Perfect. Welcome back, everybody, and good afternoon. So, we're here with our fireside conversation with General Mills. With us today are CEO Jeff Harmening and Dana McNabb, Group President, North America Retail. Also with the team is CFO Kofi Bruce and Head of IR and Treasurer Jeff Siemon. So welcome to everybody. Thanks for being here. Give me a good place to start, Jeff. You know, I know many in the audience are heavily focused, obviously, on the current environment, and we'll have plenty of time to address that as well. But maybe if we take a step back a bit, talk about your long-term goals. You've mentioned in the past you believe holding share across your current mix of categories and geographies will generate organic net sales growth that's sort of squarely in the middle of that 2%-3% long-term target.
Yeah.
What gives you the confidence and the ability to grow in line with that top-line algorithm moving forward into what is hopefully a more stable operating environment? How is that confidence maybe different today than where it was a few years ago, based on sort of what you've added in terms of capabilities, you know, portfolio changes, and sort of brand support?
Yeah, thanks, Andrew, good to be here, and looking forward to that more stable operating environment. You know, I guess I would start to say that, you know, for us to hit the 2%-3% algorithm, which we believe we can hit, I mean, you know, one needs to believe a couple of things. The first would be that our categories are gonna grow between 2% and 3%, and the second is that we can hold share with those categories. So, I mean, I think the question comes back to, are the categories gonna grow that fast, and can we actually hold share? And if you look at the-
You know, what gives me my confidence we can do that, and unsurprisingly, I am confident that we can do that, is that if you look before the pandemic, our categories were kind of growing in the 2%-3% range. And we have, you know, regained momentum in most of our categories, so they're actually back to growth. In fact, the North America Retail categories that Dana manages are at about the 1% growth range, so they're back about where they were before the pandemic. And so we certainly believe that we are approaching a space where the category growth is what it was before the pandemic. And then the question is, you know, can we gain share, and what's our confidence that we can do that?
And we're confident that we can at least hold our share in our current categories because we've done it, like, five out of the last six years, so we actually have done it. And even if growth rates were elevated during the pandemic, by the way, we exceeded the 2%-3% over the last three- and five-year periods. But importantly, during that period, and even before the pandemic, we were actually holding or gaining share in at least 50% of our categories. And so then the question is, why were we able to do that, and what gives me confidence we can do that going forward? And that is, well, first, we have leading brands in our categories. We have nine billion-dollar brands.
The second is that we've invested quite a bit in marketing through this latest period of time. I mean, our marketing spend is up about 43% over the last five years. We've invested in capabilities to drive growth, not only in Strategic Revenue Management, but also in media and evaluating media and online media, and so we've invested, you know, heavily in capabilities. And, you know, we're really good marketers when the time is to market, and we spent a lot of time over the last four or five years working through product supply chain disruptions and inflation and pricing and all the rest, and now we're back to a period where how you market really counts. And, it's one of the things that we've done well for many, many decades.
And so I'm confident that we can do it because we have done it. Our categories are back to growth, and we have the brands, the people, and the capabilities in order to achieve that. And if you look at the recent period, you'll see that our market shares are improving. Not all the way back to right yet, but I'm encouraged by the progression we've seen, not only in the category but also in our market share performance.
Great. Thank you for that. Maybe sticking with the industry environment for a moment, we've all witnessed a more elongated volume recovery than was initially expected, and your fiscal 2025 outlook is consistent with that theme of sort of gradual progress. What have you seen in maybe more recent data that perhaps gives you some confidence that, you know, the industry recovery is, in fact, sort of moving in the right direction?
I think, as you said, we're seeing progress. We're really encouraged by the gradual improvement that we're seeing in pounds. And as Jeff just said, if you look at our categories over the last three months, what we're seeing, period ending August, is that pounds are up in our categories 1%. That is an improvement of over three and a half points versus this time last year. It's an improvement versus last quarter, and it's pretty much back to historical levels. And there's a lot of reasons for that. We're through some of those big comps now, the pricing, the pantry destocking, the SNAP benefits.
We're also seeing a bit of an uptick in in-home food consumption, so from about 86% to 87%, and that makes sense as well when you think about the fact that eating away from home is four times more expensive, has a little bit more inflation. So I think when we look at the macro benefits, we believe that we will continue to see a gradual improvement in pounds.
Dana, you know, you're relatively new, at least to leading the North America segment.
Yeah.
You come from Chief Strategy and Growth Officer role, as well as positions in international and running U.S. Cereal before that. I'm curious how your experience can shape what your approach will be in North America Retail going forward, and how that might be different or similar to how it's been run previously.
Yeah, well, maybe the place to start is to give you all a little bit of my background. And so I've spent the majority of my career in operating roles. I've worked on pretty much all of our brands in all of our geographies, including a stint at Cereal Partners Worldwide, which is our joint venture with Nestlé. I ran our Big G Cereal business here in the United States. We returned that business to top and bottom-line growth, through really good demand generation, strategic revenue management. Then I moved over to Europe to take over our Europe and Australia business, returned that segment to top and bottom-line growth, but did a little bit differently. Did some portfolio shaping, where I led the Yoplait divestiture, and then also some good demand generation.
And then it was probably about three years ago, Jeff, that he called and asked me to stand up our strategy and growth group. This would be strategy, it would be mergers and acquisitions, some of our capabilities, like marketing, Strategic Revenue Management. And that was just an unbelievable opportunity to partner with Jeff, to advance the strategy, but also to learn how to operationalize that and the capabilities, think data-driven marketing and Strategic Revenue Management through people, process, and tech. So I think the combination of really deep operating experience with this understanding of emerging capabilities will allow me to understand where the NAR business is at and what plans we need to put in place moving forward.
Now, to get to your question, as I think about the NAR business, there is no question that our business is bigger and more profitable than it was pre-pandemic. And what we did through the last several years in terms of service and pricing and how we out-executed our competitors, was exceptional. But as I always say to the team, two things can be true at the same time. We can be extremely proud of what we did, and also recognize that we are in a different business cycle now, and that is going to require us to up our game on demand generation. So what I've been doing is meeting and listening to consumers and to our retailers, diagnosing the business, and really working with the team to get laser-focused on what will get us back to sustainable growth.
I believe that is a focus on regaining household penetration, and in our case, particularly, household penetration with kids. The way that we're going to do that is making sure we have the most remarkable total product offering across our mix. It's better than our competitors. That will mean product news and new products, advertising and communications, in-store execution, better than the rest. We'll fund that, because you're going to say, "Well, Dana, that costs money." We will fund that with really good focus on capabilities, Strategic Revenue Management, Holistic Margin Management, and our data-driven marketing. So it is a privilege to run this NAR segment. We have a great team.
We are really focused on reigniting the culture of demand generation, and I think, as Jeff says, what we want is to be the best in marketing, while continuing to do what we're great at, which is execution.
Okay. Thanks, Dana. Regarding fiscal 2025, you provided initial guidance earlier this summer that looks for organic sales growth of flat to up 1%, and expect EPS to be sort of between down 1% year-over-year and up 1%. Both below, obviously, the long-term algorithm. What assumptions are embedded in this guidance? And I guess, how should investors view this year in the context of sort of the longer-term health and vision of the company?
Yeah, so you know, I'll take it into three parts. I mean, first, as you think about in the algorithm, I mean, it starts with top-line growth and what are the assumptions about that. Because if you get that about right, then everything else tends to work the way you want it. And I would say for our top-line growth, our assumption is that our categories are returning to growth, which they have. And so we're not counting on a rebound in our categories from where they are right now. If that happens, that would be great, but we're counting on our categories to grow in the same range that they are right now.
We're also assuming that our level of competitiveness, which is our market shares, will improve over the course of the years, and you started out by, you know, noting that earlier. We've gained market share for many years in a row. Last year was an exception to that, and, you know, our job is to get back to market share growth through really good marketing ideas, which Dana had talked about and probably can talk about some more. So we've seen a trend improve in the first quarter of this year, you know, very consistent with our expectations, both in the category growth and our market share improvement, but we're not all the way to right. There's still improvement that yet needs to come yet. So that's what the top-line assumption is.
As we look at the rest of the P&L, our assumption about inflation is 3%-4%. We're over 50% covered at this time of the year in our commodities, so when we say it's about 3%-4%, we know it's about 3%-4% inflation. Our HMM, our productivity is 4%-5%, and we've got a great line of sight. We've delivered 4% on average a year for 15 years, so we have a good line of sight on what HMM is. Then the other part of the guidance is, you know, more tactical in nature, but important, is that we're resetting the incentive.
Generally, we would expect EPS and earnings to outpace our sales growth, but in this particular case, we are. We've got about a two-point headwind because of incentive recomp, because we didn't hit our goals last year, and we intend to hit our goals this year. We have that drag, and it's important for all of you to know that. I mean, we could have cut down on our investment and capabilities and marketing spending to try to boost EPS, but this year felt like a year where demand generation, as Dana said, is the number one goal. Our job is to improve our competitiveness, and to do that, we didn't want to cut back on our marketing investment. We have some great ideas, so feel good about that.
Great. And I guess, what do you view as some of the more significant sort of risks or opportunities, right, that could cause you to either sort of outperform or, on the other end, underperform, sort of that full year outlook at this point in the year?
Yeah, the risk and opportunities, I think about it, is kind of, kind of opposite sides of the same coin. The risk and the opportunity are kind of the same, which is all about growth. You know, and the first I would say is, you know, what are our categories gonna grow? And a lot of that has to do with away-from-home consumption versus at-home consumption. And as Dana mentioned, we've already seen at-home consumption accelerate, which was our expectation, and so we feel good about our assumptions about category growth. And then we have to be more competitive within those categories. And to the extent that we do that, it'll be an opportunity for us if we can over-deliver on that.
If we under-deliver, obviously, it's a risk, but the risk is all around that. And I say that because, as I talked about earlier, our cost structure is pretty well-defined in terms of what we see inflation coming in at, as where we see HMM. We've got a long track record of being able to predict both of those well. So really, the risk and opportunity comes in in top-line growth.
Got it. You know, in your June earnings call, you mentioned that you've seen categories within North America Retail-
Mm-hmm.
as having essentially stabilized volumes over the past couple of months, and now we're seeing some positive traction there.
Mm-hmm.
But your own level of competitiveness, as you mentioned, has not been up to par. I guess, what's been the reason for that more challenging, sort of, competitive aspect?
Mm-hmm.
And have you seen any improvement in the first few months, let's say, of fiscal twenty-five, around the general competitiveness that you bring to the market?
Jeff already mentioned it, but we did not distinguish ourselves on share performance last year, period. And there are a lot of reasons for that. We priced first and ahead of our competition, we had to comp through that. We had some of the smaller brands and private label get back to shelf earlier than we expected. We had to comp through some of the SNAP benefits. So there were some important reasons why we struggled with share last year. But as we've doubled down on demand generation, making sure that we have this remarkable offerings across the total product mix, started to get some of these things in the marketplace, we are starting to see some improvement. So if you look at our last three months of share performance, we are improving in pound share in seven out of our 10 biggest categories.
We're improving in dollar share in six out of our 10 categories, and I want to be crystal clear that we are not not declaring victory yet, because we are improving. We still aren't to growth. There's work to get done to get to flat and then to get to growth, but I really like what we are working on. I believe we're putting the right things in the marketplace, and we're focused on progress and getting better quarter after quarter.
Great. Thank you, and you spoke a lot about, on the last call, the concept of value, and you need to sort of up your level of competitiveness on that fourth quarter call.
Mm-hmm.
Obviously, the first thing investors tend to sort of think of when we hear value is simply just related to price, as you know.
Mm-hmm.
But there are a lot of other ways, obviously, General Mills is and will aim to improve its competitiveness outside of just sort of promotional activity and price points on the shelf. Maybe you can talk a bit about that.
It gets back to what I was talking about, making sure that we have the most remarkable total product offering across our mix, better than the competition. For us, that's gonna start first with our product and our news on the core. So if you think about parents today, they simply can't afford to bring something into the house that the whole family isn't going to like. They're looking for really good taste. They're looking for macro health benefits, like high protein, low carb. And so what we've been focused on in our biggest and most profitable brands is making sure that we have news that they value. So 30% of our portfolio has got news. That's double what we had last year. We're looking at new products. Last year, we did about 3.5% of our net sales on new products.
We're bringing that up to 5%, and these are ideas like double chocolate cookies. We've got Fruity Cheerios. We've got flakier biscuits. We've got a Fiber One brownie, and it may sound simple, but it tastes great, and it's gonna work. From a macro health standpoint, we have things like low-carb Old El Paso taco shells that are more than half the carbs of the regular. We have high-protein, low-sugar yogurt. We are bringing the first mainstream granola brand that will have allergen-free. The combination of these great ideas on our most profitable brands, I really think is important. It gives you something to talk about in our communications. Making sure we're remarkable in our communications, great ideas. We're gonna increase our advertising spend a little bit ahead of our net sales growth.
We're gonna make sure our marketing is more efficient and effective with our data-driven marketing tools, so we'll have something really meaningful to say. And the ideas are great. I look at our Pillsbury business. We're gonna bring back the Doughboy. Americans love the Doughboy. That's gonna work. For cereal, we have the Kelce brothers, who are talking about how much they love our core brands. They were just talking about cereal on their podcast, did a ranking of their favorite brands, and they happened to be ours. And so we're gonna do a promotion in Q2, and they're gonna introduce a new mix, and that will bring excitement to one of our biggest categories. Then, you do have to make sure that you have the right price value, but that's not just the absolute price.
It is about the right product in the right place, in the right size. And so when you think about it, you know, we run 25 categories in North America Retail, and it's logical to assume that we didn't get the pricing on everything right. And so there are three or four places where we're adjusting the pricing, but where I'm more excited is we're focusing on using our Strategic Revenue Management toolkit, and particularly price pack architecture. And I look at our snacks business. We're gonna have double the price pack architecture coming into the marketplace than we did last year, and that's small opening price point, smaller pack sizes, and then the larger ones that bring more value. And so that's what we're looking at for price.
And then, of course, it's all got to come together in-store and online, and we are deeply committed to partnering with retailers to grow the categories. So it starts first with your in-store execution. I look at our distribution. This first quarter of the year, we're gaining distribution share in eight of our top 10 categories, and that tends to be an indicator of share growth to come. We are getting really good display. We're seeing our lift on our merchandising ahead of our categories. We're gonna bring back in-store events that we haven't been able to do through the pandemic across our snacks and cereals. That will be effective for us. And then continuing to partner with the retailers on online and retail media.
And so what I'm hoping you're hearing about is that we're laser-focused on making sure that our total product offering is better across that mix, and I think that we'll start to see our performance get much stronger. And it's not coming at all the same time. It's not all gonna work, but again, it's about progress.
Thanks very much. Looking specifically at your core and profitable cereal business, a business you know well from running it, both of you have run it historically, I believe.
Yeah.
Companies gained share, right, in North America Cereal just for many years in a row, very, very consistently. How do you foresee the category playing out going forward, particularly with a, you know, structural shift in the, in sort of the competitive landscape a bit?
I think first, as we talk about cereal, I have to mention how proud we are of the results we've had the last several years on cereal. Double-digit top-line growth. We extended our share gains. We have led on new products. We have five of the top five new products in the category, and we've done that through really good brand building and what I think are some of the best brands in the category. So this is a really big category, $9 billion in sales. As I think about your question about the competition in the category, we believe that more competition is better. I mean, cereal is 90% household penetration. It is a variety-seeking category.
Most consumers have three or four cereals in their pantry, and we want our competitors to be spending and growing and driving category, driving traffic down this aisle. We think that will be good for the category. If I look at who's gained share in this past year, it's been small brands and private label. That's mostly because they've been getting back on shelf, getting on-shelf availability back to pre-pandemic levels. From a private label standpoint, it's 7% of total sales. That is far below what we see in total food, which is about 20%. And then you have the branded manufacturers who we are seeing coming back, starting to spend a little bit more, a little more news and innovation, and getting a little bit back to pre-pandemic levels.
As I said, we believe all that is good for the category. It comes back to us. What we're gonna focus on is we just have to stay focused on our game and what we're good at, which is continuing to have really strong brand building and innovation. I really like the marketing that is coming. Our new products are excellent. They're bigger and better than before, particularly what we have coming in the back half. We are the category leader, so we have a responsibility to bring excitement to the category.
I think this Kelce Brothers promotion is indicative of how we're doing that, and as Jeff always says, "Look, this is not gonna be our category that grows the fastest in North America, but we just need a little bit of growth, and it will get that flywheel going for investment in both the cereal business and our North America business overall.
Great. I think one of the key priorities also in this fiscal year is to return the Pet segment to growth, right, after what was a bit of a reset year in fiscal 2024. What does the path to getting there look like? You've seen far better performance of late in Life Protection Formula, and obviously Wilderness is now the sub-brand that needs some of the attention that you're going after. So what's the plan there, and how's it going so far?
Yeah. Yes, getting Blue Buffalo back to growth is certainly a top priority for us, and, you know, I'm encouraged by what I'm seeing in Blue Buffalo, similar to what I'm encouraged by seeing in North America Retail, and know that we have a lot more work to do. That would kind of be the heading. As we were sitting here a year ago, you know, our top line was struggling, and our margins had kind of eroded, and what I'm proud of over the last year, although our top line was not as successful as we want it to be, we're actually able to restore our margins to the business, and that gives us confidence to reinvest back into the growth of Blue Buffalo.
And so what we're seeing now is a business that is more profitable than it was a year ago, and actually, we're starting to bend the trends on top line growth. And you mentioned Life Protection Formula. We started advertising that with a new campaign maybe eight or nine months ago. We saw it start to get traction. That traction has actually increased to the point where we're actually gaining market share in dry dog food, and so those gains have really helped. But so is the fact that Wilderness, which has been our biggest challenge, we've seen the losses of that cut in half. Now it's declining at 6% in the first quarter versus 11% the quarter before that, but we've cut the losses there and largely behind some good advertising.
As Dana mentioned in North America Retail, it really is about remarkable experience. The same is true in pet food, and Jon Nudi and Liz Mascolo and the team there are doing a great job, and so we really like our new advertising, which is 30% more protein than its largest competitor on Wilderness. We've seen the gains start. We'll see. I think we'll see more traction in September and October as we work some more levers, but that's not the only thing. I mean, we're actually gaining share in dry cat food now behind good advertising on our Tastefuls line. We've seen the momentum build on that. The same is true of wet dog food. We're actually seeing market share gains now for the first time in many quarters because we had to adjust the pricing there to get under some price cliffs.
You know, the work we really have to do now is to get treats back growing again. It's actually flat for the quarter, so it's gaining share within treats, but we have to get that back to growth, get Wilderness back to growth, and I feel like we're on a good path with the things that we have put in place. We have diagnosed the problems well, I think. We're putting in solutions. Those solutions, by and large, are working. Always want them to work faster, but they're working. We've seen gradual improvement in the top line in our pet business, and we're looking to capitalize on the momentum of that business so that at the end of the year we can say, "Yes, look, we have bent the curve on growth.
We're actually now growing our pet food business, which is, you know, Blue Buffalo is our second largest brand at General Mills, so it's important that we do that.
What are your expectations for overall pet category growth in the new fiscal year?
Yeah, I think the most important place to start is what we're seeing now. And that is that category pounds are stable. And, that's important because a year ago, even though the dollars in the category were growing, actually pounds in the category were declining. And so we've seen the pounds stabilize. The number of pets in the U.S. is pretty stable. It may be growing 1%, but it's relatively stable.
The dollars in the pet category have declined slightly, but that's only because the treats portion of the category has declined, because it's more price sensitive, and it's more discretionary, as are many indulgent snacks, by the way, so it's not that different than human food. And so the pounds in the category are down, the dollars are down slightly, but that's a matter of mix. And so we see a pretty stable environment in the pet category.
What we see, based on the reaction we've seen to Life Protection Formula marketing, to what we see in fresh, the fresh part of the business, what we see the reaction to Wilderness, is that, is that the humanization trend, which we felt like has, has been a trend for a long time, will keep the category growing. We think that'll be a trend that lasts into the future.
Got it. You also recently acquired Edgard & Cooper in the European premium pet food business. How are you thinking about that brand and how that fit into the pet portfolio? And kind of what's the vision for that brand longer term? Because it's, it's the one that you've now brought in, not under the sort of Blue Buffalo umbrella.
Yeah, the pet category, the more you get into it, the more interesting it is and the more you kind of like it. What we see is the pet food category globally is more than $100 billion in sales, $50 billion of which are in the U.S. The humanization trend is not only here in the U.S., but it's actually global.
Mm-hmm.
And so then as we look at, yes, we have a job to do in the U.S. with Blue Buffalo, but we also see a pet food opportunity beyond the borders of the U.S. And then the question is: Well, how do you go about it? In China, we went about it by introducing Blue Buffalo into China, which is a big market, second largest pet food market in the world, but also still is growing quickly and relatively immature as a market. And so we launched Blue Buffalo there, as well as some other international markets. But in Europe, we took a different tack. We bought Edgard & Cooper, as you mentioned, and that's because their proposition is actually quite similar to Blue Buffalo, but they've got many years head start.
And the European market is a $30 billion market as well, and so our- y ou know, do we think - do I think Blue Buffalo would've been successful in Europe? Yes, but I think it would've taken us many years to get there and many years of investment, where we saw a brand that, although it's behind where Blue Buffalo when we acquired it originally, is ahead of where we would be starting, which is kind of ground zero. So, it's a great brand. The team there is a phenomenal team, really great capabilities, and it kind of reminded us of Blue Buffalo in the early days.
Mm-hmm.
And so we decided to buy into that market through- and on the basis of the same humanization trend.
Okay. You get asked this all the time, but in the context of this continued shift towards humanization within pet, how do you see the fresh arena playing out and sort of General Mills' role within it? You've tested, you've learned, you've prioritized your resources to areas where General Mills has the greatest profit dollar opportunity. But to the extent that fresh continues to be a growth vector, how do you approach this space?
Yeah, there are a few things I know and a few things still left to learn. You know, what you know is that consumers like the idea of fresh pet food. I mean, you see that growing in the category, so I think it'd be tough to deny that the consumers really like the idea of fresh pet food. The other thing I know without a shadow of a doubt is that Blue Buffalo, the brand, plays really well in fresh. And we tested the proposition. It didn't work as well as we wanted it to, but one of the things we learned is it's not because of the Blue equity.
Mm-hmm.
Consumers love the idea of Blue going into fresh pet food. What we also found out during the last test we did was that we can make really good product. The pets really liked it. Many were standing in front of refrigerators asking for it, and in the way that dogs do, and so we know that we can make really good product. What we probably under anticipated was what it would take to generate trial, and so as we look to learn from that experience, like good entrepreneurs, you know, that was the first salvo. You know, how do you learn from that, you know, are we done learning? I'm not sure that we are.
I think that there'll be an opportunity, another opportunity for us in fresh pet food, and we learned enough to know that some things worked really well. We learned what didn't work well, and, you know, don't be shocked if we take another run at trying something in the fresh pet food space.
International and Foodservice are segments that sometimes can get overlooked by investors, whether lack of visibility or otherwise. But what are the key messages you'd want to share with investors around those two segments, how they're performing, and why they shouldn't, you know, be overlooked?
Yeah, I would say it is true. People overlook it. It's not as easy to see Food service because you don't get Nielsen data on it, so I understand kind of how it gets overlooked, but you're kind of at your own peril, I would say. We've got a great Foods ervice business.
It is, it's a good margin business. It's a good growth business for us. We've got distinct capabilities in sales and channel experience, like in K -12 schools. We've got unique brands in cereal, in yogurt, and snacking, unique capabilities in dough. And so when you combine all of that, our unlike the Foods ervice channel in general, where, you know, quick service restaurants, you know, traffic has been declining, our Food service business has actually been growing. And it's because the channels that we over index are primarily in-store bakery and non-commercial and K through twelve, and those places are growing. But even within there, because we have some advantaged capabilities, we're growing as well.
And so, you've seen that for the last few quarters, and sometimes that growth gets masked because we have to index pricing of bakery flour to the wheat costs. And so what you see on a reported basis is not the same as underlying growth, but that doesn't take away from the profitability. It also doesn't take away from the growth. And so, we're really pleased. We're... You know, during the pandemic, like a lot of other places, our Food service business margins suffered a little bit. We're in the process of bringing those back. We like the progress we've made, a little bit more on that. But I'm glad you asked, because our Food service business is really a gem.
Mm-hmm.
And we're particularly good at it, and we'd like to keep building on that and growing in that. As investors listening, you want us to as well, because it's also a really good, profitable business. International has been a little bit more mixed. We did not cover ourselves in glory last year in our international segment. And now there were some bright spots. Our European and Australian business grew quite nicely. Dana talked a little bit earlier about, you know, the divestiture of yogurt in Europe, and that certainly helped us focus back on our core global brands of Häagen-Dazs and bars and Old El Paso, and those things have been working nicely in Europe.
We have distributor markets all over the world. Those have been working, but the challenge is really, was really in China and in Brazil, and it's kind of a tale of two different, two different things. In Brazil, it was our own execution, where we got, we got pricing wrong in Europe. We didn't execute particularly well in Brazil in this past year. I'm pleased to say, for those of you who get Brazil Nielsen data, which is probably, like, two of you listening, but for those of you who get it, you know, you'll see that we've returned that business to growth in the first quarter of our year, so we've kind of adjusted our pricing. Our execution's gotten better.
We're getting Brazil back to growth. That was kind of self-inflicted, but I feel good that we're kind of turning the corner on that, a lot, through a lot of hard work by our Brazilian team. In China, I mean, this is gonna be a familiar theme, but you know, consumers are kind of struggling in China, and because of the state of the economy and the fact it's not growing as fast, and so we happen to have a lot of Häagen-Dazs shops in China. So the foot traffic, in particular, of our Häagen-Dazs shops is down, and shops themselves are not as popular as the rest of our retail offering, like pints in Häagen-Dazs, but it's a high fixed cost business.
And so when you have an area like that in China that's not growing, it really impacts the profitability of the whole international segment, even if it's not as significant for the enterprise. If you look at international, it's more significant. If you look at the growth of international, it's more significant. And so, that's what we have seen. You know, what I'm pleased with is that, you know, for the most part, our global brands are really working well outside the U.S. Our focus on that is the right focus. We're on growing categories. We're competitively advantaged. We've got good margins, so that business will turn. But in the meantime, we're gonna have a little bit of a struggle in the nearer term, primarily behind our shops business in China, which is the challenge.
Got it. We've got three minutes left, so I'll try and just jam in two more questions if we can. One, just capital allocation. You finished fiscal 2024 right around three times leverage. We've seen increased M&A activity in the space of late. How are you thinking about prospective M&A moving forward? Are there certain categories or geographies that appeal to you more? Are they more likely to be bolt-ons versus transformative-type deals? And then I'll get to the second one right after that.
All right, so on the... I'll take my cue that I should do this fast, but the-
Correct.
On M&A, I'd say our stance hasn't changed at all, and we've seen the world around us, and that we know big deals have been announced. But our stance actually hasn't changed at all on capital allocation or specifically on M&A. And for us, we're more likely to do bolt-on acquisitions than we are something big, and think of things like we've done with Annie's or Tyson Pet business or Edgard & Cooper, $1 billion to $2 billion in sales, and we'll look to look at divestitures as well, so the combination of acquisitions and divestitures. And this is important because as we look, we think our growth rate in a normal environment, where and which we hope we get to, is about 2.5%. We'd like to get to 3%, so 50 basis points.
So, you know, a few smaller bolt-on acquisitions in areas that we're good at, things like pet or things like, snacking or Food service, which I talked about earlier. Those would probably be the most appealing to us. It's not to say we wouldn't look at something bigger, but I think in this current environment we're looking at, it's probably something, smaller that can add to the growth of the company. But most importantly, we haven't changed that, and honestly, our number one priority is growing organically. That's the number one, and that's the number one priority.
Maybe to close it out, you know, I think a lot of people sitting here, you know, this time last year, not specific to General Mills, but heard a lot of similar messaging, right? Around volumes expecting to get better, recovery has been more prolonged than I think all of us, and many of the companies would've expected. Why do you think this year is different, and that at least in your case, we're primed to get sort of the volume inflection this time around? And we've got a minute to go.
Yeah, you know, I feel like I've been wrong, like, the most I've been in my career the last four years. And I didn't see a pandemic coming.
Welcome to my life, Jeff.
Supply chain disruptions and, you know, I... Look, I'm an economist by training. You'd think I'd know better. Either give the answer or the timing, but not both. You know, but having said that, this last period of time was, you know, we probably miscalculated the length of time we would get back to volume growth because private label got on the shelf faster than we thought. The recovery of small brands getting on the shelf was faster than we thought, and a year ago, the angst that consumers were feeling or about to feel in the coming year was probably greater than we had anticipated. But we know all these things now, and so we're lapping the effects of all of those activities and the way consumers feel.
And so now we feel like we've got a much better handle on the fact that, yes, consumers are stressed, that's why they're eating at home more. That's actually a benefit. They're looking for value in a variety of ways, whether it's price to the packaging sizes or where they shopped, as Dana talked about. And, you know, the competition now is lapping all those gains, and so we feel like we're more on an even playing field. The other thing I would say is that whether it's in North America Retail or in pet, I feel great about the marketing we're doing. And, you know, and we have nine billion-dollar brands in our portfolio, and the fact is, if we get those nine brands right, we're gonna be pretty good. If we don't, we're not gonna be pretty good.
And we've got really good news in cereals, as Dana talked about. We have good news in Pillsbury. We've got good news in Blue Buffalo and Totino’s. So I feel good about the way that we're performing, regardless of the environment around us.
Great. Thank you very much, Dana and Jeff.
Thank you.
Please join us over at the breakout. Thank you.
Thank you, everyone.