General Mills (NYSE:GIS) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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The full earnings call is available at https://events.q4inc.com/attendee/120777763
Summary
General Mills reported a sequential improvement in retail trends, with a focus on improving dollar share trends through price mix, premium innovation, and price pack architecture.
The company highlighted innovation and renovation as key strategies, with successful product launches such as protein cereals and Totino's Blasted Rolls contributing to growth.
Management provided guidance on inflation, expecting it at the higher end of the 4-5% range, with mitigation efforts through cost savings and strategic revenue management.
Challenges remain in specific categories like Totino's and fruit snacks, but improvements are expected with new product innovations and renovations.
Pet segment performance was mixed, with growth in cat food and treats offset by challenges in dry dog food, particularly the Wilderness brand.
E-commerce and digital transformation are priorities, with a focus on AI and efficient packaging to drive future growth.
The company plans to increase marketing spend modestly, leveraging modern approaches such as influencer marketing and content studios.
General Mills aims to reduce leverage to three times net debt to EBITDA over the next few years, with sequential progress expected.
Full Transcript
OPERATOR
Hello everyone. Thank you for joining us and welcome to General Mills fiscal 2027 Q1 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Jeff Seaman, Vice President, Investor Relations and Corporate Finance. Jeff, please go ahead.
Jeff Seaman, Vice President, Investor Relations and Corporate Finance
Thank you, Warren. And good morning to everyone. Thanks for joining us today for this live Q and A session on our first quarter fiscal 27 results. I hope you all had time to review our press release, listen to the prepared remarks and view our presentation materials which we made available this morning on our investor relations website. Please note that in our Q and A session we may make forward looking statements that are based on management's current views and assumptions.
So please refer to this morning's press release for factors that could impact forward looking statements and for reconciliations of non GAAP information to which we may discuss on today's call. I'm here this morning with Jeff Harmening, our chairman and CEO, Dana McNabb, our COO, and Kofi Bruce, our CFO. With that, we'll go ahead and open it up for Q and A. So Warren, can you please get us started?
OPERATOR
We will now begin the Q and A session. Please limit yourself to one question and one follow up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality if you are muted locally. Please remember to unmute your device. Please stand by while we compile the Q and A roster. Your first question comes from the line of Andrew Lazar with Barclays.
Your line is open. Please go ahead.
Andrew Lazar, Analyst at Barclays
Great. Thanks so much. Good morning everybody. Nice. Nice to see some sequential improvement, you know, starting to show through. I guess I'd like to get a sense of the sort of pace of improvement in NAR specifically going forward. I know this quarter you saw retail trends improve sequentially in 2Q I guess. Would you expect further sequential improvement from the -2% this quarter or should we expect more of a stabilization at this point? Again, I'm talking about retail takeaway which excludes all the timing issue in Len.
Dana McNabb, COO
Good morning, Andrew. Thanks for the question. Our focus is really on continuing to improve dollar share trends. I'm not the quarterly Nielsen estimates, but we are pleased with the improvement. We saw two point improvement in dollar sales. We did improve our share performance in the majority of our categories. But as you probably noticed, we're not all the way to growth yet. So we still have work to do. Where we're focused is really the first thing you'll see is we expect an improvement in price mix.
If you recall in Q1 we hadn't lapped our base price investments yet. We will start to do that in Q2 and we like the plans we have against product mix, premium innovation and price pack architecture. We also will see accelerated innovation and renovation. And we really like how our marketing is performing right now. We'll continue to focus on that. So again, we still have work to do. We had the Totino's business that was a problem for us all last year.
We've cut those declines in half. That's an area we'll continue to focus on. And we expect to see improved dollar performance throughout the year.
Andrew Lazar, Analyst at Barclays
Great. And then, you know, I guess focusing on the share piece in NAR, a year ago it seemed like General Mills was showing sort of negative volume and share really across a pretty wide swath of categories. What does that look like today versus a year ago? And if it's far smaller number of categories today where the issues are, what's the sort of the planned fix for those? Thanks so much.
Dana McNabb, COO
Well, as you'd mentioned, we were in a tough spot last year and this year we have seen pretty good improvement and we're encouraged by the momentum. We saw improvement in the majority of our categories and I'll give you a couple examples. I look at cereal where last year in Q1 our share was down 0.9. This year in Q1 we're only down 0.1. Another big business. We were down 0.4 in share. This year we're only down 0.1. So we really do like what we're seeing and we're not to growth yet.
We know we still have more work to do and that's going to be an emphasis on price mix and innovation and renovation. The two spots that we're keeping our eye on, where we need to see more improvement, is Totino's, which I've already talked to. Pleased again that we cut those declines in half. But we have more work to do. We have really good product innovation, Blasted Rolls. We have some better merchandising. We have strong renovation coming. So we feel good about that.
And then we have some challenges on fruit snacks. Now the category is growing remarkably fast. It's up about 13% in Q1, but we're really seeing some small insurgent brands enter and drive that with increased distribution. And so we need to up our game there. We're going to really leverage our Annie's brand to bring some very strong new products to market. We just launched Nature Pals, which is a high fiber for great taste. We have some great renovation coming on our core business.
So Totino's and fruit is where we'll focus on and then we expect to see continued improvement in the rest of our brands.
Andrew Lazar, Analyst at Barclays
Got it. Thanks so much.
OPERATOR
Your next question comes from the line of Peter Galbo with Bank of America. Your line is open. Please go ahead.
Peter Galbo, Analyst at Bank of America
Hey guys, good morning. Thanks for taking the question. Kofi, I was hoping you could shed a little bit more light on the inflation guidance. Obviously having moved kind of up towards the higher end of the 4 to 5 range, I think it might be helpful just to outline maybe where inflation came in in Q1 and then just how you kind of see it pacing over the balance of the year and where that kind of exit rate on inflation might be as things currently stand today.
Kofi Bruce, CFO
Sure, Pete, thanks for the question. Just to give you some texture, we did see inflation roughly within the range, maybe a touch lower than we expected in Q1, but at the low end of our range, around 4%, which if I look forward, you know, and take into account sort of our hedge positions, I would expect Q1, Q2, Q3 to be roughly similar and Q4 to be just a touch outside the range at around 6% based on everything in front of us right now.
Peter Galbo, Analyst at Bank of America
Got it. Okay, that's very helpful. And I wanted to dig in a little bit on pet. I know there were a couple of maybe timing elements that happened in the quarter, the extra month of Whitebridge, but maybe the other thing that stood out was just the inventory. The retailer inventory headwind wasn't maybe as dramatic as you all would have anticipated in Q1. And I just wanted to pressure test a little bit on the go forward. How much of that low single digit headwind is maybe conservatism in pet versus Q1 being a bit of an anomaly from a retailer headwind standpoint.
Thanks very much.
Kofi Bruce, CFO
Sure. Let me start with Whitebridge first. I think as is consistent with most of our past acquisitions of any size, we generally are on a one month lag until we hit systems integration and then we do a catch up that almost always that has always flown through organic sales. So that was expected at some point, one. And then the other point I would tell you is that it was worth about a point of growth on pet, maybe 15 basis points for the company. So not frankly all that large.
On inventory, what I would tell you is this: we've been doing this long enough and the challenge is just on pet. There's a lot of volatility, quarter to quarter. I do think, based on the customer mix progression, that we still expect a low single digit headwind from inventory over the course of the year. Mainly as our mix skews more and more towards customers who carry lower inventory levels. Can't probably get too precise on a quarterly basis about how that's going to flow.
So we would still stand by that forecast for the full year, however.
Peter Galbo, Analyst at Bank of America
Great. Thanks very much.
OPERATOR
Your next question comes from the line of Robert Mosco with TD Cowen. Your line is open. Please go ahead.
Robert Mosco, Analyst at TD Cowen
Hi. Thanks. I was hoping to drill down on the high single digit decline in dog food. Love Made Fresh I believe was entirely incremental in the quarter. So can you tell us how incremental it was? Because it wasn't in there a year ago. And what's driving the declines? Is it just Wilderness or is there other factors?
Dana McNabb, COO
Hi Rob, thanks for the question. You're right. When you look at our pet business right now, we're really pleased with the growth that we're seeing on our cat business. Our treats business has inflected to growth and we've seen significant improvement in Love Made Fresh. But the area that we're having challenges in our dry dog business. From a dry dog perspective, the category was down about mid single digits. As you said, Life Protection Formula pretty much hung in there with the category.
And it was Wilderness where we saw declines accelerate. And Wilderness is a place you will have heard on the prepared remarks where we've actually applied our remarkable experience framework testing to that business to try and diagnose the challenges. And we see that we really have to relook at the entire proposition: the product, the packaging, the marketing, the communication. We have work to do. And we had the same challenge on our cat Tastefuls business a few years ago and it took us about 18 to 24 months to improve it.
And that business is back to growth now. So the main challenge we see is on Wilderness and on Life Protection Formula. We have some really good product news and renovation and new products coming in the back half that will really emphasize our ingredient superiority with benefits we know pet parents are looking for. And I really like the plans that are coming in the back half.
Robert Mosco, Analyst at TD Cowen
Okay, just a quick follow up. Wet dog food, small part of your business. But how's that doing? I heard that there might be some shelf changes at specialty retailers in wet.
Dana McNabb, COO
Wet dog food is doing as we expected. It is down about 4%. But that is not worse than we had planned. And I'm actually not familiar with the challenges that you're talking to. As far as I know, our plans are on track.
OPERATOR
Your next question comes from the line of Leah Jordan with Goldman Sachs. Your line is open. Please go ahead.
Leah Jordan, Analyst at Goldman Sachs
Thanks for taking my question. Good morning. It sounds like the step up in innovation and renovation you've done this year has been working. Just seeing if you could provide more detail on what's tracking better than expected and what is that telling you about the consumer. And then on the acceleration data that you noted, that's still to come. You know, what should we be looking for? I think you called out cereal specifically for later this year, but any detail there as well.
Thank you.
Dana McNabb, COO
So thanks for the question. From a new products perspective, we're really encouraged with what we're seeing. We've stepped up the amount of new products. We've increased by about 50% over the last two years, have gone from 3% of net sales to 5% of net sales. And we really are focused on bringing new products with benefits we know the consumer values and will pay for. So when we look at the new products that have launched in Q1, we've seen really strong performance behind our protein cereals, particularly Honey Nut Cheerios.
Our blasted Totino's rolls that are bringing new bold flavors are doing really well. Our Latiara launch is also working really well in the Mexican category. And of course we've seen Love Made Fresh improve pretty significantly. So again, we're still one quarter in, but we're encouraged by the trial and repeat that we're seeing on those new products. And as we look more to the back half of the year, I already mentioned that Life Protection formula has some great innovation coming with benefits we know the consumer value.
We are leaning into significant new products in our snacks categories. So our bars categories, we're going to lean into more protein innovation there on Nature Valley, on LÄRABAR, we're scaling up our ghost bars business and we're even launching a meat snack in our EPIC business. And we'll continue to bring really strong marketing behind all of that. So I really think we understand what the consumer values and we are bringing them appropriately to the categories that we play in and we'll continue to see improved momentum going forward.
Kofi Bruce, CFO
Thank you. Yeah. So in aggregate at the macro level, if you take our inflation guide and our guidance on HMM cost savings, those still roughly we expect to offset over the full year. Set aside any of the phasing commentary I gave you. I think the other important thing to call out are the mechanical factors around 53rd week, which will, you know, obviously have an impact on gross margins as we move through the back half of the year just solely on that comparison.
If you strip that out, actually we would expect our gross margins net to be roughly flat ex that mechanical factor. And then at operating margin we would just add the incentive comp reset as an additional mechanical factor on top of that. But all things equal, those are kind of the big puts and takes I'd be watching.
OPERATOR
You bet. Your next question comes from the line of Chris Carey with Wells Fargo Securities. Your line is open. Please go ahead.
Chris Carey, Analyst at Wells Fargo Securities
Hi everybody. Thank you for the questions. Dana, you mentioned that pricing was, you know, you were constructive about pricing. I can't remember exactly, you know, how you framed it over the course of the year. Do you have a different expectation for pricing relative to where you started the year? I'm just conscious that foodservice pricing came in better, pet pricing came in better, although I assume mix was partly a factor there. So I'm just wondering if your pricing plans are similar, namely in the context of the current inflation backdrop.
And then I have a follow up.
Dana McNabb, COO
Good morning, Chris. Thanks for the question. Well, as you know, we did a lot of work last year to adjust our everyday prices and that was really important to stabilize our base volume and to help us get back to household penetration growth. And so with that investment behind us as we move to fiscal 27, we're really focused on driving positive price mix. And that's with particularly strong contributions from product mix, from premium innovation, from price pack architecture.
And we're seeing that work on things like Cheerios Protein, Love Made Fresh, Chex Mix tubs, et cetera. So that is where we're focused. As Kofi did mention in his prepared remarks, though, we expect input cost inflation in the higher end of what we previously communicated in the 4% to 5%. And as we always do, we're going to work on all levers to address higher costs, whether that's through cost savings or through price mix. So HMM is always our first defense against inflation and then we have some transformation.
But we have a very strong strategic revenue management toolkit as well. And given this level of inflation, I would assume all levers in that toolkit are on the table: trade, mix, list pricing, et cetera.
Chris Carey, Analyst at Wells Fargo Securities
Okay. Okay, thank you. The follow up is the inflation outlook. Kofi, I think you had mentioned inflation would be somewhat similar in fiscal Q1, 2 and 3 and then step up in fiscal Q4. Clearly you have just nice hedging and good visibility over the course of the first few quarters of the year and then that step up. I mean this is way too early. But it's going to be such a strong year for HMM this year. Can you get ahead of delivering this level of performance as we think more medium term?
If this inflation is sticky going into out years and just now that you've reset some price points and value in your portfolio, how do you view—and it's a little bit of carrying through what Dana just said—but how would you view pricing as a lever if you need that over the next few years as you think about medium-term objectives after the work that you've done over the past 18 months? Thanks so much.
Kofi Bruce, CFO
Yep. So look, obviously I'm not going to get into guidance for next fiscal year given we're still in the first quarter of this one. I would tell you our construct over the long term is still built around HMM being the primary bulwark against inflationary pressures. If I just take the last three to four years we have run HMM at the high end of the 4%, 5% range. I have every confidence that that is the range that we would expect to carry with us as we go forward from here.
Now, obviously anything related to SRM and the combination of price and mix, we would expect to be in the mix of how we manage through the year and frankly how we drive growth at the top line. What I can't do is give you a sense of what 28 is going to look like from an SRM perspective other than to just acknowledge what Dana said, which is we will use all the tools in our toolkit and, you know, the environment remains frankly a little volatile with respect to costs.
So it's probably a little early for us to get too deep into the discussion beyond that. Very fair. Thank you so much. You bet.
OPERATOR
Your next question comes from the line of Alexia Howard with Bernstein. Your line is open. Please go ahead.
Alexia Howard, Analyst at Bernstein
Good morning everyone and thank you for the question. Can I just start with the marketing spend question, you said that the marketing spend was up significantly this quarter. How much is it up year on year? How do you expect that to play out over the course of the year? Is it going to stay similarly up the remaining quarters?
Dana McNabb, COO
Good morning, Alexia. Thanks for the question. From a media standpoint, in Q1 we were up modestly—not significantly—and we are expecting our media spend to be up low single digits throughout the year. But what I'm most excited about when it comes to media is just how we're modernizing our approach to marketing and communications. We have stood up Content Studio that's allowing us to make more content faster and at higher quality. We have stepped up our use of influencers to maximize reach and engagement—almost doubled that—and that will get even more used over the course of the year.
We've brought on new creative agencies and then we're also stepping up our readiness for agentic and really accelerating e-commerce. So while media spend is up modestly, what I'm more encouraged by is just the work that we've done in order to show up to consumers in a more relevant way in culture.
Alexia Howard, Analyst at Bernstein
Perfect. Very helpful. And then as a follow up, this is probably for Kofi. Where are we at with leverage at the moment? I know that your goal is to bring it down to three times net debt to EBITDA, but will it tick up just because the EBITDA is obviously down year on year and how quickly do we expect that to come down towards that goal level? Thank you and I'll pass it on.
Kofi Bruce, CFO
Yep, appreciate the question, Alexia. I would expect it will take us—on pace with the combination of all the work we're doing on HMM and Transformation Savings—at least a couple years to work ourselves back to our target of three times net debt to EBITDA, setting aside any impact from extraordinary items like, you know, for example, divestitures, which we have in the course of the past couple years used to help reduce leverage. So all things equal, we expect to make sequential progress over the next couple years.
I can't give you an exact end date, but just know that in the back of our transformation goals through 2030 is our planned reduction back to target.
Alexia Howard, Analyst at Bernstein
Thank you. And where are you at the moment? Is it a little over four?
Kofi Bruce, CFO
Yeah, yeah. Just a touch. Thank you very much. I'll pass it on.
OPERATOR
You bet. Your next question comes from the line of Scott Marks with Jefferies. Your line is open. Please go ahead.
Scott Marks, Analyst at Jefferies
Hey, good morning all. Thanks very much for taking the question. Wanted to ask first a little bit about the transformation initiatives. I think in the prepared remarks you called out working with a partner to stand up a new packaging facility to help with some flexibility there. Wondering if you can just give us a little more detail around that as well as, you know, share any other plans that you're currently working through and, you know, how we should be thinking about the benefits, you know, flowing through over the next few years.
Dana McNabb, COO
Well, good morning and thanks for the question. I think first, just stepping back, you'll remember in the prepared remarks that we committed to delivering $750 million of cost savings in this fiscal year and $3 billion in total by fiscal '30. And how that breaks out is $2 billion of HMM and a billion of transformation. And the way we're thinking about transformation is not just about cutting costs. It's about how do we get our organization to a place that's fit for future growth.
Part of that will be reimagining our supply chain and that's looking at capacity utilization, our manufacturing network, logistics. And part of it is the example that you just called out in terms of what do we need to stand up in order to get at growth faster. And so our way of doing packaging innovation today is quite inefficient. We have just recently signed on a partner, an external partner, in order to help us get more packaging innovation more efficiently and effectively and at better pace.
And that will allow us to accelerate our growth in e-commerce where we know the majority of the food growth is going. So we're still very early days. I don't have a lot more details to share with that, but I really like the approach the team is taking.
Scott Marks, Analyst at Jefferies
Appreciate the thoughts there. Next, just wanted to ask a little bit about some of the price pack architecture initiatives. Specifically in the prepared remarks you called out innovating cereal around lower entry price points as well as larger tubs and larger formats. Are there any other areas of the business where you've been that active with making those changes? And have you seen similar results as you have with the cereal portfolio in NAR? Thanks.
Dana McNabb, COO
Well, first, thanks for calling out the progress that you've seen in cereal. We're encouraged by the two point improvement we saw in Q1 and the team has done a very good job with packaging innovation. We have the cups that allow us to have an opening price point for consumers. We have large sizes, we have bags, we are launching granola in tubs. And all of this innovation just allows us to deliver unique benefits that the consumer is willing to pay for.
And I would say we've taken that approach across every business as part of our strategic revenue management plans. What we do is we have to have a minimum three year pipeline of ideas with price pack architecture. And so you will see that come in our salty snacks business where we put our snacks in tubs. And that was highly incremental. You will see it come in our Pillsbury business where we know single family households that don't have a lot of kids are looking for portion sizes to be better.
And we've launched unique innovation there. Old El Paso dinner for two. Great innovation there. And so really I would say the team has applied this strategic principle across every category. It starts first with understanding what the consumer will value and then figuring out how to launch it in a way that maximizes total consumer benefit.
OPERATOR
Appreciate it. We'll pass it on. Your next question comes from the line of Michael Lavery with Piper Sandler. Your line is open. Please go ahead.
Michael Lavery, Analyst at Piper Sandler
Thank you. Good morning. Just wanted to come back to some of the cost side and drill into wheat specifically. Obviously we get your color on how it all rolls up into, you know, all the commodities, but how much are higher wheat costs impacting you? How covered are you in terms of maybe, you know, how to think about, you know, if costs keep going up when, when that might become a pain point and how conservative in your assumptions maybe. And I know in food service there's pass through pricing for the flour, so maybe how much of a lift from wheat index pricing is there as well?
Kofi Bruce, CFO
Appreciate the question. Wheat is a touch higher than our inflation expectations for the year. Obviously as part of the basket of things, along with freight and fuel and fats and oils and maybe packaging, where we're seeing that incremental pressure that puts us at the higher end of the range. I would say broadly on our food service business, this is a dollar margin neutral exercise where the flour that we sell on market effectively is index priced and changes on a pretty regular basis roughly weekly to market and was passed through straight just based on the commodity price.
So that does have an inflationary impact. It's been about a low single digit headwind past year. We expect that to be flipped to a tailwind this year in a roughly similar range of low single digits. So that is probably still roughly unchanged. A touch higher. But we were expecting that coming into the year. I would expect, obviously as we work our way through the year, we are hedged on wheat just similar to the commodity complex. We're about 3/4 hedged through the year and have visibility that far out and obviously beyond that, then the spot future prices become a little bit more inflationary in the back end of our year.
Michael Lavery, Analyst at Piper Sandler
Okay, that's helpful. Thank you. Just one on the consumer and just kind of think about maybe an AI piece of it. There's things like Instacart's AI sort of shopping list creator and Kroger's doing similar things now. It's all quite new. So. But in terms of just how consumers are making decisions and maybe not even getting to the physical shelf where point of sale activation is the most important, how do you think about making sure you don't miss opportunities there or you're kind of on the right side of getting picked by some of these AI generated shopping lists, for example.
Dana McNabb, COO
Well, thanks for the question. It is an important one I think. First, let's start with e-commerce and omnichannel. We know that whether it's human food or pet food, e-commerce is driving the majority of the growth. We see that over 20% of sales in human food and 30% in pet food. And we expect that to accelerate. And we've really been focused on making sure that we have stood up the organization with the capabilities necessary to win there. And so far in Q1 we saw our e-commerce positions improve even faster than bricks and mortar.
As it relates to agentic, we are really working hard to stay ahead on that. We know just in this last month alone that 40% of consumers used an AI tool to make a purchase in food. And right now, I mean, who knows. But our early estimates are that agentic commerce will be about 20% of food sales by 2030. And so it's really about making sure that we're staying ahead on basics. And that's about making sure that our products are discoverable. It's making sure that the information is accurate and that they're easy to buy.
And if we focus on those three areas first, we will stay ahead. But again, it is still very early in the agentic space and we have lots to learn.
OPERATOR
Thank you. Your next question comes from the line of Nick Modi of RBC Capital Markets. Your line is open. Please go ahead.
Nick Modi, Analyst at RBC Capital Markets
Good morning everyone. Maybe I could just do a quick clarification on the inflation basket. When you think about the ag complex, given all this going on with fertilizer costs and this, you know, I just love your thoughts on how we should be thinking about that or how you're thinking about that over the next 12 to 18 months. I know you're not going to get it to forward your guidance. I just wanted to get your thoughts on how you see the implications.
Kofi Bruce, CFO
Yeah, it's a fair ask without getting too specific. What I would tell you is fertilizer costs, given where we are in the planting cycle, more likely to be a headwind and affect crop planting decisions as you go into late spring, next year, next calendar year. So that would be the place where as farmers are making trade off decisions about their input costs, they might switch to lower fertilizer reliant crops such as soybeans and swap out of grains, which obviously that affects the supply of some of the grain complex which are more fertilizer reliant.
So I would expect that's how it plays out and you'd start to see that pressure show up maybe with more clarity as we work our way through and into the calendar year, next year.
Nick Modi, Analyst at RBC Capital Markets
Great, super helpful. And then Jeff, maybe on just pets. There's obviously some macro dynamics going on, people feeling some pressure, vet appointments are down year over year. But there's also, I think, some structural dynamics that I'd love to get your thoughts on, which is, you know, you have a lot of the margins that big dogs, obviously many of them are passing away, right. And the older consumers that own them are not replacing them and the younger consumer is taking on smaller pets like cats and smaller dogs.
So just curious on your thoughts about that, just general viewpoint and how you can like manage the business over time to kind of, you know, protect margins and capitalize on growth in a smaller segment.
Jeff Harmening, Chairman and CEO
Yeah, Nick, this is Jeff. Let me take that one. You know, I think, let me start off by saying that the biggest trend in pet food is the same one that it has been for like couple decades, which is humanization. Which is why we're really thrilled with the development of Love Made Fresh and how that's worked. Why we bought Tiki Cat and that's double digits since we bought it and again it's growing strongly this year. We just gained distribution on that one.
So that's really taking off. And we even have our treat business back to growth and we've got a good fall lineup of innovation on that. So I think that the biggest trend as we think about what's going to drive our business forward is a humanization trend. Dana mentioned briefly some innovation we have coming on Life Protection Formula in the second half and that'll hit on that trend as well. So we feel great about that. As you say, in the short term there are fewer dogs being purchased than there were before and there are smaller dogs rather than larger dogs and Blue Buffalo actually over indexes to smaller dogs and so we'll see how that plays out. But there are more cats and certainly as people return back to the office and the economics of cat works out and strong cat businesses. I mentioned Tiki Cat. Dana referenced Tastefuls earlier. That one time was a headwind for us, but we've kind of redone all the pieces of the Remarkability framework and got that going again. So as we think about our pet business, we're encouraged by the start of the year. There is work to do certainly on this, so we don't deny that, but we feel as if we've got good offerings and we see some momentum in places where pet humanization is taking place and where we like our innovation for the second half of the
Nick Modi, Analyst at RBC Capital Markets
Great, thanks. I'll pass it on.
Jeff Seaman, Vice President, Investor Relations and Corporate Finance
I think we have time for one more, Warren.
OPERATOR
Understood, thank you. Your next question comes from the line of Matt Gumport with BNP Paribas. Your line is open. Please go ahead.
Matt Gumport, Analyst at BNP Paribas
Hey, thanks for the question. Last year during the back half of the fiscal year, you observed consumers waiting to buy on promo which brought along a higher cost to compete. I'm just curious for what the latest is on that front and to what degree that could present an easy comparison to the second half of this fiscal year. If you've seen some relief there. Thanks very much.
Dana McNabb, COO
Yeah, thanks for the question. I think this all stems from the fact that we still see the consumer being very stressed, especially the middle and lower income consumer. And how that translates into behaviors is yes, they are still waiting to buy products on sale rather than waiting to buy them on everyday shelf price. We haven't seen that accelerate. We'd say it's pretty similar to what we saw in the back half of last fiscal. And so when we set our guidance for this year, we assumed that that would continue throughout the fiscal year.
Matt Gumport, Analyst at BNP Paribas
Okay, great. And then just to follow up on pricing. So clearly last year was all about reducing base prices to get them in a better place. You've signaled this year that you'll leave your list prices largely untouched. Obviously you will leverage to some degree innovation, renovation, price pack architecture and other strategic revenue initiatives to get some positive mix out of the business. But plenty of your peers are discussing this price increases that we might see as soon as next month.
To what degree are you factoring in potential market share gains that could come as the consumer shifts from businesses where there has been pricing taken to businesses like yours where there are stable prices. Thanks very much.
Dana McNabb, COO
Well, as you mentioned, we really focused on improving our base prices last year to bring more value to consumers. And we saw it worked. Our base stabilized, our penetration grew. But as you rightly pointed out, the environment is more inflationary. And so we operate in 25 categories, and each one requires a specific set of actions. So what we do is we use the Remarkability framework. We'll assess the price value relative to the competition, and we'll continue to adapt as the environment adapts. And that's where, as I've talked to, our strategic revenue management toolkit is really important because we will lean in mix. That's the primary lever we want to use. But also we'll continue to evaluate both trade and list pricing going forward.
Jeff Harmening, Chairman and CEO
And I would say, just to add on to what Dana said, as we think about the momentum for the rest of the year—and she talked about our continuing momentum—the thing I'm most excited about, really, is that, having got our prices in line, it's the rest of the elements of the Remarkability framework. You know, particularly our innovation, renovation on our core. I mean, our Pillsbury business—70% of it is being renovated. We've got really good innovation in the second quarter.
We talked about light protection formula and the good innovation we have coming on. That, as well as distribution increases and the marketing on Big G, has been phenomenal. I mean, Lucky Charms is back to growth, and Reese's Puffs is back to growth, and Cinnamon Toast Crunch is back to growth. And that has nothing to do with pricing. It has to do with really good marketing and really good product news. And so, as I look at the rest of the year, while I'm encouraged by the first quarter, I'm also encouraged by what we're doing on the rest of the elements of the Remarkability framework that don't tie back to value—whether it's more protein that she talked about, whether it's bold flavors, whether it's fun on certain categories. So that's what got me excited about our ability to compete increasingly effectively as the year goes on.
OPERATOR
Thanks, Max and Warren, I think we can wrap it up here. Thank you. We have reached the end of the question and answer session. I will now turn the call back to Jeff Seaman for closing remarks.
Jeff Seaman, Vice President, Investor Relations and Corporate Finance
All right, Warren, thank you. Appreciate everybody's good interest and discussion this morning. The IR team is available throughout the day for anyone that has follow-ups. We look forward to continuing to show good traction as we go through the rest of the year. Have a great day, everyone.
OPERATOR
This concludes today's call. Thank you for attending. You may now disconnect.
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