Good morning, everyone. Welcome to the J. M. Smucker Company 2024 Investor Day. Thank you to those in the room and joining via webcast for joining us today. I'm Crystal Beiting, and I have the privilege of leading our Investor Relations and Financial Planning and Analysis teams. Today, I'm excited for you to hear from our outstanding leadership team about the incredible journey our iconic brands have been on, as well as our plans for the future. During our remarks today, we will make forward-looking statements that reflect the company's expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, please note that the company uses Non-GAAP results for the purpose of evaluating performance internally. Further details on these items can be found within today's presentation.
Before I pass it over to Mark Smucker, Chief Executive Officer, President, and Chairman of the Board, I want to provide a brief overview of our agenda for today. Mark will provide an update on our strategy, the transformative journey the company has been on, and how we are well-positioned for our next chapter of growth. John Brase, Chief Operating Officer, will share how we have executed against our strategy to achieve the outstanding results of our transformed portfolio and set the foundation for future growth. Gail Hollander, Chief Marketing Officer, will share insights related to our differentiated marketing playbook, and each of our talented business segment leaders will discuss how our strategic priorities and world-class capabilities drive their businesses forward. Jill Penrose, Chief People and Company Services Officer, will share how our unique culture and talented employees drive our business results.
Tucker Marshall, Chief Financial Officer, will share more around our financial algorithm and long-term growth aspirations for the company. We will round out the day with a question-and-answer session, followed by lunch, during which our leadership team will be available to answer your questions. With that, I'll turn it over to Mark.
Good morning. Happy holidays. Great turnout. Thank you all for coming today. It's going to be a great day. And it really is great to be here with you for our 2024 Investor Day. Thank you to everyone joining us here in New York, as well as those joining us virtually. The team and I are excited for the opportunity to share with you our enterprise ambition and how our strategic transformation and our world-class capabilities have positioned the company for growth over the long term. Through the strong financial foundation we have established, I have a high level of confidence in our ability to create value for our shareholders. And our objective by the end of the day is that we have made three distinct elements clear.
First, our legacy business, which accounts for approximately 85% of our net sales, is delivering strong growth, a direct result of our portfolio optimization, and we are well-positioned for the long term through our key growth platforms, including the Uncrustables, Café Bustelo, Milk-Bone, and Meow Mix brands. Second, we have confidence in the Hostess brand, and our strategic rationale for the acquisition remains strong. While near-term performance has not met our expectations, we are taking decisive actions to achieve profitable net sales growth of 4% over the long term, and third, we are utilizing our world-class marketing, commercial, and manufacturing capabilities in new ways to fuel further sales growth and margin expansion opportunities throughout the business, enabling us to generate over $1 billion in free cash flow annually, which we have a clear line of sight to.
For those new to our story, let me outline the transformative journey that we have been on over the last 127 years. The company was founded in 1897 in Orrville, Ohio, where we specialized in the production and sale of apple butter in the local community. We then expanded to our legacy Smucker's Fruit Spreads business. And since that time, we have transformed into a leading consumer goods company, approaching $9 billion in anticipated fiscal 2025 net sales. We have a focus on leading brands in the attractive categories of snacking, coffee, and pet. And consumers rely on our products for themselves and their families every day, with over 90% of U.S. households purchasing our brands. Our portfolio combines leading and iconic brands with emerging growth brands, a combination that enables us to drive consistent and balanced growth across our portfolio. Let's take a look.
Throughout our history, much has changed. However, many things remain the same. Our relentless focus on the consumer has remained at the center of everything we do and continues to guide our vision to engage, delight, and inspire consumers by building brands they love and leading in growing categories. At our core, we are brand builders with a focus on continuous improvement. As such, we have consistently adapted our portfolio and capabilities to better meet the evolving needs of the consumer. Four years ago, we began a journey to fundamentally transform the J. M. Smucker Company for the future. We made the difficult decisions to exit businesses that no longer fit within our key focus areas and brands that did not have leadership positions in their categories. We divested approximately $2.5 billion in net sales, or 30% of our current portfolio.
We also focused on expanding our footprint in the attractive snacking category with the acquisition of Hostess Brands, and we invested in our largest organic growth opportunities, including building a third Uncrustables sandwiches facility in McCalla, Alabama. These steps have fundamentally transformed our portfolio and give us the ability to consistently deliver against our long-term financial algorithm. Today's message will be about looking towards the future of the company with an aligned portfolio, the right leadership, and world-class capabilities. We are proud of all that we have achieved, but we are even more excited about the opportunities we see in the years ahead. Our confidence is driven by the strength of our portfolio of leading brands and how we are evolving our business to meet the needs of the consumer.
Our ability to fuel growth across our portfolio to new audiences through our world-class marketing, commercial, and manufacturing capabilities, a focus on consumer-led innovation as we anticipate consumers' needs through a relentless focus on data and insights, and of course, our talented people. Let's dive deeper into each of these. First, our portfolio of leading brands and the categories we participate in. We have positioned ourselves in three of the most attractive categories of snacking, coffee, and pet. Within these categories, we have a strong portfolio of leading brands. Over 95% of our U.S. retail channel sales come from categories where we hold the number one or number two branded position. To lead in attractive categories is more important than ever, as leading brands are resilient to changing category dynamics.
And within these attractive categories, we are focused on our key growth platforms of the Uncrustables, Café Bustelo, Milk-Bone, Meow Mix, and Hostess brands. Let me start with the snacking category. Snacking is now a $200 billion market in the U.S. and continues to play an increasingly important role in consumers' lives. The way the consumer views meals has evolved, with snacks accounting for half of all eating occasions, as small snacks throughout the day often replace a traditional breakfast, lunch, or dinner. The majority of consumers eat two or more snacks per day, with younger consumers snacking more than older demographics. And consumers continue to take a balance sheet approach as they balance multiple needs in their decisions, including taste, convenience, and quality. We are focused on three distinct areas of snacking: Frozen Snacks and Sandwiches, Spreads, and Sweet and Indulgent Snacks.
In the Frozen Snacks and Sandwiches category, we hold a leadership position with the Uncrustables brand. Consumers turn to frozen to make their lives easier to navigate from options that can be eaten as small meals, as a component of a larger meal, or even as a snack. The Uncrustables brand complements these trends and amplifies our focus on convenient food occasions. We're focused on fueling the incredible momentum of the Uncrustables brand as it leads the entire freezer in new buyers for households with kids, millennials, and Gen Z, setting the stage for high lifetime value from consumers. By investing in marketing, expanding distribution, and accelerating innovation, we are committed to creating a truly iconic brand ingrained in culture. To support these ambitions, our third Uncrustables sandwiches facility is now up and running, which will increase our production capacity as we continue to fuel growth for the brand.
After years of capacity constraints, we're now able to fuel awareness, trial, and household penetration by building brand loyalty through a national marketing campaign. We are also now able to broaden our presence in new and existing channels, including convenience stores and freezers across the nation, and we are positioned to launch exciting innovation with new varieties and seasonal offerings to drive incremental occasions. We are creating a truly iconic brand with widespread, multi-generational appeal. We also have an opportunity in snacking through our leading spreads portfolio. We are evolving this portfolio to address a new mega spreads category, which is an $11 billion addressable market. Spreads elevate daily meal and snack experiences, and snacking has the highest spreads incidence of all meal occasions. Peanut butter and fruit spreads are highly relevant, with a well-established foothold during meal occasions, particularly in a sandwich.
But there is opportunity to forge new connections by aligning with consumers' evolving eating patterns. We continue to see opportunities to expand beyond sandwiches and into new usage occasions with the iconic Jif brand. The brand's strong foundation of leadership, awareness, and loyalty enables us to create new snacking occasions through product and packaging innovation. One example is the new Jif Peanut Butter and Chocolate Flavor Spread, which offers a new flavor to drive increased relevance and excitement. In sweet and indulgent snacking, we added the Hostess brand to our portfolio, which gave us a leading position in the sweet baked goods category. The strategic rationale for the acquisition remains strong, and we are taking decisive actions to return the brand to net sales growth focused around five key pillars: delivering the base portfolio, expanding distribution, driving innovation, continuing our portfolio evolution, and establishing revenue synergies.
Each of these pillars represents a key tactic designed to fuel growth for the Hostess brand and aligns to a core capability of our company. We're launching a bold new marketing campaign, leveraging our proven marketing model to build cultural relevance, particularly among millennials and Gen Z, who represent a tremendous opportunity for growth. As part of this brand modernization, we are introducing an updated logo and refreshing the Hostess brand's packaging to make it more appealing, accessible, and impactful in stores. Expanding distribution also remains critical, and with the company's advanced capabilities, we're unlocking new channels, particularly in away-from-home markets. Our focus on distribution includes both closing gaps of our core items in our existing channels and critically entering new channels, leveraging the company's strong away-from-home sales force.
In our quest for innovation, Hostess has consistently led the sweet baked goods category over the past three years, with 40% of category innovation last year and multiple top-selling new items. We will continue to deliver innovative products that resonate with consumers, introducing flavors, formats, and limited-time offerings that keep the Hostess brand exciting and top of mind, and we are committed to evolving our portfolio for sustained growth. The divestiture of the Voortman business underscores our strategy of focusing resources on our largest growth opportunities. Further, we are ensuring our network is fully optimized to unlock costs, reduce complexity, and drive quality. Finally, we are beginning to establish revenue synergies, a key fundamental of the acquisition. We plan to execute cross-promotional events between the Hostess brand and legacy Smucker brands, where early reads are very positive.
We are also expanding Uncrustables Sandwiches into C-store using our new capabilities in that channel, representing a large white space opportunity for the company. Next, the at-home coffee category, where we have built a leading portfolio featuring three of the top seven brands in the category with Folgers, Dunkin', and Café Bustelo. Outside of water, people drink coffee more than any other beverage. Three out of four Americans over the age of 18 drink coffee. In fact, U.S. coffee consumption recently hit a 50-year high, demonstrating a continued importance with today's consumer. Consumers have a strong emotional connection to their cup of coffee. At-home coffee consumption represents approximately 70% of all coffee drinking occasions. Yet this represents only a fraction of total dollars spent on coffee, highlighting our opportunity to drive more dollars to at-home with premiumization and quality of experiences.
Our coffee portfolio is well-positioned to capitalize on these evolving trends, and we are focusing resources toward our largest growth opportunity, the Café Bustelo brand. Café Bustelo continues to be the fastest-growing leading brand in the at-home coffee category, and we are fueling the brand's tremendous momentum to drive broad national appeal to a wider audience. With a new national marketing campaign and exciting innovation that will disrupt the prepack segment, the Café Bustelo brand is well-positioned to double household penetration and continue its double-digit growth trajectory as we broaden its appeal across the U.S. Temperature state is a big area of opportunity as we think about additional occasions. Cold coffee expands consumption and extends occasions throughout the day. Hot coffee is still the predominant temperature state consumed, and while three-fourths of coffee drinkers drink cold coffee, only 4% drink cold exclusively.
We are meeting the consumer in cold through our multi-serve offering. Café Bustelo multi-serve is uniquely positioned within the category and is off to a strong start, exceeding our initial expectations. We are expanding Café Bustelo Vanilla multi-serve nationally in May of 2025 and are excited to continue to expand the brand's formats. Next, the pet category, where we have the leading brands in Milk-Bone, Dog Snacks, and Meow Mix Cat Food. The category continues to grow with more pets and pet parents than ever. Dog and cat ownership have both increased by double digits since 2019, and both are expected to continue to grow over the long term. As the pet population has grown, the humanization of the category has continued to accelerate. Pets are now viewed as equal members of the family, with nearly all consumers agreeing their pets are central to their lives.
These trends are accelerating in younger generations. For example, half of Gen Z sees their relationship with their pet as the most pure and wholesome relationship in their life. We are utilizing our marketing model to attract these younger consumers by expanding on our successful More Dog campaign for the Milk-Bone brand with the launch of our new film creative, which you'll see in a bit. And for the Meow Mix brand, we are launching a brand refresh with new packaging next month. Younger consumers provide a large opportunity and represent the next phase of growth for the category as they attain spending power and increase share of wallet spent on their pets. And we are also reaching them through consumer-led innovation. In Dog Snacks, we continue to drive the humanization trend in the category.
As one of the few companies with both a human and pet food business, we are able to meet a unique consumer experience of sharing foods consumers love with their pets. One example of this is the success we are seeing from our recently launched Milk-Bone Peanut Buttery Bites, made with Jif Peanut Butter. And with the Meow Mix brand, we are launching Meow Mix Gravy Bursts, bringing the indulgence and dual texture experience out of the wet aisle and into the convenience of the dry aisle. New pet parents are looking for deeper connections with their cats, and this innovation amplifies the mealtime experience for both the cat and the cat parent. The pet category is primed for continued growth, with next-gen consumers redefining the emotional connection with pets and committing to spend a higher share of wallet to provide them with the best life possible.
As the leader in Dog Snacks and Dry Cat Food, we are well-positioned to capitalize on the future growth of these categories. We have a portfolio of leading brands in attractive categories, but at the core of our strategy is the ability to utilize the full power of our total enterprise capabilities across brands through our world-class marketing, commercial, and manufacturing capabilities to fuel growth. Each of these has fundamentally transformed how we execute our strategy. Starting with our marketing model, throughout our history, we have been brand builders. It's in our DNA, and we have built a model that delivers a consistent and proven approach to building brands and driving profitable growth. Through the work we have done in conjunction with the global agency Publicis, we have created a proven model that drives tangible results.
Our integrated framework is powered by a disciplined approach built on data-driven insights, with culture at the core of what we do. We are able to utilize our model across our portfolio, which is what we will do for the Hostess brand by launching a new marketing campaign driven by cultural relevance. Much like our marketing capabilities, we have made significant strides in transforming our commercial model to drive sales growth and improve margins. We are excited about this next phase in our evolution as we utilize our enhanced sales, supply chain, and procurement capabilities to fuel our brand's performance. Our sales strategy has fundamentally shifted as well. We've strengthened our strategic partnerships through category captainships and expanded our data-driven approach to ensure strong in-store execution. Through key partnerships, we're achieving a seamless solution that ensures our products are available wherever our consumers shop, online or in store.
We are also evolving our e-commerce and omnichannel capabilities, delivering a seamless, consistent shopping experience across online, mobile, and in-store channels. This transformation extends into our procurement and supply chain operations, where we've built one of the strongest and most resilient infrastructures in the industry, bolstered by advancements in technology, traceability, and now artificial intelligence. Our aim is to drive efficiencies across the board, from procurement to consumer delivery, while establishing a modern, connected supply chain that positions the company for continued growth and leadership. This is just the beginning of our journey, and we are excited to dive deeper into the incredible progress we're making. As the dynamic environment over the last four-plus years has continued to stabilize, we have returned our focus to consumer-led disruptive innovation.
Looking forward, we have a robust pipeline of innovation, including new items launched this year, like Jif Peanut Butter and Chocolate Flavor Spread, Milk-Bone Peanut Buttery Bites, new Uncrustables sandwich varieties, which you can try shortly this afternoon or this morning, and Café Bustelo multi-serve coffee. Across the company, innovation launched this year is anticipated to contribute over a point of growth to net sales in fiscal 2025. This fiscal year has been one of our most successful years for innovation in recent history. Over time, we anticipate contribution from net sales from new products that were launched in the previous three years, returning to our historical average of 5% of net sales as we combine product technology and innovation capabilities. And this brings me to my final point. When I discuss our success, it all comes back to our people.
I truly believe that we have the best team in the industry. Each of these elements that I outlined this morning will be discussed in more detail by the leadership team today. We have some great content prepared, and I hope that you walk away as excited and confident as I am about our potential. In closing, our foundation has never been stronger. Our legacy business is delivering results in a dynamic environment, and we are taking action to return the Hostess brand to growth. We are uniquely positioned in attractive categories with leading brands and key growth platforms with attractive margin profiles. The work we have done over the last four years has transformed the company, and we are better positioned than ever to deliver against our long-term algorithm, including our goal of over $1 billion in free cash flow annually.
We're confident in the strategic choices we have made and that our strategy will lead the J. M. Smucker Company into its next chapter of growth. With that, I'd like to invite John Brase, Chief Operating Officer, up to discuss our strategy in more detail. John?
Thank you, Mark. Good morning. I hope everyone in the room is properly caffeinated. If not, I know we can get a good cup of coffee. Grab a donut and a coffee cake while you're over there, please. So I'm John Brase, the Chief Operating Officer for the J. M. Smucker Company, and I'm really excited to be here in person and want to welcome everyone joining us virtually. As Mark outlined, we have been on quite a journey. Smucker has an incredibly strong culture, thoughtful values, extraordinary people, and iconic brands in growing categories.
From a category, brand, and capability standpoint, we've made significant strides over the last four years to position the company to unlock our next chapter of growth and value creation. There is no doubt our strategy is working. Net sales has grown at a 7% compound annual growth rate over the past four fiscal years when you exclude divestitures and an acquisition associated with our reshape, and our transformed portfolio continues to deliver continued growth against our long-term growth algorithm. While we are proud of the progress we've made and the strong foundation we've built, we still have more work to do. In support of our relentless focus on long-term sustainable growth, we've established three strategic priorities that will allow us to deliver on the present while ensuring we position the company to deliver strong results and sustainable growth for the long term.
First, we must deliver the business, which includes a focus on growing volume, operating with excellence, and continuing to prioritize resources against our fastest growth opportunities. Next, integrate and deliver the Hostess brand, including the alignment of systems and processes, achieving our cost and revenue synergies, our growth ambitions, and nurturing a unified culture as we expand our organization. Third, achieve our transformation, cost discipline, and cash generation aspirations. Delivering the business is grounded in our ability to drive growth through our key platforms of Uncrustables, which we anticipate to grow to more than $900 million in net sales this fiscal year, driven by the success of our national advertising campaign, holistic marketing, significant distribution gains, and new merchandising investments to drive trial and awareness. The growth of Uncrustables has been truly tremendous, and the strong momentum is continuing.
We anticipate this fiscal year to be the 11th year in a row of double-digit net sales growth for the brand. The Milk-Bone and Meow Mix brands, where we hold leading positions in both dog snacks and dry cat food. The Milk-Bone brand is the number one brand in the dog snacks category and continues to grow households and, importantly, attract new and younger consumers. The Meow Mix brand has the number one volume share position in dry cat food and has outpaced the category by over three times the average growth rate in the past year. It is clear our portfolio transformation in pet has positioned us to accelerate top-line growth, importantly, at industry-leading margins. The Café Bustelo brand, one of the fastest growing brands in the at-home coffee category, where we are growing with all ethnic groups and age demographics.
This brand has grown net sales at a compounded annual growth rate of 18% over the past four years and is now the seventh largest brand in the at-home coffee category. Our strong growth is expected to continue as we launch exciting innovation in the roast and ground category and introduce the brand in the cold coffee segment. And if you haven't tried multi-serve, I strongly recommend you try it at a break. It is incredible coffee. And finally, the Hostess brand, where we hold a leadership position in the highly attractive sweet baked goods category. Recently, the brand has not met our expectations, but we are focused on returning this iconic brand to growth. We have a powerful new marketing campaign, tremendous white space opportunity in the away-from-home channel, and new innovation to continue to bring excitement to the category.
These five brands position us well to drive strong growth in the near term as well as position us for long-term success. Over 80% of the company's growth over the next five years will come from these five iconic brands. We have confidence in our ability to achieve sustained top-line growth in line with our long-term expectation of low single-digit net sales growth. This confidence is driven by our strategic investments in growing brands, our portfolio reshaping activities, and projected growth rates in our respective categories. We anticipate each of our businesses delivering a level of net sales growth over the long term, including 1%-2% growth for our coffee segment. This growth will be primarily driven by the Café Bustelo brand and the exciting expansion plans we have in place, including new innovation in pre-packed bag coffee and our expansion into multi-serve coffee.
In addition, we anticipate growth for the Dunkin' brand and to maintain our leading share position for the iconic Folgers brand. 3%-4% net sales growth in our Frozen Handheld and Spreads segment, primarily driven by Uncrustables. We expect a level of growth for the Jif brand and to maintain our leading share position for the Smucker's Fruit Spreads business. In pet foods, we expect 3%-4% growth driven by the Milk-Bone and Meow Mix brands as we continue to drive humanization trends across the category and reach new pet owners through our world-class marketing and commercial capabilities as the pet population continues to grow. In Sweet Baked Snacks, we anticipate 4% net sales growth over the long term, driven by our five growth pillars that Mark outlined earlier today.
In an International and Away From Home, we anticipate 3%-4% net sales growth, primarily driven by the away-from-home business as we leverage our portfolio of leading brands into the Away From Home channels. The team will dive into how we plan to deliver against these long-term objectives in more detail for each of the segments. I'm excited for you to meet our business leaders and hear how we envision achieving growth across the business. I can tell you this is the most talented group of leaders I've ever had the pleasure of working with. They provide a mix of talent from outside the company and internal promotion, all with strong leadership capabilities and deep industry expertise.
As part of my comments today, I want to focus on how we have fundamentally transformed how we execute our strategy at an enterprise level, which includes our ability to drive sales growth and margin expansion at a brand level across three key capabilities: sales, procurement, and supply chain. Let me dive into how each of these areas is advancing our company's transformation. In sales, we have significantly improved our commercial capabilities to place the consumer at the center of all we do, delivering what they need and what they want. As part of this, we have refocused our analytics teams and integrated them into the business segments to seamlessly connect them with our brands, our customers, and the categories they support. Through this, we have built strong capabilities around strategic customer partnerships, best-in-class execution, and customer P&L analytics.
This includes developing two- to three-year joint business plans with our strategic customers by focusing on strong data, insights, and analytics to unlock category and brand growth. Through this work, we have become category captains and have attained 23 total captainships with leading customers across our categories. These positions are an earned privilege to partner with our strategic customers to build their category growth strategy. They enable our teams to provide thoughtful leadership through critical, unbiased insights and analytics and to build the category strategy at a store level. We have enhanced our sales execution through our industry-leading retail model with Acosta, a proven sales and marketing agency. In July, we announced the expansion of our partnership with Acosta to include a complete North American solution for headquarters sales, retail merchandising, and digital commerce.
This represents a significant shift in how we go to market and represent our full portfolio of brands as an extension of our sales team inside our retail merchant offices and also in store. Acosta will activate its in-store service merchandising team to ensure our brands are readily available for purchase in store, on shelf, and online. They bring strong capability and partnerships to our retailers with a focus on data and insights and on-shelf and online availability. Importantly, we have also developed deep analytics with our customers' P&L to understand how we can deliver sales growth in a way that enhances our profitability for the J. M. Smucker Company. This shift in focus to both top and bottom line results was a transformative change in our sales organization and includes multi-year plans to improve Smucker profitability at our customers.
We want our sales leaders to think and act like many general managers at our customers, and we have built the capability and the tools to enable this. Switching to procurement, we have significant opportunities as a leader in North America for coffee and peanut sourcing, as well as other large commodities. We have a dedicated commodity risk management team covering approximately $2 billion in annual exposure. The company utilizes strategic procurement capabilities to manage cost throughout the value chain, including our deep-rooted supplier partnerships. And finally, we have made significant investments in our supply chain and operations capabilities. Our improved systems and infrastructure have created a stronger, more agile, and modernized supply chain that is delivering industry-leading standards for food safety and product quality while also unlocking growth and driving efficiency across the company.
In customer service and logistics, we're better connecting all phases of the product journey and leveraging investments in technology to optimize warehouse management, route planning, and truck fill, and unlocking end-to-end supply chain visibility to reduce inventory and improve forecast accuracy. We're also using advanced analytics to develop deep, strong consensus and forecasting processes. In addition, we have made major investments in our quality management systems to unlock traceability and to finished goods across our portfolio and provide visibility across the total enterprise. Over the last four years, we have built two of the largest state-of-the-art plants in the United States with our Uncrustables facility in McCalla, Alabama, and Longmont, Colorado. With these large projects complete, we are now looking toward the future with ambitions of a completely connected and modern supply chain, fully leveraging artificial intelligence.
We have started to utilize AI across our supply chain and operations, and the results are impressive. In our supply chain, we're using predictive modeling and demand planning to optimize inventory. In transportation forecasting, where we utilize the spot market, we're always looking at real-time transportation lanes and utilizing AI to dynamically rebid market rates for us to deliver freight savings, and for our operations, we can now build a virtual model of our plant and have AI run perfect output performance. This ensures we are running our assets optimally, minimizing downtimes and performing preventive maintenance when and where needed. As you can see, we have made meaningful progress leveraging the power of technology and AI, but we have more work to do. We've established a clear roadmap on implementation and optimization opportunities.
I have no doubt this will continue to enable us to service our customers better and at the lowest possible cost. And across all of our capabilities, we're instilling our transformation efforts into a mindset shift for the company. We are seeing broad organization adoption of new behaviors through ownership and accountability. This is the core of transformation, leveraging the power of the collective Smucker organization to execute on a multi-year productivity program, which enables us to deliver against our long-term growth algorithm while investing in strategic opportunities across our key growth platforms. In closing, I want to reiterate what Mark said. We are a different company than we were just four years ago. The transformation of the company from a capability and portfolio standpoint has us well positioned for long-term growth. I could not be more optimistic about our future. Thank you for your time today.
And now let me turn it over to Gail to talk about our marketing model. Thank you.
Thank you, John. Good morning. Good morning to everybody in the room and good morning to those online. My name is Gail Hollander, and it's a pleasure and a privilege to be here with you today to discuss how we built a world-class brand-building marketing model at The J. M. Smucker Company. A model that's scalable, it delivers consistent results, and it's proven to build our brand both in the short term and also in the long term. Six years ago, a short six years ago, we set out to overhaul how we build our brands. Our goal was to make sure that every dollar we invested in media and creative returned more.
This included a new partnership with a global company, Publicis, and nearly two years ago, I had the absolute unbelievable good fortune to join as Chief Marketing Officer. We now have a world-class brand-building model that's powered by consumer centricity, data-driven insights, and cultural relevance as a core strategic driver, and I just want everybody to know that the model works. Today, I'm going to focus on our successful playbook. I'll talk about what makes our model different. I'll also give you a sneak peek on some of the new creative work that we have underway and is not out in the wild yet, and let me begin by sharing the journey that we've been on. We are proud to say we've come a long way in making brand building a core strategic driver for the company. We've shifted brand building to be an engine of growth.
We've designed creative strategies to address a business opportunity, and we use creative and culture to make sure that it punches above its weight. We developed a big brand platform idea for every single one of our brands, and those ideas drive the core. They support meaningful innovation, and they all can stand the test of time. We shifted media from a cost center to be a strategic driver of growth. We've broken down silos to allow for end-to-end holistic thinking and investment, and we ensure for every brand that marketing is accountable to the P&L and that the work will drive not only short-term but also long-term results. We've done this by creating a playbook that is rooted in the art of the end. Our model is grounded in the principles of evidence-based marketing and breakthrough creative.
Media investment that's about brand building and conversion, and of course, breakthrough creative that's true to the brand's DNA or what's in the heart of a brand and is culturally relevant. All of this comes together in each brand to drive business today, and we're very, very focused on brand health for tomorrow. And you know what? The results speak for themselves. Our ROIs, our return on investment, has been up year over year over year. And we've been named one of the most innovative companies by Fast Company twice, but it doesn't just happen. It's kind of tough to do. And it's in recognition of our ability to deliver bold breakthrough marketing. Our unique advantage lies in how we build our strategies and how we translate those strategies into big brand ideas that have broad shoulders and can stand the test of time.
Each brand strategy is rooted in a brand truth that builds from what makes our brands different. Again, what's in its heart or the DNA of the brand. We always combine that with a human truth. What behaviors, mindsets do our growth audiences have relative to the category, and then what role can our brand play? Many brands develop their creative strategies off of a brand and a human truth only. That's typically the way you do it in the industry. Where Smucker differs is that we add a cultural truth to the recipe. Including culture as a strategic imperative helps our iconic brands stay relevant and resonate more deeply with our consumers. For example, just to give you some stats, culturally relevant ads are two and a half times more effective, and brands that are culturally resonant can grow up to 25% more than their next competitors.
Culture as a differentiator is so, so important because whether you look at perception or effectiveness or buy rates, it's really clear that being culturally relevant brings new users into our brands while increasing the effectiveness of our communication and all of our activations. So now that I've shared a little bit of our secret sauce, let's dive into how we're actually putting this into action and show you what we've got on some of our brands. We're going to start with the Jif brand, where its taste superiority makes it That Jif'ing G ood. And not only is peanut butter used in peanut butter and jelly sandwiches, but Jif is also used as a favorite dip. And what's the biggest dip day of the year? The big game, of course. And what do consumers eat during the big game? Chicken wings. In fact, this is a crazy stat.
Consumers consume over 1 billion chicken wings on that one day alone. Think of that. 1 billion chicken wings in one day. That's a lot of chicken wings. But the key part of the story is that almost every order of wings comes with celery, but only 14% of the celery is actually eaten. And that is why we created an activation to Save the Celery. So let's take a look at how the Jif brand saved the celery.
Where did you go? I drag these nights like candles. I long for you, but you don't care. You look right through me like I'm not there. Spent my whole life waiting for you to reach back from behind. You're the one I'm dreaming of. You're my one true love.
So who thought the dog was going to eat the celery?
We've leveraged an already occurring cultural event to expand usage occasions for the Jif brand, utilizing habits that already exist. Following this creative, brand perception scores among Gen Z and millennials went up double digits, and the success continued with over 1 billion earned media impressions in just under two weeks. 1 billion impressions in just under two weeks, but the cool part of the story is that's only the beginning. When you pay homage to culture, it has a tendency to pay you back. A week after this work launched, and still prior to the big game, we got an email from a creative agency that worked with Frank's RedHot. They said that they were also engaging in creative around the big game and wanted to know if we would be interested in creating a partnership, and this is what came out of the partnership.
Oh, yeah. I'm very well versed in this one. Oh, yeah. This is going to be good. I can tell already. There we go. This is how you Save the Celery. Put a little Frank's RedHot on it.
That was all free. It was free media to us. All of the wonderful results that we had, we also get to add this to it. Let's move on to the Uncrustables brand. In late 2023, we turned on demand creation for this brand by launching our first national media campaign. The campaign featured the Bread Brothers to much fanfare. As an extension to that campaign, we found real-life brothers to help us continue to drive awareness of this new-to-the-world brand. We sponsored Jason and Travis Kelce's New Heights podcast, and we supported Travis's Kelce Jam. Over the last year, the Uncrustables brand has continued to show up in culture. The brand has added four million new households and gained over three full points of household penetration. Awareness, consideration, and purchase intent all continue to increase.
This example once again shows how we combined a brand, human, and cultural truth to expand our brands to new audiences. Okay, we're going to shift to pet. Let's move over to pet and take a look at the Milk-Bone brand. This brand believes that nothing is more real than the unbridled joy the brand unleashes between humans and dogs. In fact, Milk-Bone believes the world is better with more dog in it. I personally agree. Our challenge was to keep momentum behind a campaign that feeds on culture. We had a cinema buy. We leaned into cinema as we knew that cinema is a cultural force. Let's take a look at how will you know.
Being alone was the worst thing that ever happened to me. I'm being by myself.
You are so brave.
Who's going to love you when I'm dead? Are you even trying to find a companion?
Your sister has hers. Your brother has two.
Yeah, and grandpa had four.
Your cousin Helen just met the boy of her dreams.
I'm sure she's got him on a tight leash.
No, you'll get there. Take these.
You're running.
Oh, hi. I think I'm supposed to give you this. There's a park down the street if you want to... God, I'm terrible at this.
This isn't who I am.
This isn't who you've been, but maybe this is who you are.
You have to have a little cuddle buddy to look in your eyes and say how much they love you.
Let's try it again.
Who's your good boy?
You're trying.
Who is a good boy?
I've always wanted more out of life.
Who is a good boy?
Maybe this is the more I've been looking for.
Who is a good boy?
This is the most unbelievable thing that could ever happen.
Who is a good boy?
What? I like those, actually. I think he's the one. Who's a good boy?
We launched that work in September, and early results are strong for our creative, with video completion rates almost four times benchmarks, and engagement rates are up 2,000% versus benchmarks. And now, for our newest brand, Hostess, we're applying this proven playbook to accelerate growth. We are reevaluating our target, have developed a strong point of view, and a big brand idea. More specifically, we've broadened the audience universe to include a psychographic view of all sweet snack buyers. We're doubling down on what makes the Hostess brand different and more attractive. Think extra light fillings, our extra fluffy cake, and most importantly, our extra attitude with names like Zingers and Ho Hos. Our new brand platform idea grows from culture as our product names have become part of common vernacular, and they've been that way for decades.
105 years ago, the Hostess brand introduced a lineup of snacks that didn't just fill pantries. They actually shaped pop culture. Twinkies, Zingers, Ding Dongs, Ho Hos, Sno Balls, Donettes. We invented words so bold, so playful, they left off the shelf and into everyday conversations. Case in point, Hostess products have been name-dropped in over 8,000 song lyrics, 3,000 movies, and are now considered, as I said, common vernacular. Hostess snacks became part of the world's vocabulary. People know them, say them, and love them. And that's the truth. No sweet treat speaks the language of snacking like we do, which means only the Hostess brand can speak the love language of sweet snacking. You could say, "We speaky snacky." We're in the early stages of developing creative executions, but I'm happy to share a sneak peek. Let's play a 15.
Hey, Cupcake. You're craving something sweet, like snacks that leave Twinkies in your eye. So don't add weight any longer and grab them before everything really snowballs. Hostess, we speaky snacky.
Hey, cupcake. You deserve something sweet. Might be on a billboard outside. Or hey, Twinkietoes, your snack cravings are calling, or imagine don't do donuts, eat them. This can also play in store, grab a snack that leaves a Twinkie in your eye, or hey, Cupcake, you know you want one, and imagine if it were over the aisle and we called it the snacky aisle. We tested the work with consumers, and it was received favorably. Actually, you know what? Favorably is probably not strong enough. Consumers loved the work. They were very, very excited to see a more modern Hostess brand, and they gave us permission to be bold and participate in culture. We're excited to utilize our proven marketing model to be able to fuel the growth for this brand. Now we're going to go on to media.
Let's talk about how our approach to media has changed to drive effectiveness in an ever-changing media landscape. As we all know, the media ecosystem is fragmented over the last, what, 10+ years. This has shifted our thinking from the traditional purchase funnel cycle to creating a cycle of awareness, consideration, and conversion. That's why we've broken down silos between national and retail media networks, allowing us to plan our investments holistically across the marketing ecosystem. We've also diversified our mix in a year in, year out, with approximately 90% of our spend in digital, and that's up from about a 50-50 split. And we endeavor each year to have at least a 60-40 split between awareness and conversion. And you know what? The strategy is working. We've saved approximately $100 million over the last five years. Our ROIs, relevant reach, and sales continue to go up.
We are so proud of the fact that our brands and company have been recognized year in and year out, not only for excellence in creative, which is what you would expect from the marketing group, but in excellence in media, effectiveness, and innovation. In summary, we've built a world-class marketing model at Smucker, and we are able to utilize this proven model across our strong portfolio to both successfully kickstart growth for new brands and continue to drive growth for iconic brands that can stand the test of time. Thank you for your time. Thank you for your interest, and now we're going to take a short break, so we invite you to refresh your coffee and enjoy a mid-morning snack. Thank you.
All right, guys. Numbers are in. Record dollars, record units, record volume. Everyone have a good break? Caffeinated?
Yes.
All right. Good morning. I'm Rob Ferguson, Senior Vice President, General Manager of Coffee and Procurement. Today, I am very excited to provide an overview of our coffee segment. A little over a year ago, I was appointed to lead the business after managing the pet food segment and successfully reshaping it. U.S. retail coffee is now our largest segment with $2.7 billion in net sales last fiscal year. It has an accretive margin profile for the company. We are the number one branded manufacturer in the at-home coffee category with a 26% share of the market, and we've built a leading portfolio of coffee brands featuring three of the top seven brands in the category, including one of the fastest growing brands in Café Bustelo, a growth brand in Dunkin', and the iconic Folgers brand. Coffee is a great and resilient category. Coffee is more than just a beverage.
It is a ritual for our consumers who love it. Three out of four Americans drink coffee, and it's not something they easily give up, allowing the category to remain vibrant in times of both economic contraction and expansion. Furthermore, seven out of ten cups of coffee are consumed at home, which benefits us as the number one at-home manufacturer in the U.S. When I began leading the coffee business, I recognized we had excellent brands in a great category and that the coffee category is continuing to evolve. The traditional hot cup of coffee is still the dominant share of the market, but at-home coffee is expanding and changing. Consumers, especially young ones, look for products to adapt to their lifestyles through temperature, state, and convenience.
Beyond the regular brewed, new categories in artisan coffee, ready-to-drink, cans, and cold or iced coffee have elevated the coffee drinking experience and made it more accessible and more convenient than ever before. Coffee consumption is starting at a younger age, and while younger consumers are driving growth in cold coffee trends that I just mentioned, they're also highly likely to be hot coffee consumers as well. Our deep expertise in the coffee category and consumer insights allow us to grow with the consumer in evolving segments. Just as we did in K-Cup, we were the first national brand to partner with the Keurig platform. We will continue to keep pace with evolving consumer trends where our brands have an opportunity to lead.
Our coffee portfolio is well-positioned to capitalize on these evolving consumer preferences, giving us confidence in 1%-2% net sales growth for our coffee segment over the long term. As always, we will continue to manage our coffee business through a strategy that demonstrates a balance between growth and cost management, enabling us to achieve our desired long-term margin profile of high 20% segment profit margin while driving that sustainable growth. We'll spend time on all of our brands today and their growth prospects. First up, let's dive deeper on what we view as our largest growth opportunity, the Café Bustelo brand. Café Bustelo is now the seventh largest brand in the at-home coffee category, the number one Latin coffee, and continues to be one of the fastest growing brands in our company.
Since we acquired the business in 2011, we've grown the size of the brand by over four times and will reach over $350 million in net sales at the end of this fiscal year. The Café Bustelo brand grew the most dollar share and was the fastest growing leading brand in the at-home coffee category last year. It's delivered a remarkable 22 consecutive quarters of growth. I'm going to say that one more time. It's delivered a remarkable 22 consecutive quarters of growth with consumption up 20% in the last 13-week period. The brand is delivering category growth in all segments in which it participates: mainstream, one cup, instant, and now multi-serve, ready-to-drink liquid. The growth of this once small regional brand has been exciting to watch, and we're excited to launch its next phase of growth.
We have ambitions for the Café Bustelo brand to be a top four brand in the at-home coffee category. This will be driven by anticipated double-digit net sales growth. We have the key ingredients to fuel this growth through a strategy centered around, one, driving broad national appeal to a wider audience, and two, launching innovation that meets the evolving needs of the consumer. With this focus on driving the brand nationally and broadening the consumer audience, we are fueling the Café Bustelo brand's tremendous momentum through a national marketing campaign with new creative that builds upon distinctive and unique Está Aquí campaign currently in the market. Let's take a look at that campaign.
Voy a borrachónico, si sabe jugar, let's go. One, two, three, the beat make a new one. One, two, three, te vas a refrescar. Let's go.
Bring Latin hits to iced coffee.
We've reached a point in the Café Bustelo brand growth story where it can no longer be just a regional brand, but a growing national brand. Through this new marketing creative, we aim to increase brand awareness and household penetration, both of which have significant runway to grow. We will also leverage our distribution capabilities to ensure the Café Bustelo brand reaches every corner of the market, maximizing visibility and accessibility. Our strategy focuses on geographic expansion for all formats as we push beyond the traditional East Coast markets where the brand has a high share of market already. Let's talk about the products. Our current portfolio is predominantly espresso or espresso-style products, and we want to invite more people to the Café Bustelo brand party by expanding with new and incremental products.
We're launching the Café Bustelo brand in prepack form with new roast profiles, which is a huge opportunity for us and enables us to disrupt the prepack segment like the brand has done in other segments in which it participates. We are really excited for this expansion. It's made with Arabica coffee, and it's set to begin shipping in the summer of 2025. These new roasts will expand households by appealing to younger and more diverse buyers while being authentic to its Latin roots. In short, we are aiming to reach coffee drinkers that love the brand but prefer not to drink espresso on every single occasion. This innovation provides a trade-off opportunity for us and is margin accretive to the Café Bustelo brand. I hope you had a chance to try one of the new blends. We have medium roasts that we brewed in the coffee bar.
In addition to that medium roast, we'll be launching light, dark, and dulce de leche flavored coffee in both prepack and K-Cup formats. We're also meeting the consumer in cold coffee through our multi-serve, ready-to-drink offering. Café Bustelo multi-serve is uniquely positioned within the category and is off to a very strong start. It has exceeded our initial expectations, and we're expanding beyond the initial launch with vanilla multi-serve nationally, and we are launching Café Bustelo decaf multi-serve in the summer of 2025. Multi-serve is a growing category and represents the fourth wave of coffee. It brings that shop and social inspiration into the convenience of our homes. We also have ambition for what the Café Bustelo brand could achieve in single-serve, ready-to-drink format as well.
The Café Bustelo brand is already growing with all ethnic groups and age demographics, and it's reaching the critical growth audiences that we want to reach. It is the only major roast and ground brand to over-index with Gen Z, Hispanic, and multicultural households. While we're already growing with all of these key demographics, there is still continued room for growth, and through the execution of our strategy, we will drive broad national appeal to a wider audience to increase brand awareness and double our household penetration. Now shifting to the Dunkin' brand, which continues to have a key role in our coffee portfolio as the number three brand in the coffee category. We anticipate the Dunkin' brand will grow net sales low single digits over the long term.
Though near-term dynamics continue to impact the Dunkin' brand, overall brand health remains positive, and we're seeing growth across all of the brand health attributes. We're focused on supporting the core of the brand through national media and brand building. Innovation will fuel growth opportunities focused on evolving consumer preferences in seasonal and in cold coffee. Seasonal items are extremely valuable to the coffee category and play an important role with the consumer. Different flavors are associated with different seasons, and consumers' tastes are influenced by their current settings. The seasonal category is approximately 350 million and has the potential to grow meaningfully. Three out of four households buy coffee, but only 11% of households are buying seasonal coffee, highlighting the opportunity. Additionally, buyers of seasonal coffee purchase 31% more coffee over the course of the year, indicating higher overall coffee consumption.
Seasonal is also over-indexed with Gen Z and millennials, driven by taste preferences, social media trends, and seasonal nostalgia. The Dunkin' brand has a huge opportunity to capitalize on these trends by leveraging our momentum and as the number two brand in the seasonal coffee category already. 80% of seasonal business is done in the top three brands. There is little momentum for brands in the tail end of this category. With these strong tailwinds and the momentum of the Dunkin' seasonal business, we are launching new flavors and forms for all of the seasons. Finally, to round out our coffee portfolio, the iconic Folgers brand. It's the largest at-home coffee brand in volume at more than double the size of the next competitor.
We anticipate maintaining our share position for the Folgers brand over the long term as we continue to fuel the iconic brand's relevancy with younger generations. We're connecting with younger demographics through a variety of ways. Last year, we launched a new campaign inviting people to put the great taste of Folgers to the test, which included traditional media, online video, and social. Our dark roast coffee, Folgers Black Silk, was preferred over Starbucks French Roast in a nationwide blind taste test of at-home ground coffee, with approximately 60% preferring Folgers Black Silk. There continues to be an opportunity for the Folgers brand also to win its fair share in K-cups. The brand has a $46 share of the canister segment, but only a $6 share of the one cup segment, providing runway for growth.
We are launching new Folgers Classic Roast decaf in May of 2025 to capitalize on the overall growth of decaf coffee consumption, with 1/3 of K-Cup users now choosing decaf coffee. Folgers is the best-selling decaf canister product on the market today, so we're very excited to deliver the same great experience within K-Cups, and to support the growth in K-Cups and younger demographics, we're launching new modern marketing creative that will focus on K-Cups to help drive awareness and conversion for the Folgers brand. In addition to our focus on top-line growth, cost management is a key part of our strategy. Though coffee is a pass-through category, we are leveraging our deep expertise in coffee sourcing and roasting to manage the elements we can control while the commodity remains volatile.
We're exploring where we can expand our coffee channels to source new green coffee from different countries and reduce costs wherever possible. In summary, across our coffee portfolio, we are taking actions to meet the needs of consumers and to focus on our largest growth opportunities. These actions provide confidence in our goal of 1%-2% net sales growth while maintaining an accretive margin profile for the company. This net sales growth will be driven by double digits for the Café Bustelo brand, low single-digit growth for the Dunkin' brand, and by maintaining share for the Folgers brand. We are uniquely positioned in the U.S..
Retail coffee market with our leading brands that provide consumers with options ranging from value to premium, and we will continue to leverage our deep expertise in coffee sourcing, coffee roasting, and retail category advisory to take advantage of emerging trends in coffee to support both sales and profit growth. With that, I will turn it over to Rebecca to provide an overview of the frozen handheld and spread segment. Thank you.
Thank you, Rob. Good morning, everyone. Is everyone enjoying your snacks? I hope you have an Uncrustables raspberry and peanut butter spread sandwich there to be able to try. I'm Rebecca Scheidler, and today I'm excited to provide an overview of the Frozen Handheld and Spreads segment. Nearly two years ago, I was appointed to lead this phenomenal business and specifically to develop and to execute the strategies that would propel Uncrustables to become a $1 billion brand and to continue to further our iconic Jif and Smucker brands to fuel to new heights, so to achieve such bold goals, we needed to embark on a transformational journey for our frozen handheld and spread segment. Over the last four years, we have deliberately focused on our highest growth opportunities while divesting our low-margin brands that represented a sizable portion of our business.
This portfolio reshaping enabled resource prioritization and relentless focus on our fastest-growing brand, Uncrustables, which we now expect will generate approximately 50% of net sales for our segment within the next four years. With this growth of the Uncrustables brand, our segment plans to achieve long-term net sales growth of 3%-4%. But while we're driving top-line growth, we are also focused on optimizing our cost structure. With new transformation and plant optimization initiatives, our segment profit growth will actually outpace our top-line growth, and ultimately, we anticipate achieving higher margins for our Frozen Handheld and Spreads business segment that are in line with our total company. So why are we so confident that our strategy will drive both long-term net sales growth and margin expansion?
First, our Uncrustables brand has grown at a 19% CAGR over the past 10 years, with total brand net sales for the last fiscal year of approximately $800 million. And this fiscal year, we anticipated that we would grow the brand another $100 million- $900 million. But once again, we anticipate exceeding our original net sales expectation and are not adding $100 million of growth, but even more. So we are leveraging our strength in our commercial strategy and execution to introduce even more households to Uncrustables through breakthrough marketing, through stronger-than-ever distribution gains, and new merchandising investment that disrupts the shopper in store, all in service of driving trial and awareness. So clearly, the momentum of the Uncrustables brand is tremendous. It grew 17% in the last 13-week period and gained two full share points of dollar share.
Plus, the brand has the number one repeat and number one velocity growth rate in the category. The number one SKU in the total freezer aisle is now an Uncrustables sandwich, and we have two SKUs in the top 10. The Uncrustables brand is leading the entire freezer section in new buyers amongst households with kids, with millennials, and with the Gen Z consumer targets. That sets the stage for a very high lifetime value from our consumers. In fact, we have added more Gen Z buyers than any other brand in the freezer. That's the most coveted consumer target. But if you're in tune with pop culture and with social media, you probably already knew that.
It comes as no surprise because Uncrustables sandwiches continue to show up organically in Gen Z pop culture through pop stars, through famous athletes, and online testimonials as consumers share their love for eating them. We say tasting is believing, and this organic marketing really proves it to be true. Consumers themselves are helping to propel the brand into a mainstream phenomenon. So it's really, it is undeniable. While we're really focused on helping parents embrace the daily chaos of life with young children in the household, we are simultaneously building a truly iconic brand with widespread multi-generational love and appeal. Our first-ever national marketing campaign is absolutely adorable as we introduce and endear our consumers to the brand's newest spokespeople, the Bread Brothers. Even more, though, it's increasing brand awareness, and it's driving incredibly strong equity results.
So let's just take a look at a few highlights of our marketing and commercial execution in action. Isn't it phenomenal? So simply stated, though, our marketing strategy is working. So seeing the extraordinary potential in front of us for the Uncrustables brand, we decided to invest in a third production facility in McCalla, Alabama. And our teams have done a truly incredible job. In fact, we just started shipping salable sandwiches just under two months ago. This is an incredible 900,000 sq ft facility, and it's our company's third and largest Uncrustables sandwich manufacturing site. It substantially increases our current production capacity. So with expanded capacity, we're going to have ample supply for our growth aspirations of the Uncrustables brand to $1 billion in annual net sales by the end of fiscal year 2026. And we'll have capacity to meet demand beyond $1 billion.
After 10 years of double-digit growth, we keep getting the question, why are we so confident in our ability to continue driving such strong net sales growth for Uncrustables brand, and really, it comes down to three fundamentals. One, continued brand building. Two, distribution expansion. And three, accelerating innovation, so first, let's talk about brand building. We've made significant strides in household penetration growth, adding over four million new households to the brand in just the last year alone. That said, if you compare household penetration and distribution points of the Uncrustables brand to those of primary frozen competitors, you'll see that the brand still has significant runway ahead, and remember, we are still very early in our marketing journey with only one year of brand building at a low rate of marketing spend to date. Looking a layer deeper, we've declared our aspiration to win the lunchbox.
There are 11 billion school lunches. Little over half of them are packed at home, and today, Uncrustables sandwiches are only in 8% of those packed lunches. Lunch is a perfect entry point for the brand, and we have a true competitive advantage. Parents are looking for an easy solution amidst the chaos of the school hustle, and Uncrustables sandwiches provide an easy solution that both parents and kids love through taste, nutrition, and convenience. Plus, once our Uncrustables sandwiches are in the house, consumption naturally expands, so other on-the-go family events like sporting events, et cetera, or maybe parents find themselves reaching for a snack or two throughout the day, grabbing and enjoying the sandwiches for themselves out of that freezer. We also have additional opportunities that are further down the buying funnel through merchandising and targeted marketing.
We know that first trial leads to high repeat rates, retained buyer growth, and overall lifetime brand love. Our goal is to have Uncrustables sandwiches loved and accessible by everyone, leading to our next growth driver, broadening distribution. This includes not only continued expansion of distribution points within existing channels, but also further expansion into convenience stores and even the fridge. K-12 schools remain the foundation of our strategy, and there we must strengthen our presence by adding additional variety and menu options. Then in traditional retail channels, we aim to have a consistent branded experience where our consumers shop, including the fridge, the fridge, and the eat now areas. The Uncrustables brand has runway to grow in the freezer space by gaining its fair share of TDPs. As consumers' preferences evolve, so too must the freezer section.
So we will be leveraging next-generation insights and data to help shape a better freezer experience for shoppers through integrated shopper and category insights and through incremental innovation. And finally, with new go-to-market capabilities available thanks to the acquisition of our Hostess brand, we are now able to expand meaningfully into a new white space, convenience stores. This new channel not only provides more availability for our brand, but it also unlocks the benefit of immediate consumption. So now for our third growth driver, innovation. So after being in a supply-constrained environment truly for years, we are now able to delight our consumers with new varieties and with fun seasonal integrations. Our launch this year of Uncrustables peanut butter and raspberry spread sandwich has taken the market by storm, and suffice to say, it's significantly exceeded our expectations.
In fact, it has become a top new item at one of our key strategic retailers. This new sandwich brings the popular raspberry flavor into the Uncrustables brand family. So now you can have a different sandwich variety for every day of the week. We also launched a peanut butter-only sandwich into limited distribution that will soon be expanded nationally. But remember, innovation isn't only in product form. We're also bringing fun and excitement into the brand through our new seasonal platform. This fall, we launched Halloween-themed Uncrustables sandwiches with our delicious chocolate hazelnut-flavored spread. Why seasonals, you may ask? Well, they contribute to growth for our brand in two ways. One, they expand the eating occasions for the Uncrustables brand by inspiring new usage. And two, they also drive trial across varieties that the consumers may not have even noticed on shelf.
So as we continue our quest to connect with our consumers' daily lives in new and exciting ways, we'll find additional occasions. So watch next for our Valentine's Day launch and even more to come after that. Accelerating innovation unlocks a huge growth driver for this brand, and we look forward to accelerating our ability to surprise and delight our consumers in the months and the years to come. So I'm sure you'll agree that the momentum of the Uncrustables brand has been tremendous, and our focus on the three elements of ongoing brand building, expansion of distribution, and accelerating innovation will continue to propel growth over the long term. We have high ambition and high confidence in developing an iconic brand that's ingrained in culture and soon to be a top three item in the total freezer.
So now let's turn to our category-leading peanut butter and fruit spreads businesses. Peanut butter and jelly is America's number one sandwich among households with kids. It's simple and comforting, indulgent, that's easy and affordable and provides delicious balanced nutrition. Our spreads business is in approximately 40 million household pantries, granting us number one share position for both the peanut butter and fruit spreads categories. That's nearly double the market share of our next branded competitor. So as the leader of these important and highly relevant categories, it's our responsibility to understand and to anticipate the needs of our consumers and create offerings to meet those needs. And as Mark stated, we are looking toward the future, and we have ambitions to do exactly that. We will reinvigorate our portfolio to become a modern spreads company.
We know that consumers are replacing the traditional three meals a day with multiple snacks. In fact, half of consumers say that they often eat snacks instead of a meal. So what's our role? Well, consumers want to snack with our spreads. In fact, did you know 62% of consumers are already snacking with peanut butter? But it only represents 4% of their total snacking occasions. What an opportunity for us to be able to leverage our iconic Jif brand and its strong trust, loyalty, and most importantly, taste, to be able to make it more enticing for consumers to bring new occasions through new variety and packaging innovation and experiential activations. So with consumers at the heart of our development, the first step in our spreads reinvigoration journey is Jif peanut butter and chocolate flavored spread.
This new product leverages Jif brand familiarity and nostalgia from peanut butter, paired with the delicious flavor of chocolate for an affordable, permissible, and even irresistible indulgence. Through data and insights, we found that over 70% of peanut butter buyers were not purchasing a chocolate-flavored spread today, and we saw an incremental opportunity to leverage the Jif brand into a new format. The launch has exceeded our expectations, soaring to the number one new item position in the entire nut-based spreads category, and it's on pace to be the largest launch for the category in at least the last five years. As for incrementality, yes, indeed, the Jif peanut butter and chocolate-flavored spread truly is incremental. It represents 97% of peanut butter segment growth, is 20% incremental to the nut-based spreads category, and is over 80% incremental to the Jif brand.
Spreads have the opportunity to deliver what consumers want: an elevation of the daily snack and meal experiences. Through a reinvigoration of our portfolio, we will modernize our spreads business to meet consumers' needs, delivering solutions that bring both excitement and versatility. So in summary, we remain very confident in our strategy to propel the Uncrustables brand to iconic status and to progress our leading spreads portfolio for enhanced relevance, starting first with our Jif brand. Thank you so much for your time today. And with that, I'll turn it over to Judd Freitag.
Thank you, Rebecca, and good morning. Unlike my peers, I hope no one is enjoying any dog snacks here this morning, but I do hope you'll enjoy our story as we go forward to share.
I'm Judd Freitag, Vice President, General Manager, and Marketing for our Pet business, and I'm very excited to be here with you this morning to share an overview of our optimized Pet segment. Nearly two years ago now, we decided to prioritize our focus and our investments behind our Dog Snacks and Cat food businesses, where we have leading market share positions, leading to the divestiture of our dog food business. What this decision really allowed us to do was to focus our resources to accelerate net sales behind our leading brands, Milk-Bone Dog Snacks and Meow Mix Cat Food, while creating a business with a stronger growth and margin profile.
The pet segment generated $1.8 billion in net sales last fiscal year, with the number one brand in dog snacks, Milk-Bone, the number one brand in soft and chewy dog snacks, Pup-Peroni, and the number one brand in dry cat food, Meow Mix. At the end of this fiscal year, just two years from the divestiture, we anticipate improved overall market share performance, along with a nearly 1,000 basis points increase in segment profit margin, which is expected to be in the mid-20% range. Looking forward, we expect continued margin expansion upon the wind down of our co-manufacturing and transition services agreement related to divested brands, along with continued benefits from our transformation initiatives.
Our refocused pet portfolio is performing extremely well from both a sales and margin growth perspective, and it really highlights the benefits Mark talked about from our strategy, focusing on great brands in growing categories where we have leading market share positions. Looking forward, we expect the aggregate pet category to continue its historical growth trajectory driven by an increase in pet population along with continued humanization trends. Our growth will be driven by our leading brands in Meow Mix and Milk-Bone, which already account for almost 80% of segment revenue. Our portfolio optimization, coupled with superior execution in this attractive category, gives us confidence in 3%-4% net sales growth for the segment and a segment profit margin profile in the high 20s over the long term.
Let me dive into a little bit about how we will continue to drive this net sales and profit growth for the business. In dog snacks, we are the leader with a 20% dollar share. Historically speaking, dog snacks has been both one of the fastest growing segments of pet as well as one of the most profitable. We have consistently outpaced this growth over the last few years and have three pillars to drive growth going forward: maximize and win everyday treating, amplify brand love with new pet parents, and expand consumption through impulse opportunities across both innovation and activation. First, maximize and win everyday treating. We will drive growth through our position of strength in dog snacks as the category leader, utilizing our strong brand equity to clearly communicate the trust and joy the Milk-Bone brand provides to consumers and their dogs.
Our opportunity here is to really extend our share leadership position within what we call the everyday segments of biscuits and soft and chewy, which already account for half of all category volume and where we have a commanding share lead north of 60%. The strategy here is really enabled by superior execution with the right treat at the right price in the right channel every day. A recent example of this strategy at work is our continued growth with our pure-play e-commerce customers, which already account for more than 10% of our dog snacks business and are consistently growing double digits each quarter. Winning in these everyday occasions is also essential for our brand health, and the Milk-Bone brand has brought in more new dog treat buyers than any other brand in the category over the past year.
Looking now at our second pillar, a key strategy going forward will be to focus on the next generation of pet parents that are, quite frankly, still forming some of their treating preferences. Focusing on this next generation is really going to be a consistent theme you hear across our portfolio, as we believe that the purchasing power and habits of this new cohort of pet people will drive growth going forward, and they already make up over 50% of all pet-owning households today. While love and devotion for our pets is consistent across generations, the depth and the quality of that relationship is especially profound for Gen Z. A third of Gen Z pet owners believe that their pet is their soulmate, and more than 15% of these same consumers run a separate social media account just for their pet.
And the Milk-Bone brand is in a strong position to lead and build deeper connections with these young consumers, as it is the most trusted brand in the category. In this new generation of pet parents, they want the best for their pet, and truly, the unique combination of both trust and joy that Milk-Bone brings forward will continue to set us apart. Amplifying brand love with these consumers will require a continued focus on culturally relevant, engaging marketing that matches their evolving media consumption and retail behavior. Gail shared a perfect example earlier today with our new More Dog campaign, and in addition to the hero spot that she shared, we also have unique assets and activations for every media channel and every time of year.
Combining breakthrough creativity with best-in-class media activation will continue to be a winning formula for both the Milk-Bone brand and the next generation of consumers. And this leads to our third pillar of expanding consumption through impulse opportunities across both innovation and activation. Treating your dog should be exciting, and this pillar is really all about how do we create more of these exciting moments with our brands. We continue to drive the humanization in the category by launching the first dog treat featuring a human brand, combining the number one dog treat brand and the number one peanut butter brand for new Milk-Bone Peanut Buttery Bites made with real Jif peanut butter. This launch is off to an amazing start. It's already exceeding our expectations. It is far outpacing any competitive launch that happened this year, and it will be available nationally starting next month.
Similar to our equity work, our new media for this exciting launch also plays on another familiar trope: ridiculous brand collaborations, but with a twist. As Milk-Bone and Jif is the first collaboration that finally makes sense, take a look at the new collaboration.
Introducing a collab like no other collab that has collabed before. A collab so collaborative it's almost unimaginable that prior to this, they had not collaborated. Milk-Bone and Jif parfum makes no sense at all. The real collaboration: Milk-Bone, Jif Peanut Buttery Bites. Milk-Bone Peanut Buttery Bites, the collab by Milk-Bone and Jif.
As you can see, dogs love peanut butter, and our ability to create co-branded peanut butter experience is an unmatched advantage in this category. We really see a tremendous amount of opportunity in this brand partnership as a true platform for future growth for the Milk-Bone brand.
Also, we're closing in on our fourth straight year of innovation share leadership in dog snacks, and this launch really demonstrates our dual mandate here, which is to both bring joy to consumers while driving growth through premiumization. Seasonal innovation and activation will also continue to play a role in the snacks category, as 76% of all pet parents like to involve their pet in special moments, holidays, and birthdays, and not only is this truly just a really fun experience for both the pet and the pet parent, but it allows us the opportunity to drive net sales growth through increased dollar per occasion while also attracting new buyers, as roughly 20% of all seasonal treats are actually purchased by non-dog-owning households. We are several years into our seasonal journey, and we continue to extend our shared leadership across seasons and across retailers.
Simply put, the Milk-Bone brand remains the dog treat brand through innovation and culturally relevant, engaging marketing. In our dog snacks portfolio, we also have an opportunity to drive growth behind our Pup-Peroni brand, which is actually the number one brand in the largest segment of treats, soft and chewy. The Pup-Peroni brand is anticipated to finish this fiscal year at approximately $200 million in net sales. However, we have lagged category growth in recent periods. In response, we have focused on stabilizing the core of the brand over the past year by solidifying our commercial strategy and pricing, amplifying our unique, slow-cooked, high-quality product experience through packaging, claims, and communication, all while continuing to identify opportunities for margin enhancement. The Pup-Peroni brand is really unique.
It has one of the highest levels of brand loyalty in the dog treats category, but with household penetration that is significantly behind competitors, we have a unique opportunity in front of us to introduce more consumers and their dogs to experience the Pup-Peroni difference because we know when they try it, they love it. In fiscal 2026, we anticipate returning the brand to growth behind our sharpened positioning, coupled with superior execution in driving trial and expanding household penetration. Shifting now to cat food, where we really have a tremendous amount of momentum behind our largest brand, Meow Mix, which recently surpassed $1 billion in annual retail sales. The cat category is experiencing similar tailwinds with many new pet parents as well as continued population growth. Roughly a third of all cats are actually less than two years old.
And more importantly, many of these new pet parents have evolved expectations of their cat connection. Cats are also more finicky eaters, so mealtime can be a real source of stress in this important relationship. So what these new pet parents are looking for is less stress and deeper connections with their cats. And we are continuing to evolve the Meow Mix brand to help pet parents crack the code on cats. We are focused on two key elements to drive this growth: modernize and energize our core offerings and elevate the mealtime experience through innovation. The Meow Mix brand is already the leader in the dry cat food category, with the highest volume share, the most households, the highest volume velocities, and significantly outpacing the category in recent periods.
We will extend this lead by modernizing and energizing our core offerings to maximize mainstream growth by winning more households and offering cat parents elevated mainstream options. To drive this continued growth, we are enhancing our offerings and refreshing the brand with new packaging launching here in January. This new design really showcases consumer-desired claims in a fresh new way with elevated product benefits and a much more modern design. We are providing consumers tiered options as well and are really amplifying our elevated positioning of our almost $200 million Tender Centers portfolio. Now, this is a product that's a dual-texture kibble with a soft center and a crunchy outer layer that's a really unique experience for cats. What the packaging redesign allows is consumers to really see this more clearly. It provides a more overall visually appealing look and enhances navigation across the portfolio, encouraging trade-off opportunities.
We will also continue to refresh and invest behind our multi-year award-winning Meow Mix campaign, where we really tap into the intersection of music culture and cat culture to drive brand salience. Our iconic jingle on this brand is a true standout in this category, and we look forward to continuing to put our modern, fun twist on the only food cats ask for by name, Meow Mix. Turning now to our second growth objective to elevate the mealtime experience through innovation. We have a demonstrated category-leading innovation capability on dog snacks the last few years, and we could not be more excited to turn this strength and apply it once again to our cat food business. This year, we are bringing innovation to the dry cat food category to meet these evolving needs of consumers with Meow Mix Gravy Bursts.
Cats love gravy, and gravy items are growing over eight times faster than competitive products. However, most real gravy items are found in the wet aisle. Meow Mix Gravy Bursts brings this gravy indulgence across the aisle to dry, providing unparalleled excitement for cats and convenience for cat parents. And this is really the core of our innovation, creating these experiences that help pet parents develop the deeper connections they are looking for with their cat while also driving trade-off with a portfolio of options for every cat. Outside of dry cat food, we remain excited for our longer-term opportunity to grow our portfolio across the wet food and treat segment. We are significantly underdeveloped in this roughly $10 billion growing space and really believe that the unique equity of Meow Mix and our unique understanding of consumer behavior gives us a significant runway for growth in the future.
In closing, across our brands, we are confident in the potential of our optimized pet portfolio, and we are well-positioned for long-term top-line growth and continued margin expansion. Thank you very much for your time and attention here today. I will hand it over to Dan O'Leary to provide an overview of our Sweet Baked Snacks segment.
All right, good morning, everybody. We're going to take another hard pivot from cat food to Twinkies and Ding Dongs. So I'm Dan O'Leary. I joined Smucker with the Hostess acquisition last year, and I have the privilege of leading both the pet and the Sweet Baked Snacks businesses. Today, I'm excited to provide an overview of our Sweet Baked Snacks segment and share our strategy for returning the brand to a positive growth trajectory.
Now, before I dive in, it should go without saying, none of us are satisfied with our current performance, and we are driving meaningful changes to deliver the growth that we know the Hostess brand is capable of. So with that being said, I want to jump in with a little background on the brand. For those not as familiar with our story, Hostess is a billion-dollar brand and sells within multiple segments of the Sweet Baked Goods category. Hostess markets the number one brands of packaged donuts and Donettes, the number one cupcake in the segment, and has leading snack cake brands in Twinkies, Ding Dongs, and Ho Hos. The Hostess brand is a key growth pillar for Smucker as it unlocks exposure to an attractive category that is well-positioned to win within the broader consumer snacking landscape.
We are confident we can outperform the category due to our advantaged business system, CPG toolkit inclusive of marketing and innovation, and superior Smucker execution across the board. Now, Sweet Baked Goods is an attractive category that is widely purchased by consumers today with household penetration of more than 92%, which is higher than many consumer staple categories. The category has delivered long-term growth driven by the emotional connection that consumers have with Sweet Baked Goods, their great taste, and their family favorite forms. Additionally, Sweet Baked Goods provide a permissible indulgence that is broadly available, affordable, and packaged for grab-and-go consumption.
Now, Sweet Baked Goods is one of the few food categories that is purchased by consumers so broadly across so many channels, from convenience stores to mass merchandisers to grocery stores to dollar stores and many stops in between, as consumers seek out snacks on the go and at home. The strong foothold in convenience stores creates a key competitive advantage, representing about 36% of category sales, which is double that of the total snacking market. This unique combination of products consumers love, aligned with how they snack and available everywhere they shop, has helped create an $8.5 billion category in the larger $200 billion snacking market, with significant opportunity for additional share capture in the years to come. In the long term, the category has advantages compared to other snacking options that position it well for growth.
Sweet Baked Goods are broadly available, individually wrapped, making them easy to take on the go and for portion control, well-positioned from a cost perspective on a per-snack basis versus other snacking options, and impulsive, and therefore benefiting as discretionary purchases increase. Just as Sweet Baked Goods are positioned for success within snacking, the Hostess brand will be a winner in the category, driven by our unique business model and strong focus on executional excellence. Hostess products are delivered to customers by a traditional warehouse model versus the category standard of DSD. This unique route to market is enabled by our extended shelf-life technology. Warehouse distribution enables a few key business model advantages. First, it enables baking at scale.
Rather than needing a series of regional bakeries capable of making a wide range of offerings, we produce in centralized national bakeries, providing the quality and scale benefits that come from specialization. This leads to a better tasting and more consistent product and is why, for example, our cupcakes are preferred to competition in both blind and branded testing. Second, it reduces distribution costs, allowing for stronger margins and increased investment in growth-driving marketing and innovation, and third, it enables broader availability as we are not tied to fixed routes with minimum drop sizes that can come with the DSD network. This is why we have ACV in the competitively important C-store channel that is 23 points higher than our nearest category competitor. As referenced, our performance is not where we expected it to be, driven by two factors.
First, consumers continue to be selective in their spending, largely driven by inflationary pressures and diminished discretionary income, causing the Sweet Baked Goods category to recover slower than we had anticipated. These trends are causing a reduction in all channels, inclusive of convenience where we over-index. And second, we are not performing with excellence from a distribution, merchandising, or competitive standpoint. We've underperformed in the channels where the consumer is shopping, which has resulted in lost share. With the integration now complete and our synergies being realized, we are focused on our plans to drive execution in support of growing the Hostess brand. While Sweet Baked Goods and the Hostess brand's recent performance is below our expectations, we are not sitting still. The future is bright for the category, and the Hostess brand has incredibly strong foundations.
Those foundations, combined with the Smucker Company's advanced capabilities, will propel us into the next stage of growth. We have five pillars to accelerate this growth, which include delivering the base portfolio, expanding distribution, driving innovation, continuing our portfolio evolution, and establishing revenue synergies. Here's a quick video that demonstrates some of these. All right, so each of these pillars represent a key tactic designed to fuel growth for the Hostess brand. I'm going to walk you through each of them. First up, we are going to drive our base by launching a new brand identity and packaging graphics early this next calendar year. The new graphics are preferred two-to-one from our current buyers, our growth targets, and our non-buyers, and that's a hard thing to accomplish.
This new packaging enhances the perceptions of modernity, taste, and quality, and they help gain impulse buys through improved findability, which is a key component, of course, of any snacking brand. We are excited to get our new look on shelf and believe the new graphics will also help our display programs by having that added pop in the aisle. Second, as Gail shared, we are currently building a highly effective, world-class, distinct creative campaign that is culturally relevant and appeals to the entire universe of sweet snackers, with a focus on driving growth and our younger consumers. We are really excited in the direction we're headed here and the modernizing actions we're taking to really engage with millennials and Gen Z consumers. Finally, in the last year, we need to acknowledge we have not been as effective at driving our display programs.
We are taking a series of actions to grow this important metric. First, we are partnering with several major customers to drive placements of permanent secondary fixtures, which will give our products an additional home beyond the core shelf. Second, we are making it easier for our customers to order the products they want through a more modularized version of our core displays that uses our advanced kitting capability at our Edgerton Distribution Center. And third, we are re-emphasizing our display selling model with our broker partners and providing for additional tools for efficient conversion in store. We are confident that all of these actions will drive greater takeaway from our display programs. Turning to the second pillar of our growth strategy, driving distribution opportunities.
Expanding distribution has always been a meaningful growth lever for the Hostess brand, but this has taken on a new outlook with the advanced capabilities of Smucker. Away From Home represents an incremental and enduring opportunity for the Hostess brand. We are utilizing internal resources with strong organizational and channel expertise in the Away From Home segment to drive growth and new distribution. We know that consumer snacking Away From Home continues to grow, and this provides a significant white space opportunity for the brand. And Away From Home channel selling retail packs continue to grow, serving the needs of consumers who are increasingly on the go. Additionally, we have pack configuration work underway to understand the optimal packaging formats for these various channels. In grocery and mass market, we are focused on the Hostess brand gaining its fair share and closing gaps on our top-tier items.
Given some of the disruptions over the last few years and the breadth of the Hostess brand distribution across multiple channels, we see a meaningful opportunity to close the gaps and ensure we have the right products in the right places. The Hostess brand will benefit from being part of a larger Smucker Company through strong center-of-store execution, strategic customer relationships in the grocery and mass market segments, and industry-leading insight. As I mentioned previously, this includes utilizing existing partnerships with customers to expand permanent secondary display, which will excite consumers while shopping and driving impulse purchases. We will continue to focus distribution efforts on meeting the needs of our consumers' changing lifestyles through online platforms. We plan to accelerate growth for products sold through e-commerce, where both the Hostess brand and the Sweet Baked Goods category are under index today.
We plan to be available wherever the consumer is shopping with the right offerings and price while utilizing new capabilities accessed through Smucker's to drive easier purchasing. Next, our third pillar, driving innovation. The Hostess brand is known for exciting innovation, as demonstrated by our leadership position in the sweet baked goods category for three years in a row, with the number one share of innovation at 40% last year and the launch of nine of the top 20 new items in the category. We are also on pace to achieve this for the fourth consecutive year, as currently, Hostess is slated to drive 44% of innovation dollars in the category year to date. Innovation is the lifeblood of this category. It's been the lifeblood of this brand, and we are going to continue our focus on delivering 15% of our revenue on a rolling three-year period for new items.
We will continue to deliver innovative products that resonate with consumers and introduce flavors, formats, and limited-time offerings that keep the Hostess brand exciting and top of mind. We are working to deliver consumer value and drive trial on our most important segments. With Donettes, we saw an opportunity to capture the growing trend of younger consumers snacking more in the morning. As a result, we are launching sharing-sized donuts as a complement to the family pack sizes we have previously launched in our cake items, which provide added value for the spend, and then on the other end of the value curve, we are launching suggested retail price dollar packs of our core cake and Donettes donut products to provide consumers with an especially affordable sweet treat and a chance to try our products at a lower relative cost.
The dollar program will be 100% focused on secondary display placement and not disrupt our core offerings. In terms of additional new items in 2025, we are excited to launch new platforms on our core Donettes and CupCake businesses. First up, we are about to launch new donut fritter rings, which is a modern twist on a classic apple fritter, and inspired by the mochi and bubble donut trends popular in today's specialty donut shops. And between sharing size and fritter rings, what you see is innovation in breakfast, which has been one of the drivers of growth for us in the category in the last few years. We are also taking our iconic CupCakes, which are the number one brand in the CupCake subcategory, and making them mini with Hostess CupCake Minis, which are a great option for the lunchbox.
What our research indicates is that both adults and kids desire mini form offerings, and we're seeing that 27% of snacks right now are mini, which is up 6% vs last year. Now, the last enhancement to our innovation program, and one we're really excited about, is an opportunity to launch even more impactful limited-time offerings. This past year, we ran two programs that had great impact. The first was Mystery Twinkies in partnership with a broadly appealing mega influencer, which launched in a major national retailer and generated strong incremental sales, but I would say most importantly, brought in new consumers to both the brand and the category. POS data shows that 52% of the buyers of the LTO program were new to Hostess, and 23% of the buyers were new to the Sweet Baked Goods category.
The second LTO was Cherry Flavored Twinkies in partnership with Slurpee at 7-Eleven, which occurred over the summer during National Slurpee Day. The program generated incremental display, in-store marketing, increased everyday distribution in our core items, and new buyers to the brand and category. We see limited-time offerings as a core part of our innovation strategy and look forward to partnering with strong consumer engagement hooks in licensing and promotion to justify allocating floor space. Now, our fourth pillar is evolving our portfolio for sustained growth. The divestiture of the Voortman business underscores our strategy of focusing our resources on our largest growth opportunities. Further, we are ensuring our network is fully optimized to unlock cost, reduce complexity, and drive quality. And for our fifth and final pillar, establishing revenue synergies.
First, we plan to execute cross-promotional events between the Hostess brand and legacy Smucker brands, where early reads are very positive. One promising example where we see the potential benefit of cross-promotion is through an execution we did recently on the Hostess brand with Jif Peanut Butter and Smucker's Fruit Spreads, which yielded a 64% improvement in ROI at the retailer. We are going to accelerate these cross-brand revenue synergies and are excited for the potential to co-promote multiple iconic brands, including pairing highly non-discretionary staple products with impulse purchases. So think partnering our leading coffee portfolio with Donettes as one example. We also see revenue synergies via innovation and brand mashups across our portfolio. And we see distribution opportunities of selling legacy Smucker products into channels in which Hostess has traditionally had a strong footprint.
So like Rebecca talked about, including expanding Uncrustables sandwiches into C-store, representing a large white space opportunity for the company. With these multiple growth initiatives in place, we continue to be encouraged by the many opportunities for our Sweet Baked Goods business. Long-term, snacking trends continue to be favorable, and we are focused on growing snacking occasions. We believe we have the right assets, the right insights, the best team, and the right strategy to win. The decisive actions we are taking reinforces our confidence in 4% net sales growth for the Hostess brand over the long term. With that, I will turn it over to Tim Wayne to highlight the strategy for international and Away From Home. Thank you.
Good morning, everyone. I'm Tim Wayne, and I have the privilege of leading our international and Away From Home businesses.
I've led these combined businesses for nearly two years, with the majority of my career being in the Away From Home industry. Today, I am truly excited to provide an overview of each of these businesses and how they will continue to drive growth against the company's long-term algorithm. Let me start with the largest growth driver of the two businesses, Away From Home. Away From Home is an attractive channel, and our Smucker's Away From Home business has outperformed the Away From Home industry for several years running. The channel can act as a beneficial consumer-facing and brand-building lever for our total portfolio as well, especially when they are present in the front of the house of a customer. Approximately 75% of our business is front of house, which benefits the company in two ways.
First, customers want products that consumers desire in their everyday lives, making us an attractive partner for them with our large portfolio of leading brands. And second, it drives trial and awareness for our brands. Our Away From Home business has continued to see tremendous growth, having grown double digits for three consecutive fiscal years, and we expect this trend to continue as the business grows to over $750 million in net sales. Our portfolio includes leading positions in prepared sandwiches, on-demand dispense coffee, and portion control fruit spreads, nut butter, and syrup products. We also have a strong position in roast and ground coffee and continue to win share from the leading brand in the category. We've developed a strategically positioned portfolio in Away From Home through three unique aspects.
First, we have leading national brands, which represent trust and quality, both with operators and consumers, which we have been able to leverage to drive above-average industry growth rates across our categories. Next, our portfolio is resilient to economic dynamics that tend to impact the restaurant space disproportionately because of where we have decided to play. With approximately two-thirds non-commercial and one-third commercial, our portfolio performs in times of economic expansion and contraction. Our business primarily operates in schools, businesses, lodging, healthcare, convenience stores, and restaurants. And finally, the breadth of our total company portfolio allows us to provide a wide range of brands and product formats to suit our consumers' and customers' needs, including utilizing innovation as a direct extension of our total company to bring new opportunities to the Away From Home channel.
These elements are fundamental to the strength of our business and the success we have demonstrated over the last four years. To fuel continued growth, we are focused on four distinct areas to continue our strong momentum, including expanding the Uncrustables brand in K through 12 schools and beyond through improved capacity and innovation and driving new distribution in C-store, utilizing experience gained from the Hostess acquisition, growing our leading spreads portfolio through capacity expansion, accelerating on-demand dispensed and roast and ground coffee by leveraging all the brands in our leading coffee portfolio, and expanding into cold and specialty coffee innovation, and driving the Hostess brand into traditional Away From Home channels. Now, let me dive into each one of these. The Uncrustables brand has seen tremendous momentum, and we continue to see meaningful future growth in K through 12 schools, C-stores, and additional Away From Home channels.
Supply had been constrained for the Uncrustables brand for years, and from a total company perspective, we focused supply towards K through 12 schools and U.S. retail channels to ensure we could continue to grow the overall brand. The completion of our third production location in McCalla, Alabama, has now unlocked capacity to fuel further growth in Away From Home channels. Historically, net sales for the Uncrustables brand have been split approximately 80% U.S. retail, 20% Away From Home. But with increased supply, we anticipate that split could shift favorably to the Away From Home business. This demonstrates just how much opportunity we have yet to unlock in the Away From Home channels. The Uncrustables brand is a great example of what makes our Away From Home business so beneficial to the company.
Younger consumers are able to eat one of their favorite brands at school and then share their love of the product with their parents, who will then purchase Uncrustables sandwiches in stores. In our leading spreads portfolio, we recently expanded our capacity at our Orrville plant. This new capacity allows us to fuel continued growth for our fruit spreads, syrup, and honey in the important tabletop restaurant, carry-out, and lodging spaces. For our coffee portfolio, we are accelerating growth for our on-demand dispensed and roast and ground coffee offerings. Coffee represents a new opportunity for us to grow via cold and specialty coffee innovation through both product and equipment. We must also utilize all brands in our leading coffee portfolio, including Bustelo and Dunkin', which currently do not have a meaningful presence in Away From Home, and also expand channel access for Dunkin' in One Cup.
Finally, we are excited to drive growth through the newly acquired Hostess brand. Away From Home channels represent a large white space opportunity. With a strong portfolio of single-serve options and bagged donuts, the brand is an ideal fit for Away From Home channels. And we will leverage our experience, our breadth, and our depth in Away From Home to reach our growth aspirations for this brand. Through our strategically positioned portfolio and these key growth drivers, we anticipate mid-single-digit growth for our Away From Home business over the long term. Now, shifting to our international business, where we are primarily focused on Canada. Additionally, we have an export business that supports geographies across the globe. Sales for the international business are split approximately 80% Canada and 20% export.
In our international business, our strategy is to leverage opportunities consistent with our U.S. business, with a focus on the company's key growth platforms. This includes launching the Uncrustables brand in Canada, which is off to a strong start. This is our largest growth opportunity for the business, as we focus on making the Uncrustables brand a household name in Canada, much like it has become in the U.S. Expanding our leading coffee brands, including exploring opportunities for Café Bustelo and Dunkin' brands. The Folgers brand is already well established in Canada, but has potential for further international expansion as well.
Accelerate our pet expansion through our leading Milk-Bone and Meow Mix brands in both Canada and internationally, and utilizing our expertise and leadership in spreads to grow the Jif brand, which has a small but growing share of market in both Canada and internationally compared to its number one position in the U.S.. In addition to these growth opportunities, we are focused on maintaining our baking leadership in Canada as the number one manufacturer, which includes the beloved Robin Hood, Five Roses, Eagle, and Carnation brands. Let me show you just one way we are focused on expanding the company's key growth platforms through the Uncrustables brand. We recently developed a commercial with the Montreal Canadiens, one of the most popular sports teams in Canada, connecting this iconic brand to local culture.
This commercial shows Cole Caufield unable to focus on a post-game interview due to enjoying a delicious chocolate-flavored hazelnut spread Uncrustables sandwich. Please take a look.
Cole, tes impressions sur le match de ce soir? Uncrustables, si tendre, si délicieux, ce sandwich parfait sans croûte qui peut être servi n'importe où. Cole! Essayez les Uncrustables. Trouvez-les dans l'allée du surgelé.
This is a great example of incorporating local culture into our marketing. C'est magnifique. Though we do anticipate a level of net sales growth for the international business as we expand upon these opportunities, we are primarily focused on transforming the margin structure of this business to be more in line with the total company. We have multiple levers to pull through our transformation office to deliver margin expansion opportunities across the portfolio.
We have exciting opportunities in each of these businesses, and the best part is we are able to share our leading brands with consumers across geographies and channels. Now, with that, we're going to take a quick break, and I do mean a quick break. Please, if at all possible, stay within the room, but grab a quick snack or beverage, and please be back here in just a couple of minutes, and we'll resume. Thank you so much.
Hi, Kid Uncrustable. Your coffee looks fantastic .
Gotta rep the brand.
Kid Uncrustable, our very best employee. Good morning, everyone. I'm Jill Penrose, and I have the privilege of serving our employees across the U.S. and Canada as our Chief People and Company Services Officer.
I'm here today to discuss how we have built a thriving, vibrant culture nurtured by nearly 9,000 highly skilled and passionate people, a culture that we see as a true competitive advantage to delivering our business. While much has changed over our 127 years in business, the core principles of what makes our culture unique remain. Inspired by our purpose, feeding connections that help us thrive, life tastes better together. We view our success as deeply connected to the success of our constituents, our consumers, our customers, employees, suppliers, and the communities and shareholders. Our commitment to each other, drafted by Paul Smucker in the 1980s, is a simple yet profound mindset and set of calls to action that guide our interactions with each other and, in the simplest of terms, define expectations for how we do things around here.
It calls on us to listen with our full attention, to look for the good in others, to maintain a sense of humor, and to thank others for a job well done, so after a century in business, how do we keep the magic of our culture alive? How do we attract top talent and retain them for long, successful careers? And importantly, how do we harness their unique skills and passion to drive the continued success of this great company? I have specific examples of our approach to culture and people, but first, I'd love for you to hear from some of our very own employees.
No matter what department we're in, can find ourselves in and can really make an impact, and we're expected to make an impact. I used to work in intern recruiting, and we would have a career fair here.
We would tell students at their campuses, "Our Smucker culture is what sets us apart as a great place to work." Then they would say, "Okay, yeah, that's what everybody says, though, right?" They would come here physically to our campus for career day, and they say, "I can feel the energy of positivity and of collaboration."
I love having the opportunity to come together with teams to assess a problem, to figure out what the potential solutions might be, and to ultimately execute on those solutions. This, for me, is where our culture really jumps off the page. You don't solve tough problems without being bold. You don't solve tough problems without playing to win. You don't solve tough problems without thriving together.
Oh, I truly think Smucker is a place that appreciates work-life balance. I know everybody's family looks different.
I know everybody's outside life looks different, and I appreciate that it's never questioned when you might need to leave early or if there's just something that comes up.
When I think about what I appreciate most about the company, it's the opportunities we have ahead of us. I think about this portfolio of brands, these products people love, this organization of just smart talents and people who are so passionate about what they do, and then our culture that empowers us to be even better tomorrow than we were today. And when you put all of that together, it's incredibly powerful and incredibly exciting.
As you heard from our employees, our culture is what sets us apart. Annually, we conduct an all-employee engagement survey with Perceptyx, an enterprise employee-listening, surveying, and analytics company.
Over the past two years, our engagement index, a compilation of questions most closely correlated with employee engagement, exceeded 80%, putting us above Perceptyx's benchmark of more than 500 companies and well exceeding their CPG benchmark. These questions focus on employees' desire to remain with the company, their pride in working here, whether they would recommend the Smucker workplace, and if their work gives them a personal sense of accomplishment. We are industry leaders by focusing on what I call the three key truths of employee engagement. First, employees are people with full, rich lives outside of work that shape who they are. To have employees who bring their diverse passions, unique experiences, and individual points of view to the workplace makes us a stronger organization. Second, leadership is a quality and set of behaviors that requires continual nurturing, not simply a title that is given.
And third, a shared vision for the future and unified purpose drives mutual success. Here are a few ways we've put these principles of employee engagement into action. When the pandemic struck and our country transitioned from the corporate workplace to the home office, we were all forced to rethink the ways we work, the ways we collaborate, and the ways we nurture and preserve culture that is built on human connection. As America reopened and returned to the workplace, we introduced a flexible working philosophy for our corporate and sales offices, a philosophy we coined "Presence with Purpose." Instead of prescribing a set number of days employees must be in the office each week, we established core weeks, 22 weeks throughout the year where we hold key business meetings, team events, company and social gatherings, and often host entertainment like live music, farmers' markets, and food trucks.
We ask employees to be present during core weeks while recognizing that off-site commitments still exist. Through this model, we've been able to achieve a few things. First, a vibrant, energetic, creative, and collaborative physical workplace. Second, an engaged employee base that deeply values the work-life flexibility we offer. And third, a culture of trust. We're not asking employees to come in simply to check a box. We're asking for their intentional participation in our culture, to make a meaningful connection with a peer, to mentor a colleague, to engage in a collaborative work session. And we're encouraging these opportunities across every core week. This model has enabled us to recruit beyond our Northeast Ohio footprint, attracting super commuters from across the state and the nation as far-reaching as California and Florida. Across our salaried workforce, where this program applies, we have a 92% retention rate, well above industry average.
Beyond our workplace flexibility program, we offer industry-leading benefits meant to care for the whole person. This includes on-site daycare and fitness centers at our corporate headquarters, health and wellness centers at facilities across our footprint, 12-week parental leave for births, adoptions, and foster placements, pet adoption assistance, pet insurance, and pet bereavement, and so much more to create a total rewards package. We believe leadership is a quality and set of behaviors that requires cultivation and continued nurturing and not simply a title that is given. To foster truly remarkable leadership, we've invested in a two-part training program developed in partnership with Case Western Reserve University's Weatherhead School of Management. It is titled "Discovering the Art of Leadership and Mastering the Art of Leadership," which focuses on the core principles of resilient leadership: mindfulness, hope, and compassion.
Since their introduction more than a decade ago, the courses have been completed by nearly 1,200 Smucker employees. Across our operations locations, we place a strong emphasis on professional development with comprehensive training and skill step-up programs in our manufacturing facilities. We have a strong track record of promoting from within and encourage our operations employees to consider advancement opportunities across our footprint. As we remain committed to cultivating leadership at every level of our organization, we are also proud of the strength and expertise of our company officers. Our officer leadership team brings an average of 26 years of industry experience and is further bolstered by our board of directors, nine of the 10 who are independent directors. Together, they bring varied backgrounds and skills and deep industry experience.
Each director has held senior executive-level roles at leading organizations across various industries, in addition to serving on the boards of other large publicly traded companies to further their expertise. These leaders bring vision, strategic perspective, and relevant consumer and industry experience to support our organization in delivering our business ambitions and serving our constituents. We also utilize performance-based compensation and long-term incentive plans to demonstrate management and shareholder interests align. This includes bonus-based compensation awarded from net sales and operating income results and equity-based compensation that incentivizes employees to drive long-term company growth and performance. While you've had the opportunity to see the passion and vision of our leaders firsthand today, I can assure you that their passion and drive for excellence is matched by our own employees.
This is a group of highly talented people who take great responsibility and pride in the role they play in support of our work to make, pack, ship, and market these iconic brands and products our consumers love. They are deeply committed to our culture, to advancing our great brands, and to ushering in the next chapter of growth for our company. Our employees also take great pride in the role we play in our communities. As highlighted by our purpose, we believe that making connections is vital to fostering thriving, vibrant communities. Last year, we donated more than $10 million to nonprofit organizations and community-based programs across our footprint to improve access to quality food, further education programs, advance equitable treatment of people and pets, and to support a healthier planet.
Through our work to eradicate hunger, an epidemic that's on the rise in our country, we also donated more than 2 million meals to people and 33 million meals to pets through our partnerships with Feeding America, Greater Good, the American Red Cross, and dozens of local food banks. This work is further bolstered by our employees who have dedicated countless hours of volunteer time and their own money through our matching gift program to support the communities and causes nearest to their hearts. I am so proud of the incredible people and their work and what they do to move our strategy forward, to grow our iconic and beloved brands, and to live our purpose of feeding connections that help us thrive. Life does taste better together. So, as I conclude, I would like to thank our employees for all that they do to support our company.
From the tireless efforts of our operations teams to the dedication of our corporate and sales employees, our entire workforce and their passion drives our business. It is their genuine care for each other and our constituents that makes our culture a unique competitive advantage. I'll turn it over to Tucker. Thank you.
Thank you, Jill. Good morning, everyone, and welcome. So many familiar faces and friends in the audience, and to those that are joining us virtually, simply thank you for being here today. My name is Tucker Marshall, and I'm the Chief Financial Officer for the J. M. Smucker Company. I'm excited to bring our story together as it demonstrates how we will deliver results and create value. So far today, you have heard several themes. We have excellent growth opportunities across our business through our key platforms. We have world-class marketing, commercial, and manufacturing capabilities.
We have consumer-led innovation as we anticipate consumers' needs through a focus on data and insights, and we have talented people with a strong culture. We are well-positioned for our next chapter of growth. As Chief Financial Officer, I'm committed to supporting the company's strategic growth plan while ensuring the entire company maintains financial discipline in support of our shared goal of value creation for all our constituents. This has led to the development of my financial priorities, which are as follows: consistent execution toward credible financial targets, a focus on productivity and cost initiatives, prioritization of the highest and best return on investment opportunities, a balanced capital deployment model, and active and transparent communication. These are the building blocks that have supported the creation of a portfolio of leading brands in attractive categories that is positioned to deliver consistent net sales and earnings growth while enhancing our profit margins.
Through a balanced top-line and bottom-line approach, we also anticipate generating strong cash flow, enabling us to reinvest in the business and to return cash to shareholders. Our focus is on maintaining business momentum and actively responding to consumers' tastes and preferences as we capitalize on opportunities with our strong portfolio of brands. Our strategy and execution is working. Net sales has grown at a 7% compounded annual growth rate over the past four years when excluding divestitures and an acquisition associated with our portfolio reshape. And we will continue our consumer-centric approach by making strategic investments to strengthen our brands and drive growth in the attractive categories of pet, coffee, and snacking.
Our strategy and priorities give us the confidence to achieve our long-term financial algorithm, which comprises of low single-digit net sales growth, mid-single-digit operating income growth, high single-digit adjusted earnings per share growth, and total shareholder return of approximately 10% or greater when considering our dividend policy. We see these objectives as steady, compelling, and compounding, including a commitment to a disciplined capital deployment model. Let us review each of the components that define our financial algorithm in greater detail. Beginning with low single-digit net sales growth, we have fundamentally transformed our portfolio to consistently deliver against our long-term algorithm, and the portfolio is delivering positive results. While industry volume has been uncertain in this dynamic environment, our portfolio continues to deliver a combination of both volume mix and price growth.
Our success is driven by our key brand growth platforms, where we are continuing to prioritize resources and investments, including the following: the Café Bustelo brand, where anticipated double-digit growth will support 1-2% net sales growth for our coffee segment. The Uncrustables brand, as it continues on its path to reaching $1 billion in annual net sales and beyond, fueling 3-4% net sales growth for the frozen handheld and spread segment. The Milk-Bone and Meow Mix brand, through accelerated growth as we continue to drive humanization trends in the category that will position our pet segment for 3-4% net sales growth. And finally, the Hostess brand, where our leadership position in the sweet baked goods category and the company's capabilities through marketing and distribution will drive 4% net sales growth for the segment over the long term.
Moving down the income statement, we anticipate operating income growth will outpace sales growth and increase at a mid-single-digit % over our strategic horizon, supported by the following: first, consistently driving top-line growth through volume mix as we benefit from our strategic initiatives, including reshaping our portfolio by divesting lower growth and margin businesses, prioritizing resources to our fastest growth opportunities, acquiring the Hostess business, and exiting low-margin co-manufacturing sales related to the divested pet food brands. Second, we anticipate a moderation of commodity and input inflation, as well as continued stabilization and improvements in our supply chain and manufacturing environments. We continue to focus on managing the elements we can control to offset inflationary pressures through cost productivity. Third, benefits from our transformation efforts that will support growth and operating margin improvement, along with reinvestment into our portfolio.
The transformation workstream is driving ownership and accountability for the execution of cost and productivity initiatives, stranded overhead, and synergies. We view transformation activities as a permanent part of our operating model and have established a three-year roadmap of initiatives that will deliver significant benefits to the business. Fourth, the realization of synergies from the Hostess acquisition. We anticipate cost synergies of approximately $100 million, half of which are expected to be realized in fiscal year 2025, with the full annualized amount to be achieved by the end of fiscal year 2026. Of the $100 million in synergies, 25% will benefit gross margin, with the remaining 75% benefiting SG&A spend. With the majority of our cost synergy analysis and organization design completed, we have a high level of confidence in delivering on our synergy targets. And finally, the mitigation of stranded overhead costs related to the pet food divestiture.
We anticipate relief from the majority of the stranded overhead costs next fiscal year. Below operating income, we expect our capital deployment model to drive a high single-digit % growth for Adjusted Earnings Per Share as we grow net income, pay down debt, and repurchase our shares over time. Our company has consistently demonstrated the ability to generate strong cash flow that allows us to take a balanced approach to capital deployment in support of shareholder value creation, including investing in the growth of our business, paying down debt, returning of capital through quarterly dividends and opportunistic share repurchases, and maintaining our current investment-grade debt rating. Our objective remains to generate at least $1 billion in Free Cash Flow annually. Business growth, managing working capital, and reducing capital expenditures are the key components to how we will achieve this objective.
We have talked about the business growth, but we also have a line of sight of reducing capital spend in the coming fiscal years. Our long-term strategic target for capital expenditures continues to be approximately 3.5% of net sales. Capital expenditures have been elevated for the last five years, primarily driven by Uncrustables sandwiches as we supported its rapid growth and required capacity expansion. This fiscal year, we expect to finish at approximately 5% of net sales, and we forecast a sequential improvement as a percentage of net sales moving forward. Let us review each of our capital deployment priorities. First, supporting organic growth of our business. The building of iconic brands such as the Uncrustables sandwich to deliver organic growth remains one of the highest and best return opportunities that we can invest in as a company.
Historically, we have assessed inorganic growth opportunities as well, but we do not view this as our near-term focus. Next, we plan to prioritize debt reduction by paying down approximately $500 million of debt annually in each of the next three years before factoring any use of transaction proceeds from the recent Voortman divestiture. We plan to use the proceeds from the divestiture to repurchase certain tranches of our senior notes through a public tender offer during the month of December. With this anticipated debt reduction, along with the achievement of cost synergies and overall business growth, we anticipate a leverage ratio at or below three times net debt to EBITDA by the end of our fiscal year 2027. This level of debt provides the financial flexibility for a balanced approach to capital deployment. Another key component of our capital deployment model is our dividend.
We are proud to be a member of the Dividend Aristocrats, an index that includes companies that have increased their dividend each year over several decades. Our dividend has increased at a 6% compounded annual growth rate over the past 10 fiscal years. In fiscal year 2025, we increased the dividend for the 23rd consecutive year. We expect our board to maintain the company's current dividend policy, which is to return approximately 40%-45% of our annual adjusted earnings per share to shareholders, reflecting dividend growth consistent with future earnings growth. Finally, we have historically used share repurchases to return cash to our shareholders and to replace divested earnings. Over the past 10 fiscal years, we have returned $2.5 billion of cash to shareholders through share repurchase programs. We will continue to evaluate share repurchases as a lever to increase shareholder value when appropriate.
The capital deployment model enables us to reinvest in the business and to fund our largest growth opportunities while delivering sustainable returns for our shareholders. We certainly believe a total shareholder return of approximately 10% or greater is achievable over the long term when considering our next chapter of growth and margin outlook. In closing, I have high confidence in our ability to create meaningful value for our shareholders. The company that we built has never been stronger, driven by the elements that we have reinforced throughout the day. Our legacy business, which accounts for approximately 85% of our sales, is delivering strong growth, a direct result of our portfolio optimization, and we are well positioned for long-term growth through our key platforms, including Uncrustables sandwiches, Café Bustelo coffee, Milk-Bone dog snacks, and Meow Mix cat food.
We have confidence in the Hostess brand, and our strategic rationale for the acquisition remains strong, and we are taking decisive actions to deliver profitable net sales growth of 4% over the long term, and we are utilizing our world-class marketing, commercial, manufacturing capabilities, and new ways to fuel further sales growth and margin expansion opportunities throughout the business, enabling us to generate over $1 billion in free cash flow annually. We hope that you leave today with an understanding of our strategy and culture, strength of our portfolio and business execution, and a shared belief in our commitment to delivering against our long-term financial algorithm and capital deployment model that are the foundation for value creation for our shareholders. We have a clear and compelling investment story. I would like to express my appreciation for our employees.
They have demonstrated their commitment to executing with excellence, and their passion for our company positions us for continued success. Thank you for your time and for your interest today. Before I turn it over to Crystal for our question-and-answer session, we would like to invite those participating virtually to begin to submit their questions. And as we prepare the stage, we would like to share another Uncrustables sandwich creative. Again, thank you.
All right. We're now going to transition to our question-and-answer session with our executive leadership team. From a logistical perspective, we'll answer questions in the room and online. For those online, you can submit questions on Open Exchange. There's a question box. To allow everyone the opportunity to participate, we ask that you limit your questions to one.
And then if your question doesn't get answered today, you could always reach out to me directly after today's event. With that, we'll take our first question.
Hi, Ken Goldman, JP Morgan. I had a question about Hostess. Dan mentioned that sweet baked snacks are advantaged within snacks because they're, and he gave four reasons, broadly available, easily on the go, cost-effective, and impulsive. Isn't it fair to say that that's a description of a lot of snacking categories? I wasn't quite sure. And I was hoping for a little bit more of an elaboration on what that differentiating aspect was. I could also say that about salty snacks and about chocolate too. So that's my first question.
And then I wanted to get a little bit better sense of the timing of the marketing push and the dollars really spent behind advertising promotions because I know at CAGNY, there was a—I don't want to say a big deal was made about that, but it was certainly brought up that you were going to spend more on the Hostess brand. I want to get a little bit of an update on that timing if we could. Thank you.
Yeah, Ken, I think in terms of the sweet baked goods category, you know, I think what's important is the snacking phenomenon. You're right. There are several categories that we think will continue to benefit from really what is a change in consumer habits. And we believe we're at the right spot to capitalize on a change in consumer behavior.
So we love the category as much today as we did when we made the acquisition a year ago, and we continue to really be optimistic in the future. But I think we have a really important role to drive demand in the category. I think this is the unique combination of Smucker and Hostess utilizing brand-building capabilities, all the things that we've done to kind of revitalize brands in our portfolio, which gets to your second question. We're ready to turn it on now. And so I think you'll see in our Q4, you'll see the new packaging show up in the marketplace. You'll also see the launch of the new advertising campaigns. We're excited to get out in the market in early 2025.
Rob.
Hi, Rob Moskow, TD Cowen. Another Hostess question.
I appreciated the commentary on how Hostess didn't get the display and distribution that you expected in the near term, but I didn't quite understand why. You know, what broke down? You were going through an integration. Did that create any distractions? Was there any breakdown in customer relationships or departures? There's some tactics being mentioned to try to improve things, but wanted to know, is there anything else to it?
Yeah, Rob, I think, you know, we take a step back. I think the unique combination of Hostess strengths was really C-Store, right? And by the way, we continue to do a really good job in C-Store. The channel has been under a lot of pressure. Our share in the channel continues to perform well. I think the opportunity is you think about our traditional strength in legacy Smucker, which is really food, drug, and mass.
Honestly, it just takes time, right? You're building joint business plans with customers. Think about distribution, display. Those are not things that you can just flip on overnight. I think the partnership with Acosta has been critical, which was just announced in July. That is already unlocking tremendous in-store activation. Our in-store activation through Acosta is very different than legacy Smucker because of the impulse nature of the category. And we're already seeing big dividends as we think about display through, you know, headquarters, but also in-store retail activation through them.
Thanks. I wanted to ask on the pet side. You mentioned the target for high 20s margin over time. We're kind of getting to the high 20s now the past couple of quarters and also, you know, expect to have the tailwinds coming from the unwind of stranded costs.
Are there margin offsets to be thinking about, such as price investment or stepped-up marketing that might offset some of these expected margin tailwinds as we think about the coming year? Thanks.
Yeah. So, Rob, as we forecast the outlook for the pet profit, you know, we're kind of in the mid-20s this fiscal year. We continue to have co-manufacturing sales in the base, so that will continue to be a tailwind to the overall margin outlook. We'll continue to support the brand portfolio with ongoing reinvestments, whether they be through the top line or whether they be through the form of marketing. We'll continue to focus on bringing along cost and productivity savings into the portfolio, and we see the overall outlook continue to be very strong for the profit performance that Judd referenced in his prepared remarks.
Hello there, Alexia Howard with Bernstein.
Can I talk about coffee, please? So can you talk about the resilience of the coffee supply? I mean, given what's been going on in the cocoa markets over the last couple of years, I know you talked about diversification of geographies, but maybe a little bit more elaboration on how you're building out the resilience of the coffee supply for the longer term. Thank you.
Alexia, thanks for the question. So first of all, you know, we have an incredibly robust set of coffee suppliers. We buy from 40 different countries. We obviously use every financial instrument available to us in the hedging markets. And we manage the business to our financial plan. So we buy the coffee, we blend the coffee, we do everything in service of ensuring that we can meet demand. Excuse me. So we have offices in Brazil and Vietnam.
And so, you know, we do have boots on the ground in a couple of the biggest producing countries. And that allows us to, you know, continue to gain intelligence. The other thing I think maybe you're hinting at in your question is how are we really trying to help the crop itself? Like how are we trying to ensure that we're supporting the resiliency of the trees themselves? We actually do a number of initiatives, some in Central America and Indonesia, that are really around farmer viability, helping to support farmers through partnerships with a couple of different nonprofits that are actually supporting, educating farmers on how to improve their crop, particularly the smallholder farmers, make their farm a profitable business.
And then we've invested significantly along with other of our peers and competitors in World Coffee Research, which has had some really nice wins in helping to cross-breed Arabica trees in essentially Colombia and Central America to be more resilient to a warming climate. And I'm pleased to report that those efforts are going well. So we're going to continue to invest in those things and make sure that we're supporting a healthy coffee crop.
I might take one question from online if that's okay. John, this one's probably for you. You've talked about exceeding $1 billion in sales for Uncrustables. Can you support growth beyond $1 billion with current capacity? And what is the long-term potential for the brand?
Yeah, I'm glad we got a question on Uncrustables because hopefully today you share our confidence in that great brand.
We continue to exceed expectations kind of year on year. We will get to the $1 billion as committed by next fiscal year. Honestly, the build-out of capacity has been an intentional choice to make sure the capacity does not be a barrier to growth in the future. Our capacity at McCalla has the capability to take us well beyond $1 billion in sales. The marketing machine, the demand creation machine is just getting started. So there's just tremendous white space opportunity that continues for the brand.
Thank you. Andrew Lazar, Barclays. You shared longer-term margin targets for a number of the segments that were discussed today. I didn't see that for Hostess business or sweet baked goods. I'm trying to get a sense of where you think margins maybe could or should ultimately settle out for that business.
And is it just too early to get a sense of that given you have to see what the return on some of the incremental spending looks like? Just trying to get a handle on where that goes over time. Thank you. Yeah.
So Andrew, we have outlined sort of the margin profile and the growth profile for each of our businesses inclusive of kind of the total company. I would highlight right now we remain confident in the top line long-term growth story for the business at 4%. And the margin profile of the business will continue to improve as we not only support reinvestment for growth, but as also we continue to drive efficiencies within that overall portfolio.
And as we also think about efforts that come through our transformation and our cost and productivity savings efforts inclusive of synergies, it's probably early to declare what the margin outlook is specifically, but we remain confident in the profitability and the overall strength of that portfolio.
Max Gumport with BNP Paribas. I have a follow-up on Uncrustables in terms of the McCalla plant. Could you just give us any more color on how much capacity it does provide? Because I think saying it's going to take you above $1 billion in revenue, it's not telling us all that much because you're pretty close to that level already. And this plant's quite large. It's a $1.1 billion in investment, 900,000 sq ft, which is a doubling of your square footage, the doubling of your CapEx for the brand.
So just curious for how far this could take you with regard to revenue or volume. Thank you.
Yeah. Max, I think McCalla will be our largest facility on Uncrustables. So I think that gives you an idea. And we've really built this plant with an idea to be able to expand significant capacity. And so you're seeing the early phases of how we've opened the facility. But we have more space to grow. And again, I'll use the word take us significantly beyond $1 billion. I'm not going to give you the number today, but we've got plenty of runway as you think about capacity coming online for well into the next five to 10 years of growth.
Steve Powers with Deutsche Bank. Thank you. Rebecca spent a decent amount of time talking about the C-Store opportunity for Uncrustables.
I was hoping you could just drill down a little bit what the leverage points are with Hostess and also the differences just given shelf stable versus chilled. And then if maybe related, but Rob also talked about an ambition for single serve with Bustelo. I just was curious if that's something you can do on your own or if that's something you envision partnering with somebody to get that single serve distribution.
Yeah. Steve, I think you really hit one of the things that excites us the most about the partnership, bringing the capabilities of Hostess together with the capabilities of Smucker. And specifically on Uncrustables, there's a tremendous white space opportunity in C-Store. And we were able to capitalize on the capability, the in-store capability in C-Store of Hostess with an extended shelf life product of Uncrustables.
So the two together really will enable a pretty significant expansion into C-Store. That will be one of the biggest growth levers for the brand moving forward. It's a tremendous opportunity there. The flip of that is what I think you heard today. Away From Home is a huge white space opportunity for Hostess. Think about Hostess's nonexistent college and universities, many different hotels and other establishments. So the ability to bring Hostess to new points of distribution is exciting. Your last point on single-serve is exactly right. We see a couple of different opportunities there, one in C-Store where we have built some tremendous capability and also some partnerships to help expand capability there. And we will utilize those partnerships as you think about bringing single-serve into C-Store. But we also see opportunity in front-of-store and food, drug, mass for single-serve as well.
So we are in the conversations of a partner to help enable that ambition that Rob has for the growth of that business.
Yeah. I might just add, John, too, that we mentioned, and I know Dan in his presentation talked about some of the cross-promotion opportunities, and it is very early days. But as we have done some early tests, whether that's donuts or coffee cake with Folgers Coffee, things like that, the early reads are very positive. So we do think over time we'll be able to turn on some of those cross-promotion opportunities because there are synergies between our respective brands. And then just to emphasize what John said about Uncrustables, there's so much runway and want to leave the group confident that we do not believe we are going to have capacity constraints as we turn on continuously over the coming months multiple lines in McCalla.
Not only are there new channels that we're entering with Uncrustables, but to expand actual shelf space, we've been able to do that pretty consistently with our existing lineup as well as some of these new flavors.
I'll take another question from online. John, this is for you. How are the historically high coffee prices impacting the competitive and promotional environment within the coffee category? And how are you balancing the need for pricing with promotional activity?
No doubt green coffee has seen significant inflation this calendar year. We've taken two rounds of pricing, as you're well aware, one in the summer, one in the fall. We feel like we're priced in line with our position as we think about cost and price for the fiscal year. I think this is a key season for coffee.
And we knew we needed to be sharp and competitive from a promotion standpoint during the key holiday season. We feel really good about the plans we have in place through holiday. We'll continue. This is going to be a very dynamic environment. What I think hopefully you have confidence in is this is a real strength of the company and a competitive advantage. Our ability to be agile in pricing, our ability to reformulate and source where needed. I think this is a real strength of the company. And so although it is a bit of a volatile and dynamic envir onment, I have no doubt that we'll continue to lead the industry in how we manage price and cost.
Thank you. Chris Carey, Wells Fargo. Tucker, you talked about multi-year productivity programs allowing to deliver on the growth algorithm while still investing.
You also spoke to the mitigation of stranded overhead next year and seeing a relief of a majority of the stranded overhead, and just in the context of this conversation around coffee inflation, Robusta hitting all-time highs, can you talk about some of the flexibility with your productivity programs and the stranded overhead if you need to front-load those programs to cover some of these cost increases that we're seeing? You've already given building blocks for fiscal 2026. I'm not really asking for that, but I would say just given some of these moves, how do you think about the flexibility of some of these initiatives on the productivity and cost side?
Yeah, so Chris, our transformation office has given us the capability to look across the enterprise to consider new ways of working while also addressing a multi-year roadmap to deliver cost and productivity initiatives.
The great thing is we have a three-year roadmap. The organization understands what the annual objective is, not only to reinvest in the business, but also to deliver against our financial algorithm and where and when appropriate also support inflationary pressures that we may feel are given against a given commodity or ingredient. As we think about the transformation office, it really comprises 10 key work streams. Eight are core to the business. Then the remaining two are really around synergy delivery and also the mitigation of stranded overhead. We feel very good around the opportunity to mitigate stranded overhead for next fiscal year. We continue to work through what that journey will look like to support next fiscal year. We continue to realize against our synergies associated with the Hostess acquisition.
That pipeline within the transformation offers, again, enables us to support business delivery, but also reinvestment and hopefully to mitigate any inflationary pressures over time.
Max Gumport with BNP Paribas. Just one more on Hostess. Could you give us a sense for the timeline of getting back to the long-term target of 4% growth to the extent you have visibility to it? That would be appreciated. Thank you.
Yeah. I would just say we're not going to commit to a timeline. But given all of the five work streams that we talked about, we feel very confident that we can get there.
Tom Palmer, Citi, maybe I could ask Max's question a little bit differently. You laid out a lot of initiatives in terms of not just stepped-up marketing, but innovation and kind of driving expanded distribution and shelf placement.
I guess as we think about just the typical retailer cycle for innovation and shelf resets, what's the timing for really starting to see these changes on shelf in terms of, again, the new product introductions and when these shelf resets really start to occur? And I guess just given that timing, the visibility you have today versus, say, the visibility you might have in another quarter on what's actually taking hold? Thank you.
Yeah. Tom, the predominance of the resets in the sweet baked goods category happened in our Q1. And so the good news is we're really excited about the new packaging, the new marketing hitting the same time that we're really out talking to retailers right now about their assortment changes that will hit in our Q1 of next fiscal year.
I might just add, frankly, that those conversations are taking place at all levels.
I mean, John and I personally are involved in those conversations at the top of top level with some retailers. And our team, our senior sales leadership has also engaged across the entire industry as well as Dan. And so we feel very good about what the future holds in our next fiscal.
Yeah. Mark, to that point, I think we can't underestimate our retail partners are looking to us. We're the only branded player that really, I think, really drives excitement and demand. We're the only one that advertises nationally. So they're looking to us, quite frankly, to reenergize category growth. So it's been incredibly productive and powerful conversations really across our retailers. They want to see this category return to growth. They're looking to Hostess to do that.
And I'm very optimistic about the work that Gail shared today.
I think just having investment in the consumer space and speaking to the consumer directly through advertising and social channels, I feel very confident that that work and trying to insert the brand back into the lexicon of today's culture where it really hasn't been, I think, is really powerful. So I think it's a combination of factors that give us confidence that Hostess is going to continue to drive growth. But thanks for the question.
I have a question from online, probably for John. How should we think about the innovation you've rolled out recently? And then maybe Tucker as well. Are they hitting profitability as well as sales objectives?
Yeah. I tell you, I'm incredibly proud of the innovation that we brought to the market this year. And the good news is, one, we've actually exceeded really our bucket across our innovation program.
And we look at the Vitality Index. We continue to perform kind of at the right level of innovation for the portfolio. The other thing I think is important, which is embedded in the question, our margin is typically accretive on innovation. And that's really what we look to our teams as we bring meaningful innovation to the consumer. It needs to be accretive to the portfolio. And for the most part, it is significantly above our brand average when we bring new innovation to the market.
Take another question from online. You have talked about portfolio reshaping as an ongoing priority. Are there any areas where you see acquisition potential in the medium term? How does M&A fit in? It's hard for you, Mark.
Yeah. Look, you all have, I mean, a lot of familiar faces in this room. And you know our company very well.
You know that we've grown significantly over two-plus decades through both organic growth and M&A. So both are very important. Clearly, we have priorities right now from a cash standpoint to pay down debt and continue to support dividend growth. So that's really, and of course, invest in our business. So that's really where you're going to see the cash going in the very near future. But I think we've got a great track record of demonstrating our ability to focus on what's important and really wanted to spend a lot of time today talking about why the portfolio reshape is setting us up for continued consistent long-term growth. Even recently with the Voortman divestiture, we've continued to demonstrate the ability to have courage to reshape our portfolio in whatever form that may be. Sometimes it's as simple as SKU rationalization.
So we will continue to do that. I'm really proud of this team. I hope that you saw that today. This is an incredible team that really understands what the priorities are and is capable of making the bold decisions to really focus where the growth is going to be. So we believe that over time, M&A will continue to play a role. It's got to be the right M&A. And I think we've got a pretty strong track record of showing that. But right now, we got to focus on making sure we continue the growth that we've set. We've had great results showing both unit, volume, and sales growth. So feeling really good about where we're headed.
Another question from online, and this is for you, Tucker. You talked about achieving $1 billion in free cash flow.
What specific growth drivers or cost efficiencies are critical to reaching this target?
Yeah. So what's going to support the billion-dollar ambition is going to continue to demonstrate base business growth or momentum across earnings. That'll largely be fueled by not only the positive volume mix, but also our ability to deliver cost savings and productivity to the bottom line while also mitigating stranded overhead and realizing the synergies. I would also acknowledge, too, that in my prepared remarks, we talked about CapEx coming down as a percentage of net sales. That's largely due to the need to not spend so much against the rapid growth and capacity expansion associated with Uncrustables. And then lastly, we'll continue to effectively manage working capital all in support of that billion-dollar or better ambition.
We'll take another online. I'll ask if there's any more questions. All right.
Maybe Tucker, for you, can you speak a little bit more about the transformation office and what types of initiatives that function is working on to drive some of the cost and productivity items that you spoke about earlier?
Yeah. Absolutely. So a few years ago, we established our transformation office. It's really a key work stream, as I've noted previously, that is embedded throughout the entire organization. We really have our most senior leaders involved all the way down to the teams within our supply chain and manufacturing environments. And it really begins by thinking through these 10 key work streams. And these 10 key work streams enable a conversation by department, by area, by activity to begin to question how we do things, why we do things, where we might save, where we might contemplate activities differently.
It's been very exciting when you think about anything from design to value, from improvements in your manufacturing environment, whether you think of marketing improvements or whether you might even see opportunity in your SG&A environment. The conversation has really led to a robust pipeline of initiatives or activities that are defined over many years. What's exciting about it is we meet monthly to review each of these. These activities may be simply a $10,000 item. They may be a $5,000 item. They may be a $5 million item. But they all add up. What we ultimately believe is that pennies become nickels and nickels become dimes and dimes become quarters and quarters become dollars. Ultimately, every idea and every initiative matters.
And we hope that this continues to enable us not only to reinvest in the company, but most importantly, our ability to deliver against the financial algorithm and also the capital deployment model. So it's very exciting. And we're very pleased with the results today.
One more question here. You've laid out your goals for growth across business units. Given the investments underw ay, why are you not raising the long-term growth target?
Today's discussion was really about a demonstration of the strength of our strategy, the conviction, or the demonstration of execution along with our ability to share our key growth platforms. And when you put all of that together, it gives us the confidence and the conviction to consistently deliver against our credible financial targets.
And over the long term, we feel that the algorithm we've laid out is the right one in support of the portfolio that we shared with you today. And that's really where our focus is.
And we have about 30 seconds left. If not, we can transition. This concludes the Q&A session. Thanks.
Yeah. It wouldn't have been Investor Day without that last question. I know. Look, before we conclude, first of all, I want to just thank my team. Everyone is amazing. I am so proud of this team. And I really do believe we have the best team in the industry. I want to thank the team that really put this on.
I mean, it is a huge deal to actually make this happen, just coordinating and preparing the event, as well as all of the employees back home at all of our locations, at every location, for their continued focus. Lastly, I want to extend thanks to the New York Stock Exchange for hosting us today and to each of you for attending. This is probably the best turnout we've had. I think Caitlin told me we only had two vacant seats. So that's great, and each of the folks on the webcast. So as you've heard, today's presentation was about looking toward the future with an aligned portfolio, the right leadership, and world-class capabilities. We believe that we truly have the right strategy to deliver on the goals that we've set, and we're really excited about the next chapter of growth.
Our confidence, just to repeat what we've said, is driven by the strength of our portfolio of leading brands and how we are evolving our business to meet the needs of the consumer in attractive categories. Our ability to fuel growth across our portfolio to new audiences through our world-class marketing, commercial, and manufacturing capabilities, a focus on consumer-led innovation. I hope that came through today as we anticipate consumers' needs through a relentless focus on data-driven insights and our talented people. Through the strong foundation that we have established, I have a high level of confidence in our ability to create value for you, our shareholders. Our portfolio, frankly, has never been stronger. Our legacy business is delivering results in a dynamic environment. We're taking decisive actions to get the Hostess brand back to growth. We're uniquely positioned.
We really love the portfolio and the breadth of it with leading brands, attractive margins, all very important. We hope that you all come away from today's event with a renewed appreciation for why Smucker is truly a great investment. To all of our shareholders, we want to thank you for your support and trust in the Smucker Company. With that, what we're going to do next is I'd like to invite everyone to stay for lunch. All of my team will be available at different tables throughout lunch today. One request we have is if you could let us, the Smucker team, take our mics off, zip over, and grab our food so that we can get situated each at our respective tables and be ready for all of you and get a bite to eat and be ready to answer your questions.
So if you could just allow us to exit first, that would be great. I want to wish everyone a very happy holiday season. I hope everybody gets some rest and is able to unwind a little bit, spend time with family and loved ones, and recharge a little bit before 2025. So thanks again. God bless and have a fantastic rest of 2025.