WK Kellogg Co

Good morning, everyone, and thanks for being here. Wasn't that a tremendous breakfast? Sabin, Diana, our team set that up all last night, and in particular, it was a cereal-only breakfast. I think you're going to hear that theme during the course of today. So again, a round of applause for our team who did a tremendous job. Thank you. I'm joined on stage today by Doug Vandevelde, our Chief Growth Officer, Bruce Brown, our Chief Customer Officer, and Dave McKinstry, our Chief Financial Officer. Our business and our brands have been part of all of your lives. We know that. Now let's fast forward to today, and we're going to unpack for you who we are, the unique opportunity that lies ahead of us, and how we're positioned to deliver against that opportunity. You're going to hear from us what's very different about how we're operating, how we're focused and integrated, and how we're investing for today and tomorrow. You'll also hear how excited we are about the cereal category. a very special category indeed. Now, we thought we'd start the morning with a quick look back at how WK came to life. Why don't we roll a quick video? We'll be right back.

Turn in the page. We are moving forward to write the next chapter of our great history, and we're going to do it together. We are WK.

Let's start by looking at our foundation and our opportunity as an independent company. We are in a unique position to leverage the foundation of our business. We have a leading position in a large and relevant category and a powerful portfolio to match. We call ourselves a 118-year-old startup because of our profound heritage and the singular attitude, energy, hunger, and unwavering belief that this business can and will do great things. This strong foundation will allow us to again win in cereal. Today, Doug, Bruce, Dave, and I will walk you through our strategy and how we're already executing against it. In our short time as an independent company, we're operating differently and we're starting to see those results. We're more focused. Everything is about cereal. We're more integrated. We're running one business with one P&L. And we're investing across our business, particularly to modernize our supply chain. We have the privilege to elevate this great business to new heights and to deliver significant margin improvement and attractive returns for our shareholders. Today, you will hear about our path and how we're going to get that done. But a quick reminder about who we are. We are a scaled $2.7 billion revenue business and a leading player in the US, Canada, and Caribbean. We have approximately 3,000 dedicated employees. We also have a direct sales force in the US and Canada with the same store coverage that existed pre-spend and a dedicated supply chain network. We have a deeply experienced management team who quickly identified our biggest opportunities as we designed our transformation. Let's take a closer look at that team. This is the WK leadership team, a highly talented group of leaders with a wide breadth of experience and deep knowledge and passion for our business. They have more than 180 years of combined Kellogg experience. They're talent magnets and are champions of culture, driving performance across our organization. And they are the ones who built the WK strategy. They are challenging the organization to think differently every day to unlock the full potential of our business. You will hear how we have reimagined each of our marketing, sales, and supply chain functions, and these are the leaders who knew what needed to be done and know how to do it. We are combining all of our experience with the energy of a startup to drive different outcomes. That's exactly what you're going to hear today. That's how we are doing things differently. Now let's take a look at our path to success. More than two years ago, we started exploring the idea of creating a standalone North American business. The spin logic became very clear. North American Cereal would be stronger as an independent company for a variety of reasons. It would have a dedicated team focused on a single business. The team would be integrated in a way that allowed for better visibility, decision-making, and agility. And we would have the balance sheet flexibility needed to invest, including investing in our supply chain. to make the business more reliable, agile, and profitable. As soon as the WK leadership team was named, we developed our strategy, then established the financial flexibility to execute the strategy, and built the organizations with the capabilities to win. Today, we're executing that strategy. While it can take some time, you can already see the benefits of doing things in what we like to call the WK way. Now let's take a look about how we're going to create value and the horizons over which we will do so. The first horizon is about building our foundation and optimizing this scale business. That is the horizon you're going to hear about today. We're already investing in the first horizon to drive much stronger business with a more reliable supply chain and stable top line, generating substantially more profit and cash flow. 500 basis points of margin expansion is indeed a unique opportunity and particularly when you're starting from a 9% EBITDA base. It's important to note that the 500 basis points of expanded margin is simply a mile marker, not a destination. We know that as we execute our first horizon, it's just the beginning. As we exit this horizon, we will have just started leveraging our transformed supply chain network, and we expect continued optimization to further expand margins. The second horizon, That's about growing beyond cereal, building on our iconic portfolio of brands, and further accelerating top-line growth. As we have said, we will be exploring inorganic growth like M&A, joint ventures, and the like during this horizon. But make no mistake, today we're focusing on horizon one, that is, optimizing our scaled business. So let's take a look at our category. There are many things that we know you already know about this great category, but I bet you there's some that you might not. For example, you know cereal is greater than a $10 billion category in North America, the number one breakfast choice for children, and number two for adults. And you know that WK Kellogg Co. has a leading position within the category. We're the number one largest seller of cereal in Canada and the Caribbean, and number two in the US. What you may not know is that cereal drives 50 million purchase decisions, just 50 million every single week. And basket sizes for our customers are almost 150% bigger when cereal is purchased. You have heard that cereal is a top five category, but it's also the largest warehouse delivered category. Add to that, it's the only one in the top that provides positive nutrition. You can see why cereal is an extremely important category for customers and our consumers. Now let's take a look at some other benefits of our foods. When you understand the credentials of cereal, It's easy to see why it's so large, durable, and strategically relevant. Families can and have relied on cereal to deliver the nutrients many people don't get enough of. You already know that cereal is low-fat, low-calorie, and nutrient-dense. But did you know cereal eaters get more vitamin D, more iron, more calcium, folate, whole grain, more fiber than non-cereal eaters? These are important nutrients that most people do not get enough of. Do you know that cereal eaters get less of sodium and saturated fat than non-cereal eaters? These are the nutrients we all get too much of. And importantly, cereal represents only 5% of the added sugar in the average daily diet. And multiple studies have shown that cereal eaters consume the same amount of sugar as non-cereal eaters. And if that wasn't enough, half of all milk is consumed with cereal. We know cereal is convenient and accessible Did you know it costs less than a dollar for a bowl of cereal and milk and fruit? Which is one of the many reasons it performs well when consumers are under pressure. Cereal's versatile. 25% of our sales are outside of the breakfast occasion. So when you combine the nutrition credentials with affordability, versatility, and convenience, you can see why cereal has been so durable for so long. Now, let's take a closer look at our strategy. As we shared with you at Investor Day and during our Q4 earnings call, we have three key priorities on which our entire organization is focused. First, we're integrating our commercial plan to win in serial. Second, we're modernizing our supply chain. And third, we're unleashing an energized and winning culture. Executing on these priorities would result in outsized margin growth, a stable top line, and meaningful cash flow improvement, creating value for our stakeholders. Our strategy is clear. We know when a strategy is understood by our teams, it drives even better execution. Critical to that execution is the way we're organized. This is one of the many reasons to believe we are one integrated organization. If you take a step back, the key parts of our business have been run separately in the past, and appropriately so when part of a global company focused on snacks, frozen foods, and other categories. Before the spin, The WK cereal business was separated across five different businesses that included multiple categories. Today, we have one integrated cereal business, bringing together U.S. retail, away from home, Canada, the Caribbean, and even Kashi and Bear Naked were operated separately. Now that these businesses are integrated, we have much better visibility and can already see its positive impact on decision-making as well as our investments. Everything is in service of Cereal, one business, one P&L. Not what's best for one part of the business, but what's best for our entire enterprise. The same could be said about our functions. Within WK, we have integrated sales, marketing, and supply chain functions, and the intentional end-to-end connectivity across these functions is allowing for better visibility and execution. We can go from idea to shelf much faster today than we could in the past. Previously, our functions served multiple categories, which would naturally create more complexity, competing priorities, and led to the deprioritization of serial. Now, across the board, our functions are dedicated and focused only on serial, under one aligned team and one performance plan. Now, let's take a look at our strategy that these teams are now executing. Integration is a huge enabler for us. It's the unlock that allows us to execute the first pillar of our strategy driving an integrated commercial plan to win. This priority brings together our demand-creating infrastructure under the leadership of one commercial team. Perhaps the most tangible example of this focus is our sales force. Every time they talk to a retailer or walk into a store, they sell cereal and only cereal. They are driving the category and amplifying our iconic brands and stores. And you'll hear more today about how our commercial plan is enabled by our supply chain. We are an integrated, connected team, and our priorities are end to end across the enterprise. Doug and Bruce will take you through this priority in much more detail in a moment. The second strategic priority is modernizing our supply chain, which is the centerpiece of our 500 basis point margin improvement plan. And we're confident we will capture that opportunity. This strategy can be broken into two parts, investing capital and building capability. In the short time we have been an independent company, the team has already made progress, and working with our people and our communities to drive improved economics, and as you heard on our Q4 call, we significantly improved both customer service and overall equipment effectiveness, or OEE. Dave will take you through that priority in a moment. Underpinning everything. is our strategy priority to unleash WK's winning culture, guided by our core beliefs and behaviors. Importantly, these beliefs and behaviors have been created with the input from every part of our organization, every function, every location, every manufacturing facility. Our focus strategy in everything we do will be supported by our people, truly our competitive advantage. We have a bold, entrepreneurial, and connected employee base that is hungry and ready to win and who passionately believe in our future. We are already getting after it the WK way. A big part of building our culture is winning with purpose. Let me introduce our sustainable business platform. Mr. Kellogg and we know that doing good for people and planet can and should also be good for business. You will hear from Bruce specific examples of how this program drives our commercial agenda. Just last week, we launched Feeding Happiness, our commitment to helping families, kids, and communities be healthier, happier together. And we will do this through the foods we make, the way we make them, and how we share them with the world. First, we're going to make eating well easy. That means increasing access to foods, providing positive nutrients and ingredients, making good food and ensuring it's in the reach of those who need it. Second, we will help millions of kids be their best through sports, play, and learning. This comes to life through our program called Mission Tiger, an initiative that we've already brought to life with customers and consumers. And finally, we'll better our communities by investing and engaging the communities where we live and work. yet another example of being more focused and a personal company, we can make a big impact. As you can see on this slide, we believe WK is a compelling investment opportunity. We're building a strong foundation, starting with a 118-year-old history and a portfolio of iconic brands, operating in a large and strategically relevant category. We're already seeing the benefits of our serial-focused sales force and integrated commercial plan to win which will help us deliver on our financial commitments. Our actions to modernize our supply chain will help us capture the margin opportunity as well as enable our top line. And we will be positioned to generate significant cash flow leading to attractive returns for our shareholders. With that, I'm going to turn it over to Doug Vandevelde who will share more about our integrated commercial plan to win. Doug is a longtime veteran of the Kellogg Company, where he spent the last 25 years in a variety of important leadership positions, most recently leading the U.S. cereal business. No one knows our brands and business better than he does, and I'm thrilled to be partnering with Doug at WK. Doug, over to you.

Thanks, Gary, and good morning, everyone. We are really excited to be here today. Our integrated commercial plan to win brings together our demand creating infrastructure with our in-store activation. At WK, this priority allows us to operate more seamlessly end-to-end with greater agility, driving stable top line and expanding margins. Bruce and I will walk you through each of the elements and how we will build on our portfolio of iconic brands, integrate the team to drive strategy and execution, Launch our new marketing model and strong innovation plan. Activate with a sales force dedicated only to cereal and enable all of that with a reliable supply chain. So the first element is building on our portfolio of iconic brands. Our core six are relevant brands that everyone knows. They represent approximately 70% of our business and hold leading share positions. These brands appeal across cohorts and needs. There's something for everyone, including taste, nutrition, and fun. Our next core is also an important and profitable element of our portfolio, which represents approximately 15% of our business and includes brands like Corn Flakes and Vector in Canada. Then there is Kashi and Bare Naked, which have been leading brands within the natural and organic segment. We like to say they are under new management now, fully integrated into WK with a sole focus on cereal, and both have the potential to unlock future growth. And as WK Kellogg Co., we will amplify the power of these brands through our new marketing model and dedicated sales force. In addition, our unmatched team of characters plays a hugely important role in bringing our brands to life. Tony the Tiger, Toucan Sam, Snap Crackle Pop, and others are all well-known, cherished, and unmistakably Kelloggs. You will see today how our characters are driving engagement with consumers and how they are just as relevant today as they have always been. Now let's get into how we will leverage the power of our brands and characters through our strategy. Our commercial plan is centered on four key enablers. First, we have fully integrated our business and our teams to operate more seamlessly end to end. As a result, we have clear focus, better visibility to drive performance, and can respond in a more agile way. Second, through our new marketing model, we have a new approach and new capabilities to be able to maximize the reach of our brands and grow their relevance in today's digital world. Next, our dedicated sales force allows us to execute and amplify all of this with customers and shoppers. And finally, we are increasing our supply reliability, which allows us to strengthen plans with customers and better execute our commercial initiatives. are the four enablers that are the what's different, and that will allow us to drive top line stabilization. And when you combine this with the power of our iconic brands and strong innovation plan, you can see why we are confident we can deliver. Earlier, Gary touched on how we integrated from five businesses to one, and how we have better integration across our functions. In that same vein, growth marketing has moved from centers of excellence working on multiple categories to integrated teams across marketing innovation focused only on Cereal. Brand marketing, R&D innovation, revenue growth management, Omnicommerce, those teams are now all integrated. They have the same priorities and are using the same data to drive insights, which means we have better information from which to make our decisions. And we now have better end-to-end connection with sales and supply chain. Silos have been eliminated. We are one integrated team, making decisions together across the enterprise. And all of this allows for better execution. The next element of our integrated commercial plan to win is our new marketing model, which will help amplify the power of our brands, make us more effective and more efficient, and deliver a stable top line. First, we will leverage more multi-brand campaigns, where a number of brands can benefit from a unique insight and a single idea. More on that in a moment. Next, we are moving to a new media strategy and approach that enables us to better reach our target consumers. More digital, more social, more commerce-led, and all enabled by stronger data and analytics. And we have moved to a more integrated agency model. We now have one world-class partner with strong capabilities, and who has just announced a significant investment in AI, which we will leverage and benefit from. Finally, e-comm is 10% of our business, up from 5% pre-COVID and growing faster than the total business. We have a higher share online and have invested in data and analytics capability, which will help us continue to win in this growing channel. Driving these four elements with our integrated WK growth team will make us more effective, more agile, and more efficient. Now, let's take a closer look at our multi-brand approach. As you can see here, when we take a unifying insight across three or four of our brands and support that through one campaign, it drives overall portfolio effectiveness and efficiency. We have two of these in market now, our multicultural akiyaya, as well as our new value-driving occasion message cereal for dinner. We see strong incrementality in return, and both have the potential to drive the total category. Next. A great example of the second element of our new marketing model, Next Generation Media, is our recent collab with the University of Michigan, following their victory in the college football national championship game. In just three days, we went from idea to reality. When following the Wolverines' victory, we launched a Fruit Loops Go Blue national championship box, which completely sold out in 48 hours. More importantly, we generated significant media value from the coverage. Even Toucan Sam attended the National Championship Parade in Ann Arbor and received a victor's reception from fans chanting his name along the parade route. Toucan Sam! Toucan Sam! Demonstrating how very relevant our characters are today. This is just another example of how our increased agility is helping us bring our brands to life. Next. The area of omni-marketing is changing rapidly. E-commerce is growing. Retailer media and lower funnel digital conversion are becoming more important. And the blurring of online and offline sales is accelerating, all driven by more and more data. We have changed the way we operate here, integrating this team directly into the business and focusing them only on cereal. We are investing in new capability and new partnerships that can drive value for shoppers. You'll see that in our Breakfast for All promotion next month as we partner with the Silk and Tropicana brands. With these changes, we plan to drive outsized growth in Omni. And then we add to that a strong innovation plan. Let's look at our plan for the front half of 2024. We all know innovation is critical to the cereal category. It delivers consumer excitement, grows the basket, and drives points of distribution. We have a strong record of cereal innovation, and the team that developed those innovations is now part of WK. This plan has three elements. First, driving the premium segment. We are introducing new premium brands in Eat Your Mouth Off and Extra, which will join our premium launches from last year, Special K Zero and Special K High Protein. The premium segment in cereal is growing as consumers are showing their willingness to pay more for value-added benefits. More on that in a moment. The next element of our innovation is expanding the appeal of our existing brands with brand extensions on Kashi, Frosted Flakes, Raisin Bran, and Special K. And finally, we continue to expand in occasions with the launch of mini snacks. Let's take a closer look at this innovation plan and how we are operating differently. The launch of Eat Your Mouth Off is a great example. This idea came from a small, passionate group of disruptors within our team. We went from idea to launch within a year. Our integration across marketing, R&D, supply chain, and sales was very evident, both in our speed to market and the uniqueness of the brand design and food offering. Eat Your Mouth Off is the first cereal with 22 grams of plant-based protein and has zero sugar. It's designed to appeal to a new cereal audience with different nutritional needs, and again, reinforcing our commitment to help grow the category. The other thing that is different is how we launch the brand. We leverage our new marketing model to reach the right consumer audience. More data, better targeting, and the right message for the audience. Our social media campaigns are different, more edgy, and use influencers to help convey our message. So we launched a food that's different under a new brand and launched that brand in an efficient and relevant way. You can see how we are operating differently within WK. And then there is Extra, our taste premium brand, which is a great example of a legacy European brand from Kellogg that we have access to as WK and have launched into the North American market. And this food is delicious. Next, we're committed to reigniting Kashi. The brand is under new management and part of our integrated cereal team for the first time. We are launching Smoothie Loops, which expands the Kashi brand appeal across cohorts. We've developed a food which is delicious, all natural product designed for the whole family. And we're just getting started. And finally, mini snacks. Approximately 25% of cereal is eaten outside of breakfast, and we are expanding our cereal snacking range with mini snacks, adding to our portfolio of cereal snacking, which we launched in 2019. Snacking is a highly incremental occasion for cereal. We are driving it with innovation and marketing, and again, reinforcing our intent to help grow the category. So I've covered two of the key elements of what's different, integrated teams and our new marketing model. I'll now hand it over to Bruce to walk you through the next two enablers, our dedicated sales force and a modernized supply chain. Bruce is another longtime veteran of Kellogg. also with more than 25 years of experience. Bruce is a true expert in our sales organization and our customer strategy, so there's really no one better equipped to lead our integrated sales organization than Bruce. Bruce, over to you.

Hey, thanks, Doug, and good morning, everybody. It's great to be here. I'll start with a reminder of how our sales organization is enabled to win in serial. This slide illustrates how our sales force will drive increased granular focus. We have moved from a team that was responsible for multiple categories to a sales force dedicated only to cereal in our iconic brands, enabling us to operate very differently. We believe this focus and simplification will enable us to be true cereal experts. As we've shared, our dedicated sales team has a singular focus on winning in cereal. With this, we are driving increased customer engagement. We are completely integrated with marketing and supply chain, and we are amplifying the in-store and online presence of our brands through enhanced execution. In fact, we are already seeing how much easier it is to go from idea to execution because of the business integrated end-to-end. Let me start with customer engagement. When you think about what's different about how we engage with customers at WK, it's really our ability to focus. In our meetings with customers, we now only talk about cereal, leading more in-depth conversations on what we can do to help grow this important category and help our retailers win. This drives better joint business planning across our customer base and allows us to better understand and meet their needs. This is different. We are building on the great heritage relationships of Kellogg Sales Organization with deeper customer engagement that enables better execution in market. Next, you'll recall Gary touched on feeding happiness in Mission Tiger. I'll show you how this program is driving our business through engagement with customers. But first, here's a reminder of the program. Tonian is on a mission to help kids be their best through sports. So he started this program called Mission Tiger. We have helped schools buy uniforms, volleyballs, gym equipment, and more. To date, we have helped millions of kids in thousands of schools. That is real impact in the marketplace. Next, let's take a look at how it drives partnerships with our customer and comes to life in store. Our retailer partners have embraced Mission Tiger to positive impact our shared communities. You can see on this slide an example of how we activate this program in store, delivering benefits to our business, our customers, and our communities. Not only are retailers executing the program in store, in many cases, they are extending the reach of the program by making matching contributions to double the impact for the youth in the communities we both serve. It is a great example of how utilizing our most iconic character to generate excitement and goodwill in communities by helping kids be their best. As Gary said, this is the WK way. Another example of how we are partnering with customers is to drive our integrated commercial plan that Doug spoke to. It is our recent holiday activation in Canada. We showcased our Rice Krispies and Crispix brands utilizing treat making as the centerpiece for our in-store display activation, resulting in the number one category seasonal execution. WK delivered a 40% market share in the Canadian market in the month of December, 40%, partially driven by this exceptional work. The examples I just shared highlight our intense focus on executing with excellence. Every day, our sales force is focused on driving improved assortment improved merchandising, and the right pricing and shopper solutions. What is different about WK is the level of detail we can drive across all our channels and customers to deliver on the joint business plans driving WK in category growth due to our singular focus in prioritization. With the innovation Doug featured, we'll broaden our assortment and market. With the improved reliability of our supply chain, will improve our merchandising execution. With our price-packed architecture strategy, we will provide the right product in the right place at the right price. And with our deeper insights, we will provide shelf solutions that drive category conversion and growth. Let's take a look at how we are already making progress on assortment. Back in Investor Day in August, We showed how our total points of distribution lagged the category compared to 2019. As of Q2, we indexed at 91% of the 2019 level. Now, in Q4, we've raised that index to 95%. We have realized some improvement, particularly on our core brands, and we still have opportunity to further improve. As Gary shared, there are things you already know about the cereal category. For example, number one food choice for breakfast, and it's the third largest center store food category. But did you also know cereal has the highest level of unit lift when on display versus other top grocery categories? This is one of the reasons it's critical for category and retailers on why it's so important to continue to drive in-store merchandising. While we have recovered display in some channels, we continue to have opportunities in others. That will be enabled by our supply chain. Finally, as we've said, supply chain reliability is critical to enabling improved in-market execution. One way we measure supply chain reliability is our customer service. You can see the impact of a focused WK team making already. In Q4, we achieved the highest level of customer service since March of 2020. You can see how these pieces of our strategy are coming together to unlock our opportunity. Next, Dave McKinstry will walk you through more about how we will modernize our supply chain. Dave is a 13-year Kellogg veteran and has deep experience in finance. He previously held many roles, including CFO of our Kellogg snack-based business, and most recently led integrated planning for the entire Kellogg North American business. Dave, over to you.

Thank you, Bruce. I'm very excited to be here today and bring to life for you our progress on our supply chain modernization priority and do a financial review. Let's start with our supply chain. As Gary mentioned, our second strategic priority to modernize our supply chain can be broken down into two parts. First, we're making capital investments. We're moving from maintaining to modernizing our supply chain, including our manufacturing facilities. Second, every day we're optimizing our ways of working so that our plants can operate more efficiently. We're deploying new tools and building capabilities to enable high-performing teams, which drives better execution. As we make these investments and build capabilities, we will consolidate the manufacturing network, moving production to our lowest cost, most efficient facilities. This will drive our margin improvement plan and is a catalyst for top line stability. Let's take a look in more detail. At Investor Day, we showed this slide. It outlines the cost and efficiency dynamics within our manufacturing network. As shown on the left-hand side of the slide, we have a significant disparity between our lowest cost and highest cost facilities. approximately 50% factory expense cost per kilo. The chart on the right shows that we also have an approximately 20% differential in operating efficiency from our most efficient to least efficient facility. This frames our opportunity and gives us confidence that we can realize a significant margin improvement. To capture this opportunity, there's two key elements, as I mentioned previously. We're making and will continue to make capital investments in a variety of places, including new manufacturing technology, automation of our manufacturing processes, and enhancement of our digital capabilities. Over the next two years, we'll invest $450 to $500 million to modernize our supply chain. We'll share more details on that later this year. The second element is building capabilities. This is where we invest in our people. We're focused on enhancing capabilities by enabling better insights through data and analytics, deploying new tools, and providing increased training. This will better equip our employees to operate more effectively. To be clear, we're not waiting, and we've already taken actions. A recent example can be seen through the way we partnered with our Battle Creek plant and union, the city of Battle Creek and the state of Michigan, to unlock a solution where our business, our people, and our community won. We received incentives from the state of Michigan and reached an agreement to implement Kellogg Integrated Work Systems, or KIWS, in the plan. These work systems have already been deployed in our most efficient facilities. And I'll go further in depth on those in just a moment. This is a good example of the way we're going to work with our people and our communities to drive our business forward and improve productivity, efficiency, and engagement. Now, let's take a look at our capital investments. There are three areas we've already made progress. The first is the expansion of our Belleville, Ontario plant, which we've talked about previously. We've expanded the building footprint and will add a new production line at this plant, increasing production at one of our lowest cost, most efficient facilities. The second part of our investment is focused on gaining enhanced output from existing lines to enable network consolidation. For example, we are consolidating our Shred platform that produces mini-wheats, moving from three lines in three different facilities to two lines in two of our lowest cost, most efficient facilities. And the third element focuses on digital enablement. PacLine analytics have been expanded across our network and provide greater insights and visibility to increase productivity. Next, let's take a closer look at how we have already begun building capabilities, which we spoke about at Investor Day back in August. We have made significant progress since then, creating a framework to allow our manufacturing employees to operate more effectively. KIWS creates a standard for work that's integrated across our supply chain. Think about this as a blueprint for how we get work done. In addition to enabling work systems, we are driving engagement and improving our culture by fostering connection with our people who are our most valuable assets. The WK Academy is a new training delivery vehicle. The all-encompassing program will extend from how to operate manufacturing equipment to how to be a better effective leader and coach. Combined, these efforts will create high-performing teams and drive continuous improvement. As Gary said earlier, this is the WK way. We've already started and generated significant benefits in our first quarter as an independent company. This slide shows the fourth quarter results at one of our facilities. We created a focus program aimed to unlock capacity and make the facility more efficient. We delivered significant efficiency gains in a very short period of time. We increased our processing OEE 10 points and reduced packing changeovers 30%. This led to a greater than 10% increase in pounds packed per day, which resulted in more than 50 days of incremental capacity per year. These improvements contributed to the margin improvement we spoke about on our Q4 call. Importantly, we're making these improvements sustainable through our KIWS framework and through utilizing the WK Academy, we can deploy this across our plant and across the network. So you can see how our actions fit together to deliver on our goals. We make capital investments to expand lowest cost facilities. We build our capabilities to drive better performance on existing assets, making them more efficient. We consolidate the network utilizing the lowest cost, most efficient facilities, and the outcome is a modernized supply chain that is more reliable, resilient, agile, and produces at a significantly lower cost. As Gary outlined earlier, we're on our path. I've given you a sense of the actions we've already taken, and we will continue to update you as we move forward. It will take time, but we know when we invest in our supply chain, we unlock greater efficiency and drive enhanced margins, which is a centerpiece of our financial model. Let's go into that model. This slide summarizes our financial priorities. A stable top line, our investment in realigning our supply chain network, overall improvements in operating efficiency and reliability, all of which should result in significant EBITDA growth and increasing cash flow. I'll overview how the priorities we took you through today deliver this profile. Now, let's take a deeper dive into this model. First, our stable top line is a result of our durable category, iconic brands, and how we better position Day as an integrated business, our focused sales force, which is enabled by more reliable supply. Second, we plan to drive more efficient and reliable operations through both our supply chain and commercial organizations. I covered how we'll invest capital and build capabilities to drive our business forward, and you also heard how our commercial organization is leveraging our new marketing model to drive higher ROI. A stable top line, combined with improved operations will lead to increased cash flows, which we can then use to pay down debt, advance our strategic priorities, and pay an attractive dividend as demonstrated through our Q4 and Q1 declarations. This is how our model works. Next, we'll overview how we capture our margin opportunity. You recall at Investor Day, we said that WK was an approximately 9% EBITDA margin business. We also told you that we'd expand margins approximately 500 basis points as we exit 2026. More in line with our mid-cap center of store peers. This expansion will be enabled by the $450 to $500 million investment I just mentioned. Our journey has already begun. We've worked diligently to execute with improved operational discipline with the tools I spoke about to increase margins to 9.4% in a very short amount of time. I spoke moments ago about the role our supply chain modernization will play, which is the centerpiece of our expansion path. But beyond that, we'll focus on three other key elements. First, revenue growth management. This will be focused on premium innovation, which Doug spoke about, promotional effectiveness, and price pack architecture. Each of these elements will be diligently executed to drive both net sales and margin. Next, our new marketing model, which Doug outlined, drives improved ROI, resulting in increased brand building effectiveness. And finally, a disciplined overhead structure, focusing resources to support our key strategic and executional opportunities, as well as a focused and planned TSA exit, centered on a fit-for-purpose IT infrastructure and warehouse footprint. Finally, let's take a look at our capital allocation strategy. We'll take a disciplined approach to capital, focusing first on high ROI investment areas, returning cash to shareholders, and maintaining the right amount of financial flexibility. As I mentioned, in the near term, our capital allocation will be focused on high ROI investments to unlock the margin expansion opportunity. Next, we'll pay a dividend to our shareholders in line with the amounts we've already declared. Additionally, as our margins increase, driving improved cash flow, we will have an opportunity to increase cash return to shareholders. And last, as margin enhancement opportunities come to life, we'll rapidly increase cash flow and target ongoing debt levels at approximately 2.5 times EBITA, which will allow for strategic flexibility. With that, I'll hand it back to Gary for some closing remarks before we open it up to your questions.

Thank you, Dave. Thank you, Bruce. Thank you, Doug. As we wrap up, we want to remind you about how we're operating differently. We took you through our commercial plan to win, which included how we integrate teams, our new marketing model, our dedicated sales force, our improved supply. We took you through how we're investing in capital and we're building capabilities in our supply chain as we modernize our supply chain, which is the centerpiece of our enhanced margin program. And throughout the presentation, you heard how we're operating differently, what we call the WK way. Now, I hope you can see that when you bring all these elements together, it leads to improved outcomes and value creation. Thank you for joining us this morning. I think we have time for a few questions before we head to the breakout session.

Thank you. As I think about over the years, we've heard a lot of optimism from cereal manufacturers based on whether it's adding oats or organic varieties or different better for you or premium or moving cereal outside breakfast. You're kind of leaning in a little bit toward the premium side with some of your, I think, new products. And I think you've talked about moving cereal outside breakfast. I'm still a little unsure what's different this time around. It's been 20 years of kind of serial being, I think more than sluggish, really down on average as a category. And I'm just curious what you think you've uncovered, if there's certain secret sauce, if there's just better execution needed that will allow you to differentiate from the past, I guess.

When you think about this, Ken, thanks for the question and good morning. When you think about this category, I don't think anybody can remember a time when you didn't have 70 feet of cereal boxes in your grocery store. It's durable, it's big, it's important, it always has been, and our sense is it always will be. Fair question of what's going to be different going forward. I think we're different. Everything we're doing is different. If you take a look back and you look at the trajectory of this category, it's been the last decade or so where it performed in the trajectory that you had talked about. That was a period of time where the Kellogg Company deprioritized cereal. We've said it. We've said it publicly. And it made perfect sense. We were in those rooms when the company was shifting towards snacking to emerging markets, expanding into white spaces. You have to make decisions about capital. Capital is about resource deployment, and you have to make those decisions wisely. Well, over time, when you're not prioritizing a business, things happen. We're now back in the game. It's the reason why we did the spin. It was the underlying logic and rationale for the spin. How do you take the original company, the company, the founder that created this category, and all we're gonna be doing is to be thinking about and servicing this category. We're doing more than just premium. We're doing everything differently. If you think about it and you zoom out about what we do for a living, we manufacture, we sell, we distribute cereal. We are transforming marketing, sales, and supply chain. There's not a piece of this organization that won't be changed. Now at the same time, we respect the legacy of the business, so we inherit all these wonderful things about the Kellogg Company. That's why we call ourselves a 118-year-old startup. So I would not underestimate the power of integration. When you have five separate businesses that are running multiple categories, And now they're all together looking at one category. You could scale up big ideas. I think that's intuitive. You could find efficiencies across the organization. And I would please ask you not to underestimate the power of this workforce, the startup mentality that we have. These are people who believe in this category. They had great careers at the Kellogg Company, would have had great careers at Kelanova, and chose to be on this journey. So I would suggest to you almost everything's changing.

other than the durable important nature of the cereal category thank you you've talked a lot back at the analyst day and then again today about the power of a dedicated Salesforce I was hoping Bruce maybe you could take us through maybe bring it to life for us a little bit more maybe in the old model a specific example of when the organization tried to do something and not having a dedicated sales force caused a lot of friction. You were unable to get it done in the right timeframe, or with the right customer, or what have you, and how that changes now. Just maybe something more specific, just so we can get a sense of how that really actually brings it to life. Because I do sense that's a major unlock, potentially, and I want to get a better sense for it. Thank you.

And it is an unlock, and it's a place that we're invested in, in a disproportionate way as we've built the organization. And understand, when you listen to Bruce, you're listening to someone who knows more about sales than just about anybody. So, Bruce, over to you. Yeah.

So, you know, a specific example that we just went through was our FMI engagements, if you think about it. Now, if you folks are familiar with that, that's when we go to our function, much like this, and we get the opportunity to speed date and meet with the top 25 grocery retailers in the industry over three days. Historically, after we've done that, we had a 45-minute meeting that I would try to cover engagements on six categories. So you were at a very low level of depth in solving solutions for retailers, and many of the engagements then ended up being discussions on whether it be high-level supply, inflationary pressures, high-level macro things. This year, as we did that, I still have my 45-minute meeting. I brought Doug along with me, which we'd never be able to do in the past because we couldn't get to that kind of depth on six different categories. So Doug and I are engaging with the leadership of the top 25 grocery retailers on discussing what we can do on their cereal business to drive growth for that 45 minutes. That's an example of the engagement side and the focus on how we drive through. We play that all the way through the organization from a retail standpoint with an individual in store. That individual in store, if let's say we were doing back to school drive on the cereal business, Well, they would need to be doing back-to-school drive on a cereal business. They'd also need to be doing back-to-school drive on a snacking business to make sure that lunchbox was covered. That separation and prioritization ends up being a lack of focus to drive the execution on back-to-school for our cereal. So those are two broad-based examples, but that's how you see the energy start going in the engagement, be it a different depth with our customers.

Thanks very much. That's all the time we have. Let's take it to the breakout. And please join me once again in thanking Kellogg for a great