Okay. Welcome, everybody. Thanks for joining us. For our next session, I'm thrilled to welcome back General Mills to the conference and equally thrilled to welcome back Jeff Harmening, Chairman and Chief Executive Officer. Jeff, thanks for being with us.
Great to be here. Thank you.
I'll let you pour your water.
Yeah, pour my water here. Yeah, that's right.
I guess we're going to use the entirety of our time for Q&A, so I'll just jump right in. I'll start, Jeff, with the way that I've started with a lot of teams here. It's just obviously been a very eventful start to 2025. Lots of different cross-currents and pressures on the consumer. Maybe we just start there, talk about your assessment of consumer health broadly and how those dynamics have impacted your categories specifically.
Yeah, sure. Thank you. I appreciate everyone being here in person and those listening online. I'll start with the U.S., because 85% of our business is in the U.S., and then we can expand later on from there. It has been an eventful start to our 2025 year. In the U.S., consumer sentiment is really tough right now. The University of Michigan puts out a poll, and what it would say is that it is the second lowest reading they have ever had. The lowest reading was right after the pandemic began in 2020. Consumer sentiment is tough. The U.S. consumer is stressed financially. They are still buying, but they are stressed. You can see U.S. consumer debt has risen. As a result, consumers are looking for value. That is not exactly a shocker, I think. I'll give you some perspective on that.
It's not all bad for us. I mean, 87% of eating occasions in the U.S. are now at home rather than away from home. That's a benefit to our categories. Our categories are actually growing a little bit. Consumers are looking for different places to shop. They're changing their habits about where they shop and how they shop and when they shop, right after a paycheck, for example. There are a lot of things that come into play looking for value. Also, equally, I think it's important to remember that the consumer is stressed, but value isn't the only thing that they're looking for. The U.S. consumer is looking for more protein. They seem like they can't get enough protein. We talk about functional benefits, but that kind of starts with protein. Increasingly, the U.S. consumer is looking for bold flavors.
No matter what the category, they're looking for bold flavors. Also, because the environment is tough, and we see this in recessions, kind of I've been doing this for 30 years, so we unfortunately have seen a few of these, consumers really look for nostalgia as well. They look for things that are going to make them feel good. Whether that is Pillsbury and the Doughboy, which we've gotten back to growth, or whether that's Lucky Charms, which is growing again, consumers are looking for things that remind them of something comfortable. Those are some of the trends we see in consumer sentiment as they currently stand.
Okay. So that was the U.S. What about what you're seeing in Europe and China and elsewhere?
Yeah. In Europe, the consumer sentiment is not quite as stressed as it is in the U.S. right now. As a result, we see our categories growing. Here in France, we're seeing growth in the ice cream category, and we're growing share, and the same with Nature Valley. As well, we see growth at Old El Paso. The consumer environment in Europe is not nearly as stressed as it is in the U.S. right now, and we're seeing more growth here. China, I would say, is a sentiment not too dissimilar from the U.S. Consumers are pulling back. They feel the economic challenges. We've seen that in our Häagen-Dazs shops. Traffic is down double digits in our Häagen-Dazs shops because people aren't eating away from home as much, similar to the U.S.
On the other hand, we do see growth in our retail business in Häagen-Dazs in China. China is a little bit stressed. We're seeing growth in Brazil. The Brazilian economy is doing pretty well. We see growth in Brazil, and we're doing quite a bit better in Brazil. A little bit of a trip around the world. I would say that for us, China and the U.S. are kind of the two places where we see most consumer stress.
Yeah. I will tell you that Häagen-Dazs ice cream is up here at the conference year over year.
It's up here at the conference. That's good. We aim to please. Pleased to hear that. The sea salt caramel is my favorite. Our investor relations said Jeff Siemon likes the cookies and cream, but I think we can't go wrong really with either one.
Thank you for both.
Yes.
If we step back, we'll talk about some of the things you're doing in the moment in a second. Just, I guess, how do you feel that your broader Accelerate strategy has equipped the company to navigate and identify course corrections through this volatile time?
Yeah, I appreciate that. We set our accelerate strategy. I mean, timing is everything. We set it about two weeks before we sent people home for the pandemic in 2020. Having said that, the strategy itself has really stood the test of time. We have reshaped our portfolio 30% over the last seven years, both through acquisitions, a lot of that in pet food, a little bit in food service, and through divestitures. We just got regulatory approval to divest yogurt in the U.S. just this last week. Kind of from where we play, our accelerate strategy really has stood the test of time. Over the last five-year period, we have outperformed our long-term algorithm on sales growth and on profitability growth. Of course, there have been swings up and down during that period, but that has served us well.
In addition to that, we've taken this time over the last five years to really invest in leveraging our scale, particularly in data and technology. We spent a lot of time developing the foundation for data and technology. That has allowed us to accelerate significantly our investment in things like strategic revenue management and e-commerce, and more recently in our supply chain digitization, which has allowed us to go from our productivity savings from an average of 4% a year over the last decade to now 5%. There are some real tangible benefits. We think it's going to continue to pay dividends into the future as we change how we do marketing content, the way we create value. We are really pleased with the investments we've made in our infrastructure in addition to a lot of the portfolio shaping that we have done.
Good. Okay. If we go into the here and now in terms of what you're doing more tactically to address some of the pressures you talked about, we'll start with North American retail, where you're adding a lot of incremental investment. I think there's some perceptions it's just price. I know it's not, so you can kind of help us with that. A lot of investment there. Can you just, I guess, give us your scorecard on the effectiveness of that spending so far, the progress you've made, and your expectations for further returns as we go forward?
All right. That's a lot of good questions right in a row. I'll try to answer all those. If I miss one, come back because I'm not trying to dodge it. I said, look, for the first question, it's like, what are we trying to accomplish? What we're trying to accomplish is getting back to organic growth. That is the most important thing that we can do. If you're not doing that, then you're just spending money. You're actually not investing. You're just spending money. The question becomes, okay, if that's your objective, what are the levers that you pull in order to achieve that objective? Of course, they differ by category. We compete in 25 categories in the US alone. We've developed what we call a remarkable experience framework.
That framework is really important because it allows us to understand where we put that investment. It could be in value. It could be in packaging. It could be in advertising, in omnichannel availability. We have a very disciplined approach to how we approach this. Where we invest actually differs quite a bit by category. Right now in the U.S., with a lot of value-seeking behavior, we are putting a lot of investment back into value. Value is the only starting point. We started doing this really kind of in January. Because we have a very good Pillsbury business, we came into our fiscal year in 2025 knowing that our advertising was really good. We had really good new product, good product news.
About four or five months into the year, it wasn't working the way we thought it would work. When we took a look at using this experience framework, we took a look at why that was, and the value equation just wasn't right for consumers on where they were. As a result, we changed our pricing on Pillsbury kind of throughout the category. We maintained the marketing investment. We maintained the innovation investment. We saw that business return to growth. We are able to not only do we have this framework in place, remarkability framework, but we also have the mechanisms to understand our marketing mix. We can diagnose the problem. We are able to look at, okay, how is that investment working, and then understand what changes we need to make. We modeled out the changes we saw.
We thought we would saw in Pillsbury, and it performed almost exactly as we had predicted. We have applied then what we learned in Pillsbury to our Totino's business. We changed the pricing there, but we also added marketing spend. We had a Super Bowl ad for the first time in a decade, and it was the most viewed socially of any Super Bowl ad. We increased the marketing, we changed the pricing, and we saw the results we expected on Totino's. We looked across our portfolio and said, what do we need to do? Kind of category by category, we analyzed what needed to take place. We have made investments across many categories.
What I am pleased to be able to say is that we said in the third quarter during our earnings call that we would improve several businesses in the fourth quarter. If you just look at Nielsen data in the fourth quarter, what you would find is that we improved our pound volume in about 65% of our categories in the U.S. Our pounds were down 3% in the first half of the year. They're down 2% in the third quarter, and now they were only down 1% in the fourth quarter. Dollars have lagged that. Our dollars in our U.S. business are down 4%, but we expected that. In fact, we modeled that. We feel very good about all the investments we're doing in our value equation or getting that right.
As we look ahead, now the job to do is to make sure we continue those investments into our fiscal 2026, but then add on top of that more new product innovation. In fact, we have about 30% more new product innovation in fiscal 2026 than we had in fiscal 2025. We are not launching 30% more new products. We actually have some better products across a lot of our lines. We have launched a couple of those things in our fourth quarter already. Cheerios Protein, for example. I told you consumers want more protein. Cheerios Protein is off to a great start. We have launched something called Pitmaster Soup for Progresso. It is also 20 g of protein, off to a great start. You mentioned the Häagen-Dazs Stick Bars we are sampling here at the conference, but we have reformulated those.
In Europe, they're off to a great start, and we have local manufacturing in China now. Our Häagen-Dazs stick bar business in China is off to a great start. What we see is getting the value right is really important, but it's not the only thing to do. We have to add the marketing on top of that. I will tell you for fiscal 2026, without giving guidance, that our marketing spending will be up in 2026 behind the new innovation. This combination of getting the value right, then adding more new product innovation and renovation news in our core along with increased marketing spend, that is a formula for getting our organic sales back to growth.
Got it. Without giving guidance for 2026, what's a timeline for getting the portfolio as a whole back to pound volume parity with the categories? Ultimately, if the innovation, the marketing is successful, you start to outpace on pound volume and hopefully add some remarkability-based premiumization to the mix. What's the path to get to that kind of more hopefully algorithmic cadence?
Yeah. The path to getting back to pound growth really has started in our fourth quarter. As I said, we thought in Q3, coming out of Q3, that our volume would improve in Q4, and it has in many of the categories in which we made investments. We thought cereal category pound volume would improve. In fact, we grew pound share in the fourth quarter. The same with Pillsbury, the same with Totino's, the same with Progresso Soup, the same with Fruit Snacks. All the places we invested, we saw this pound growth. As we go into this next fiscal year, through the first half of the year, we would expect that our pounds would continue to improve.
Our dollars, our dollars and particularly dollar share would lag our pounds as it has in the fourth quarter because that is the time in which we will be lapping the pricing from a year ago. As we do that, importantly, in the first half of the year, we will be launching a lot of new product innovation, which we will talk about in three weeks at our Q4 earnings call. We would expect the business in the back half of next fiscal year to not only start to gain pound share, but also dollar share and get back to dollar growth after that.
Great. Maybe a similar status update on improvement plans for North American pet.
Yeah.
I'll let you drink. Sorry, short question after a long.
No, first of all, we've been really pleased over the arc of the last seven years with our pet food acquisition of Blue Buffalo and the subsequent acquisitions we have made. Over that time, we've done quite well from a share perspective behind a humanization trend. Importantly, that humanization trend is going to continue. It's a 20-year trend. I'm not exactly Nostradamus for predicting that humanization trend is going to continue. It's also a global trend. It's not just a U.S. trend. People all over the world want to feed their pets like they feed themselves, like they feed the rest of their families. That will continue. What I'm pleased with this last year is we use the same remarkability experience framework in pet as we do for the rest of our business.
Looking at that business, we saw there was not as much value work to do. In fact, we needed to improve our advertising on Life Protection Formula, which we did. We saw that business get back to growth. We needed to improve the advertising on our cat business, our Tastefuls business. Now that is growing at 5%. We did not change the value of that at all. All we did was change the advertising. There are a couple more businesses in pet that have been more challenging for us. Our Wilderness business, we probably changed about every lever on the Remarkability Experience Framework. While it is not back to growth yet, we have continued to see sequential improvement in that business. In fact, in many channels, it is actually growing.
The same would be true of our treats business, which is code for snacking when it comes to pets. In our treats business, it is not all the way back to growth, but we have stemmed the declines. As a result, in our fiscal year that just ended, our fiscal 2025, we have stabilized our share position. Now that and probably eke out a little bit of growth for the year on our top-line sales. Now the job to do is accelerate that growth. We will talk again more about how we are going to do that in this coming year. I can tell you it will primarily be through new product innovation. We have got a great lineup of new products in our pet food business, including our new Tiki Cat acquisition, which is growing double digits and even better marketing.
Anyway, we've stabilized pet. We're pleased that we're back to at least maintaining share. Now the job to do is accelerate growth, and we're confident we can do that.
Great. I guess if we pivot over to food service, because this is the business that I do not think we talk about enough, but it has been a relative bright spot for the company. Maybe talk about just maybe level some of the company's positioning there and then your ambitions in building a bigger presence in some of your end markets.
Yeah, I'd love to talk about our food service business. I mean, we have a good food service business, and it's growing. I'd love to talk about it. For perspective for those listening who do not look at our food service business every day, through the first three quarters, the top line was growing 3%, and the profitability was up 15%. It is a really good business for us, and it has good margins. The reason why it is a good business for us and has good margins, I think, starts with the fact that we have some R&D capabilities that are competitive advantages for us, especially when it comes to reformulating for regulatory changes and reformulating when it comes to our baking business. We have competitive R&D. We also have our own sales organization, which most food service companies do not have.
What this allows us to do is solve operator problems. Our direct sales force helps us understand what those operator problems are, and combine that with our R&D capabilities helps to solve those things. We have some capabilities that are advantages. I'll give you a couple of examples of where that plays out. In food service, we have a really good business in our K through 12, kindergarten through 12th grade school business. Our cereal business in that channel is more than double our share. The share there is more than double what it is in U.S. retail because we've been able to reformulate products over time, say, colors or sugar reductions or sodium reductions that other people simply can't do. We have really good shares there.
The other thing about our food service business that's a little bit different from others, in addition to our competitive advantage capabilities in this current period, it's important about 60% of our food service business is in what we call non-commercial channels. These are, think of non-restaurants, kindergarten through 12th grade schools, universities, hospitalities. Those channels are actually growing. The restaurant traffic has struggled as it has become more expensive. We have actually been growing through these non-commercial channels. Again, because we've got great capabilities, we're helping solve operator challenges, which are generally labor-related. If they're not labor-related, then they are nutrition-related. Those are two things we're really good at doing.
Can you talk about the level of investment you're putting behind food service? Is it natural growth, or are you leaning in and trying to accelerate it further?
We've been accelerating our growth in food service. We love to invest in our food service business because, again, it's got a great margin structure to it. We have competitive advantages. We've made an acquisition in food service to help accelerate that growth. We don't spend in advertising in food service the way we do for the rest of our business, but we're investing in our capabilities in food service and have over time. That has paid dividends. I will also say the investments we make in our branded business also flow over to food service. To the extent that we create more remarkable experiences for consumers on our branded products, a lot of our sales in our food service business are also branded.
When Lucky Charms is growing or doing the right thing in retail, the same thing tends to happen in our food service outlets.
Okay. We were talking, we both used the word remarkability earlier, talked about your remarkability framework, but did not really define it. Maybe spend a minute on exactly kind of what that looks like so people have a common understanding. I guess the real question is sort of where do you think the company got out of balance on remarkabilities or conversely, what other brands were doing better than you and then how that has led to some of the course corrections you have made?
Yeah. The remarkability experience framework is really just a disciplined and consistent framework that our marketers use to diagnose challenges our business faced, but also where we're doing really well. That's important because then we speak the same language across the company. That framework, I mean, we've always been good brand builders. General Mills, for 160 years, General Mills has been great at building brands. This just gives us a disciplined framework to evaluate what we're doing. What we do is we measure the remarkability of our products against our biggest competition. In some cases, that's another big branded manufacturer. In some cases, it's against private label, and some of it may be a smaller manufacturer. We look across several dimensions. One of those is value. We look at packaging. We look at communications. We look at omnichannel presence.
We look across all these different vectors. We kind of rate ourselves, are we better than the competition, the same, or worse? Not surprisingly, where we find that we are worse, we want to make it better. Where we find we have advantages, we like to double down. That is why we use this framework. It is important because when you have 25 categories, the challenge may be different on Pillsbury than it is on Blue Buffalo than it is on Totino’s than it is on Cheerios. That is the way we use this framework. One of the things we found that was pretty consistent was that our value equation was out of line with what consumers' expectations were. I am not sure that we did anything wrong necessarily. It is just the context changed over time.
I mean, for a few years, we had been battling, we battled a global pandemic, record inflation, supply chain disruptions. Most of our energy went into all that. At a time when most of our competitors, when many of our competitors, especially private label, did not have the shelf presence we did because our supply chain held up better. That was a great competitive advantage for us for about three or four years. Now the supply chains have stabilized quite a bit more. We will see what happens in the future, but they have stabilized a lot more as it looks right now. The premium we were to a lot of our competitors, that gap, it increased.
What we are doing right now, when we talk about adding value and making investments back in value, we are really getting back to historical price differences between competition, which had gotten out of line. The context has changed. We are changing with it. It is no longer good enough just to be better at pricing and supply chain and availability. You really need to be better across all the vectors of your marketing mix.
Okay. I guess if we take a step to the side and talk about, I guess, potentially how that impacts your views on portfolio construction. In pet, we've seen the company add Edgar & Cooper, Whiteb ridge to help bolster beyond Blue Buffalo. But we've seen more divestments of late in North American retail, including yogurt, as you referenced. I guess looking ahead, how do you see that evolving? Do you see yourself more explicitly prioritizing additions in North American retail?
Yeah. I'll be glad to talk about our portfolio shaping because we've been successful at it. You always like to talk about things you've been successful at, with the caveat that the most important thing we have to do the next year, in fact, priorities one, two, and three are getting back to organic growth. I only say that in that you can't really portfolio shape your way to success if your core is not growing. Our number one priority in the next 12 months is really organic growth. Having said that, we haven't changed our strategy when it comes to M&A. It's been successful, and we think it will be successful. The combination of making acquisitions over time in areas that are growing, where we think we have the capabilities necessary to win, those are places where we'll continue to look for acquisitions.
We've made divestitures. Yes, we just divested in the process of investing yogurt here in the U.S. and Hamburger Helper, but we also divested yogurt in France. I'll talk about that in a minute. We have made some divestments outside the U.S. We will also look to divest businesses where we think that it's not prudent for us to invest, all with the mind to create shareholder value. I want you to know our capital allocation strategy and our M&A strategy really hasn't changed because we've been successful in what we have done. One of the things we found, and here in France, so we're in France right now, here in France is that when we divested our yogurt business in Europe, it was a business that was lower growth for us, higher capital costs, lower margins.
That was not a business that we were particularly well situated to create competitive advantage. We divested that. That improved the profitability of our European business. I think, as importantly, what it allowed us to do was focus on the businesses that were the most important to us, in this case, Häagen-Dazs and Nature Valley and Old El Paso. I do not think that it is a coincidence that for the last three years, we have actually grown all three of those businesses in France. In fact, Nature Valley has a higher market share in France than it does anywhere else in the world. I think grew at 43% here in France last year. We are gaining share in Häagen-Dazs. We are growing Old El Paso. It is hard to put it in a spreadsheet when you make a divestiture.
People always say, like, what's the dilutive effect or whatever or the growth impact of that divestiture you make? You can quantify that. What's harder to quantify, but yet still real, is that it allows you to focus back on the things that matter most to you. We saw that in Europe. It gets talked about in theory. I've heard about the theory. I've never seen it in practice. Now I've experienced it. I will tell you, that's one of the things we're really pleased with what we've seen in Europe.
We also think it'll happen with our U.S. business that by divesting yogurt, which has been a good business for us for a long time, but one we weren't going to make the investments in, it allows us to invest in things that are going to be more important to us and focus on the things that are more important to us.
Okay. Acknowledging the focus on organic growth, 100% clear. In some ways, you mentioned small brands kind of on the rebound post-pandemic related disruption. Arguably, the conditions that are kind of returning are more similar to the conditions that existed 10 years ago that led to brands like Annie's come to the fore, which then was a successful acquisition for you guys. Do you see that market construction maybe taking shape such that the opportunities to be more offensive from M&A may come to be over the next few years?
Yeah. So yeah, by the way, I'm glad you mentioned Annie's. It has been successful. By the way, it's growing really well right now. It was a $200 million business when we acquired it, and we doubled it. So it's now a $400 million business for us and really still nicely growing and profitable. When you look at the current environment, there has been a lot of small brand growth. A lot of that growth, not all of it, but a lot of that growth has been on the back of kind of getting back on the shelf because there was a period of time when, frankly, the small company supply chains and private label supply chains didn't hold up as well as ours did. A lot of our retail customers were focusing on e-commerce sales, particularly as people weren't going to the stores as much.
They did not want small brands that were not turning kind of in the way of their broader e-commerce objective. A lot of the growth we have seen in small brands over the past period of time has really been related to just getting back on the shelf. There have been other brands where they provided real and meaningful benefits to consumers that are important for us to make sure we reflect in our brands. It is a combination of getting back on the shelf and some real benefits. As we look to what consumers want to do in the future, we have a choice to make. Are we going to launch ourselves into benefits that consumers are looking for? Are we going to acquire, or are we going to do both?
I think the answer is we'll be very willing to do both. As you said, with regard to Annie's, we made an acquisition. With Tiki Cat, we made an acquisition. By the way, in Tiki Cat, it's growing, but so is Blue Buffalo's cat business. It is kind of an and. As we looked at the cereal category, there have been brands like Magic Spoon that has been growing for six years and low sugar and high protein. We launched Cheerios Protein six months ago. It's already bigger than Magic Spoon. In that case, we decided not to make an acquisition. We decided we could do something organically, the same with soup. As we look across the landscape, we do have an always-on M&A capability.
To the extent that we think it's more attractive for us to buy into a business rather than build on our own, we're certainly capable of not only buying it, but also making it work, which is the ultimate goal and what creates the share value.
Okay. We talked about yogurt, which the other piece of news recently was that you released information about a transformation initiative that will include $130 million in charges going forward. Maybe just a little bit more color on that initiative and what it means to the company and what kind of savings you expect to be generated from those charges that you disclosed.
Right. I'm very willing to talk about that. I'm going to sound a little bit like a broken record, but there's a theme here. I'm not that subtle. I mean, the most important thing about that restructuring is that it's in service to organic growth. That's the most important thing to take out of this discussion. What we announced on the restructuring is something that we talked about really on our Q3 earnings call, which on our Q3 earnings call, we said we plan to save an additional $100 million in the coming year in addition to what we do every year. We generate productivity of 5% every year. We said we'd save another $100 million in the coming year. This restructuring announcement is kind of the official announcement of what we talked about on our Q3 earnings call.
The question then is, okay, how exactly then is that in service to organic growth? Really, there are two ways. First, I mean, growth is not free. I mean, we talked about the investments that we're making. We have to pay for those investments. One of the ways is through our program, but the other is going to be through this restructuring that we are doing. The other is that in this transformation, we want to make sure that not only are we saving money, but we come out of this a better company than we started. One of the things that we know we need to continue to do is free up time for our people and become more agile at what we do.
Through the use of technology or putting the right work in the right place, we're actually transforming, really transforming how we do a lot of our processes. With an eye toward using our data and technology, which I talked about earlier as a competitive advantage, to make our processes more streamlined and easy and free up other people's time to do what they do best. It really is a transformational restructuring, and it will help us with organic growth, not only in the short-term fuel that it provides, but also making us more efficient and agile in the way we go about our work.
Very good. Okay. Tariffs have been a big topic.
I've heard of those.
Yes. Yes. Clearly, the backdrop is changing frequently. I mean, how did tariffs as we know them today, but more generally, just the dynamic tariff backdrop influence your business planning as you go into 2026?
Yeah. We spent a lot of time on it. It's not clear to me that we're at a steady state yet when it comes to tariffs. I'll tell you how we think about it, and we'll give some more information in three weeks on our earnings call. I suspect we'll give even more information after that.
Yep. Probably right.
With regard to tariffs, I mean, a couple of important pieces of context for us to probably keep in mind. The first is that we're largely a North American company. About 97%, approximately 97% of the products that we sell in the U.S. are made in the U.S. We are not shipping a lot of finished product from someplace else into the U.S., which kind of limits our exposure. Also, between 85% and 90% of the goods, the raw materials that we use in the U.S. are actually sourced from the U.S. or somewhere in North America. That has some limitations on our liability. There is another 15% that we source, either we source from outside the U.S. or our suppliers source from outside the U.S. An example of that would be cocoa.
I mean, we do not use the same amount of cocoa as chocolate companies, but I mean, we have an embedded cracker product. So cocoa would be an example. We cannot get it in the U.S. We are not going to get it in the U.S. I mean, it is going to be there. Steel and aluminum. That would be another piece. We use steel and aluminum for Progresso Soup cans and for Blue Buffalo dog food. So a couple of things that we are going to use those materials. And to the extent there is a 25% or 50% tariff or 14% or whatever it ends up being, we cannot mitigate against that. And so what we think about, we think about tariffs really as an add to short-term inflation. That is really what it is. And so I believe that it is manageable. The risk is not nothing. The risk is ever-changing.
There's a lot of things that we can mitigate, and we have. There are a few things that we can't. The question is only, do we have enough productivity to cover those costs, or do we need exact pricing in some other form at some time?
Great. Very clear. Another evergreen topic of late is evolving food regulation, government oversight, mostly in the U.S. I guess, what is General Mills' take on the direction of discourse and government action in the U.S.? What impacts do you see it potentially having either on your portfolio's growth or just the cost to operate over the next several years?
I've heard of this topic too. The first thing, we and I have been really engaged at a federal level with the people talking with the groups, especially the head of Health and Human Services, RFK Jr., talking about what it is that we can do collectively. We really have had a constructive dialogue at a national level. The primary topic of conversation among food regulation really is about colors, artificial colors or certified colors. That's been the main topic. There are about four or five that are kind of in the national topic. Because of that, I mean, we're actually pretty well positioned because only about 15% of our products in the US actually have these artificial or certified colors. In our food service business, we've been working through these kind of issues for literally decades.
Every time the regulation changes, we come out competitively advantaged because we have R&D capabilities that other people cannot match. We have a thousand scientists in Minneapolis alone working on things just like this. Smaller companies may have to outsource it. I want you to know, I think there is probably a net opportunity for General Mills over the long term. It is not the easiest to reformulate. It takes time. It takes a little bit of money, but mostly it takes time as we try to get texture right and color right and moisture transfer right and all of those things. I want you to know it is important that we have the most important thing when it comes to this food regulation, which is that we have something at the federal level.
Now, what really does not work for consumers or for manufacturers like us or anybody is state-by-state regulation. Because as you can imagine, it creates consumer confusion. If something's safe in Texas, but it's not allowed in Maine or something different in Minnesota or California, how does that work? The answer is it doesn't because consumers just get confused. It also drives up costs. Can you imagine trying to have to formulate 50 different times? That just won't work. I'm pretty sure American consumers don't want their cost of food going up. What we're working with the administration on is how can we create a framework so that we can have a consistent standard. Even if it's not something that we all love, even if it's something we like, a consistent federal standard is really, really important. That's what we're working with the administration on.
Great. In the couple of minutes we have left, fiscal 2025 is officially behind us. We are narrowing in, as you mentioned, on fourth quarter reporting. I guess acknowledging we are going to have to wait a couple of weeks for official fiscal 2026 guidance. As we stand here today, what are some of the key building blocks that investors should keep in mind as they consider the dynamics heading into next year, both in terms of financial puts and takes as well as strategic objectives?
We always start with the objective, which I've talked about already, but really is getting back to our organic growth. That's the most important task we have at hand. We'll be making a lot of investments to do that. We talked about some of that is in value, which will carry over from the fourth quarter through the first for the first half of our next fiscal year, maybe in some cases, the first three quarters of our fiscal year. The investments aren't only in price or value. The investments are going to be in increased marketing spending. We've got great innovation, but innovation only works if people know about it. When you have really good innovation, you want to make sure that you talk about that.
We will be making significant investments in innovation and making consumers understand that that innovation is coming to market. We will be making those investments. We talked a little bit already. We are really good at productivity, which we call, and we have 5% next year, which is, and by the way, we know going into a fiscal year what the answer is going to be. I can tell you with a high degree of confidence that we will generate 5% of productivity next year because we have already identified what all these projects are. We will also have savings from this transformation initiative, which we talked about. There will be inflation. We will talk exactly about what that is in three weeks, but it is not extraordinary inflation. Tariffs aside, it is not extraordinary inflation. That is on the other side in addition to the brand investments.
We also have a 53rd week, the famed 53rd week. We have that every five or six years. We are going to reinvest all of what we have in that 53rd week back into brand building and back into driving organic growth. We have the Yoplait divestiture, which we have clearance for. We think it will close by the end of June. Pretty much a whole year of that divestiture and the dilution on earnings and EPS that comes with that. Those are kind of the, I mean, I think we are pretty, those are the building blocks. We feel good about the investments we are going to make. It will not happen, getting back to growth will not happen overnight, but we are encouraged. We are encouraged by what we see in the fourth quarter.
Even if you read in Nielsen data, the dollar sales are not as robust as we would like, when you look underlying that.
Pound volume.
The pound volume and the household penetration that comes with that, we see quite a bit of green shoots. Importantly, the investments that we have made have worked as we thought they would. As we go into next year, we're confident that as we continue to make investments, whether it's in value or innovation or brand building, we are confident that they will work the way that we think they will.
Great. With that, we're out of time. In one year, I look forward to hearing all of the returns on the investments you're making and talking about all the growth that lies ahead in fiscal 2026.
I look forward to telling you about it.
All right. Fantastic.
All right.
Thanks, everybody. Thanks, Jeff.