通用磨坊 (GIS) 2009 Q4 法說會逐字稿

Okay, we're really going to start.

So, an official good morning, everybody.

for those of you that I haven't had a chance to meet, I'm Kris Wenker.

I want to welcome all of you that have joined us here in Boston and we're also welcoming everyone who is listening on the Webcast.

Here with me are General Mills Chairman and CEO, Ken Powell, our CFO Don Mulligan, Chris O'Leary who is Chief Operating Officer for our international businesses and Ian Friendly who is our Chief Operating Officer for US retail.

Before they begin, I need to remind you our presentation will include forward-looking statements that are based on management's current views and assumptions, and as the slide behind me illustrates, there are many factors that could cause our future results to be different than our estimates.

We issued a press release earlier this morning that contains our fourth quarter and 2009 fiscal year results.

You can find a copy of that press release on our website along with slides we'll be using in today's presentation and the last few slides will reconcile non-GAAP measures that we'll be referencing today, so with that, I will turn the meeting over to Ken Powell.

Okay, well, good morning to one and all.

Thank you, Kris.

We're very glad that you have been able to join us this morning to hear us talk about General Mills' strong performance in 2009 and our plans for continuing growth in 2010.

Four years ago, we established the model that you're looking at right now for our earnings growth.

It calls for low single digit growth in net sales, mid single digit growth in segment operating profit, and high single digit growth in earnings per share, and we believe that this earnings growth coupled with an attractive dividend yield should bring double digit returns to General Mills shareholders over time.

Now as we've said many times before, this model is not the absolute best we can do.

It is the level of growth we believe we should deliver to shareholders consistently and over time.

In good years we can exceed this model, and I'm very pleased to report that the fiscal 2009 was a very good year.

Today's press release summarizes our results, which exceeded our long term model, and the specific targets we set for 2009 back when the year began.

Net sales increased 8% to reach $14.7 billion.

Segment operating profits grew faster than sales, up double digits, to exceed $2.6 billion.

Earnings per share grew 2%.

This includes several items that affect the comparability of our results year-over-year.

Excluding those items, earnings per share totaled $3.98 in 2009, up 13% from comparable earnings of $3.52 per share in 2008.

Sales and earnings growth in 2009 includes some benefit from an extra week of this fiscal year but our results exceeded our growth target without the extra week and we believe this represents strong financial performance in a very challenging operating environment.

Our net sales growth in 2009 included contributions from pricing and mix, which we needed to partially offset higher input costs.

Pound volume contributed two points of net sales growth, and foreign currency translation reduced net sales growth by two percentage points.

Our sales growth was broad-based as you can see in this table.

Each of our US retail divisions recorded net sales increases including double digit gains for Small Planet Foods, for baking products, Yoplait, Pillsbury, and Big G cereal.

I should note that snacks growth would be higher if you exclude the divested Pop Secret business from both years, and Small Planets reported growth benefited from the Lara bar acquisition.

Net sales for our international segment also grew double digit on a constant currency basis, so our business portfolio is clearly showing its resilience in this challenging economic environment.

We faced significant input cost pressure in our business last year.

Our plan estimated 9% inflation, the highest rate that we've seen in many years, and our actual costs essentially matched that estimate.

I'm pleased to report that our Companywide focus on holistic margin management, or as we call it HMM, that focus enabled us to offset this cost pressure, and protect our gross margin in 2009.

On an as reported basis, gross margin was within 10 basis points of last year, and if you exclude several items that affect comparability of results year-over-year, gross margin rose modestly.

By protecting our margins, we generated the funds to increase consumer marketing support for our brands.

In 2009, our consumer marketing investment grew at a strong double digit rate, building on spending increases made in each of the past three years.

This reinvestment is fueling net sales growth and it supports value-added brands in an environment where lower priced retailer brands are getting increased attention.

We took actions during 2009 that strengthened our business portfolio.

We acquired Lara Bar, a leading fruit and nut based energy snack.

We sold our Pop Secret microwave popcorn business.

We exited two foodservice businesses, and we exited pasta and cheesebread businesses in Brazil, in order to focus our operations in that country on our Nature Valley and our Haagen Dazs brands.

We finished the year with strong performance in the final quarter.

Net sales grew 5%.

Segment operating profits were up double digit due primarily to lower input costs year-over-year.

Diluted earnings per share for the quarter were double last year's level, primarily due to a large swing in the mark-to-market valuation of commodity positions.

Excluding mark-to-market effects and the other items affecting comparability of results, our fourth quarter EPS would be up 18%, and remember these results once again reflect some benefit from the extra week.

Reported sales growth for the last quarter doesn't quite do justice to our real business momentum because foreign currency exchange and divestitures are dampening the number, but as you see in the press release, US retail sales grew 12% in the fourth quarter.

International net sales were also up 12% on a constant currency basis, and the bakeries and foodservice sales decline is moderated when you exclude results from divested businesses in both years.

We also continue to reinvest at strong levels in the fourth quarter with consumer marketing spending up 19% from the period.

We expect that investment to help sustain our top line momentum as we move into 2010.

Our business has generated strong cash flow in 2009 and we returned much of that cash to shareholders through share repurchase and increased dividends.

Annual dividends per share grew 10% in 2009, and on Monday of this week, we announced a 9% increase in the quarterly dividend rate to $0.47 per share, effective with the August 3rd payment.

We've stayed tightly focused on our business model and our long term growth goals and that's resulted in consistent superior performance.

Over the past three years, we've added $3 billion in sales, more than 500 million in operating profit, and we've grown our underlying earnings per share at a double digit compound rate.

This sustained financial performance stacks up very well relative to the results from our peer companies, and our goal is to build on this strong growth in 2010 and we think our chances of doing that are excellent.

The major food categories where we compete are growing, and at attractive rates.

Our leading brands are driving growth in our categories because they offer the nutrition, convenience, and value that today's consumers are looking for.

Our company-wide focus on holistic margin management is protecting our margins and our increased consumer marketing support is fueling net sales growth for our businesses.

So we're looking forward to telling you more about our progress and the plans we have for 2010, and here is the agenda for the rest of our time together this morning.

Ian Friendly will start us off with an update on the US retail business and then Chris O'Leary is going to talk about the growth plans for our international operation.

Don Mulligan will give you an update on bakeries and foodservice, and then summarize General Mills' financial targets for fiscal 2010 and I'll wrap up with a few comments on our over arching business strategies as we go into the New Year, and then we'll be happy to take some questions.

So with that, over to Ian.

Thanks, Ken, and good morning, everyone.

I'm happy to be here to update you on our 2009 performance and our plans to drive continuing growth for our categories and our brands in 2010.

General Mills US retail businesses just wrapped up a terrific year.

Sales were up 11%, crossing the $10 billion mark for the first time.

Profit growth was even stronger, up 12%, and even with significantly higher input costs and strong marketing spending behind our brands, we grew our operating margin by 30 basis points to 22%.

Our brands are one of our biggest assets and we continue to invest to keep them healthy and relevant.

Consumer marketing spending for US retail was up 19% in 2009.

Our total trade spending increased as well, but our programs were more efficient so trade costs per case declined for the fourth consecutive year.

We delivered great innovation in 2009.

We introduced 80 new items, including two new product lines, Savorings and Macaroni Grill, that are both off to a good start.

Our new introductions were highly incremental and margin accretive, consistent with our goal.

More than 5% of our 2009 sales came from products introduced in the past year.

We also improved the health attributes of our portfolio.

Since 2005, we've made health improvements on 45% of our US retail products.

Our product innovation and consumer marketing resulted in increased baseline or non-promoted sales across most of our key categories last year.

We're pleased with these gains because baselines are one of the best indicators of the underlying health of a business.

We drove strong growth across both measured and non-measured retail channels.

In the channels where we have data, our retail sales grew 7% overall last year.

Growth in non-measured channels was even stronger.

Our net sales to club store customers increased at a high single digit rate and our sales to drug and discount, dollar stores and the natural channel were all up at strong double digit rates.

So when we look at Nielsen data together with estimates of our performance in non-measured channels, we grew our aggregate dollar share in 2009.

That's due in part to the fact that our brands represent good value for consumers.

This slide shows the average non-promoted price per serving for a variety of our products, even before any reduction from merchandising, they are very affordable choices.

And as a result, our brands are growing, despite increased intentions to other brands in this environment.

In total, retailer brands represent 15% of sales in our category.

That's up from a year ago, but still well below the 19% of sales they hold in food and beverage categories across the store.

In fact, because our leading brands are driving growth for our retailers, we actually increased our distribution in 2009.

Our total points of distribution were up 2% for the year and that includes growth in the last quarter.

We finished the year with good momentum.

Net sales grew 12% in the fourth quarter including the benefit of the 53rd week, with growth across all divisions, and our operating profit grew even faster, as we recovered gross margin given up in last year's fourth quarter.

As we had projected, our merchandising levels were down in the final quarter from high prior year levels, but our baseline growth remains solid and we continue to reinvest at strong rates with marketing spending up 26% in the fourth quarter.

, We believe we can continue to lead growth for our brands and our categories in 2010.

We compete in growing, on trend categories with a terrific portfolio of brands.

We're driving growth for our retail partners across the grocery store, and I feel great about our product and marketing innovation plans for the New Year.

It certainly helps to compete in good categories, and we do.

Our categories are on trend with the health and value needs of today's consumers, and they deliver great taste and convenience.

Sales of our food categories grew about 4.5% in 2009 in measured channels alone, 50% faster than sales growth across food and beverage categories in total.

We compete in these categories with terrific brands, and we hold the number one or number two share position in all our key categories.

General Mills is driving growth across the store for our retail partners.

This slide shows the dollar share of the top 10 manufacturers across all food and beverage sales in the Nielsen-measured channels.

The list includes companies you know well, like Kraft, Kellogg's and Campbell.

General Mills' share of total food and beverage dollar sales is about 3.5%, but our share of total growth across all food and beverage categories last year was 5%.

We were the only top 10 manufacturer to grow our share of industry sales in 2009.

We lead growth in our categories and we plan to keep it up in 2010.

Our business model will remain the same.

We'll drive growth through innovation and brand building efforts, fueled by our continued committment to holistic margin management.

You'll see a greater focus from us on the inherent value our products offer.

It is something consumers care about and our portfolio delivers.

I think the game will be won in 2010 by those who can deliver good growth on the top line so that's where I'll focus most of my comments today.

Let me start with Big G.

2009 was nothing short of a fantastic year for our cereal business.

Net sales were up 11%.

Growth in measured channels was strong, resulting in a share gain of more than a point.

Our sales in non-measured channels grew nicely as well, including double digit growth in club, dollar, and drug and discount stores.

We delivered strong HMM innovation, resulting in margin gains and the number of households that buy our cereals increased by more than a point in 2009.

That bodes well for future growth.

The real key to our performance this year was baseline growth.

Consumers bought Cheerios, Lucky Charms and Fiber One at every day prices, not just when they were on sale.

Baseline sales grew 4% in 2009, and growth accelerated during the year, with baselines up 5% in the second half.

The percent of our dollar volumes sold at reduced prices was actually down slightly for the year, but the merchandising was more impactful, resulting in good growth in merchandising effectiveness measures, and our merchandising returned to a more balanced flow across the year, so quarterly comparisons in 2010 will be less noisy.

Cheerios, the number one cereal franchise in the US, posted a 10% sales increase in measured outlets.

We achieved strong double digit gains on Honey Nut and Multi-Grain Cheerios and new Banana Nut Cheerios, launched in January, was the largest cereal introduction in the last 12 months.

The good growth extends beyond Cheerios.

Many of our kid-focused brands were up nicely as well.

Lucky Charms, Cinnamon Toast Crunch and Reese's Puffs all delivered strong growth in 2009 lead by baseline increases.

Fiber One sales were up 35% in AC Nielsen outlets.

This brand is our fastest growing cereal with Hispanic consumers, an important demographic.

In 2010 Big G is focused on driving continued growth with innovation on our core brands.

For starters we'll bring flavor varieties of growing Total and Cookie Crisp franchises.

We'll convert additional Chex cereal varieties to gluten-free, building on the success we had in 2009 with gluten-free Rice Chex, and we'll offer larger packages on some of our most popular brands as a value offering for consumers.

We'll support our established and new items with strong consumer marketing efforts.

In 2010, Honey Nut Cheerios will expand its successful Hispanic campaign, we'll continue to focus on the role Cheerios can play in helping reduce the risk of heart disease and we've got a great Cinnamon Toast Crunch ad that kids love.

So, by staying focused on the fundamentals and innovating, Big G will do its part to keep the cereal category growing.

Industry growth in 2009 was the best we've seen in 14 years, and we expect the category to keep growing in the years ahead.

People are eating breakfast at home more often, and cereal is the most frequently chosen option, and despite all that growth, cereal is still consumed by only a third of all breakfast occasions.

We believe Big G has the brands to lead continued category growth.

Let's turn to the soup category, where Progresso has driven growth for the ready-to-serve segment in recent years with innovations like rich and hardy, reduced sodium varieties, and the light segment we created in 2008.

Ready-to-serve soup is now a $1.6 billion category in measured channels alone, and we estimate sales exceed $2 billion across all channels.

Progresso has grown faster than the category for the last six years, and our share of ready-to-serve soup has increased to nearly 35% of category sales.

We think this category is right on trend with consumer needs for taste, convenience, health, and value.

So in 2010, we're focused on innovation that we think will drive growth for our business and the ready-to-serve soup category.

In July, we're introducing Progresso high fiber soups.

Nine out of 10 Americans fail to get their daily value of fiber.

These four new soups provide 28% of the daily recommended intake.

We think this is some good health news for the soup category.

Our advertising will focus on the many benefits of ready-to-serve soup, and Progresso's unique combination of great taste and health, so we're looking forward to good growth in this business in 2010.

Yogurt is another category that lines up well with the needs of today's consumers.

Yoplait has delivered great growth in this category, total sales in measured channels were up 8% last year, lead by 18% growth on our Light business.

This is the fifth consecutive year of double digit growth for the Light business and long term growth prospects for this category are excellent.

Per capita consumption in the US is still well below that of more developed yogurt markets around the world.

In 2010 we're focused on bringing innovation to keep the category and our Yoplait business growing.

We're introducing Yoplait's Delights Parfait.

Delights have two visible yogurt layers, a thick, creamy texture, and come in great flavors like chocolate raspberry and lemon torte.

With only 100-calories, they are a smart snack or dessert alternative, and we think Delights will drive incremental category sales.

We're also introducing Yoplait Smoothie.

These fruit and yogurt pouches will be in the frozen section of the store.

Consumers just add milk and blend to make a great tasting smoothie with the benefits of live and active cultures.

We tested this product in market last year and it performed very well.

It will be available nationally in September.

We'll also continue to build our core business.

We're reintroducing Yoplait Whips, with a new vanilla creme flavor, and a Try It Frozen campaign.

By putting Whips in the freezer, consumers can have a new way to enjoy this great product.

We'll communicate key health benefits, like the calcium and Vitamin D in Yoplait, or the new and improved Fiber One yogurt, with 5 grams of fiber, 0 grams of fat and only 50-calories per serving, and we're extending our Yo-Plus probiotic line with three new reduced calorie items, Yo-Plus Light has 70-calories per serving and is a nice addition to this growing line.

Now, the three businesses I just covered, cereal, soup, and yogurt, are important businesses to us, which represent about 40% of US retail net sales and they are the ones you ask about most often, but the key to our performance this past year has been the strength of our whole portfolio, so I'd like to spend some time now on the brands that make up the other 60% of our sales.

Over the past year, many of General Mills long-established brands have shown their real resilience.

Retails of Bisquick and Gold Medal Flour both grew more than 20% in 2009.

Core brands like Helpers, Pillsbury Toaster Strudel and Totino's Pizza Rolls all delivered double digit growth.

Sales for grain snacks including Nature Valley and Fiber One were up 10% last year, and in fact General Mills is the market share leader in the grain snacks category for the first time in 15 years.

Betty Crocker desserts were up 9% and Pillsbury refrigerated baked goods, old El Paso Mexican products, Green Giant frozen vegetables and Chex Mix all delivered solid retail sales growth, so we really do have a portfolio for all seasons and it's helping us stay strong in today's challenging environment.

We'll keep investing and innovating across our portfolio and we have a number of initiatives planned for fiscal 2010.

We're adding two new varieties to the Savorings line we launched in January, giving consumers more options for their at home entertaining.

We're adding new flavors to our restaurant favorites line, which helped consumers prepare restaurant quality meals at home, and we're bringing the Wanchai Ferry brand to the frozen section, with the introduction of five easy to prepare entrees.

These products target a rapidly growing section of the freezer case.

They are designed to serve two and provide a complete meal, including the chicken or shrimp, ready in just 14 minutes.

We're extending Nature Valley to a new form with the introduction of Nature Valley Nut Clusters.

This product is a 100% natural combination of granola, nuts and honey, and we think this product can bring new users to the Nature Valley franchise, and we're introducing a line of gluten-free baking products.

These are the first nationally-branded gluten-free baking mixes, and they are all getting great response from the 12% of consumers trying to reduce or avoid gluten in their diet.

In the refrigerated dough section, we're adding Simply Cookies.

These ready-to-bake cookies have no trans fat and no artificial flavors, colors or preservatives.

They have a simple ingredient list and they taste great.

Sales for natural and organic foods overall are being impacted by the economy, but our small plan of foods business is performing well.

Last year, our brands gained market share in 10 of the 12 categories we track in the traditional grocery and natural channel.

We're introducing nine new items this Summer, including new cereals and grain bars, two reduced sodium soups and new flavors of Lara Bar.

Those were just a few of the items we're launching in 2010.

In total, we have more than 50 new products launching in the first half, and these items meet the goals we establish for our new products a few years ago.

They are bigger ideas, more incremental and margin accretive.

We'll couple the strong innovation with impactful consumer marketing.

We have lots of great examples, but I'd like to highlight just a few today.

The first to add highlights the value and special occasion quality of our Pillsbury biscuits.

Next is the first television spot we've done on Fiber One snack bars.

We'll follow with the Yoplait ad targeting Hispanic consumers and then end with a spot for Honey Nut Cheerios that is driving terrific growth for this brand.

Let's take a look.

(video playing).

In total, we're projecting a high single digit increase in consumer spending for our US retail businesses in 2010.

So we're not backing off from our strong levels of innovation and brand building.

Consumers are back in the store and products across our portfolio deliver what they need.

Taste, convenience, nutrition, and value.

We think this is a great time to talk about our brands and introduce new items.

Let me wrap up with a quick word on holistic margin management.

It is core to what we do and enables us to grow our margins and our brands.

Behind the scenes, we have hundreds of initiatives under way to drive value by focusing on the things that matter to our consumers and reducing waste across our operations.

Although input cost pressure is moderating, we are just as committed to HMM.

It's not a productivity initiative.

It's how we do business and we think it gives us a competitive edge to drive growth for our brands.

Overall, I'd say that it's time for General Mills US retail businesses.

The at home eating trend is at our back.

Our categories are growing.

We've got an advantage brand.

We're executing well against our proven model and we think we can stay a step ahead by delivering innovation and value for our customers and consumers.

So for 2010, our targets include low single digit growth in net sales driven by volume.

We've got a strong innovation line up, and we plan to continue to invest to grow our brands.

We'll use HMM to fuel this investment and help us expand our margins, and we're planning for a mid single digit increase in operating profit in line with our long term model.

So I expect another strong year in the US retail segment and with that I'll turn you over to Chris O'Leary to discuss our

Thanks, Ian and hello, everyone.

I'm happy to report that 2009 was a good year for General Mills International as well.

Net sales last year totaled $2.6 billion.

Our top line has grown at a 12% compound rate over the last three years.

Profit growth has been strong too, although fiscal 2009 results were significantly impacted by foreign exchange.

The dramatic strengthening of the US dollar last year created foreign currency headwinds for us.

It reduced our net sales growth by nine points.

It had an even bigger impact on our operating profit, as you can see on this slide.

On a constant currency basis we delivered 10% sales growth and 11% increase in operating profit last year, consistent with the double digit growth we have posted in recent years.

The FX impact has moderated recently, but we still expect our reported sales and earnings growth will be reduced by translation and transaction effects in fiscal 2010.

Don will share some specifics on that later this morning.

My comments today will focus largely on constant currency results to give you better visibility to the underlying performance of our business.

Our key international brands are generating good growth before the impact of foreign exchange.

This slide shows 2009 sales growth on our global brands as well as key local brands, Wanchai Ferry and Nature Valley were both up more than 25%.

Haagen-Dazs and Old El Paso delivered strong growth.

Diablitos Meat Spread in Venezuela was up more than 20% and Latina Pasta in Australia grew 12%.

Our sales also grew across all major geographies.

This slide shows constant currency growth rates.

Net sales in Europe grew 4% driven by Old El Paso and strength in the UK and our UK business.

Sales in Canada were up 7% with good gains from cereal and Fiber One bars.

Sales in the Asia Pacific region grew 16% led by China, and in Latin America, sales were up 22%, driven by Nature Valley and Haagen-Dazs as well as local brands like Diablitos.

We grew across both developed and developing markets.

Sales were up 13% in the UK, 11% in Australia, and in our emerging markets, sales in India increased 37% and China delivered more than 20% sales growth.

We continue to aggressively expand our business in China.

Our key brands there are Haagen-Dazs and Wanchai Ferry and both continue to grow at strong double digit rates.

Haagen-Dazs is sold in more than 100 shops and we regularly introduce new products.

And Haagen-Dazs Moon Cakes, our ice cream version of a traditional gift given during the Mid Autumn festival, grew almost 40% last year.

Our Wanchai Ferry frozen dumpling business is expanding rapidly as well, as we capitalize on consumers needs for increased convenience.

Across our international businesses, holistic margin management is really gaining momentum.

It is quickly becoming part of the way we do business, just like here in the US.

In 2009 our HMM contributions were up more than 50%.

As we turn our attention to 2010, we remain committed to our long term model.

It focuses on three growth strategies: First, we will drive top line growth through innovation and geographic expansion.

Second, we continue to improve margins, fueled by growth of our key businesses and our expanding HMM efforts, and third, we will keep building our infrastructure and developing our people to support the larger international business we envision.

We are focused on four global platforms.

The first of these is cereal.

Cereal sales in Canada are consolidated into our international segment results.

The rest of our international cereal business is managed through our CPW joint venture with Nestle.

The second global business is super premium ice cream, where we have the powerful Haagen-Dazs brand.

Next is convenient meal solutions like our Old El Paso and Wanchai Ferry ethnic products, and the fourth global platform is healthy snacking, which includes the Nature Valley franchise.

We are still in the building phase of these platforms, and we have lots of room to grow by expanding distribution and increasing household penetration.

Cereal, Haagen-Dazs, Old El Paso, Nature Valley each have operating margins above the Company average, so our segment margin will improve as we expand these global businesses.

Now, I'd like to share our plans to drive growth in 2010 on each of these key platforms.

Ian talked earlier about our cereal performance in the US.

Our business in Canada just wrapped up a terrific year as well.

We have been steadily gaining share for the last few years, and our share was up a full point in 2009, driven by strong increases in baseline sales.

We will leverage Honey Nut Cheerios, our largest brand in Canada, and the power of the entire Cheerios franchise to drive growth in 2010.

We'll work to increase household penetration on core established brands like Fiber One and oatmeal crisp, and we'll leverage our sponsorship of the Vancouver Olympics, giving us some fantastic marketing opportunities like the Cheerios cheer postcards pictured on this slide that consumers can spend to their favorite Canadian olympic athlete.

Overall we believe we can continue to lead growth in the expanding cereal category in Canada.

Our second platform is super premium ice cream where we compete with Haagen-Dazs.

Haagen-Dazs stands for affordable luxury in more than 60 markets where it's available.

Sales on this business have grown at a 9% compound rate over the last five years.

We sell our product in Haagen-Dazs shops, high end foodservice outlets, and retail stores.

In 2010 we'll strengthen our core business with additional flavors, and we'll expand on the strong gifting tradition we've built with Haagen-Dazs Moon Cakes.

We will also continue to expand geographically, opening new shops in Egypt and in India.

We have some good product innovation planned too.

New Haagen-Dazs ice cream smoothie is a blend of Haagen-Dazs ice cream and fruit sorbet.

It has half the fat and 30% fewer calories than regular Haagen-Dazs ice cream, but still delivers the great taste and uncompromising indulgence that this brand represents.

We've launched this in the UK, in France and in Spain and initial response is quite encouraging.

Let me shift to Old El Paso, which serves as the introduction to Mexican food for many consumers around the globe.

This brand is available in about 20 markets outside the US, and our sales of this brand in international markets actually exceeds sales in the US.

In 2010, we'll launch some new products including a Healthy Fiesta line in Australia that is lower in saturated fat, and sodium and higher in fiber.

We'll extend the Old El Paso brand in Canada to side dishes, including several rice varieties, and we'll continue to add to our product line up in Europe with the introduction of several items including a new burrito kit.

In addition to our new product offerings, we have great consumer marketing to bring new households to our Old El Paso brand.

Wanchai Ferry is our authentic frozen dumpling business in China.

Sales have increased more than 20% a year since 2004, and we're really just beginning to expand this brand.

As dual income households grow consumers are looking for increased convenience.

Wanchai Ferry offers convenient dumplings and other dough products along with authentic home made taste.

We have two big opportunities to grow this business.

First, we can take the brand to new cities.

Today we are in more than 60 cities in China, and we're the top dumpling brand in the three largest markets of Shanghai, Beijing and Guangzhou.

In 2010 we have plans to add about 10 new cities.

In addition to expanding geographically in China, we can also expand Wanchai Ferry by entering new dim-sum segments.

To this point, our products have been largely in the dumpling and won ton segments, which represent about half of total dim-sum sales.

In 2010, we're entering the Bousa and Manto segments.

These segments represent another 20% of category sales.

Wanchai Ferry is a strong equity in China and we're extending it to more varieties that are important to Chinese consumers.

The brand is traveling beyond the borders of China as well.

Ian mentioned the Wanchai Ferry dinner kits and frozen entrees in the US.

We recently introduced Wanchai Ferry to the United Kingdom with the launch of three dinner kits in that market.

Finally, let me talk about our growth plans for Nature Valley.

This is a great brand for General Mills here in the US, and it's proving to be a winner internationally as well.

Sales have increased at a 25% compound growth rate over the last five years, and Nature Valley is currently available in more than 50 markets.

That number is growing rapidly as we continue to introduce Nature Valley in new countries.

In 2010, we'll bring Nature Valley to Korea and to additional countries in the Middle East, and we'll add new cities in markets we've already entered.

We'll add Nature Valley chocolate varieties in Canada and in Europe, and we have some exciting advertising initiatives in place.

You can see a few examples on this slide.

To date our focus has been on introducing the Nature Valley Crunchy Bar in markets around the world, but our product pipeline for grain snacks is tremendous.

Our domestic grain snacks business has consistently added new items, like chewy trail mix bars that have been highly incremental and have driven growth in the category.

As you can see on this chart, we believe many of these items are a good fit with consumers around the globe.

We just started adding chewy bars in several markets and we see plenty of opportunity to grow our grain snacks business outside the United States.

I've mentioned our brand building efforts a few times this morning.

Our consumer spending was up at a double digit rate last year on a constant currency basis.

I'd like to take a few minutes now or a minute now and show you a few examples of some TV spots we're currently running.

First, you'll see a spot for Honey Nut Cheerios from Canada.

Next is an ad for Old El Paso Crispy Chicken Fajita Kit and the third is a Nature Valley spot from the UK, and finally, you'll see a Haagen-Dazs ad that features our new smoothie.

Let's take a look.

(video playing).

We're projecting another strong increase in HMM contributions for our international business in 2010.

As we drive improvements across all aspects of our business.

Key projects include automating production of Wanchai Ferry products, consolidating some of our Nature Valley packaging, locally sourcing Green Giant vegetables for Asia and driving efficiencies in our trade and our consumer spending.

The final key to our international growth is people development.

Our focus is on building global talent with leadership development programs, improved systems and processes, and our work culture that makes us the employer of choice wherever we operate.

We have a great team of people and we're committing to helping them grow even stronger.

So let me summarize the outlook for our consolidated international businesses.

Foreign exchange remains a head wind and it will impact our reported results on both a translation and transaction basis in 2010.

We have strong brands that are growing but still have plenty of potential.

Our HMM efforts are just beginning and we'll support brand investments and fuel margin expansion.

For 2010, we're targeting mid single digit growth and double digit operating profit growth on a constant currency basis.

Now before I turn it over to Don, let me comment briefly on our international joint ventures.

Joint venture earnings in 2009 were $92 million, below last year's levels due primarily to one-time gains in our year ago numbers and the negative impact of foreign exchange.

Cereal Partners Worldwide represents the majority of our joint venture sales and our share of CPW net sales exceeded $1 billion.

Net sales for the Haagen-Dazs ice cream venture in Japan totaled almost $200 million, with pound volume down due to the difficult economic environment there.

For 2010, we're targeting a mid single digit increase in JV earnings driven by good growth on CPW.

CPW, as you know, is our joint venture with Nestle selling cereal in more than 130 markets around the globe.

Sales are up 9% for our fiscal 2009 period before foreign exchange impacts.

Our core brands including Fitness, Nesquick, Cheerios and Chokapee continue to be important drivers of growth, and we have excellent growth in key regional brands like Shreddies in the UK and Plus in Australia.

The global cereal categories continues to expand, but as you see on this slide, per capita cereal consumption still leaves lots of room to grow.

Sales in the UK and Australia are fairly well developed but the other markets, the category is still in its early growth phase.

CPW is well positioned to capitalize on this growth with solid share positions in key established markets and a strong presence in many emerging markets like Russia, Brazil, Turkey, and Southeast Asia.

This slide shows share performance in our 10 largest markets.

CPW held or grew share in seven of their top 10 markets, resulting in a net share increase for the joint venture in 2009.

So the outlook for CPW is very positive.

We see continued category growth as per capita consumption increases.

We are well positioned in markets we believe will be strong drivers of growth in the years ahead and we expect to achieve continued share gains as we invest in product innovation and consumer marketing.

CPW is adopting holistic margin Management as well, and we expect that will fuel marketing investment and improve our margins.

I'll wrap up my comments this morning with these key points.

General Mills businesses outside the US continued to deliver good growth.

We have unique well positioned brands in developing countries.

Our joint ventures bring strong earnings and cash to our overall results and much of our growth still lies ahead.

Now, I'll turn you over to Don to wrap up our business review.

Great.

Thanks, Chris and good morning everyone.

As Ken mentioned, I've got two topics to cover today.

I'll start with a review of our bakeries and foodservice business.

As we've discussed before, the current economic trends are a head wind for this segment of our business.

You can see the impact of weak foodservice industry conditions on our pound volume results for the year, which were below prior year levels; however sales and operating profits were up modestly, and remember that last year, included unusually strong grain merchandising earnings.

If you exclude grain merchandising profits for both 2009 and 2008, operating profits for this business segment grew 15% in 2009.

That is industry leading performance in this environment.

We're driving these results by prioritizing the branded portion of our product portfolio.

Higher margin, branded products now generate more than 65% of our foodservice sales, and that percentage has consistently increased over the last few years.

In 2009, net sales of our cereal brands and foodservice channels grew 7%, yogurt sales were up 13%, and sales for our snack brands are up 14% in these channels.

We're also continuing to prune this portfolio.

During 2009 we divested a portion of our frozen unbaked bread dough business along with our bread concentrate business.

Together, these two product lines generated roughly $150 million in annual net sales; however, they were a lower growth segment.

With these divestitures, the percentage of our foodservice sales generated by higher margin, branded products will approach 70% in fiscal 2010.

Our actions to reshape the portfolio are driving operating margin growth.

Over the last four years, we've improved the margin for this segment of our business by 200 basis points.

It's not the double digit level yet, but that's still our longer term expectation.

Our business today is split between three primary customer channels: Foodservice distributors, and restaurant customers accounted for roughly 45% of sales in 2009.

Bakery customers generated another 45% of the sales, and the remaining 10% came from convenience stores and vending accounts.

We're focusing on the customer channels that are showing the best resilience in this economy and those with the most attractive growth and profit opportunities.

According to the latest projections from Technomic, overall foodservice industry sales are expected to decline between 2 and 3% in calendar 2009 but some channels like K-12 schools, colleges and universities, and healthcare outlets are still expected to generate modest sales gains.

Food and beverage sales in convenience stores are also projected to grow this calendar year.

We're targeting our product innovation efforts on these growing foodservice channels.

For example, we're working with K-12 school customers to be their go to breakfast supplier, with the combination of our Big G cereals and Yoplait yogurt, and are expanding into our hot breakfast with our new Pillsbury mini pancakes and I know several of you tried this at the Cagney conference back in February.

We're also launching Yoplait Parfait Pro, which helps foodservice operators make yogurt and granola parfaits with 50% less labor.

And we're bringing lots of new snack products to our convenience store customers, including the new Nut Clusters from Nature Valley and unique spicy flavors of Chex Mix.

In 2010, we expect that reported net sales and volumes for our bakeries and foodservice segment will be below 2009 levels.

We'll have one less week of sales, we divested $150 million in revenues, and we're expecting that overall foodservice industry trends will remain weak.

We're also assuming lower prices for bakery flour in 2010 because industry practice is to index to the underlying commodity prices.

So these factors will reduce reported results; however, we expect to achieve good underlying sales growth for our branded product lines.

We expect segment operating profits will be below 2009 levels too, but profits should decline less than sales due to productivity and positive mix.

We see good opportunities to gain share in the current operating environment and looking longer term, we still like the growth opportunities in the $0.5 trillion US market for food away from home.

I don't know when the economy will rebound, but as it does, we expect consumers will revert at least some of their former habits of eating away from home, so we believe the growth prospects for our brands in foodservice channels remains excellent.

So now let me summarize our key expectations for General Mills' growth in 2010.

We've built our plans for the year, assuming that the global operating environment remains challenging.

On the positive side, the outlook for input cost is better, after five consecutive years of steep cost increases, we expect our input cost inflation to moderate in 2010.

As a result, our plan assumes little new pricing.

We expect our 2010 growth rates on a reported basis to be constrained by one less week in the fiscal year and by the absence of sales from our divested businesses.

Our plans also assume foreign exchange as a headwind for us in 2010.

Let me give you a bit more detail on that.

As we noted in today's press release, our 2010 earnings guidance includes an estimated $0.15 per share drag from foreign exchange effects.

Roughly 85% of that negative effect relates to transaction foreign exchange, primarily in two markets: Canada, which sources most of its finished goods from the US, and the UK, which sources most of its products from Continental Europe.

A good portion of this transaction FX is hedged.

The other 15% of our FX estimate is translation.

Our estimates for this impact are based on the rates as of May 2009.

Obviously the actual impact of foreign exchange translation on our 2010 results will depend on the currency movements throughout the year.

So, including our estimates of foreign exchange effects, here is a summary of our growth expectations for fiscal 2010 and remember, this is 52 weeks of 2010 compared to 53 weeks for 2009.

We expect net sales to be comparable to 2009 levels as reported.

Segment operating profits should grow at a low single digit level.

Our plan assumes $30 million of restructuring expenses.

We expect net interest expense to increase at a low single digit rate, and we're assuming a tax rate of 34% for the year, basically in line with the underlying effective rate in 2009.

After-tax earnings from joint ventures should grow at a mid single digit rate, and we're targeting a net reduction in shares outstanding but less than our 2% long term target as we do plan to pay down some debt, and our guidance is earnings of $4.20 to $4.25 per share before any impact of mark-to-market valuation of commodities.

These targets represent growth at the low end of our long term model on an as reported basis; however, if you exclude foreign exchange impacts, our 2010 growth targets are squarely in line or above that long term model.

We continue to target a combination of superior earnings growth and improving return on capital.

Four years ago, we established a goal to increase return on invested capital by an average of 50 basis points per year, and we've done that in each of the ensuing years, including fiscal 2009.

We're targeting another year of ROC improvement in 2010 although at a slightly more moderate pace, and while net earnings growth will continue to be the primary driver of ROC improvement, disciplined use of cash also plays a role.

Our businesses are strong generators of cash.

In 2010(Sic-see press release), cash from operations totaled $1.8 billion, up 6% versus fiscal 2008.

This includes a voluntary $200 million cash contribution we made to our principal pension plans at the end of the Fiscal Year.

With that cash contribution, these pension plans ended fiscal 2009 fully funded.

For fiscal 2010, we will not be required to make any cash contributions to these plans.

And the impact of pension and post retirement on the income statement should be roughly comparable to 2009.

The first call at our cash in 2010 will continue to be the good growth opportunities and productivity projects we see in our business.

Capital investments in 2009 totaled $563 million, or just under 4% of net sales.

Our target for 2010 is $630 million, and let me remind you that about $30 million of that budget is the replacement of an Argentina plant which will be funded by the insurance proceeds we received in fiscal 2009.

In addition to replacing that plant, our civic other projects in 2010 include capacity projects for grain snack bars, pizza rolls, yogurt and cereal.

After capital investments to support our business, we prioritize returning cash to shareholders through dividends and share repurchases.

General Mills' annual dividend has been growing at a high single digit compound rate in recent years.

As Ken mentioned in his opening remarks, we just had a 9% increase in the dividend for 2010.

The new annualized rate represents a strong pay out of our earnings to shareholders, and it also represents a yield of more than 3% at recent prices for our stock.

Repurchasing stock is inherent to our shareholder return model.

We target an average annual reduction in diluted shares outstanding of 2%.

Over the past four years, we've met that objective.

As I mentioned earlier, we're targeting a further reduction in average shares outstanding in 2010, but at a rate less than our long term target because we also plan to pay down some debt this year.

Our cash discipline in terms of working capital use was very good in 2009.

Core working capital declined slightly from year ago levels, reflecting sales timing shifts on accounts receivable and lower valuations and levels of grain inventories.

Looking forward, we'll continue to target growth in core working capital at or below the rate of sales growth.

We also strengthened our balance sheet last year.

Total debt at year-end was $7.1 billion, up just 1% from prior year levels, despite a strong growth in our business.

As a result, our operating cash flow to debt ratio improved to 26% and our ratio of fixed charge coverage improved to 5.3 times.

We also shifted our mix of debt during 2009 to a longer and more fixed rate.

In particular, by taking advantage of a good window to term out some commercial paper with a 10 year bond that marketed at very attractive rates.

So let me wrap up my section of our presentation today with a summary of General Mills' financial condition and outlook.

General Mills delivered high quality sales and earnings growth in fiscal 2009 and plans to call for continued growth in 2010.

Our cash flow from operations is healthy and growing, and we're returning a significant portion of that cash to shareholders.

And our balance sheet is strong, reflecting progress we've made in recent years to improve key financial ratios.

I look forward to talking to you more about our continued growth in 2010 as the year progresses.

But now I'll turn you back to Ken for some wrap up comments today.

Okay.

All right, thanks, Don.

So, I hope that in these presentations we've demonstrated that General Mills is positioned to achieve another year of good growth and returns in fiscal 2010.

We've been investing in our businesses, and strengthening our brands, and our business portfolio is resilient, built to deliver good performance through all seasons including today's challenging environment.

We believe our long term growth model is serving us well.

It focuses our organization on delivering consistent high quality earnings growth and shareholder return.

Back in 2006, we established sales and earnings goals for the year 2010 based on our growth model.

Two years later, in 2008, we were able to raise our 2010 targets as a result of strong financial performance, and today, we've raised those 2010 targets once more, based on the good growth of our businesses this year.

With the year 2010 now at hand, we'll need to set some new longer term growth goals for the Company, and we'll be conducting our annual long range planning process this Fall, and after that plan is completed we'll look forward to sharing some new long term growth targets with you.

We see five key drivers of our continuing growth: Innovation and margin expansion are the bedrock of what we do.

We innovate to develop products that meet consumer needs.

Innovation also drives our productivity initiatives, and these cost savings ideas help us protect and expand margin for our businesses around the world.

Now beyond these two bedrock factors, we grow by investing in advertising and other forms of consumer marketing to build our brands.

We grow by partnering effectively with our customers, and we grow by expanding our business in international markets where we're really just getting started.

We will stay sharply focused on this model, which is driven by holistic margin management, or HMM.

This Companywide discipline of leveraging productivity, mix and price has enabled us to offset significant input cost inflation in recent years, protect our gross margins, and reinvest increasing levels of consumer marketing support in our brands.

Our plans for 2010 include a high single digit increase in consumer marketing investment.

We'll keep improving our established products by adding health attributes, by offering new flavor varieties, and by making them easier to compare, and we'll keep innovating to bring customers great tasting new products with the nutrition, convenience and value that they're looking for today.

Worldwide, we plan to launch more than 150 new products in the first half of 2010 alone.

We have tremendous strengths to leverage as we move forward.

We compete in food categories that are on trend and growing.

Consumers are spending more of their food dollars for meals at home, and that trend is a tail wind for our US retail and our international businesses.

Our brands hold large market positions in these categories.

Our company-wide focus on HMM helps us to protect margins, and we're increasing our marketing support behind our brands.

Most important of all, we have exceptional people working across the business around the world.

Their innovation and committment give me great confidence in our continuing growth.

So that's the General Mills update this morning.

We had a strong year, with sales up 8% and comparable EPS up 13%.

We took actions during 2009 that position us for continued superior growth, including strong holistic margin management that protected our margins and significant consumer marketing investment that built brands, and we're sticking with this game plan again in 2010 and believe the prospects are very bright for another year of strong growth and returns to shareholders.

So that concludes our prepared remarks.

Ian, Chris, Don and I would be happy to take a few questions.

Wait for a microphone so that listeners on the Webcast can hear you.

Thank you.

This is Judy over here.

She was first hand in the air.

Thanks.

Ian, can you talk about the increased competition that you're seeing in some of your key categories like cereal and yogurt and how you're thinking about the merchandising dollars.

Is there a need to really take that up as you're seeing increased competition in those categories?

Yes.

We're certainly seeing in some of our key categories increased levels of merchandising.

We've seen that a little bit from one competitor in cereal.

We've seen it in yogurt, and I guess we expect it in food.

That being said, our competitors are normally a very rational set of competitors who are trying to grow the categories and so far, we don't think that it's changed really the nature of our game.

We're competitive enough in that area and our level of innovation and consumer brand support is really what we think will fuel baseline growth which ultimately will be the tail of the tape but we'll make sure that we're appropriately competitive in the merchandising arena, and while I've seen a little bit early in the year I think it's hotter than I would normally like to see it, I wouldn't find any of it alarming.

Another hand?

Thank you.

Just to follow-up on that, so have you changed your merchandising plans for the year in any way, or are those pretty steady of what you expected in that answer?

Yes.

Our merchandising plans are pretty similar levels of expenditure to this year.

And so there are always adjustments to be made on how to do it better, but in gross terms, we see it pretty similar.

And I guess a question on HMM, that encompasses a lot of things, cost savings and mix and one element of that is managing your mix well in the business and I'm just curious in a difficult economic environment, as you look at 2010, do you expect mix to be positive in the year?

The new products seem to be enhancing for mix.

Any of the general comments about the business mix across your portfolio?

Yes, this has generally been very good and one of the things we just always have to remember is cereal is a category that absolutely thrives, well in good times and in bad, but it particularly thrives in more difficult economic times, and cereal is the best mix General Mills can have, and so when cereal is growing at the rate it's growing it's generally very positive to us so we're seeing it even within other categories.

We aren't seeing in our own portfolio a trade down effect per se.

Generally we're seeing mix gains, but over our entire portfolio, cereal as a category is one that really drives us.

The other thing that I would add over the last three years and I think Ian, you mentioned this in your presentation, we've had a really high focus in our new product activity on selecting for launch products that we thought would really be incremental and we've really improved the discipline around making sure that we're launching new products that are either mix neutral or mix accretive, and sort of our performance on that last measure of accretive new products has dramatically improved and so I think that's another driver of positive mix as we go into this New Year.

And both concentrated on US retail, but do you want to say a word about mix internationally because your key platforms is working for you there too?

Yes.

Obviously we are focused on margin expansion as our margins are below the Company average but the good news is all these global platforms, Haagen-Dazs, Old El Paso, Nature Valley have multi-company average, and as you saw from the presentation we're growing those brands quite strongly so our mix is going to naturally improve with that, and that's a key part of our strategy to improve margins around the globe.

Good morning.

Looking at your fiscal 2010 plan, you're clearly relying much more on volume and very little on price in terms of driving the top line, which is not surprising given the current environment.

Looking at the fourth quarter reported volume numbers though, adjusting for the extra week, they looked like they were down slightly on a year on year basis, and perhaps both for the total Company and in US retail, so I'm wondering whether you could address some of the factors that lead to the volume declines in the fourth quarter for both the Company and US retail.

Did the divestitures and bakeries have a significant impact there, and I know you had a tough comp with US retail volumes up 6% last year, if could you give us some color?

I'll give you the U.S.

retail component and Ken or Don with comment on the rest, is our sales dollar growth say in the fourth quarter which was reported at 12 but might be if you took out the effect of the extra week would be about mid single digit, 5%, which is very much in line with our growth model and if you looked at our consumer intake, or offtake I should say over the same period, it would be low to mid single-digit offtake and you could combine Nielsen, retail and Wal-Mart and so that's about in line and slightly stronger than what we were expecting.

You may recall we said at Cagney and even in the beginning of the year, because in the year prior we had right size, right price push all our cereal particularly merchandising in the Q4, that this year, we would rebalance, we would have stronger merchandising spread out throughout the year and then Q4, we would be significantly below our levels of last year.

That's exactly what played out, mostly in cereals, true in some of our other categories as well and so our Q4 was very much designed to be that way, and an actual fact relative to our expectations that out performed and the reason it out performed was the baseline particularly in cereal we're that much stronger than we had forecast so we're not concerned about Q4, per se.

It was very much in line if not a little bit better with what we were expecting in US retail.

Don?

Yes, for the two other segments, international had 5% volume growth and very little impact from the 53rd week because most of our countries report on a monthly basis so that was not heavily impacted by the 53rd week and on bakeries and foodservice we did have the impact of the divestiture which was $150 million, about 7% of the total portfolio that was out for most of the quarter and in addition, we also had some bakery flour, similar to what we saw in Q3 where as the pricing has come down, we didn't chase volume in that segment.

Eric, as you know, this is also one of the lumpiest measures we have and you can look at it, it's best to look at volume I think on a 12 month basis, and we're quite confident that our volume expectation for next year is very reasonable, given the category of development that we continue to see.

Thanks.

I have a few questions.

First is a little more broader based.

The company has done in my opinion a great job in terms of kind of being out front on weight loss, organic, and I suppose kind of health oriented products, and it seems like you're gearing up for a more ethnic push, but the last time the Company tried that, it failed pretty quickly with power of [Su Familia] and I think maybe a few other products so I'm kind of wondering why you think now you're going to be successful in the ethnic push.

What ethnic products, are you referring to some new products that you saw?

Advertising.

Yes, if you look at the demographics of the country, the two most powerful on an age profile, it's the unfortunate aging of the baby boomers, and so our health initiatives help with that, and then as it relates to families which we sell a lot of products to families, most child and new family information is coming from consumers of a multi-cultural background, and I guess I don't accept the premise, in fact we've been spending quite heavily, we've almost tripled our expenditures over the last three years against marketing to Hispanic consumers and they've lead our growth.

They've grown stronger than the non-hispanic consumer set.

We are seeing great returns.

We get an ROI on that just like we do on other aspects of the consumer spend so as it relates to marketing to this very important large and growing part of consumers both African American and Hispanics, we're seeing great results.

We're very pleased with it.

I think we have had, you're quoting, we've had I think when we came out with products that were very specifically and narrowly designed for those communities, that hasn't worked as well for us.

When we take the products they already know and love, Honey Nut Cheerios, Yoplait Yogurt and market it in a meaningful and targeted way, we have seen fabulous results.

The other thing I would add to that is that our customers are very very interested this entire opportunity so we are partnering with them particularly in the Southern parts of the US where we have high concentrations of Hispanic consumers we're developing promotional activities that we can run with them in store and this is a very positive development and opportunity for us that as Ian said it's driving differential growth for us.

Okay, and then two questions on the specific parts of the portfolio to Ian.

One, can you comment on how the Pillsbury Dough business and the potential impact of the Nestle Tollhouse recall?

Yes, we're sort of in the off season right now, obviously so that business doesn't really start hitting its high seasonal impact until September, and my guess is most of that will have come and gone by that time.

We're seeing no impact, negative impact on our business at all.

We're surveying consumers and it is not translating from Tollhouse over to Pillsbury.

We're seeing customer clearly order more of our products right now as they have empty shelf slots to fill until Nestle gets back into business, but other than that, we're not seeing effect.

And then last question, on Progresso, in a lot of the slides that you put up, you quote Nielsen and Wal-Mart but on Progresso, you only quote Nielsen, and according to Campbell's if you include the Wal-Mart, you aren't gaining share, so can you talk a little bit more about your share trends in Progresso including Wal-Mart and alternative outlets and what is the right data point between the two of you?

Yes, we do not get access as we aren't a category at Wal-Mart for soup so I can't tell you the total category performance at Wal-Mart.

I can certainly say that we did better this year with our traditional customers than we did at Wal-Mart.

Campbell's Soup had, was in a special sort of merchandising arrangement at Wal-Mart so I assume they did very well and strong.

Our best guess as we look at secondary data though is we held share overall in the marketplace but I can't tell you specifically at Wal-Mart other than I do think Campbell Soup grew very fast at Wal-Mart.

I think they're telling you accurate data there.

We were not participants in that kind of program.

I'm coming.

Thank you.

David Driscoll of Citigroup.

A couple questions.

First is back to that 53rd week, I do want to make sure I'm clear on this.

So, 53rd week contributed 6% to sales growth in the fourth quarter, stating it did not have a significant impact on the international business, thus it's a disproportionate number and I know it would be 7% or something like that to US retail.

That would actually suggest a weaker volume performance on an organic basis within US retail than maybe my first look this morning.

It's 4 to 5%.

Okay, and in bakeries and foodservice it would be just the six points, it should flow through, there's nothing funny there?

No.

There's nothing unusual in the bakeries and foodservice end.

Okay, very good.

Second question is that and Ken this goes back to some of the comments you made about new products in the end.

There was, I believe you announced there's 50 new products to be introduced in US retail and in the first half of F-2009 I believe that's going to be down about 15% versus what you produced, what you launched in the first half of 2009.

2009 was a good year.

Certainly, I believe you used the word "fantastic" and I don't disagree, so I almost want to throw this back to you and say, why should I be happy to see a 15% reduction in new product activity in the first half of 2009, what's the confidence level here that the incrementality of the new products you're doing is so much better than the ones you did in 2009 that were successful and maybe could you just put a number to it so we can put this one to bed?

We're very excited about our new products.

We have a plan and also we'll be introducing new product later in the year as we did this year as well.

Roughly speaking, our percent of volume that we expect next year from new products is in line with what we would have expected this time last year.

Don't forget we also have the carryover, Banana Nut Cheerios, which has been a big success to launch in the middle of the year, last year, it will be incremental and that's true of several other new items, so I think the combination of what we have in carryover and the size and scale of the ideas that we have next year, I put them together and say it's roughly comparable.

I'll also tell you that we're out of the business of counting numbers of new SKUs and items.

That's a dangerous place.

We were in that business for a while, and it causes us to launch smaller ideas that don't work and don't get our base back for shareholders, and so we have a very good level of new product activity next year, hopefully bigger better ideas as opposed to large numbers of ideas.

The percent of volume we expect to get is roughly similar.

The only thing I would add to that is I think Ian is right on, we're very focused on incrementality and size and sort of benefit to the consumer but the other thing I'd add to that is we've heard some of the players in our space talk about this is a time to launch fewer new products and we'll kind of pull in and we're not looking at it that way at all.

We think this is a great time to launch new products and the feedback that we have generally from our customers is that our new product portfolio as we go into our new fiscal year is terrific.

They would say that we are best-in-class right now, so we think that this is a terrific line up of new products.

Final question, can you comment on trade diluting, any trade diluting, have you seen any effects in the fourth quarter either domestically or internationally?

Well I'd Chris to comment on internationally.

Domestically, we don't and in fact our movement and our deliveries, were almost in sync in Q4 for us, very very similar so we do not see any effects of trade diluting in the US.

Same around the globe.

Nothing material.

A question, a couple of them.

The first is on holistic margin management.

Can you give us any kind of details as to how to quantify the savings that you've generated this year and what you expect next year, you can mention hundreds of projects but can you just give us some examples of what are the key ones that are increasing productivity at your facilities, and then secondly, I've heard rumbling about value offerings in the cereal category.

I think you mentioned some entries of your own.

What do you foresee in terms of value offerings 25% more volume in a box from yourself and from your competitors as the year goes on?

So we don't give you numbers on HMM, but I think the most meaningful and powerful set of numbers that we've shown you today is that we've been able over the last four or five years, and particularly over the last two years in an environment of very significantly high input cost inflation, we've been able to basically protect our margins and so I think that's a very good testimony to the power of that HMM concept that we have going throughout General Mills, and there really are, it's hundreds of projects.

Someone asked about mix management and I think we gave you a little bit of a flavor of how we're trying to drive mix, because that is a positive driver of HMM, but then you get down into our plants, and that really is still a wheelhouse for us.

The way we procure inputs, the way we process them in the plant we've got lots of activities designed to eliminate waste in that manufacturing process, it then moves out into the logistics environment, the accuracy of our forecasting, we've got projects now that enable us to consolidate loads and fill trucks better, and that takes trucks off the road and reduces diesel and lowers our cost, so it really is holistic, and that's why we refer to it that way, and it's something that we've driven very deeply throughout the company around the world and even the proof of the pudding I think is very impressive margin performance.

And I'll add just if you're looking, there's hundreds of examples but one really interesting tangible one that we're doing that started this year and will go into next year is we're mostly divisionalized but what we're finding oftentimes is we're a very big buyer of certain ingredients but the spec is ever so slightly different for the flour, we might use in snack products versus cereal versus baking with a sugar spec, and our R & D teams are working on how much of that is functional and how much of that is just accidental because of independent development paths and so we're looking at many of our ingredient streams across the Company and seeing that specs can be aligned, so that the one being bought for snacks is not any different than the one being bought for cereal and your negotiation strength to buy that ingredient is substantially higher and it's generating significant savings as an example so we're always finding new ways.

I think now looking across the Company and how to get them to see between the divisions, not inside the divisions and the functions only, has been very productive for us as just to let you know, there's always new trees to find HMM examples on.

Your other question was on value offerings in cereal and the one I had referenced is really that in some of our large retailers when you look at the value orientation consumers, they aren't buying the cheapest price on the shelf, the entry level price on the shelf.

They're buying very large volume packages, and usually this is large families, and so we have super size versions of some of our largest SKUs, we're adding to that, and that trend really varies by customer, and some of our customers it's all about the entry level price offering, and other customers, it's all about having a very good price per ounce on a large size, and so we are tailoring our strategies and efforts to the consumer base of our customers and it varies.

Andrew?

Ian, forward on HMM, just as a quick follow-up to that.

Would it be a fair statement to say that the incremental saves you generate in fiscal 2010 can be still equal to or more than maybe what you saw incrementally in fiscal 2009, just trying to sort of, because all of the projects and all of the things you talked about make sense but that's also backward looking in terms of what you've been able to offset to keep your margins relatively stable, just want to get a sense of, is there still enough going forward to now drive the margins further with input cost, inflation kind of backing off a bit?

We've got a good pipeline going forward, and as you heard from Chris, we just started doing it really in the international business and it takes a while, because Andrew, we try to push this down so deeply in the organization.

This is not something that starts up on a dime so it does take time but Chris has it really well entrenched in international and CPW.

So that piece is going to ramp.

Okay.

And then we've all heard and been given a whole bunch of reasons why maybe the soup category hasn't been quite as robust as we all might have expected, some maybe reasonable, some less so.

I still just don't understand, I would still think that this category ought to be one that is thriving in this environment and so I just want to get your perspective on that to see if I'm just really missing something completely there and then just the last one, anything we should think about in terms of the quarterly flow if we're thinking sales in the EBIT line or EPS side that given what may have, things that happened last year we want to take into account as we kind of model out 2010.

Thanks.

I couldn't agree with you more on soup.

I think it's a category that's terrifically situated for most environments, and this environment in particular, and I think by focusing positive messaging and good innovation, focus on the consumer, not the battle between manufacturers, but focus on the consumer, will drive and could drive category growth, and so that's certainly how we hope the category plays out next year, but I don't see any reason why the soup category, the ready-to-serve soup category couldn't thrive in this environment.

We've got some great drivers.

We have fabulous messaging on soup.

It's a wonderful product.

It's low in calorie, high in nutrition, so we've got great messages.

It's the Light segment which we invented a couple years ago, we think has lots of growth.

We think the reaction of retailers to high fiber soup is very positive and consumers see that as a natural.

We know there's fiber in vegetables so that's an idea that fits so those are the kind of things we know across many categories really build categories over a long period of time so that's what we're focused on.

And as for the reasoning that I think was aware of comps and ForEx in particular, you'd think the growth would be more backwards loaded, overcoming we had about a 21% EPS growth in the first half of this past Fiscal Year.

I think what I'm going to do is pause here for a moment and say goodbye to the people on the Webcast because we're up to our window of time here, so I'll let you go ahead and cast them off, and then these folks are up here for a few more minutes.