Post Holdings Inc (POST) 2021 Q4 法說會逐字稿

Welcome to Post Holdings Fourth Quarter 2021 Earnings Conference Call and Webcast. Hosting the call today from Post are Rob Vitale, President and Chief Executive Officer; and Jeff Zadoks, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 12 p.m. Eastern Time. The dial-in number is (800) 938-2490. No pass code is required. (Operator Instructions)

It is now my pleasure to turn the floor over to Jennifer Meyer, Investor Relations of Post Holdings, for introductions. You may begin.

Good morning, and thank you for joining us today for Post's Fourth Quarter Fiscal 2021 Earnings Call. With me today are Rob Vitale, our President and CEO; and Jeff Zadoks, our CFO. Rob and Jeff will begin with prepared remarks, and afterwards, we'll have a brief question-and-answer session. The press release that supports these remarks is posted on our website in both the Investor Relations and the SEC Filings section at postholdings.com. In addition, the release is available on the SEC's website.

Before , I would like to remind you that this call will contain forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. Additional information regarding these risks and uncertainties is discussed under the Forward-looking Statements section in the press release we issued yesterday and posted on our website.

We also urge you to read both registration statements, the proxy statements and prospectuses and other documents related to the proposed distribution of our interest in BellRing Brands that will be filed with the SEC when they become available because they will contain important information. These forward-looking statements are subject as of the date of -- are current as of the date of this call, and management undertakes no obligation to update these statements.

As a reminder, this call is being recorded and an audio replay will be available on our website. And finally, this call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website.

With that, I will turn the call over to Rob.

Thank you, Jennifer. Good morning and thank you for joining us.

Our fiscal year ended in quite a disappointing manner as cost inflation ran ahead of pricing, and supply chain inefficiencies caused us to meet our estimates. We ended fiscal 2021 with adjusted EBITDA of $1.12 billion, down 1.5% to last year as COVID-affected rebounds in foodservice and declines in retail channel segments roughly offset each other.

This morning, I will share with you the sources of the miss and frame our expectations for the upcoming year. I want to start with the detail on our shortfall from guidance.

Sales were largely in line with our expectations. The miss was entirely the result of cost escalation. The 2 biggest drivers versus expectations were unfavorable manufacturing costs of nearly $18 million, resulting from plant inefficiencies and poor fixed cost absorption and transportation costs, which were $12 million above forecast. In addition, capacity constraints, largely resulting from labor and material shortages and contract manufacturing under shipments, inhibited our ability to service demand. The capacity limitation resulted in customer allocation across Foodservice, Refrigerated Retail and BellRing.

Stepping back from supply chain, there is plenty of cause for optimism. Our demand remains quite strong in Post and Weetabix-branded cereal, Bob Evans-branded products, most of our Foodservice categories and especially in Premier Protein shakes. We have pockets of softer demand in our value cereal segments, notably MOM Brands and private label.

Our Post-branded cereals performed well this year, gaining 0.5 a share point on the strength of the Pebbles franchise. This was offset by weakness in our value portfolio. We expect consumers to return to value price points as consumer liquidity normalizes.

Weetabix had a modest share gain this year lifted by innovation. Compared to 2 years ago, however, the business has gained 1.5 share points. Our Bob Evans brand continues to gain new households with penetration up 3% over the prior year. This gain was achieved despite capacity constraints and out of stocks limiting its growth. We plan to fully support this brand with marketing and promotion investment in the back half of the year.

BellRing's flagship product, Premier Protein Shakes, continued its impressive consumption, up 30% this summer. As with Bob Evans, capacity constraints are limiting brand metrics. I continue to believe we remain in the early stages of category adoption, and I'm quite bullish on BellRing's future. Finally, foodservice demand recovery continues to progress with the exception of travel and lodging and business cafeterias.

For fiscal 2022, we expect adjusted EBITDA in the range of [$1.16 billion] (sic, see press release, "$1.16 billion") to $1.2 billion or a growth rate of 3% to 7%. Two key assumptions supporting this range are: that by the end of our second fiscal quarter, ingredient, packaging and freight inflation will have peaked; and that labor markets will normalize. To the extent those assumptions prove optimistic, there could be pressure on our outlook. Specifically, with respect to inflation, the risk is primarily the timing as we expect to continue to price inflation, albeit with a potential lag.

Regardless, that level of adjusted EBITDA does not reflect our expectation of the company's baseline earnings potential. There are 3 specific drivers. First, we do expect some of these cost pressures and capacity constraints to continue during the first half, easing throughout the fiscal year as pricing labs cost increases and supply chains normalize.

Second, we continue to expect the full profit recovery in Foodservice will not occur until fiscal 2023. And finally, synergy realization of prior year acquisitions will largely occur in fiscal '22, with 2023 being its first full year in the P&L.

As we expect each identified issue to improve sequentially, likewise, we expect each quarter to improve sequentially through the year, exiting the year on a more normalized run rate. To drill further into quarterly cadence, the continuation of fourth quarter 2021 is, of course, particularly acute during the first quarter. More specifically, during the first quarter, we expect our foodservice platform to underperform in the fourth quarter as a result of persistent labor shortages inhibiting volume demand growth and non-pass-through inflation that accelerated after year-end. That inflation is being priced but will not be effective until the second quarter and will be perhaps a $15 million hit to the first quarter.

In Refrigerated Retail, we will see significant sequential improvement. We are now largely staffed in this segment, and it is improving rapidly. However, capacity constraints in the fourth quarter limited our ability to build inventory ahead of the holiday demand spike. Meanwhile, recall the balance of the businesses tend to have a seasonal sequential decline in the first fiscal quarter.

With respect to capital allocation, we remained an active buyer of our own shares this quarter. Since July 1, we've acquired 1.5 million shares at an average price of $108.02. Recent M&A is performing to plan with the exception of Almark. Almark is performing to volume plan, but has experienced the cost acceleration I mentioned and will need to take incremental pricing. All others are performing to both volume and profit expectations.

Recall that the private label business we acquired from TreeHouse is slightly negative EBITDA and is expected to remain so until the second half of the year. Likewise, I mentioned that synergy realization will largely occur in fiscal '22, with '23 being its first full year in the P&L.

We continue a strong M&A pipeline for Post and Post Holdings Partnering Corp. as numerous potential counterparties. However, for core Post, executing pricing and improving supply chain performance, including synergy delivery, remain a greater priority than near-term M&A.

Hopefully, you saw our release describing the BellRing Brands distribution. Recall the transaction has 3 steps. First, we will execute a debt for debt exchange, which will generate cash to be distributed to BellRing stockholders at closing. Second, we will distribute at least 78 million shares of BellRing in either a pro rata spin or via an exchange offer for Post shares. Finally, roughly 6 months after the initial 2 steps, we will monetize our remaining stake.

We believe this transaction will benefit both companies by enabling BellRing to trade on a more liquid fully distributed basis. It will also result in reduced leverage and complexity around the remaining Post franchise. There is no question this is a challenging environment and will remain one for a bit longer. I am grateful for the effort and the commitment of our teams. While the consequences of COVID had, had far more reaching impact than expected, the experience is making us better as we identify and cure supply chain weaknesses and become ever more crisp on pricing and revenue management.

With that, I will turn the call over to Jeff.

Thanks, Rob, and good morning, everyone.

Fourth quarter consolidated net sales were $1.7 billion, and adjusted EBITDA was $272.5 million. Net sales increased 20% and benefited from approximately $100 million from recent acquisitions as well as volume demand recovery in the Foodservice segment, strong growth at BellRing and pricing actions.

As Rob discussed, higher manufacturing and freight costs were significant burdens on results this quarter, and internal and external labor shortages disrupted our supply chains. As a result, throughput declined and per-unit product costs increased. Additionally, our customer order fulfillment rates suffered.

Moving to our segments and starting with Post Consumer Brands. Net sales and volumes increased 11% and 7%, respectively. Excluding the benefit from the private label cereal and Peter Pan acquisitions, net sales and volumes declined 3% and 5%, respectively, primarily from continuing softness across value and private label cereal products and our exit of certain low-margin business.

Our Pebbles brand continues to show great growth with volumes up 7%. Cereal average net pricing improved 2%, driven by favorable product mix and pricing actions. Adjusted EBITDA decreased 13% versus prior year. Supply chain disruptions, including planned and unplanned maintenance downtime, drove declines in throughput and fixed cost absorption, causing significantly higher manufacturing cost per pound of production. This was exacerbated by input costs and freight inflation.

Weetabix net sales and adjusted EBITDA increased 12% and 13%, respectively. This growth was driven primarily by a stronger British pound to U.S. dollar exchange rate. Total segment volumes were flat. Branded and private label biscuit volumes declined as we lapped COVID-related increased at-home consumption in the prior year. Offsetting these declines was growth in new product introductions, other private label cereal and drink products. Lower trade spending drove a modest increase in average net pricing.

Supply chain disruptions, most notably packaging and transportation availability, were offsets to this otherwise strong result.

Our Foodservice business saw net sales and volume growth of 43% and 23%, respectively, and were lifted by significantly higher away-from-home demand. As with the third quarter, revenue growth outpaced volume growth as revenue reflects the impact of our commodity cost pass-through pricing model as we catch up with grain cost inflation. Although we saw year-over-year and sequential growth this quarter, total segment volumes remained below pre-pandemic levels.

Adjusted EBITDA improved to $56 million, benefiting from volume recovery, improvements in average net pricing and better fixed cost absorption. Higher freight costs partially offset these benefits. Fixed cost absorption, like volumes, remains below pre-pandemic levels as labor availability and other supply chain disruptions weigh on throughput, driving higher per-unit product costs and suppressing volume growth.

Refrigerated Retail net sales and volumes increased 12% and 10%, respectively. The volume growth included an 810 basis point benefit from acquisitions as well as organic growth in side dish and egg products. Pricing actions drove increases in average net pricing for side dish, sausage and cheese products.

Adjusted EBITDA decreased to $24 million and was pressured by significantly higher sow, cheese and egg input costs, increased freight and higher manufacturing costs. Similar to our Foodservice business, labor availability and other supply chain disruptions drove higher product costs and constrained volume growth, primarily in side dishes and sausage.

BellRing net sales and adjusted EBITDA increased 20% and 7%, respectively. Top line performance was strong for both Premier Protein and Dymatize. Premier Protein sales increased 18%, benefiting from distribution gains, strong velocities and shake price increases. Dymatize net sales increased 41%, driven by distribution gains, lapping COVID impacts, strong velocities and higher net selling prices. Higher freight and raw material costs drove a decline in segment gross margins.

You can hear further detail about BellRing's results on their conference call later this morning.

Turning to cash flow. We had a strong quarter, generating $193 million from operations. Reduced working capital was a key contributor to this quarter's performance. For the full year, cash flow from operations was $588 million. After deducting capital expenditures, free cash flow was $396 million, essentially flat to prior year. Lower capital expenditures offset by higher working capital were the primary contributors for the year.

Our net leverage at the end of the fourth quarter, as measured by our credit facility and excluding BellRing, was approximately 6.2x. On this basis, we expect to deleverage between 3/4 and a full turn once we have completed all of the steps in our announced separation of BellRing.

With that, I'll turn the call back to the operator for questions. Operator?

(Operator Instructions) And we'll go first to Chris Growe with Stifel.

I just had a question for you, if I could, first -- and obviously, Rob, a lot of companies are struggling with and battling through this environment of pricing to cost inflation, which has skyrocketed, and supply chain issues, and obviously those worked against Post this quarter. I guess I just want to get a sense of kind of each of those elements, if I could. It sounds like from a pricing standpoint, while there's obviously a lag in some areas, Foodservice as an example, you are pushing through pricing that will, it sounds like, offset cost inflation. Is that a reasonable assumption for fiscal '22? Or do you expect to kind of achieve a rate of pricing through the year that will ultimately offset inflation in fiscal '22?

The latter. I think we will lag in Q1, and then we should achieve parity in the middle of Q2 with the uncertainty, of course, being inflation from here.

Okay. Right, right. And the other thing on the supply chain. Again, I think a lot of companies are having these issues as well. But I guess I sensed a bit of a hopeful view of the supply chain. You had your challenges, obviously, this quarter. But I'm thinking, like, for example, in Refrigerated Retail, that seems to be improving a bit. Am I reading that the right way or hearing that the right way? Are we starting to see some improvement here in the supply chain that gives you a little more confidence in your outlook for fiscal '22?

No. You're reading that the right way. I think if you -- you have to almost go market by market because the labor market is such a local issue. But we have we've had at the peak 6 factories that we had what I would characterize as severe labor shortages that -- in the time frame, late August, early September.

Of those, 3 are now largely cured, and 3 still have some fairly severe shortages that we're working through. And it's not just a lack of hiring, the turnover is elevated right now as well.

So if you look at the leading indicators, first leading indicator is applications, and those have moved significantly in the right direction. We now need to make sure that we've got the right applicants. And then once we've hired and trained, we do a good job of retaining. I don't think we're any different than anybody else in this in this particular issue, but it remains challenging as we work through kind of the egg and the snake as we swallow the impact of this labor shortage through the first quarter.

But I would say labor is the most significant aspect of this. It is improving with freight still a challenge and some ingredients still a challenge.

Okay. And I know we'll have a chance to speak to Darcy about BellRing, but in terms of their supply chain, this is a disappointing quarter. You have such a great retail growth -- or consumption growth, I should say, and then weaker shipments. And I know that Post is committing some capital here to try to help BellRing along. Is that like a sequentially improving supply chain issue as well for them? Do they see better and better incremental supply each quarter that will allow them their sales to improve as well their shipments?

They do. There's an element of co-manufacturer execution that we are pushing. So if you look back early in '21 and really up until the latter part of the fourth quarter, our co-manufacturers were attempting to keep pace with all the incremental consumption demand. So they were performing ahead of their contract minimums.

Because of their own supply chain issues, several of our contract manufacturers have returned to minimums, which has put some of the pressure, specifically on September, a bit into the first quarter, but we expect that to same issue. There was a one bespoke issue in terms of a reasonably significant COVID outbreak at one factory in our co-man network. But in general, it's the same issue facing our co-man network as it is the balance of the labor market in the country.

Okay. And then just related to that and then my last question, the capacity that Post would like to build to help BellRing. When could that be ready to go? And how much like of the total capacity would that represent for BellRing?

It will take about 18 months to build. And it's still a relatively modest portion, about 10% to 12% initially, growing -- the factory is 4 lines with the potential to double. So it will initially be a relatively modest piece of the entire network with the potential to grow.

We will go next to Andrew Lazar with Barclays.

Maybe to start, I wanted to just explore the -- I know it's not the biggest aspect of things here near term, but I want to explore this co-packing arrangement with BellRing just a little bit more for a moment. I understand maybe the opportunistic nature of this. It's -- I guess it seems like it's a bit at odds with Post's plan to sort of be getting out of BellRing stock early next year. The common arrangement seems like it's sort of getting back into BellRing and more of like a pick and shovel sort of way but maybe without the brand ownership. So I guess we're trying to wrap my head around that a bit and better understand why maybe a current co-packer for BellRing would not be stepping up to take on this opportunity.

Well, they certainly would and are. So we are not the only part of the BellRing network expansion. I would encourage you to look at it less from the BellRing side and more from the Michael Foods side. So by that, I mean Michael Foods is essentially an enormous aseptic processor. That's essentially what we do in processing eggs. So when you look at marginal opportunities to invest capital in our core competencies within the Michael Foods network at a relatively low risk with a decent return in excess of our cost of capital, it was an interesting tactical, strategic -- sorry, tactical initiative for Michael Foods to step into that mix of contract providers for BellRing, much as we do for some other customers within our foodservice network. So we see it from a Michael Foods perspective as an expansion of our ingredient-ish, ingredient co-manufacturing business. BellRing just happens to be the customer. We obviously have a considerable amount of confidence in the BellRing demand projections. So it felt like a relatively easy way to allocate capital in businesses that we have very strong capabilities, very strong knowledge of the demand side and take advantage of that relationship.

Great. And then in the release, you -- I think you mentioned that in your fiscal second half of this year -- of this past year, a lot of -- most of Post's retail channel product categories trended towards growth rates that were back to in line with their pre-pandemic levels. And I guess just a little bit incongruent with what we still see is obviously very elevated growth trends for many companies in the packaged food universe. And I guess it's important, right, because it kind of gets to the debate on whether or not the packaged food players can exit the pandemic with even a slightly better growth rate moving forward given all of the incremental trial the past 2 years from the shift to at-home meeting. So I guess I was hoping to get a little bit more clarity on this comment and what might be making -- maybe trends that you're seeing somewhat different than maybe what some others are, if they are.

Yes. Well, I think that's really a cereal comment because both Bob Evans and BellRing are reverting to a bit ahead of already very robust pre-pandemic growth rates. So I think that -- I'm inferring your comment is more the slower growing, getting back to slower growing or shrinking.

If you look at cereal, where I think that comment is most at, I think it's a shift in premiumization within the category more than it is a category issue in private label. If you pull out private label, I think the category over '19 is up 3% to 4%. So I believe what we're seeing is more of an issue with private label, specifically within that category. Strip it out, you see growth rates very consistent with some of the other center store categories.

So I think it's part leading that lower-income consumer. I don't think it's systemically different than other categories.

Got it. And very quickly, just it may be too early, but any even anecdotal data point to get that sort of suggests that you're seeing consumers start to trade down a little bit, whether it be to some of your value brands or private label? Or is it still just too early for some of these macro conditions to have sort of forced that to happen?

No. I think we are starting to see some anecdotal -- well, it's data, but it's very recent. So if you look at the last 4 weeks and maybe 8 weeks, you've got first some bottoming in the trends. So instead of declining, they're flat. And then in the very recent weeks, we've seen some uptick in private label.

So it's too early to call it an inflection point, but if these trends continue, it is an inflection point.

And we will go next to Jason English with Goldman Sachs.

Oh, goodness, lots of questions left. Let's start with the easing of cost pressure by the end of 2Q. Can you unpack that a little bit more? What specifically do you expect to ease? Is this predicated more on like spot holding, begin to lap the upward move in the cost? Or are you actually underwriting sequential deflation?

No. We are certainly not underwriting deflation. So I think the comment I made was net of price increases. So we're assuming lapping pricing increases by the end of fiscal -- the second fiscal quarter and that the rate of inflation will not dramatically accelerate so that there's not a further lag effect on taking pricing. But we're certainly not taking in disinflation.

Where we do -- yes, where we do expect to see some cost improvement is on supply chain execution as we get better health in our labor situation, which is improving. So the controllable aspects of supply chain are improving. The noncontrollable aspects of various forms of input, transportation inflation, we are not assuming will moderate, but that our pricing activities will lap the lag effect.

Understood. That makes sense. Two questions on Foodservice. So you have more volume flowing through this quarter. Grain prices sequentially eased. And based on your pricing mechanism, pricing should have sequentially moved higher. I would have expected under those conditions, the EBITDA would have sequentially grown, not sequentially shrunk. A, am I right on those 3 drivers? And if so, b, what's the negative offset?

Yes, you're right on those drivers, and the negative offset is transportation and packaging, which are not hedged and are inflating in the quarter at double-digit rates.

Okay. And I hear you loud and clear in fiscal '23 being back to sort of the first normal year, but I have a question on what normal is. I've always thought about that business as predominantly an egg business where consumption grows around 2 underlying eggs, Foodservice. You're premiumizing through more processing, adding another point and then conversion of shell to process. All in, this can be like a 4% sort of volume metric, volume mix grower that could be levered to at least 5% of EBITDA. You put out a presentation in September suggesting, if you look at it quickly, that maybe it's actually only a 2% to 3% EBITDA grower full cycle. Is that right? Like should I really be thinking about this only as a 2% to 3%? Or is there more potential full-cycle growth there?

No. We have no reason to believe once recovery, and let's define recovery as profitability levels comparable to fiscal '19, that the rate of growth in Foodservice has changed. Now what remains a bit uncertain is the baseline because we have yet to see full recovery in some segments, specifically travel. But we have no reason to believe that, that rate has changed. I think the -- there were some mix of category growth rates in that presentation that may have led to that conclusion, but the expectation is, again, that we'll see low single-digit volume growth, some shift to higher value-added product. And between the 2, those will add in -- I believe we have said historically and continue to say it's 3% to 5% EBITDA growth rate.

We'll go next to David Palmer with Evercore ISI.

Just to follow up, I can't help but on the Foodservice side, it feels like your customers -- the food attach has been very strong within that breakfast segment. Those coffee players are talking about a lot of breakfast sandwiches being sold. It just felt like when you look at an index of your potential customers, it would have been at least a few points higher than where The Street was versus below. So I'm wondering about just the shortfall of just your constraints versus what you thought would have been possible in terms of supply.

But my real question was really on Refrigerated Retail. I'd love some anatomy of the decline versus -- of that EBITDA margin versus 2019 levels. When you think about pricing net of cost versus supply chain, what impact do each of those have? And then how do those get better as we think about maybe '19 being an anchor year getting back towards those mid- -- towards high teens actually EBITDA margins, when can you get there?

That was a long question, David. So I'm going to do my best to break that down. So if I don't get it, please come back to the specifics. But on Foodservice, your assumption is quite right. We should have sold more than we did. The specific customers that order our highest value products are doing quite well, and demand is very strong. 100% of the answer is labor availability in key markets where those products are made.

And I may have used this statistic in our third quarter call. But we pre-pandemic expanded that network from 17 to 22 lines, and we are currently only able to operate 18 lines. We expect that to change throughout the year. We expect to be at 19 by the third quarter and then full utilization of lines by the end of the year. But the single source of the gap between what you would expect looking at our customers and what we were able to ship is labor availability crimping our capacity.

So let me stop there and see if that answers your questions.

Yes. And I guess -- yes. No, and I wonder what happens to that business. I mean these are big customers that want their egg sandwiches. And so are you -- are other suppliers filling that in? Or is there a backfill? Or is there a big quarter coming to you in 1 or 2 quarters as you're potentially rebuilding their inventory?

It should be the latter. We actually believe we have gained share. There's just not a whole lot of capacity in this category. So the bigger customers are not where we have demand issues, it's that we're not providing as effectively some of the smaller customers. So we are -- we will have an inventory rebuild when we have the inventory.

Got it. And then with regard to Refrigerated Retail, just the pricing net of commodities versus supply chain and the pace of recovery there.

Yes. So the pricing net of commodities is predominantly a sow issue. And sows have been extraordinarily volatile in the last year, going from a low of 26 to a high of 93 or so. They're about 70 now. So we've been chasing that. And as we chase that, we have bracket pricing. So it's an automatic reprice, but it puts margin pressure on the up and margin benefit on the down. So that will be a consistent source of margin variability as long as we have that particular line and price it accordingly.

Over time, it really -- over time, it is a nice return on its capital, but it does create some margin variability. The core potato business has priced perfectly well and has no pricing -- excuse me, has no cost ahead of pricing. No issues there. The issue with our side dish business is that for a while, that particular plant was our most acutely challenged plant from a labor perspective.

We were -- we have demand that would be in the 15 million pounds a month or more, and we had dipped to a capacity of less than 7 million pounds. We had a glide path to get back to 12 million by April, and we are now already at just shy of 12 million, so well ahead of our expectation. As we cure the labor situation, that was the root cause of many first and second derivative issues that were driving incremental costs within that particular segment.

So I'm most optimistic from a trajectory perspective, when I look at Refrigerated Retail, about the pace of recovery and the margin restoration because it is largely an issue of having to pay a higher tolling charge to go to third-party manufacturers and having extremely poor throughput in the factories, driving fixed absorption down.

We'll go next to Michael Lavery with Piper Sandler.

You've called out labor as a headwind, and obviously, we hear that all over the group. But can you give a sense in your outlook, what assumptions you're making about a vaccine mandate? It's surely got a date with the Supreme Court. So it doesn't seem like it's completely settled just yet. But are you factoring in what might be potentially reduced even further labor market? Or how are you thinking about factoring that in?

It's a great question, Michael, and we are certainly planning it. But no, we have not factored in that the vaccine mandate will further crimp the labor market. I think the impact that it could have is some incremental cost, but I don't think -- if that rolls out as drafted, I don't know if I should say as expected, it would probably be an incremental cost of a handful of millions of dollars to us to monitor and test. But we would need to push through that in terms of paying it pretty aggressively in order to make sure that we don't further exacerbate the labor issue.

Okay. Great. That's helpful. And this -- I touched on a little bit with one of Andrew's questions, but just coming back to the low-end consumer. Certainly, you are looking are at what may be an inflection point. Can you just maybe quantify a couple of things? Do you have a sense of how much -- what percentage of your cereal consumers are SNAP recipients? And obviously, we've already seen the PEBT piece of those benefits roll off, which is significant. That seems to coincide with the timing you're looking at for bottoming and potentially turning a corner. Is that a substantial piece of your consumer base? And is that what might be driving -- giving some hope that this is really on the rebound?

100% yes. When the changes went into effect, it was precisely when we saw the bottoming and then the start to lift in private label. I don't have the specific percentage, but it's a material portion of the cereal category.

We'll go next to Ken Zaslow with Bank of Montreal.

As you think about the transaction, is there any sort of ability -- thought of revisiting it given where everything is? Is it -- is the snowball already rolling down the hill? How do you think about that and the value creation from your asset?

To clarify, you mean the BellRing transaction?

Yes. I'm sorry, yes.

No. I think the notion that the 2 businesses ought to be separated is price-agnostic. What is not is how you do it. And as we have laid out at each step along the way, we will make determinations around how to execute it as we get closer to the execution date. And by that, of course, I mean, as I had in my prepared comments, do we simply distribute it to shareholders or do we use the BellRing currency as a means of shrinking Post share so it's obviously relative value. So that is the only piece that I would characterize as uncertain and impacted by the relative changes in the 2 companies' share prices.

Okay. The second question I have, and I'll keep it to 2 questions, is you did say that you're going to be accelerating the marketing investment. I believe it was of the -- I don't remember exactly which...

Bob Evans.

Bob Evans, right. That's an interesting move given the capacity constraints. So what do you see that gives you the confidence to be able to just not parallel with the commentary of saying, "Hey, look, we're still capacity constrained." Is there a timing? And how do you see that playing out?

There is timing. So what I commented on is that we expect towards the latter half of the year to be more fully engaged in driving demand in that category, and that's specifically the reference I was making to the side dish business, which has gone from a really acute labor situation to largely a solved one in a short time frame. So it's the business we are seeing the most rapid improvement from a supply chain and output perspective. So that gives us confidence that by the time we get into the second half, we would be in a position to drive incremental demand.

Okay. And if that doesn't -- I mean -- so again, obviously, I guess your level of confidence is very high. It's just a very seemingly fairly aggressive step without making sure the inventories are rebuilt. But I understand.

But largely self-policing. So if we are wrong by a quarter, we will know that in time not to spend the advertising.

And this does conclude today's Q&A session and the Post Holdings Q4 2021 Earnings Call. You may now disconnect.

Thank you.