communicating all of our brand benefits at the point of sale. Finally, continuing to invest media behind our pet specialty exclusive product lines, which is how we've built the business to date. Innovation is key in pet, we're going to continue to innovate to make sure that we do have the right products with the right sizes in all the right channels that we need to continue to develop.
We have some exciting new packaging formats and product offerings in our wet foods and treats, which is a key initiative for us, have some enhanced dental bones, which is going to be very popular in the right sizes with our pet parents. We're going to continue to improve our wet food and treat mix, which as we know, is an important part and underdeveloped in the Blue portfolio, but also is margin accretive to our overall business. From a manufacturing standpoint, we've always adopted and have used the hybrid manufacturing strategy. Basically, we feel this allows us to gain flexibility, productivity, and really help our innovation as we continue to build a business.
From a self-manufacturing standpoint, we started up and commissioned successfully our Heartland manufacturing facility in Joplin, Missouri. We're continuing to open up two new facilities, a treat facility in Joplin, which we're actually in the process of commissioning today, and our new dry food facility in Richmond, Indiana, which we'll start commissioning on at the end of the summer. Again, both of these things allow us to not only help control our supply chain, but also help drive margins. From a General Mills standpoint, we're excited to be part of the General Mills family. We think we have a lot of opportunities to realize as we continue to get to know each other. We want to leverage General Mills' capabilities in a couple different areas.
First and foremost, they have expertise in the FDM channel. We think that's going to help Blue Buffalo continue to expand as we go and grow. Also, with e-commerce, as Shawn talked about, they have great strategies related to category management and dealing with CRM, which I think can only enhance Blue Buffalo's connectivity to pet parents. Then from an innovation standpoint, clearly, they know human food, and I think that really excites me in how we can continue to premiumize and humanize the pet space as we continue to innovate in this channel. We do have a great line of sight on our synergies. We talked about it earlier. We have $50 million in synergies that we're working towards, and we feel confident that we have a line of sight into delivering those over the next couple of years.
We've already seen some of that take effect in purchasing Both with ingredients and media, as well as Blue Buffalo has been able to help General Mills in some efficiencies as well in our Joplin plant, allowing them to actually store some of their freight on our campus. Again, I think we have some great synergies to be able to go after with our General Mills partners. In summary, we are leading the transformation of the wholesome natural pet food space in the U.S. We're going to continue to do that as we go and develop the Blue brand in our new channels. We have strong plans in FY 2019 to deliver both double-digit top line and bottom line growth.
We're going to see us over the years continue to leverage General Mills capabilities to create value for our shareholders, and we're confident in the future of Blue Buffalo. With that, I'm going to turn it over to Don. Thank you very much.
All right. Thanks, Billy. Good morning, everyone. I'll start by covering our joint ventures, then I'll summarize our fiscal 2019 plans on margins, cash, and capital allocation. Our joint ventures, we have two unconsolidated JVs, Cereal Partners Worldwide and Häagen-Dazs Japan. CPW is our 50/50 joint venture with Nestlé, selling cereal in 130 markets outside North America, with annual revenues of $1.7 billion. CPW is the number 2 cereal player outside North America and has leading share positions in the fast-growing emerging markets, including Russia, Turkey, Southeast Asia, and Eastern Europe. HDJ has been operating in Japan for more than 30 years, with Suntory as our primary JV partner and has grown to reach more than $430 million in annual revenue. Our CPW plans in fiscal 2019 include consumer-first innovation and renovation on our core brands.
We're launching Nesquik Alphabet cereal in various formats, and we'll invest behind Lion cereal bars that were introduced in April. We recently relaunched Fitness cereals in certain European markets with a focus on nutritious energy and are expanding this news into other regions. Finally, we're launching CPW cereals in India this month, and we're excited about the growth potential for this market in FY 2019 and beyond. On HDJ, our fiscal 2019 plans were to strengthen our core Mini Cup momentum, including our new Story Time offerings and chocolate chip Mini Cups. We're also relaunching Stick bars to extend our global presence in the handheld ice cream category. In addition to the more than $2 billion in annual sales generated by CPW and HDJ, these JVs are, I opine, an underappreciated source of profit and cash.
Over the past five years, CPW and HDJ contributed over $400 million to our after-tax earnings and distributed over $400 million in cash to General Mills, making them a valuable component of our shareholder value. Now let's turn to our financial overview. Beginning with our long-term targets for our shareholder return model, Jeff outlined our goal of consistent low single-digit sales growth. A modest amount of margin expansion will turn low single-digit sales growth into mid-single-digit operating profit growth. From there, we aim to convert our earnings into cash with a goal of at least 95% of adjusted after-tax earnings converted to free cash flow. Then we target returning at least 90% of that free cash flow to shareholders through dividends and net share repurchases over the long term. Later in the presentation, I'll cover our near-term capital allocation strategies coming out of the Blue Buffalo acquisition.
Achieving these performance metrics has historically generated double-digit top-tier returns for General Mills shareholders. With my colleagues having reviewed our top-line plans for fiscal 2019, let me provide a few details on how we're driving the other three levers of our model across our business. Margin expansion starts with our drive for efficiency throughout our organization, products, and processes. HMM is at the center of this effort and continues to generate significant savings in our COGS. We've delivered over $1.6 billion in COGS HMM savings since fiscal 2015, and we're well on our way to reaching our goal of $4 billion of COGS HMM savings this decade. We've undertaken additional initiatives since fiscal 2015 to improve our organizational effectiveness and efficiency, delivering incremental cost savings.
We restructured and optimized our supply chain network, eliminating more than 15% of our 2014 factory base. We strengthened our global organization structure, and we streamlined our global organization structure to reduce admin costs and better align resources behind high-growth initiatives. Between these initiatives, we reduced roughly 12% of our global headcount. We also implemented zero-based budgeting to drive efficiency in our non-headcount admin spending. In total, these projects delivered $700 million in aggregate cost savings through fiscal 2018 above and beyond HMM. These actions helped us deliver 130 basis points of expansion in our adjusted operating profit margin between fiscal 2015 and fiscal 2018. That margin performance did include a step back in fiscal 2018 when we faced a sharp increase in supply chain costs.
Jeff and our segment leaders provide examples of how we're moving with urgency to address these rising cost pressures with initiatives that will support our profitability in fiscal 2019 and beyond. These include COGS HMM savings of $450 million in fiscal 2019, which is ahead of year-ago levels, driven by a full-year benefit from global sourcing. SRM actions across our portfolio will drive improved price mix. North America distribution network optimization project that Jon referenced, and actions we've taken recently to further optimize our global administrative structure. We've also identified enterprise process transformation initiatives that will improve our efficiency and effectiveness, such as adjusting our forecasting process to enable agile decision-making across the organization. My colleagues shared how we're making significant investments behind high ROI initiatives that will accelerate growth in fiscal 2019 and beyond.
We're increasing our investment in e-commerce and SRM to create advantage for General Mills by optimizing convenience, product assortment, and price-value equation. You heard a wide variety of examples this morning of how we're investing in our accelerate platforms to drive growth globally, from Häagen-Dazs freezers, Old El Paso front-of-store displays, to new EPIC and GoodBelly nutrition bar launches. These initiatives will enhance our growth in fiscal 2019 and will drive further acceleration in fiscal 2020. We're also investing in capital to enable growth, drive efficiency, and generate strong returns for our shareholders. Billy highlighted that we're just a couple of months from opening our new Richmond, Indiana pet food facility, which will drive efficiencies in our Blue Buffalo product lines and provide growth capacity for years to come.
To put all these margin drivers together for fiscal 2019, we expect positive margin contribution from increased HMM savings, SRM actions, and other efficiency initiatives such as our administrative cost structure change, and will benefit from the addition of the higher-margin Blue Buffalo business. On the other hand, we expect higher levels of input cost inflation, our growth investments, and increase in other SG&A expenses, including incentive comp, to pressure margins this year. As a result, including the addition of Blue Buffalo, we estimate our full-year fiscal 2019 adjusted gross margin will be in line or slightly above fiscal 2018 levels, and we estimate our adjusted operating profit margin will be lower than last year. Let's shift gears from margins to cash.
A key enabler of cash conversion is a disciplined focus on core working capital, and we've made significant progress on this front over the past five years. Since fiscal 2013, we've driven core working capital down by over 60% through improvements in accounts payable as well as reduction in inventory days. While we've made great strides in improving our core working capital, we haven't yet reached the top quartile of our global food, beverage, and household product peers. There's still room to go, and we expect core working capital to be a source of cash again in fiscal 2019, driven by continued benefits from payables as we broaden our terms extension program to new suppliers, and from opportunities to reduce inventory levels as we optimize our logistics network and effectively manage assets acquired in fiscal 2018.
With strong profit margins, a disciplined focus on core working capital, and prudent capital investments, General Mills generates healthy levels of free cash flow. Our goal is to convert at least 95% of adjusted net earnings into free cash flow on a rolling three-year basis, which balances out the inherent volatility in the annual figures. We've beaten that goal in recent periods. As a result, our rolling three-year free cash flow has increased by 13% versus five years ago, and that growth rate would've been 16 points higher excluding the cash spent on restructuring projects. Our long-term capital allocation strategy focuses on making prudent capital investments and returning cash to shareholders through dividends and share repurchases. Our long-run goal is to grow our dividend with earnings over time, and we've displayed a strong track record of consistent dividend growth.
Between fiscal 2013 and fiscal 2018, we increased our dividend at an 8% compound rate. In fact, General Mills has paid dividends without interruption or reduction for each of the 90 years we've been a public company. On share repurchases, our goal has been to reduce our share count by an average of 2% per year over any multi-year timeframe. We've been slightly ahead of that goal over the last five years, despite the fact that we used some cash to fund acquisitions during that period. Having increased our leverage to help fund the Blue Buffalo acquisition, we've made a change to our near-term capital allocation priorities to emphasize de-leverage while maintaining our strong investment-grade credit rating. We'll continue prudent investments in capital projects to fuel growth and cost savings, with fiscal 2019 capital expenditures targeted at roughly 4% of sales.
As we said when we announced the Blue Buffalo acquisition, we plan to maintain our quarterly dividend at $0.49 per share in the near term. At this current dividend rate, our yield stands at close to 4.5%, which is the highest of our large-cap global consumer packaged goods peers. Additionally, we will put share repurchases on hold as we focus on de-levering to 3.5 times net debt to adjusted EBITDA by the end of fiscal 2020. We closed fiscal 2018 with a pro forma leverage ratio of 4.2 times, which positions us well to achieve our de-leverage goal. We believe in the continued viability of our shareholder return model, and we are attempting to strike a balance between all four levers, remaining flexible and adapting to the opportunities in front of us in any given year.
As Jeff mentioned up front, our goal in fiscal 2019 is to take another step toward consistent balance of top and bottom-line growth while maintaining a sharp focus on cash. With that in mind, let me remind you of our key assumptions for fiscal 2019. We expect input cost inflation to be approximately 5%, which is one point higher than fiscal 2018. As I mentioned earlier, we are targeting $450 million of cost of goods sold HMM savings. We plan significant growth investments in our accelerator platforms and in global capabilities like e-commerce and SRM. Below the operating profit line, we expect net interest expense to total approximately $550 million, driven by higher debt levels resulting from the Blue Buffalo financing. We are planning for an adjusted effective tax rate of 23%-24%, reflecting a full-year benefit of the U.S. tax reform.
We anticipate average diluted shares to increase roughly 4%, driven by our recent equity issuance. We expect the Blue Buffalo deal will have a $0.04 negative impact on fiscal 2019 adjusted diluted EPS. This includes $0.09 of non-cash charges related to purchase accounting. I will close by summarizing our fiscal 2019 guidance, which we shared on our fourth quarter earnings call two weeks ago. Reported net sales are expected to increase 9%-10% in constant currency, including the addition of Blue Buffalo. We project organic net sales to range between flat and up 1%. We estimate constant currency adjusted operating profit will increase 6%-9% from the base of $2.7 billion reported in fiscal 2018, with 11 points of growth coming from Blue Buffalo, inclusive of the purchase accounting impact.
Constant currency adjusted diluted EPS is expected to range between flat and down 3% from the base of $3.11 earned in fiscal 2018. We currently estimate foreign currency will be immaterial to full-year net sales, operating profit, and EPS. We are targeting free cash flow conversion of at least 95% of adjusted after-tax earnings. That concludes our review of our fiscal 2019 plans. Thank you all for taking the time to join us today. With that, we will open it up for a bit more Q&A.
Okay. Let's start way up here in the front with Jonathan Feeney. We have microphones, I think, coming. Here they come. Shawn, you got it.
We're doing it all.
Good man.
This is the man who can talk about the convenience channel. A question for Don, just on Holistic Margin Management. $1.6 billion is a gigantic number in the context of $2.7 billion in adjusted operating profit. Does that mean had you not gone on that mission and done that, how does that compare to the cadence before? Had you not done that, you're going to have less than half of the operating profit you have right now? How do I think about that, how that sort of compares to just continuous improvement that's been going on in the business for a long time? Looking forward, $4 billion in the decade, just to clarify, that's through FY 2025. What allows that to new opportunities to emerge in a steady cadence? Is it new technologies? What are the big-picture things that enable this kind of savings? Thank you.
Sure. The 1.6% is fully embedded in the 2.7%. That's a gross number. Again, it's offsetting inflation. It's not net of inflation. It's a gross number. Each year, obviously, inflation, whether it's going to be running the 5% this year, the 1% or 2% we've seen in the past years, is going to be an offset to that number. As is any other investments that we're making in our products that may be reflected in our COGS, packaging changes, for example. That's part of our ongoing margin strategy. To your question about the pace, HMM has been a lever for us for the past decade plus. It started stepping up really in the late 2000s, and that was a period when we started seeing elevated inflation.
Rather than being in the 1%-2% range, we started seeing 4%-5%, spiking actually one year up to double digits. We took a very different approach, and it's around really an innovation process. It's how to not just the supply chain team and the finance team, but how do you get with R&D and with marketing and think about what is a consumer-relevant cost there in our product, and how do you make sure that that is all you're offering, and if it's not consumer relevant, taking those costs out. It's an innovation process, which has allowed us to continue to drive significant savings and which gives us confidence we'll continue to do that. Also, for clarity, the $4 billion in savings is for this decade, so it ends in 2020, not 2025. It's for the decade that we're in.
Thank you.
Great. Okay, we'll go to Kenneth Zaslow here in the middle.
Thank you. Bethany, when I think about the margin structure in Europe, it's very far below that of North America. When we hear about the convenience store strategy, you say, "Wait, why don't we extrapolate that strategy, put it on the European strategy, and get 500, 600, 700 basis points and stabilize the sales?" My first question is, why not implement that strategy that seemed to work great in the U.S., and on the flip side, is there a critical sales number that would flip the margin structure to realign with North America, or not realign, but just narrow that wide?
There's a couple reasons driving the margin structure, and the first one is going to start with the scale. We have much lower scale. I ran the Convenience and Foodservice business before, which was the same size in terms of $2 billion. The difference in Convenience and Foodservice is you're able to draft off the scale of North America. You draft off of the manufacturing assets, you draft off of the brand building. When you take that same $2 billion and you go to Europe, you have a lot less scale, right? Scale would be the number 1 driver, and we're looking to drive our scale by driving top-line growth. The other difference in our business is portfolio. We have a very, very large yogurt business in Europe.
Yogurt, you can see anywhere, always will have different margins than a cereal business. It's to drive scale in our business will help us increase our margins for sure. It's also our mix. When we talk about driving a Häagen-Dazs and snack bars and Old El Paso, that will also drive our margins as they have a higher mix profile. A little different than C&F, but opportunity to increase.
Great. Go to Steven Strycula over here on the left.
Yeah. Tell him.
Thank you. Question for Jeff. On the fourth quarter call, you said that today you would speak a little bit more about the North American segment business and what the outlook would be for fiscal 2019. I might have missed it earlier in the presentation, could you give us a quick comment as to relative to the corporate average of flat to 1% organic sales, how should we think about that business trending? Specifically, we think it would be positive because you commented earlier that distribution will be higher in North America, trade benefits will be positive this year. In the event that it's flat or negative, what's the offset or the plug factor that's offsetting trade and distribution gains? Thank you.
I'll try to help you understand a little bit more about that without giving segment guidance on sales for North America. Let me step back, I'll get back to this. As I look broadly across our portfolio, the two things I think that are going to broadly drive our I guess there are probably three that'll probably drive our sales improvement this coming year. The first will be accelerator growth in markets outside of North America. I think you'll particularly see that in the Asia LATAM region, particularly in Asia, but the growth accelerators outside of North America, the Häagen-Dazs, Old El Paso, snack bars, a lot of those things. I think we'll really see that differentially to what we saw this past year. The second is really an improvement in the yogurt business.
Jon Nudi alluded to it, but we were down 20% in the first quarter last year. In the first month of June, we were down one and a half. As I look at North America, our big improvement in sales, a big piece of that is going to be driven by an improvement in our yogurt business. The third piece of improvement in sales is really going to be driven by our new product effectiveness and the new product launches. We had a good year in fiscal 2018. They've got a terrific lineup of new products in fiscal 2019, and that new product effort will help drive increase in distribution points, where last year we were down. Those are going to be the three main drivers of improvement across our business.
So if you look at North America Retail specifically, you will see the drivers of improved sales performance, really a lot of it coming out of yogurt and a lot of it coming out of the fact we have improved new product performance. In terms of profitability, you have factors that are countering each other. One, we have significantly more inflation, even than we had a year ago, and part of that is commodities and part of that is logistics offset by higher levels of HMM, and we will see how that plays out throughout the year. We are really pleased with the improvement we saw in fiscal 2018 in our performance, and I would anticipate that we will see another improvement yet again in fiscal 2019.
I would just add on your question on the offsets, we obviously, in 2018, we were coming off a very poor year on some businesses from 2017, especially some of the seasonal businesses, we had some pretty easy comps and had some better growth, and I do not necessarily think we would expect the same type of performance in 2018 given the comps are quite a bit different. Okay. Let's Akshay.
Thanks for the question. I wanted to ask about the pet business and the long-term potential. Can you talk about what you think the penetration rate can be for the category that you are in and your brand specifically? And to that, is there a certain percentage of the population that cannot afford these products? Just in terms of there being a segment out there that just cannot afford it. I know we have talked in the past that you do not think that is the case, can you give us some insights into what you think the penetration is and why there is not a certain segment of the population that maybe perhaps could never afford to fully transition? Thanks.
Sure. Again, Blue Buffalo is really in the early innings, I think. We feed just over 3% of pets in the U.S., a lot of upside there to go after. I think when you look across our four product lines, we have different price points that I think allow entry for various incomes. When you factor it all in, just one example that we refer to a lot is when you look at a medium-sized dog It only costs less than $0.60 a day to feed a medium-sized dog BLUE Life Protection Formula versus probably the most widely distributed private label brand, Ol' Roy. The price of entry is not huge, and we find that we do equally well across a lot of geographies.
It really is that emotional connection that pet parents have with pets, and then really being able to make Blue more available, widely available to those pet parents that currently don't have the opportunity to purchase wholesome, natural products. I think for us, it's to stay focused on what we're doing, make sure that we execute this expansion with excellence, and continue to communicate the right messaging to pet parents at the end of the day.
Great. Go to David Driscoll over here.
Great. Thank you. Good morning. Just two questions. Just a follow-up for Don and then a more substantial question for Billy. Just to follow up, HMM, $450 million. As you laid out in the slides, there were a lot of other programs, Century, Catalyst, Compass. I forget the rest of them.
That's okay
They were big programs. You didn't say that there was any savings from those other programs. You didn't quantify any savings from those programs in FY 2019 or going forward. Are they all done? Are there any other substantial savings that will come outside of HMM?
No. Well, those programs wrapped up in fiscal 2018. When we started those in fiscal 2015, we'd always set out a three-year timeframe on those, and those wrapped up very successfully last year. The other thing that's helping this year is we did take some administrative structural actions at the end of last year in the fourth quarter, so savings for those are coming through this year as well. That'd be the one other item I would point to on top of HMM.
Okay. Billy, I believe that in the first quarter, Blue grew 7% for the top line. Guidance is for double-digit growth. Then I think you guys made a comment that through April, the year-to-date through April sales were up double digits. Kind of two questions here. What happened in the first quarter? Then something really powerful occurred in April. What was that? Second question is, how much do you expect to expand distribution in food and mass in FY 2019? You showed the slide of 30% ACV. I just note that there's a key competitor that you have out there, a brand that I think is comparable at roughly 70% ACV, and I'm really just trying to get at any kind of impediments to the ACV expansion of the Blue brand.
Sure, David. In regards to calendar Q1, there was some unfavorable trade that drove our top line down from double digit to seven, that's really what made up that result there. As you look through, I think as we've all talked about, both Jeff and Don, regarding through April, we are at double-digit growth. I think our consumer takeaway continues to be strong, and we feel good about that, and we feel good about the entire year in delivering both double-digit growth on the top line as well as the bottom line. In regards to further expansion, I'm not going to get into the specifics for competitive reasons. I can assure you, our plans are to continue, obviously, to lay down the Blue footprint within the FDM channel. We want to do it in a real selective way, and I think you've seen that so far.
We want to continue to execute that model. When we do it's with the right Blue key elements to ensure success for the long term.
Thank you.
Great. All right. Let's go back to Michael Lavery here in the middle.
One quick one for Billy. You mentioned the price adjustments you made for some products going into FDM. Are those identical products, or how does that work in terms of just the trade relationships and spending? Just for Jeff, you had mentioned earlier the divestiture target of around 5%. How did you come to that? Is there something you already have in mind, and what are the characteristics of a business you would likely look at divesting?
Sure. As regards to Blue, the FDM channel typically does better with smaller pack sizes. For us, it's really making sure that we have the right packaging size, similar products, but just in the right package size that pet parents are looking for within that channel. Larger bag sizes tend to do better in specialty as well as on e-commerce. For us, it's again, more price pack architecture, making sure that we have the right packaging and the right prices for the right channel.
As we look at divestitures, there are certainly things we have in mind and options that we're considering. As we look at the structure of the business, the businesses we're looking at, broadly speaking, are ones where the cost of competing is higher than the cost of accelerating in other places. If I have an extra dollar, am I going to put it against Nature Valley or am I going to put it in something else? The businesses that we'll look to divest are ones where we feel as if the cost of competing, and we can compete effectively in anywhere we're playing, but in some, the cost of doing that is higher than in other places.
We'll look at places where we feel like the cost of competing effectively, we'd be better served and our shareholders would be better served by our putting up money in other places. Those tend to be businesses that are declining and/or have lower margins than the businesses we're looking to accelerate. Great. Rob Dickerson in the back.
Great. Thank you. Two easy questions, hopefully. First, just on total company margin. You said today, I've heard you say before, feel fairly comfortable with where North America Retail is and Convenience Stores & Foodservice, but also pointing to hopefully margin expansion in the international segments. If we just focus on those four for the time being, is it fair to say internally as you think over the next three years, that the likely higher probability of margin expansion total company would be coming from the non-U.S. businesses or non-North America? That's one.
I think the answer from a percentage standpoint is yes. Given the size of our North American business, as you can imagine, even a little margin expansion from a dollar standpoint is a big contributor. In terms of step-up in percentage points, certainly our international businesses have more opportunity.
Okay, thanks. Then two, just on the 5% divestment you put out there, is there any rough timeline on that? Is that a three-year goal or we'll probably see that coming over the next 12 to 18 months? I just ask because I would think there would be some likely dilutive effect of that, just given where your valuation is. Thanks.
I'll take that, Don, if you want to follow up, you certainly can. We haven't put a timeline on it, I'm not looking to put a timeline on it. We'll divest as soon as we can. We'll divest to the extent it's going to benefit shareholders. We're not going to do it because it's strategically interesting, it doesn't benefit shareholders. We'll do it as soon as we can, what we're really making sure we're focused on as we're thinking about divestiture is that the biggest value to our middle shareholders comes in growing our core and making a smooth and successful transition of Blue Buffalo. To the extent we can execute those two things with excellence as well as divestiture, you'll see us doing that.
We're making sure that we're able to execute the first two pieces of that really successfully because if we do that alone, that will add a tremendous amount of value for our shareholders. When we feel confident we can do that and divest, we'll certainly do that. We'll do it as soon as we can, we're not going to put a timeline on it. We want to make sure that we're successful in executing the first two pieces of the growing our core and transitioning Blue Buffalo.
The only thing I'd add is there's nothing in our plan or our guidance related to divestitures this year.
Okay. I think now that we're a quarter till, I think we're going to go ahead and wrap up the webcast. Appreciate everyone's time and interest in GIS and spending time with us this morning. We'll go ahead and close the webcast.