Good morning and welcome to the 97th Annual Meeting of General Mills Shareholders. I'm Jeff Harmening, Chairman and Chief Executive Officer of the company. It's 8:30 A.M. We have a quorum, all official papers are on file, and the Inspector of Election has been appointed. I'll call this meeting to order. Before I get to the business update, I would like to take a few minutes to introduce some of the people who are attending this meeting. Here with me today is Karen Wilson Thissen, our General Counsel and Corporate Secretary, Jano Cabrera , our Chief Communications Officer, and other members of our Senior Leadership Team.
Also with us today are our Board members who are standing for election: [Ben O'Doer], former Chairman and Chief Executive Officer of (Inaudible) ; Maria Henry, former Chief Financial Officer of Kimberly-Clark Corporation; Jo Ann Jenkins, former Chief Executive Officer of AARP; Elizabeth Lempres, former Senior Partner of McKinsey & Company; John Morikis , former Chairman and Chief Executive Officer of Sherwin-Williams; Diane Neal, former Chief Executive Officer of Sur La Table; Steve Odland, President and Chief Executive Officer of The Conference Board ; Maria Sastre, former President and Chief Operating Officer of Signature Flight Support Corporation; Eric Sprunk, former Chief Operating Officer of Nike; Jorge Uribe, former Chief Productivity and Transformation Officer of the Procter & Gamble Company; and I am also a member of the Board. At this time, I would also like to recognize Kim Goodwin for her service to the Board.
Kim is now standing for reelection to the Board at this meeting. Next, let me introduce Ian (Inaudible) and Laura Collins, who are attending the meeting virtually and representing our Independent Auditor, KPMG. Finally, our Inspector of Election for today's meeting is Broadridge Financial Solutions. Now, let's turn to our business update. Please note that our remarks this morning will include forward-looking statements that are based on management's current views and assumptions. There are many factors that could cause our future results to be different than our current estimates. You can refer to our SEC filings on the General Mills Investor Relations website for a reconciliation of the non-GAAP measures discussed in today's business update. I'll start with three messages I hope you take away from today's meeting. First, our Accelerate strategy remains the right framework for driving long-term growth and returns for our shareholders.
Second, while our results in fiscal 2025 did not meet our plans, we continued to deliver industry-leading Holistic Margin Management cost savings, strong free cash flow conversion, and meaningful portfolio reshaping, even as an evolving external environment and a pressured consumer created headwinds for our top line. Third, as we look ahead, we are focused on returning the company to volume-driven, organic sales growth in fiscal 2026, positioning General Mills to generate sustainable, profitable growth and strong shareholder returns over the long- term. Grounded in our purpose to make food the world loves, our Accelerate strategy is centered on choices we've made about where to prioritize our resources to drive top-line shareholder returns. These choices, where we play and how we win, guide us toward long-term value creation through consistent sales growth, margin expansion, cash conversion, and return to shareholders.
Through this strategy, we've reshaped our portfolio, enhanced our capabilities, and evolved our organization to stay competitive in an ever-changing environment. We entered fiscal 2025 with three priorities: accelerate organic sales growth, create fuel for investment, and drive strong cash generation. While we started the year on solid footing, a challenging macro-economic backdrop and continued value-seeking consumer behavior pressured our top-line results. Organic net sales and adjusted operating profit fell short of our expectations, even though we exceeded our cost savings and free cash flow conversion goals. Our Continuous Improvement Productivity Program, that we call Holistic Margin Management or HMM, continues to be a strategic point of competitive advantage for General Mills. In fiscal 2025, we delivered HMM savings totaling 5% of cost of goods, which is at the top of our industry. We used those savings to help offset input cost inflation and reinvest behind our brands.
We also delivered strong free cash conversion in fiscal 2025, helping us return $2.5 billion to shareholders through dividends and share repurchases. In addition, we continued to actively reshape our portfolio in fiscal 2025. We divested our North America yogurt business and added Whitebridge Pet Brands to our North America Pet segment, sharpening our focus on categories and geographies with stronger long-term growth opportunities where we have unique competitive advantages and a right to win. Including these latest transactions, we have now turned over 30% of our net sales base since fiscal 2018, which has added more than a point of growth to our projected long-term category growth exposure. Looking forward, we continue to manage through an evolving operating environment in fiscal 2026, with consumers navigating economic uncertainty, geopolitical conflict, and regulatory changes.
Against this backdrop, we are focused on restoring volume-driven organic sales growth while balancing reinvestment for the long- term with cost savings to fund that growth. With that goal in mind, we have set three clear priorities for fiscal 2026. Our first priority is to return our North America Retail segment to volume growth by investing in remarkable consumer experiences. Our second priority is to accelerate growth in North America Pet. We will do that by strengthening our core Blue Buffalo business while adding accelerators in attractive spaces, including our recently acquired Edgard & Cooper and Tiki Cat brands, as well as the national launch of Blue Buffalo's new Love Made Fresh natural fresh dog food. Our third priority is to drive efficiencies to reinvest in growth by continuing to deliver best-in-class HMM productivity while also advancing our Enterprise Transformation Initiative.
Our Remarkable Experiences Framework will play a central role in fiscal 2026. Using this framework, we assess our brands across five dimensions: product, packaging, brand communication, omnichannel execution, and value to identify our strengths versus competition and where we have opportunities to improve. One particular area of focus for us this year is improving our value for consumers. While price remains an important tool, especially in today's environment, it is not sufficient to drive lasting growth. Sustainable, profitable growth comes from making sure all elements of remarkability truly resonate with consumers. That is why our fiscal 2026 plans include core news on each of our top 10 U.S. categories, a 25% increase in innovation, more investment behind new creative campaigns, and significant events that capture consumers' attention, whether in-store or online.
These plans are heavily weighted toward our eight global billion-dollar brands, including Cheerios, Old El Paso, Blue Buffalo, Häagen-Dazs, Nature Valley, Pillsbury, Betty Crocker, and Totino’s. We reported our first quarter fiscal 2026 results two weeks ago, and I'm pleased to say that our end market results were broadly in line with our expectations, with strength in pound share on eight of our top 10 categories in North America Retail, stable pound share in North America Pet, and continued strong competitiveness in North America Foodservice and International. Our Q1 financial results included a low single-digit decline in organic net sales and a double-digit decline in adjusted operating profit and adjusted diluted earnings per share. To be clear, this is what we expected on the top line, and even a bit better than we expected on the bottom line.
We thought our results would be pressured significantly by our increased investment profile, the dilution impact from our yogurt divestitures, and difficult phasing comparisons. We expect declines to continue in Q2 before improving in the second half and returning to growth in Q4. Our job in fiscal 2026 is clear: restore sustainable, volume-driven organic sales growth. This is the foundation of long-term value creation for General Mills. We know the road ahead will require focus and strong execution, and we are confident in our ability to deliver. With our remarkable brands, a proven framework for creating consumer value, industry-leading capabilities, and a talented and committed team, we are well- positioned to achieve our fiscal 2026 goals. Together, we will continue to evolve, deliver on our purpose to make food the world loves, and generate strong, long-term returns for you, our shareholders.
I would now like to turn to the proposals that are being voted on at this meeting. For shareholders, if you have not voted or would like to change your vote on any of the proposals, please make sure to do so now on the virtual meeting portal. I am now going to turn it over to Karen Wilson Thissen, our General Counsel and Corporate Secretary, who will introduce the management proposals being voted on at this meeting.
Thanks, Jeff. We are presenting three management proposals for a vote at this meeting. These proposals are: first, the election of the 11 directors named in the proxy statement, second, an advisory vote on executive compensation, and third, the ratification of KPMG as our independent auditor. These three proposals are recommended by our Board of Directors for shareholder approval. Full details on each of these items are provided in the proxy statement. We also have two shareholder proposals to be voted on at the meeting. I will now ask a representative from each of the shareholder proposals to present their shareholder proposals for a vote at the meeting. First, I will call on Caroline Boden to represent the disclosure of regenerative agriculture practices within supply chain proposal on behalf of shareholder Mercy Investment Services, Inc. Will the operator please place Boden 's pre-recorded shareholder proposal statement?
Good morning, Mr. Harmening, members of the Board, and fellow shareholders. My name is Caroline Boden , and I am a Director of Shareholder Advocacy with Mercy Investment Services. Thank you for the opportunity to present Proposal No. 4 on the proxy. This proposal asks General Mills to disclose the success of its regenerative agriculture program, a program it has invested millions of dollars in, by reporting its outcomes, including but not limited to pesticide reduction. Pesticide use degrades soil health, the cornerstone of natural capital. The failure to regenerate healthy soils by reducing pesticide use may cause significant harm to farm and supply chain resilience. Soil degradation can also increase commodity prices, raising long-term viability concerns for our company. Pesticides also harm the health of farmworkers in fenceline communities. Each year, 44% of farmworkers experience pesticide poisoning, causing nearly 11,000 deaths annually.
Similarly, biodiversity, pollinator health, and air and water quality all suffer as a result of pesticide use. Despite claims about the benefits of its regenerative agriculture program, our company does not disclose its success, if any, in reducing pesticide use on farms. This lack of transparency leaves shareholders unable to determine whether the company's program is successful in regenerating soil health and/or in reducing environmental and human health impacts, as well as mitigating reputational, regulatory, and financial risks. Meanwhile, General Mills' competitors Conagra and Lamb Weston are publicly reporting the number and/or amount of pesticides used or avoided to demonstrate the success of their regenerative agriculture program. Additionally, farmers are already required by law to track and record restricted-use pesticides, and most farmers keep extensive records on pesticide use to ensure application efficiency.
Therefore, collecting pesticide use data from regenerative suppliers would add little to no additional cost and complexity to General Mills' regenerative program. As a leading food manufacturer, General Mills has the ability to engage with its suppliers and collect and disclose pesticide data to demonstrate the success of its regenerative agriculture program. We look to the company to live up to its commitment by providing investors with the information they need to reduce risk and make informed investment decisions. We urge a yes vote on this resolution. Thank you.
Thank you for the statement, Ms. Boden. The Board strongly believes this proposal is not in the best interests of the company or its shareholders. Requiring farmers to track pesticide use would add cost and complexity, with no benefits to the farmer, which would jeopardize continued progress in the company's strong and successful regenerative agriculture program. Our regenerative agriculture goals include far more than just reducing pesticides. Adding requirements for pesticide tracking and reduction would negatively impact the overall benefits of our regenerative agriculture program. Finally, we already provide significant disclosures on a regenerative agriculture and pesticide reduction initiative.
Given the success of the company's sustainability initiative and the breadth of its existing disclosures, the Board believes that the company is already addressing the concerns in the shareholder proposal and that specific tracking and disclosure of pesticides used in our regenerative agriculture programs is unnecessary and not an effective use of the company's or farmers' resources or time. For these reasons, the Board has unanimously recommended a vote against this proposal. I will now call on Matt Prescott to present the proposal requesting the adoption of a policy to separate the Board Chair and CEO roles on behalf of The Accountability Board. Will the operator please unmute Mr. Prescott's line so that he can present the shareholder proposal? Mr. Prescott, please proceed.
Thanks so much, and good morning to everybody. We can keep our remarks pretty short today for the sake of time. We think that our proposal pretty much speaks for itself, and again, for the sake of time, we'd just refer folks to the proxy statement for more information. The only thing we want to add is that both Institutional Shareholder Services and Glass Lewis are supporting adoption of the proposal. As ISS concludes, General Mills' "long-term total shareholder return underperformance" suggests that shareholders would benefit from a more robust Board oversight of management through separation of the roles of CEO and Board Chair. On top of that, we also just want to note that every member of General Mills' Governance Committee and many other directors outside that committee have served on other companies that actively tout the benefits of separating the Chair and CEO roles.
We filed a notice of exempt solicitation with General Mills on September 15th that's available in the company's SEC filings, including many quotes from those companies on the benefits of separation for anybody who's interested. I'll just leave it there. Thanks again, and we urge shareholders to vote for the proposal.
Thank you for your statement, Mr. Prescott. The Board strongly believes that this proposal is not in the best interests of the company or its shareholders. Our Independent Directors should retain the ongoing flexibility to select the leadership structure best for the company and its shareholders at any given point in time, including whether the same person should serve as both Chief Executive Officer and Chair, or whether the roles should be separated. As a reminder, approximately 71% of our U.S.-based peers have a combined Chair and CEO structure, which also remains the predominant Board leadership structure for S&P 500 and S&P 100 companies. Our Independent Lead Director role is robust, with substantial leadership responsibilities that ensure Independent Board oversight. Additionally, 10 of our 11 directors are independent. They're all elected annually by majority vote of the company's shareholders, and all committee members and chairs are independent.
Additionally, our Independent Directors meet in executive session at each Board meeting. Our Board leadership structure is supported by strong corporate governance practices that ensure that the Board can provide independent oversight of management and the company. Finally, our current Board leadership structure is reviewed at least annually, and the Board continues to believe that this structure best serves our shareholders at this time. For these reasons, the Board has unanimously recommended a vote against this proposal. With the summary of this year's shareholder proposals completed, we can now transition to sharing the preliminary vote totals. As a reminder, these totals represent shareholder votes received prior to today's meeting.
I am pleased to announce that preliminary voting results suggest that more than the required number of shares have been voted in favor of the three management proposals: the election of all director nominees, an advisory vote on executive compensation, and the ratification of KPMG as our Independent Auditor. The preliminary voting results also suggest that both of the shareholder proposals have failed to gain a majority of shareholder support. Approximately 28% of the votes cast supported the disclosure of regenerative agriculture practices within supply chain shareholder proposals, and approximately 36% of the votes cast supported the separation of the Board Chair and CEO roles shareholder proposal. As a reminder, the final vote totals, which will include votes received prior to the adjournment of today's meeting, will be reported on a Form 8-K filed with the SEC within the next four business days.
We will make that Form 8-K available on our company website.
Thank you, Karen. That concludes the formal business portion of today's meeting. Before beginning our question and answer session, we will now officially close the polls and adjourn the meeting. I will now turn it over to Jano Cabrera , our Chief Communications Officer, for the question and answer portion of this meeting.
Thank you, Jeff. To ensure everyone had an opportunity to ask a question, we opened the meeting portal 10 days ago. Of course, if you now have a question, you may submit it by following the instructions on your computer screen. Please note, we will limit questions to two per shareholder and will only respond to one question per topic. Please keep your questions brief so we can cover as many subjects as possible. Now for the first question. Jeff, we received a question about our approach to supporting healthy diets and providing nutrient information across our portfolio.
Look, we've had a long history of providing families with increased access to really important nutrition, things like whole grains and fiber, iron, vitamin fortification, and a whole lot more. Over the years, we've reduced sodium and sugar. Importantly, food nutrition is always an evolving space, and we recognize that and have over time consistently and positively evolved our portfolio and have transparently shared our progress. Our global health reporting system provides a clear overview of the nutritional characteristics of our portfolio. Families should feel very confident that General Mills' portfolio offers them a delicious variety of nutrient-dense foods and that we will continue to report all changes transparently.
Thank you, Jeff. On to the next topic. With all the transformational M&A activity in the food industry, what are your thoughts generally, and can you speak to the specific decision criteria you have on divestitures, such as when a business like Hamburger Helper or Yoplait are better to divest than for us to continue to operate?
Yeah, sure, Jano. With regard to consolidation in the food industry and specifically our own activity, you know, I would note that we have an always-on M&A capability, and we'll continue to look at opportunities to upgrade the growth profile of our portfolio through both acquisitions and through divestitures. With our recent yogurt divestitures, we have turned over about 30% of our net sales base since fiscal 2018. By efficiently managing our portfolio and sharpening our focus on our global platforms and our local gem brands that have longer, stronger growth prospects, we'll be in a better position to drive top-tier shareholder returns over the long- term.
Thank you. Our next topic is transformation. Jeff, you recently announced a global transformation initiative that is expected to generate $100 million of savings in fiscal year 2026. Do you expect to reinvest most of those savings, and what are the savings opportunities beyond fiscal 2026?
Yeah, sure. We've been clear that fiscal 2026 is a reinvestment year, and in that vein, we'll be utilizing our savings from our global transformation initiative to fuel our growth investments. Taking a step back, the global transformation initiative is an enterprise transformation initiative that's designed to enhance and to streamline our end-to-end processes. Our goal is to free up resources and time to reinvest back into the business to improve our top-line growth. While many changes will take place in fiscal 2026, some of the process changes will take a bit more time to fully implement, and we expect the initiative to be completed by fiscal 2028.
All right, thank you so much, Jeff. With that, we now formally close our Q&A session. If you submitted a question that was not addressed here, please note that all responses to questions will be posted on our Investor Relations website by the end of this week. Lastly, I'd like to thank you for participating in today's meeting and for being a shareholder of General Mills. We look forward to next year's annual meeting.
The meeting has now concluded. Thank you for joining. You may now disconnect.