Greetings, and welcome to the General Mills fourth quarter fiscal 2022 earnings Q&A webcast. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. At that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder, this conference is being recorded Wednesday, June 29, 2022. I would now like to turn the conference over to Jeff Siemon, VP of Investor Relations. Please go ahead.
Thank you, Kelly, and good morning to everyone. We appreciate you joining us today for our Q&A session on our fourth quarter and full year fiscal 2022 results. I hope everyone had the time to re-review our press release, listen to our prepared remarks, and view our presentation materials which were made available this morning on our investor relations website. Please note that in our Q&A session we will make forward-looking statements that are based on management's current views and assumptions. Please refer to this morning's press release for factors that could impact forward-looking statements and for reconciliations of non-GAAP information which may be discussed on today's call. I'm here with Jeff Harmening, our Chairman and CEO, Kofi Bruce, our CFO, and Jon Nudi, Group President of our North America Retail segment. Let's go ahead and get right to the first question. Kelly, can you please get us started?
Certainly. Thank you. If you'd like to register a question, please press the one followed by the four on your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration, please press the one followed by the three. Our first question comes from Andrew Lazar with Barclays. You may proceed with your question.
Great. Thanks. Good morning, everybody.
Good morning, Andrew.
Morning.
Morning.
Great. I think you've talked about over the course of this year how the combination of HMM and pricing and other levers have actually been pretty effective at sort of protecting, you know, a lot of the at least the dollar cost of actual sort of inflation, but that supply chain costs and some other things of course have weighed, you know, on margins and profitability as well, like it has for the group as a whole. I guess as you look forward to 2023, I think you mentioned that you anticipate, you know, another sort of call it low double-digit benefit from pricing that's you've taken already or is already in place.
Of course you still see another very significant 14% jump in inflation and, you know, slowly but surely hopefully will continue to improve on the supply chain side. I guess the question is: Do you think that the combination of the pricing and the HMM and the other levers that you've got would be enough in fiscal 2023 to sort of better protect dollar, you know, dollar profit even including, you know, some of the supply chain issues and other things as opposed to just cost inflation? I've just got a quick follow-up. Thank you.
Kofi, you wanna take that one?
Absolutely. Thank you, Andrew. As we think about our approach to the next fiscal year, we're thinking about it much, much the same way. We're expecting only a modest decline in the level of supply chain disruption. We expect, as you mentioned, our price realization and the combination of HMM to largely offset the dollar cost of the 14% inflation that we've called. Our expectation is that the remainder of costs from disruption we would work out over time to the extent that we see the environment stabilize. The only big question remains, when that happens. We're, you know, I think we're expecting another year of uncertainty, candidly similar to the table that was set this year.
Okay. Obviously it's still very dynamic, and I know there have been plenty of discussions and a lot of debate of course around, you know, around pricing and cost and everything else, but, you know, as you built your plans going into 2023 and then discussed them with, you know, with your key retail customers and things, I guess are there things that have changed a little bit around going into your plans for fiscal 2023 in terms of your retailer conversations versus, let's say, a year ago? Meaning, you know, things around innovation or marketing plans, merchandising plans. I mean, are you seeing customers start to think a little bit differently about those things as opposed to simply, you know, the pricing and inflation dynamic, or am I being naive and we're just not there yet? Thank you.
Jon, you wanna take that question?
Yeah, absolutely. So, it certainly is a dynamic environment. There's no doubt about that. Certainly inflation and supply are two of the big topics that we spend a lot of time with retailers on. I would say, Andrew, that things are pivoting back a bit more to, you know, growth from a marketing standpoint, from an innovation standpoint, so we're having those conversations as well. Also how do we provide value to consumers in a time that they need it as well. We're talking about many things that were, you know, honestly a year ago it was really about supply that we were thinking of then. I think things are getting back to some of the conversations we've had in the past, and it's all about how do we profitably grow our businesses together.
Okay. Great. Thank you.
Our next question comes from Bryan Spillane with Bank of America. You may proceed with your question.
Hi. Thank you, operator. Good morning, everyone. I guess my question, and maybe this is for you, Kofi, if we look at the guidance, the organic guidance, right? The revenue range is 4%-5%. If you add back the impact of the net impact of the divestitures and acquisitions, the operating income range is 1%-4%. Can you just kind of help us kind of think through what are the drivers that would cause you to be at the low end of that range, the OI range, or the higher end of that OI range? Again, assuming that 4%-5% organic sales growth is the right number. Is it a reflection of commodity volatility or just like what are some of the pieces there that kind of describe or inform that wider range on OI?
Yeah. No, I appreciate the question, and I think, you know, back to my earlier comments about sort of the backdrop for the operating environment, it still remains volatile with a high degree of uncertainty. I think we're expecting as a backdrop that, you know, the supply chain disruptions to the extent they are foreseeable will in the near term not abate that much. That is a factor that even as we work through this past year was a headwind to margins and even as we move from quarter to quarter provided some volatility to our expectations. The guidance range primarily reflects that.
You know, obviously, you know, inflation is our best call based on the information we have in front of us is 14%. But I would note that, you know, our expectations moved up even as we worked through the early part of this last fiscal year we just closed. Those are the two primary sources of, you know, of volatility that are driving our expectations on the range.
Okay. Thank you for that.
Brian-
Oh, go ahead.
Bryan, I would just add one additional piece on the inflation is, you know, we are about 55% covered on our ingredients and packaging material requirements as we start the year. That's a bit higher than average, but, you know, that still leaves obviously some lack of coverage, especially in the back half of the year. To Kofi's point about the uncertainty.
Okay. Anything in terms of, I guess you must know more about the first half of the year than the second half of the year. Just anything we should think about that in terms of phasing, just, you know, in terms of the inflationary pressure is a little bit more for front or back half loaded?
I think that's a great question and one worth just a little bit of comment. As you think about the year, I would say we'd expect the first half profit growth to be you know slightly weighted in favorable to the second half. You know, a lot of that obviously is in part of the weight of the comparison on this Q4 that you know we just closed. As you think about inflation, which you also referenced, we would expect that to be highest in Q1 and then decelerate as you work sequentially through the comps over the course of the year.
Price mix, we'll expect a partial impact in Q1 from recent actions and a full impact kind of in Q2. Then the other factor that I just call out that's worth mentioning is, you know, the impact of divestitures. The ones that we've announced and the ones that we've closed will be a bit higher in the first half, before we begin to lap the yogurt and dough divestitures, which happened in the second half of this recent fiscal year.
All right. Thanks, Kofi.
You bet.
Our next question comes from Robert Moskow with Credit Suisse. You may proceed with your question.
Hi. I guess a couple of questions. You know, Kofi, I think in the middle of the year, you actually quantified the cost of supply chain disruptions, and then I don't know if you've quantified it since. Do you have a number for us? When you talk about your pricing and HMM actions offsetting cost inflation, does it also offset that disruption estimate, or is that a separate number? Then I have a quick follow-up.
Yeah. We did provide a number. I think it has been given a range of 200, previously 250 is about where we hit the mark here at the end of the year. I think back to my earlier comments, as we look at the full year, you know, our adjusted gross margins are down, and if you kind of deconstruct that, the elements would drive you to inflation being about 500 basis points, roughly drag offset almost completely by, you know, price mix and HMM. That leaves the cost of the operating environment, the disruptions, the de-leverage, you know, other intermodal transfers, all the things that we're doing to accommodate supply in this environment as the driver of the margin decline.
Okay. I might just not be competent in finding things, but I'm having trouble finding the price mix for North America Retail in fourth quarter. I think I'm backing into something like 16% pricing.
You're close.
Okay. If your cost inflation.
15 points is the number of organic price mix.
I guess here's the question. If your cost inflation for the year is only 14%, but you're running pricing at 16%, isn't that a net positive?
Are you talking this fiscal year or next fiscal year?
fiscal 2023. For fiscal 2023, I think you're guiding to 14% inflation, but your pricing in your biggest segment of the market is up mid-teens. I guess it seems like the pricing benefit is That from a dollar standpoint is a net positive, compared to your price inflation on a cost inflation on a dollar standpoint.
Yeah. I, Rob, I think you've got. I mean, you have to remember that we'll be starting to roll over some pricing as we come into fiscal 2022, and certainly much more so as we get into the back half of the year, you know, as we have significant pricing come through in the back half of fiscal 2022. We'll be rolling over that in fiscal 2023. My apologies. The other piece that would be included in that would be, you know, the offset from volume and deleverage that comes through. You know, we mentioned that we are expecting elasticities to be below historical levels, but to increase somewhat, as we go through 2023.
Okay. That makes sense. Should I think about, like, for the first quarter pricing, is it you're lapping only a 4% price mix for North America, but you're taking more action. Are those two things kind of offsetting each other, do you think? Like, you still be mid-teen-
Yeah
In first quarter?
Yeah. Roughly. I think that's a fair assumption.
Got it. Okay. Thank you.
You bet.
Our next question comes from Michael Lavery with Piper Sandler. You may proceed with your question.
Thank you. Good morning.
Morning. Good morning.
Just looking at the SNAP benefits that the federal COVID emergency authorization is now set to run at least into October, and that of course supports the state emergency elevated levels of SNAP benefits that have been pretty significant. As you contemplate your top line guidance, what assumptions do you make around how that might unfold?
You know, I would start, and I'll have Jon Nudi follow up on this. Michael, I would start with what our assumptions include people starting to eat less away from home more to a little bit at-home eating. I think, you know, as consumers become more concerned about their economic reality, the first thing they tend to do is eat more at home and less away from home. We've seen restaurant traffic year-over-year the last couple of months has gone down a little bit, and eating at home has gone up.
As we think about our assumptions for the year, you know, and we saw this in the last recession, you know, the great recession, we saw that consumption away from home eating was down and replaced by at home eating. We're seeing the same kind of behavior start now, that's actually the first place I start. That's because, I mean, consumers wanna eat out more, but the cost of eating away from home is more than double the cost of eating at home. Of course, there's value seeking behaviors, you know, once they get in the store. Consumers try to change their habits as little as possible and still be able to get what they want. I would. That's how I would frame.
I mean, it's a non-answer to the SNAP question, but before we go deep down that hole, I just wanted to start with kind of an overarching comment. Jon or Kofi, do you wanna take over a little bit on the SNAP question?
Yeah. Thanks, Jeff, and I think you hit it exactly right. SNAP is obviously one of the elements that will drive top line. While SNAP is down versus pandemic highs, it's still above pre-pandemic periods. We continue to monitor SNAP and it plays into things. As Jeff mentioned, some bigger factors in play as well, including the shift to more in-home eating and then even what's playing out in their categories. We've obviously watched very closely as well in terms of how brand employers are performing, how private label is performing. If you look back through history during economic downturns, we tend to perform pretty well to see our categories increase by a point or two in terms of volume performance. We've actually held our own from a share standpoint during those periods.
We've seen the second and third tier brands lose share to private labels. It's a dynamic time. We're very close to, you know, our business and watching all the different factors, but SNAP is just one of those.
That's really helpful color. That's great. Just to follow up, I know you've called out the elasticities you expect to start at least getting closer to normal levels, and factoring in some of that volume piece. On the pricing side, just especially with what the consumer's facing and some of the pushback maybe even from retailers, are you starting to feel like you're hitting a price ceiling in any categories, or is it really still more of the same like it's been in this recent environment?
I would say, like, up until this point, we haven't really seen any change in elasticities. I think the reason for that. There's a couple reasons for that. One is that consumers have switched to more at home eating because it's more expensive. The reason I started talking about would be a big contributor to elasticities not having changed much even over the last month from what they were two or three or four months ago. The consumer is actually still in a decent place. They're getting nervous. You know, when it comes to savings rates or the employment rate, I mean, consumers are still spending quite a bit of money. Now, as they look ahead, they get nervous because they see inflation and so forth.
Right now the consumer is in a decent place, and we haven't really seen any elasticity change, and I think that's because of the shift from away from home to at home eating.
Okay. Really helpful. Thanks so much.
Yeah. Thank you.
Next question comes from Cody Ross with UBS. You may proceed with your question.
Hey, good morning, folks. Thank you for taking my question. I just wanna dig a little into pet here because the pet margin continues to slide further, driven by inflation and supply chain disruptions that you called out. Did this catch you by surprise during the quarter? And when do you anticipate the rate of margin declines to moderate? And then I have a follow-up.
Sure. Yeah, absolutely. Sorry, I just presumptively jumped in there. Thanks for the question. It is. I just wanna kinda set the frame by just acknowledging, I think the pet business for us is still seeing a really strong demand, right? We've grown the pet business double digits on both the top and the bottom line in the four years post-acquisition. This is more a function as we look at the margins specifically around two things, roughly in equal measure.
The first, the impact of the acquisition that we completed early this year, in this past fiscal year, of the pet treats business, which has, you know, largely driven by some one-time costs and some modest margin dilution that comes with that business. Second, the cost to serve, which were acutely higher in the quarter on the pet business. We've sought to service that business at levels to meet demand. We candidly were not able to produce to the demand we saw in the quarter and have had challenges and headwinds as we work through the year. We're taking significant actions to your question on kind of what we're doing about it to de-bottleneck and continue to add external supply capacity.
In addition, we've put $150 million of capital spending, additional capital spending behind our dry dog food business, which is where we're seeing the most acute challenge on service to get additional capacity online and starting in FY 2024. We would expect this the margin pressure to modestly improve as we take the near-term actions and then the real unlock to come as we get additional capacity, both external and internal online.
Gotcha. Thank you. I just wanna follow up a little bit about gross margin and some of the stranded costs you expect. So if you combine the low double-digit price mix with the HMM savings, it looks like you should fully cover the inflation you're going to endure next year. You'll also be lapping the supply chain challenges in the second half next year. Is it fair to say right now that gross margin could actually increase next year? And if not, is that because of stranded costs? And if so, can you just kinda give us any color on how much stranded cost you expect? Thank you.
Cody, this is Jeff. You're I think you've got the right drivers. You're right that HMM plus our SRM pricing actions are intended to offset the inflation component. We did talk about a modest decline in disruptions. We will have an impact from divestitures, and obviously, particularly the Helper and Suddenly Salad divestiture. That's clearly a higher margin business as we disclosed in the announcement on the deal. The divestiture of that business will, you know, have a negative mix impact on margin for the year.
Got it. Thank you very much. I'll pass it along.
Our next question comes from Pamela Kaufman with Morgan Stanley. You may proceed with your question.
Hi, good morning.
Morning.
Good morning.
In the prepared remarks, you highlighted that portfolio reshaping is going to be an ongoing aspect of the company's strategy. One of your key competitors is pursuing a more surgical approach to portfolio reshaping. What are your views on pursuing a similar strategy, and have you considered splitting up the company across higher and slower growth segments?
Yeah. Thanks for that question. You know what I love is that our strategy is working. It has been working regardless of what competitors are doing. Our strategy has been working for the last four years, you know, as evidenced by our continued, you know, growth above our long-term algorithm and the fact we're gaining share in the majority of our categories. I think actually the worst thing that we could do is look at what somebody else is doing and try to emulate that when the strategy we have is working. You know, I say that because, you know, we're executing well on our core business as evidenced by the, you know, the share gains over the last four years.
We've also integrated M&A quite well, and whether that's, you know, seamlessly divesting the yogurt business or, you know, aggressively growing Blue Buffalo and the pet treat business, we feel great about that. The other thing I would say is it kinda goes people get lost, and we talk, you know, there are a lot of dyssynergies from splitting things up, and not only financial dyssynergies, but also capability dyssynergies. Let me give you a couple examples. When we bought the Blue Buffalo business, one of the things we said was that, you know, the capabilities we have at General Mills are very similar to what is needed at Blue Buffalo, and one of those is extrusion technology, which is the technology we use in cereal.
We're one of the world's leaders, if not the world's best at extrusion technology. You know, the same would be true for things like thermal processing, where, you know, the same technology that's used for wet pet food is used in things like soup and yogurt and other things. You know, for a whole host of reasons, but ending with our strategy is working. You know, whatever our competitors do, their strategy may be best for them, but we really like our strategy. We like the way it's working. At the end of the day, it's creating quite a bit of value for shareholders.
Great. Thanks. Also, you've discussed how you expect consumers to seek more value given the pressures that they're facing. In this environment, how are you thinking about managing price gaps versus private label, and your branded competitors? It seems that your price gaps have widened pretty meaningfully versus private label in your categories. What are your expectations around trade down, and how are you thinking about price gaps going forward?
Yeah. You know, I'll let Jon do the answer to the details. I would note that our pricing, you know, it has been higher in the last few months, but at the same time, we're still growing share, which I think speaks to the strength of our brands. But Jon, you wanna follow up?
Yeah, absolutely. You know, Jeff, you touched on this before, but it's not only looking at our categories, but looking at broader consumption. It starts with our consumers eating away at restaurants or eating at home, and we're seeing that shift at home, which is important. We've built an SRM capability over the last, you know, five or six years that we're really proud of, and it's much more sophisticated today than it was.
We're able to monitor what's happening in the environment and then take targeted actions, and it might be list pricing, it might be promotional optimization. We're taking the actions we believe will enable us to win in the categories that we're competing in, and we are. If you look at the past year, we've grown share in the majority of our categories, not only in North America Retail, but really across the enterprise, leveraging the SRM capability. We take private label very seriously. I would call it retailer brands. We believe the best course is to make sure that we build our brands and we innovate. Over time, if you look at our performance, our categories actually hold up really well versus private label. In total food and beverage, private label is an 18% share, in our categories it's a 10.
We believe that's because we build our brands and we innovate, and we'll continue to do that as we move forward. We compete in North America Retail alone in over 25 categories. We're laser focused on looking at what's happening from an inflation standpoint, how we're gonna offset that from a pricing standpoint, how we're gonna build our brands, and how we're gonna innovate. We feel good about our plans for the coming year, and we do believe that we're gonna be able to compete effectively, and grow share in a majority of our major categories again in fiscal 2023.
Great. Thank you.
Our next question comes from Chris Growe with Stifel. You may proceed with your question.
Hi, good morning.
Good morning. Morning, Chris. Hi.
Just had a question for you to be clear on kind of the phasing of pricing through the year. Is it so you have pricing actions that have already been announced, and you have carryover pricing from this past year. Is it the second quarter when pricing plus your HMM cost savings would be sufficient to offset inflation? Is that the right way to think about that in the second quarter?
Yeah. That's roughly right.
Sorry, I jumped in again. Chris, roughly right. I think that's a fair expectation given the inflation assumption for the yearly expected phasing.
Okay. I was curious, jumping over to the pet division, you're bringing on new co-packers. You won't have new capacity available, doesn't sound like, until fiscal 2024. Do you believe you can meet demand in fiscal 2023? Is it the addition of co-packers and, perhaps some of the new capacity that's gonna allow you to meet demand in fiscal 2023 for that division?
I think it's fair to say in the near term, this will continue to be a headwind. We expect modest improvement to come in the near term, primarily from bottlenecking and enrollment, continued enrollment of additional external supply chain capacity. You know, I wouldn't expect it to be, you know, fully enough to satisfy the demand we're seeing on the business in the near term.
Okay. That's all I had for you. Thank you.
Thanks, Chris. Thank you.
Thank you.
Our next question comes from Ken Goldman with JP Morgan. You may proceed with your question.
Good morning, it's Thomas Palmer on for Ken. I wanted to ask on elasticity. Guidance assumes elasticity increases but remains below historic levels. I just wanna make sure I understand this. Are you assuming elasticity returns to more normal levels at some point or the year, or that some degree of below average elasticity persists throughout the year, and you know, why you have that view and what do you consider to be normal elasticity? Thanks.
Well, You wanna take that, Kofi?
This is. Yeah, this is Kofi. So I think the fair assumption is for the full year, our guidance is predicated on elasticities being higher than this past year where, as a reminder, they were significantly below what our historical modeling would tell us. We are not expecting for the balance of the year a full return to the full levels of elasticity that the historical models would indicate. You know, structurally, there are a number of reasons for this, and Jeff referenced a lot of them around the at-home dynamics, the consumption patterns that we expect to see from consumers being a primary driver as a backdrop.
You know, I think it's hard to drive by the continued challenge around supply chain disruption. You think about that as a backdrop for better choice and selection for consumers. You know, lastly, when you think about you know the broader inflationary pressures and the value trade-offs that the consumers make, it's important to note that inflation is hitting away-from-home foods more heavily than even at-home foods. I think all of those things are there for our assumption.
Okay. Thank you for that. Just on shipment timing, I think a quarter ago you talked about how some of that under shipment in North America would likely be a fiscal 2023 event. At least looking at Nielsen seems to be a bit of timing benefit in the fourth quarter. Is there more to come as we think about 2023?
Jon, you want to take that?
Yeah, absolutely. We actually don't believe there was any benefit in the quarter. We think non-measured channels is really the difference versus what you see in Nielsen and movement versus RNS. We don't believe that we either built inventory or replenished it at our customers. As we move through the first half of fiscal 2023, we expect some of the same service issues that we experienced through fiscal 2022 to still be with us. As a result, we're not baking in any real benefit from rebuilding inventories.
Great. Thank you.
Our next question comes from Steve Powers with Deutsche Bank. You may proceed with your question.
Yes, thanks. Good morning, everybody. Just a relatively quick follow-up on pet, if I could. I think the discussion's been pretty full, but I guess, you know, the growth rate as realized in the quarter was still quite substantial despite the supply constraints. I guess you know, can you give some color on what that implies about what you're seeing in all channel consumption, number one? To the extent you're not delivering to that demand, you know, how you're thinking about channel inventory levels, any risks that you're monitoring or we should be aware of around fulfillment rates or out of stocks?
I guess I'm looking at the current situation as a potential opportunity as you catch up, but I'm also just trying to level set on the interim risk.
Yeah. Well, let me frame it primarily through the lens of what we saw for service. As we looked at the fourth quarter on this business, our service levels came in at the high end of 60, low end of 70%. I think the opportunity as we go forward is to be running probably closer to 80%. We see strong demand across all the channels as we look forward. This is not a demand issue. It is ultimately going to be even modest improvements in supply will allow us to unlock additional growth.
The other factors I gave you listed around, you know, retailer inventories are less a challenge and a consideration as we look ahead.
You know, I would say in terms of risk.
Okay
I'm not sure there's risk beyond what we've already identified in our guidance. I mean, the demand is clearly there, and we've accounted for the fact that in the very near term, you know, we're not gonna catch up fully to demand, but this is not beyond the wit of what we know how to do. I mean, this is really about de-bottlenecking capacity and using external sources and then building more capacity. As you indicated, you know, we also have to remember we did grow, I think, 20% in the fourth quarter. We feel great about our pet business and, you know, we just have to make sure that we get our capacity back, particularly on dry dog food, and we're in the process of doing that.
Yeah. Okay. Very good. Thank you very much.
Yeah.
Our final question comes from David Palmer with Evercore ISI. You may proceed with your question.
Thank you. Just following up on the gross margin question so far. Gross margin in the, in fiscal 2022 is 33%, I think, and gross margin in pre-COVID fiscal 2019, mid-34s. You know, I wonder what the net impact to that gross margin has been from M&A over that time. You know, basically I'm wondering how much lower gross margins were versus pre-COVID on a comparable basis, and how that compares to that 200 basis points plus of supply chain friction you mentioned.
Yeah. I think I can give it to you in the perspective of the inflation from other supply chain costs being the primary driver of the drag as you look from beginning of that period to through the most recent quarter. You know, I think I would note that some of the biggest divestitures we've made over that period also had probably some margin dilution already embedded in our P&L. To the extent that we are, you know, the most recent divestiture obviously had attractive margins, but the net of all of those is probably a small plus to neutral from a margin mix perspective.
Basically, the decline, to put a finer point on it, the decline versus pre-COVID is really all supply chain disruptions.
Yeah, no, that makes sense. Any thought on the ability to reclaim that margin? Is there anything that, you know, aside from the timing of pricing actions versus inflation that makes you think you can't get back to a business-adjusted pre-COVID gross margin level?
Yeah, no. Look, I think the main thing I would start with is a recognition that the supply chain environment stabilizing. Once that begins to stabilize, we will be able to apply our you know our peer-leading HMM capability to get at these costs. Some of these costs will fall fully naturally with the environment and the stabilization of supply chains. Some of them will require just some focused HMM work and all within our capacity to deliver. If you look at our historical ability to drive HMM, pre-COVID levels have been in the 4%-5% range. I think this is comfortably in the zone of what we can manage. What's not knowable right now, obviously, is exactly when we'll see the supply chain environment stabilize. That is the way we're managing the business.
I just have one last one. Like, your media advertising, you said in the presentation it's gonna go up by more than the 5% CAGR that you've had over the COVID era. That would get you, I guess, 20% above pre-COVID levels in media spend. You know, this is sort of a fundamental change that you started from before, just before pre-COVID, where you're, I guess, getting bigger in digital. I think it's worth sort of addressing how different this has been for you, how you're spending on this. Also why you feel confident that this is getting an ROI in some way that would make you know, different than you were in the three years before COVID. Thanks.
Maybe I'll-
Yeah, maybe I'll talk about that a little bit.
Yeah, let me clarify one point, and then maybe I can shift it back to Jon or Jeff. David, in the presentation, we talked about the fact that we expect media to be up in fiscal 2023, but it wasn't in relation to the growth rate. That was just in terms of dollars.
Oh, okay.
We've grown at a 5% compound growth rate the last three years. We expect media to be up in fiscal 2023, but that wasn't a rate guidance. In terms of where we're spending or how we feel about it, maybe I'll pass it over to John or Jeff.
Yeah, I would just say we feel great about our media and the granularity we have in understanding the return or the ability to optimize. North of 50% of all our media spend is digital now. Among that digital spend, more than 50% is performance marketing, and that's where we're leveraging our first party data, which we've invested to acquire, partnering with our retailers and their data, which is really powerful and becoming really targeted, building one-on-one personalized relationships, and then testing and iterating at scale. We can take 200 different ads online and optimize and really have the focus on the one that has the best return. That's seeing significant increases in return for us. We believe we're getting more than you know, more return from our advertising than ever before. We're able to optimize.
The days of shooting an ad and hoping it works for a year or more, we're literally optimizing ads on a daily basis. That's really good for our brands because it helps build them, it helps refine the messages, and it builds more loyalty for us as well. We feel great about media, and we're continuing to invest heavily to make sure we have the digital capabilities we need for the future.
Great. Thank you.
Thanks, Jeff. We can close up here.
Pardon me. It seems Mr. Harmening's line did disconnect, unfortunately. Mr. Siemon, you're good to close the call if you'd like.
No worries. Thanks, Kelly. We just appreciate everyone's continued engagement and interest in General Mills. Certainly, the IR team will be available today for follow-ups, but we wish you all a good continued summer and look forward to catching up soon. Thanks so much.
That does conclude the conference call for today. We thank you for your participation, and we ask that you please disconnect your lines.