WK Kellogg Co

Thanks, John. And good morning, everyone, and thank you for being here. Hopefully you had a chance to enjoy our cereal at breakfast this morning. It is our intention to start a great day for everybody here this morning, okay? That's our goal, and I'm pretty sure we'll be able to accomplish that. I'm joined on stage by Doug Vandevelde, our Chief Growth Officer, Sherry Bryce, our Chief Supply Chain Officer, and Dave McKinstry, our CFO. Before we get started, I'll remind you that our remarks today include forward-looking statements that reflect our current views and our assumptions. The slide lists factors that could cause our future results to be different than our current estimates. So today, we're going to unpack for you our unique value-creating strategy. You will hear about how we are delivering today during our first Strategic Horizon while also building for tomorrow to achieve our aspirations for our second horizon. Now let's start with a recap of who we are because we are a relatively new company. We are a scale North American cereal business with a number of the most iconic brands in the consumer products arena like Frosted Flakes, Special K, and Kashi, just to name a few. Our brands are instantly recognizable, and it's not an exaggeration to say everyone knows our chief mascot, Tony the Tiger, and we saw a lot of you taking pictures with Tony this morning. Through these iconic brands and characters, we generated adjusted net sales of $2.7 billion in 2024, and we hold leading market positions in the US, Canada, and the Caribbean in this durable, large, and important category. And as important, this is the category our founder created. In fact, today is our birthday as Kellogg Company was founded on this day 119 years ago. Thank you for that, and I think that is worth celebrating. We showed this slide last year, and it's as relevant today as it was then. As a reminder, three years ago, Kellogg's started exploring the idea of creating a standalone North American cereal company. The spin logic to us was very clear. North American cereal would be a stronger company if it were independent. It would have a dedicated team focused only on serial that would be integrated in a way that allowed for better visibility, decision making, and agility. The team would develop a fit for purpose strategy to drive outsized margin growth while maintaining a stable top line, the result of which would be a unique value proposition. And it would have the balance sheet flexibility needed to invest in that strategy, including investing our supply chain to make the business more reliable, agile and profitable. Today, we're executing on our strategy, delivering results, and we are firmly on our path. You're also going to see a new mile marker on our path. we're making significant progress separating from Calenova, a major undertaking that requires investment and focus from the entire organization. We expect to have that in our rearview mirror by mid-year. Now, a lot of you know we have been laser focused on three key priorities across our organization. First, we developed an integrated commercial plan to win. Second, we're modernizing our supply chain and third, we are unleashing an energized and winning culture. In 2024, we made significant progress executing against each of these priorities. Doug and Sherry, in a moment, we'll take you through our integrated commercial plan and our supply chain modernization. Let me unpack for you our third strategic priority, unleashing an energized and winning culture. It's safe to say it underpins everything we do. And we were very intentional about making this a strategic priority. We did this because our beliefs and behaviors shape how we operate. We affectionately call our culture the WK way. It's a culture that starts with being more personal and building trust. As you see on the slide, it frees everyone up to create and act boldly. In other words, our people are expected to speak their minds, think differently, and move faster. And it expands everyone's impact as our make it better mindset pushes each and every one of us to act beyond individual job descriptions. And finally, we win with purpose. Every day, we are focused on driving the right outcomes for our business. Our culture is as special and unique as our brands and characters. And best of all, it's only the beginning. I hope you could see that our culture is profoundly important to us. We can already see how it's driving better results. And indeed, culture does eat strategy for breakfast. And consequently, we believe we're the ones to serve it up. As we discuss our progress and aspirations, the theme you will hear is how we're delivering today while we're also building for tomorrow. Let's first review how we're delivering today. We call it Investor Day. We talked about our strategy in two distinct horizons. The strategy in our first horizon is about optimizing our scaled serial business, where we drive outsized improvements to our margins while maintaining a stable top line. Delivering today is about how we're executing on that very first horizon. Now, let me explain what we're doing. The slide tells you in a very simplified way what we're doing and what we knew we needed to do to optimize Serial. It starts with maintaining a stable top line and improving our profitability. Notably, we did this while transforming marketing, supply chain, and sales. Speaking of transforming sales, we successfully stood up a new, direct, dedicated sales force focused only on Serial. We're also transforming and modernizing our supply chain, which is the centerpiece of our margin improvement plan. And we're investing to separate Kalanova, becoming a fully independent organization. You'll hear more about that in a moment. Now let's walk through each one of these areas. Our near-term financial model is to maintain a stable top line and drive margin growth. We delivered that in 2024. Dave will take you through the details, but overall, we're very pleased with our financial delivery in 2024, particularly our adjusted EBITDA growth of 6.6%, which is above the top end of the guidance range we raised earlier in the year. The second key element of how we're delivering today is through our direct dedicated Salesforce. We expect even better execution going forward as our Salesforce continues to mature. Relationships with store managers are growing and we're becoming a more reliable partner through our improved customer service. In 2025, we're just beginning to fully leverage our Salesforce. The third element of delivering today is modernizing our supply chain. Earlier this year or last year in Q2, we announced the details of our modernization plan, which includes investing in our more efficient plants and consolidating our manufacturing network. Importantly, at that time, we confirmed all of the economics that we provided at Investor Day in 2023, investing up to $500 million, expanding adjusted EBITDA margin by approximately 500 basis points as we exit 2026. Sherry will talk about this more in a moment. The fourth and final element of how we're delivering today is separating from Calanova and importantly, investing in our operating structure as we do so. We expect to complete the separation and exit our transition services by the middle of this year. Importantly, as we have been separating, we are creating scalable infrastructure along the way. In other words, we are exiting a different and stronger company once we complete this complex transition. First, we will have our own IT platform, including a dedicated ERP system. We also took the opportunity to transform our IT capabilities and select business driving areas, such as marketing and sales. And we established our own dedicated independent warehouse network. Again, the network has been designed to best fit the needs of our business, including changing the location of some of our sites to enhance product flow across the organization. That's a summary of how we're delivering today. We're delivering our financial goals, standing up our direct sales force, modernizing our supply chain, and separating from Kelanova to emerge a stronger company once we are fully independent. Now that we've talked about delivering today, let's talk a little bit more about building for tomorrow. While Horizon 1 focuses on optimizing serial, we said that in Horizon 2, our strategy would be to accelerate our top line while continuing to expand margins. You're hearing that today, we are focused on delivering Horizon 1. We know there is so much to play for, so much value to create as we do so. That said, as we do that, we're also laying the groundwork and preparing for Horizon 2, which is our tomorrow. Our today is about cereal and our tomorrow is about cereal and beyond cereal. Now let's start with the left-hand side of the slide. Cereal will always be foundational for WK. We are competitively advantaged in this scaled category that is so important to our consumers and to our retailers. We're positioned to win in cereal through our iconic brands and capabilities. We know we can't and we will not stand still. Consequently, our team has identified specific areas to accelerate top line through what we call our serial growth framework. And now on the right side of the slide, as you look at Horizon 2, we believe we're building today what we would call a platform for growth, which we can use to grow in both serial and beyond serial. Our platform for growth includes the following. First, we can leverage our iconic brands in categories beyond serial. Second, we have what we call scalable infrastructure. The IT systems and the independent warehouse system I talked about a moment ago, just to name a few. And third, we have expandable capabilities, which can translate to unlock new growth opportunities outside of serial. Let me explain just a bit more. Like I said, it starts with serial. So let's review our serial growth framework. Doug and his team developed this framework and are beginning to execute this new framework focuses on effectively driving our core business and delivering exciting innovation. Both of which are part of today's playbook, but it includes new and different ways to drive growth. What's even newer would be capitalizing on green shoots and expanding into under penetrated white spaces in the category. such as certain channels and formats. We're clear on what we need to do, we have the assets to do it, and we also have the team to execute. Doug will expand on this framework right after my remarks. Now let's look about how we can expand beyond serial. We believe what we're building today is unique for a company our size and creates a platform for which WK could grow. Three key things I want you to listen for. Iconic brands, Scalable infrastructure and expandable capabilities. First, we're starting with a strong foundation of our iconic brands and characters, which we know can travel. As many of you know, we have the rights to use these brands in numerous categories. Second, we're building scalable infrastructure, including the Salesforce and IT network we talked about and the distribution system. Add to that what we call expandable capabilities. WK's commercial skills, in fact, all of our skills, largely come from a global multi-category company. These large cap capabilities, if you will, are translatable and expandable outside of serial. We have invested in all three of these areas to enable growth into the future. And while today we're focused on delivering our first horizon with outsized near-term commitments during that horizon, We're also preparing for the future and ensuring we have a foundation that enables growth. And so that brings us back to our strategic horizons. Dave is going to talk more about this, but you can see that our value creation path evolves over time. We have discussed the significant investments we're making in 25 and 26 to modernize our supply chain. As we realize the returns from those investments, it fuels investments to drive accelerated top-line growth with Serial and beyond Serial, all of which makes us even more cash generative, creating financial flexibility. Our platform for growth will be largely complete in 2025, and we can see Horizon 2 getting closer to begin exploring potential inorganic opportunities. We do believe inorganic growth can play an important role in our future. This slide gives you a high level understanding of the criteria we might use to evaluate potential opportunities. It starts with ensuring we are leveraging our infrastructure and capabilities. We're a branded center of store, dry food company, and we would stay close to our core. That would allow us to leverage our scalable infrastructure and utilize those large cap capabilities to drive synergy and value. And we would focus on exploring brands or businesses that compliment our portfolio and accelerates our top line and profit growth. And importantly, we would maintain our balance sheet strength, being a good steward of cash. For us, inorganic growth could come in various forms. Lower investment alternatives, such as distribution, as we use our distribution network and Salesforce. Alternatively, we could license our brands into other categories. Perhaps our inorganic growth could come in the form of tuck-in M&A or joint ventures. I led corporate development for the Kellogg Company and saw the power of reshaping our portfolio through both of these frameworks. We share this with you today to give you a sense of where and how we can expand in the future. That said, rest assured, our focus right now is optimizing our serial business. As we have said, we have much to play for. Our first horizon drives so much value for us, and we remain focused to ensure we do exactly that. Now let me bring it all together to express why WK is a compelling investment opportunity. We're building on a strong foundation starting with a now 119 year history and a portfolio of iconic brands. And as a standalone company with a focused strategy, we're positioned to deliver. Our dedicated sales force, integrated commercial plan, and serial growth framework will help to deliver a stable top line. Our actions to modernize our supply chain will allow us to capture the margin opportunity that's in front of us, as well as drive reliable service for our retail partners. And we expect to be well positioned to generate significant cash flow, leading to attractive returns for our shareholders. Through our platform for growth, we can win in serial and prepare beyond serial. So 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 our chief growth officer. No one knows the cereal category. No one knows our brands better than Doug, and I'm excited to introduce you to him. Doug?

Thanks, Gary, and good morning, everyone. What you're going to hear today is that we've made a lot of progress in our first year, and we're just getting started. So let's jump in and review our category and our brands. Let's start with the fact that so many people love the cereal category. Cereal is a top choice for kids and adults for breakfast and one of the largest center store food categories for retailers, with total category sales north of $10 billion. In the U.S. alone, there are 50 million purchases of cereal every week. While the category has been largely stable over the past years, we see some tailwinds and some potential for future growth. To start, there are many benefits within cereal that go largely unrecognized. It all starts with the letter S. Cereals are more simple than you think. Most of our cereals start with a grain that we simply puff, toast, flake, or shred. to unlock the benefits. And many of our cereals start with only four ingredients. And then we add vitamins and minerals. Our biggest brand, Frosted Flakes, is one of these. More on that in a minute. P is for protein. Not many people think of protein when it comes to cereal. But in fact, a bowl of cereal with milk contains as much protein as an egg. And When you take our high-protein cereals like Special K with 10 grams of protein and you add a high-protein milk, you get over 20 grams of protein in one delicious bowl of cereal. Next, studies show that cereal is the number one source of fiber for kids. Awareness of fiber is growing due to its benefits to overall gut health. And the fact is, it's a key nutrient that most people don't get enough of. and that's where cereal comes in. Last year, our portfolio provided over 7 billion servings of fiber in the diet. Cereal also helps bring other healthy foods along. It's a top food eaten with fruit, and 90% of all cereal is consumed with milk, bringing along added nutrition. We know that consumers add nuts, seeds, or even protein powder, offering the ability to make cereal exactly what you want. N is for nutrients. Cereal eaters get more nutrients than non-cereal eaters, including important nutrients such as vitamin D, calcium, fiber, iron, and folate. Cereal eaters also get less sodium and less saturated fat. The last S, sugar, is often associated with cereals. But the facts are that cereal eaters get no more added sugar than people who don't eat cereal. And cereal contributes less than 5% of the added sugar in the diet. Less than 5%. And what could be more fitting than the acronym spoons? The way all of that nutrition and great taste gets from the bowl to your mouth to enjoy. This year, we intend to invest behind communicating these credentials to consumers to highlight the benefits of cereal. So as we think about how all of that can come to life, we have a strong portfolio of iconic brands that families have had in their homes and on their tables for decades. This portfolio delivers on the positive spoons attributes we just discussed, which we can leverage to drive our top line. For example, our biggest brand, Frosted Flakes, starts with a simple grit of corn that is toasted and frosted to deliver an unmistakable taste that consumers love. And Frosted Flakes are simple, with only four ingredients, plus the nourishing vitamins and minerals. No wonder there are 3.5 million units of Frosted Flakes purchased every week and growing. Frosted mini-wheats and raisin bran bring whole grains and fiber. Kashi delivers offerings that are natural and organic, as well as high in protein and fiber. We offer a portfolio of choice. And as we like to say, no matter who you are or what you do, there's a Kellogg's cereal that's right for you. So there's a lot to like about our category and our brands. Now, Taking a step back, as Gary mentioned, over the past year, we've been delivering today and building for tomorrow. We've made significant progress. We've completely transformed how we operate and manage the business. We integrated across functions and business units, creating a cohesive strategy to deliver on our number one priority of winning in serial. We launched a new marketing model, and stood up a dedicated sales force. And the team is executing better and better every day. We're continuing to invest in our capabilities and assets to position ourselves for future top line acceleration. And we're wasting no time. We are immediately leveraging our integrated commercial plan and capabilities in the near term. I'll first unpack how we've transformed the way we operate, and how we've enabled capabilities. And then I'll go through our framework to drive the top line growth today and over the long term. So at the core of our strategy is an integrated commercial capability which brings together sales, marketing, and supply chain, a key component of the SPIN rationale. Today, our team is entirely focused on serial. With a unified strategy and shared priorities, This cross-functional collaboration enables cohesive end-to-end planning, greater agility and speed, and resulting in improved execution. One of our key competitive advantages is our direct and dedicated sales force. As part of the SPIN, we designed the organization to maintain the same level of store coverage as pre-SPIN. Now we dedicate 100% of our focus to cereal, unlike before when our efforts were divided across six different categories. We have equipped our in-store teams with the data and insights to highlight the benefits of cereal to our retailers, whether it's demonstrating how cereal drives in-store traffic or optimizing merchandising to achieve improved sales lifts. And we are seeing the results. During the critical weeks of back to school, our Salesforce delivered display growth at key retailers, resulting in increased dollar and unit share. This will be year two for our Salesforce. Capabilities are maturing and relationships are strengthening. The execution of our Salesforce is a key enabler of our top line. Next, we created our new marketing model to improve our capability to deliver bold, big ideas and media that elevate the impact of our iconic brands. We've already seen promising results from this revamped approach with Frosted Flakes and Raisin Bran being the primary beneficiaries, both of which were among the fastest growing top 10 category brands in 2024. We know this model can be utilized across the portfolio, so let's take a moment to unpack how we are leveraging these new capabilities. First, we are scaling the use of multi-brand campaigns. Multi-brand has a strong impact, helping to boost visibility across the portfolio. As a result, the returns are stronger. In fact, multi-brand campaigns have nearly 2x the return of a single brand. Second, we're improving our brand relevance with bold, culture-first ideas. For example, we partnered with Minecraft and mega influencer MrBeast to drive our brands in an activation that delivered strong consumer engagement. Third, we have brought our social media team in-house, which has allowed us to be more agile and has expanded our customer reach with greater precision. And last, we are continuing to lean into Omni. We've integrated the Omni team, so items like optimizing search, click and collect, and improving alignment with our brick and mortar strategy are now getting more focus than ever before. And on top of that, we're continuing to build capabilities in data and leveraging AI to deliver targeted consumer experiences. Next, we are building our R&D capability. Within the cereal category, it all starts with the food. Our R&D team was well established coming out of the spin. Originating from the resource and expertise of a large cap multinational organization, they are equipped with a breadth of knowledge and capabilities, a key differentiator for a company our size. We know this category thrives on exciting innovation, and that's why we're continuing to invest in our people, capabilities, and infrastructure. In fact, most recently, we built a new state-of-the-art food development lab to strengthen our ability to innovate, ensuring we stay ahead of consumer trends, and continue to bring exciting innovation to the market with speed. Sherry will talk next about what we're doing to build and integrate our supply chain capability. But before that, let's transition to our serial growth framework that Gary touched on earlier. You can see on this slide, this framework encompasses effectively driving our core business, delivering exciting innovation, capitalizing on category green shoots, and expanding into new channels and formats. As Gary mentioned, there are new elements across all of these areas. We are beginning to execute this new framework in 2025 and will continue to leverage it over the medium term. I will take you through each of these now. First, one part of driving the core We conducted new research to deepen our understanding of what consumers love about cereal and to identify barriers around the category for lapsed users, benefits and barriers. It's been a insightful analysis which we like to refer to as cereal reappraisal. Cereal is convenient, it tastes great, it's satiating and nutritious, but most of all, it elicits feelings of joy. I saw a lot of joy on the faces in that breakfast room this morning. Let's take a look at how we leverage those insights by harnessing the power of joy through nostalgia with our latest ad campaign, Tastes Like Saturday Morning, and Frosted Flakes, They're Still Great. Please roll the video. Frosted Flakes, good. They're great. Great. Great.

You're still great, Grandpa.