Post Holdings Inc
NYSE:POST
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Post Holdings Inc
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Welcome to Post Holdings Fourth Quarter and Full Year 2020 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 a replay beginning at 12:00 PM Eastern time. The dial-in number is 800-585-8367 and the passcode is 303-9636. At this time, all participants have been placed in a listen-only mode.
It is now my pleasure to turn the floor over to Jennifer Meyer of Post Holdings for introductions. You may begin.
Good morning, and thank you for joining us today for Post fourth quarter full 2020 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 Web site in both the investor relations and the SEC filing section at postholdings.com. In addition, the release is available on the SEC’s Web site.
Before we continue, 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. These forward-looking statements 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 Web site. 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 Web site.
With that, I will turn the call over to Rob.
Good morning. Thank you, Jennifer, and thank you all for joining us. Let me start with my comments this morning by again thanking our many colleagues who each day honor the commitments we have to each other, to our customers and to our consumers. This quarter ends our fiscal year and it's certainly been extraordinary. I am proud of the way this organization navigated the extreme shocks created by the global pandemic. For the full year, a year in which a key channel shutdown and only slowly reopened, our sales were flat and EBITDA declined 5.8%. I believe this evidence is the resilience of our business.
The fourth quarter itself delivered largely as expected. We saw the initial signs of recovery in foodservice and we saw some moderation of the upsized profitability in our segments that service retail channels. Across the board, our retail channel businesses continue to perform well. While Post consumer brands declined in total volume, Jeff will provide details explaining that this overall decline masks strong growth in the premium branded portfolio, offset by intentional decline to lower margin business plus some channel shifting impacting the portfolio.
Isolating this business only, we priced out of approximately $15 million of revenue that contributed only approximately $2 million to profit. We also saw the anticipated reversal of share trends from early summer as we returned to modest levels of merchandising. Within our refrigerated retail platform, we likewise prioritized higher margin branded product over lower margin private label in managing through tight capacity. Bob Evans branded side continues to grow impressively with net sales up 24%. Both segments saw meaningful margin expansion. Additionally, both Weetabix and BellRing had quite strong quarters.
Our foodservice business returned to positive even this quarter and continues to recover. However, this is a slow build and ultimate recovery to pre-pandemic levels will not occur quickly. We continue to see profound weakness in key channels, such as education, and travel, and lodging. At the same time, we were quite encouraged by the adaptations in all sectors of the restaurant industry that have led to impressive volume recovery. You’ve see that we provide a guidance for only the first half of fiscal 2021. Based on the recent vaccine news, we are cautiously optimistic that the pandemic will have waned by the midpoint of our fiscal 2021.
Meanwhile, we have growing concern that the ensuing months will bring new challenges with respect to managing our supply chains without some degree of interruption, as COVID impacts our workforce. While we have clusters of outbreaks across our business, this is a generalized concern rather than a reaction to anything specific. We have made substantial investments in plant redesign, protective equipment and additional training and we believe our work environments are well protected. Nonetheless, we will continue to be affected by outbreaks in these communities in which our factories are located.
Our first half guidance is roughly in line with the results of the second half of fiscal 2020, the timeline impacted by the pandemic. However, we expect greater contribution from foodservice and less from our retail channel businesses. To provide a bit more context, we expect to continue to see performance in our retail channel businesses at levels ahead of pre-pandemic metrics, but we do not expect to repeat the surge demand results that occurred in April and May.
Relative to prepandemic levels, we expect the first half in foodservice to materially underperform. However, we expect it to materially improve from the most recent six months. While we have seen solid volume recovery in several channels and we are better able to manage costs at this demand level, we do continue to see [anemic] performance in a handful of key channels. Last, foodservice contains some first half headwinds and related to timing of commodity changes versus the automatic timing of repricing of its grain-based contracts. There tends to be a three month lag.
We believe we have been appropriately cautious with respect to our volume and profit assumptions. Risks to this midyear outlook would be supply interruptions for our retail challenge businesses and foodservice demand sensitivity to mobility restrictions. If our assumptions regarding the virus trajectory prove accurate, we would expect the second half to accelerate over the first. If you participate in the BellRing call, you will hear that we expect attractive profit growth in BellRing to be skewed to the latter half of the year. Foodservice recovery would be the second material driver. Our outlook on the first half is sufficiently cautious for consumer brands, Weetabix and refrigerated retail that we do not expect the profit decline despite greater consumer mobility.
One comment specific to Weetabix. We are well prepared for the final Brexit departure on December 31st. Our primary preparations throughout the working capital build up to protect against delays in inbound raw materials. We do not expect this to have a material impact on our operations but it could cause some currency fluctuations in short term. We did provide fully year guidance with respect to capital expenditures. We are investing aggressively in our business to drive productivity and better leverage the recovery.
In terms of capital allocation, recall that in March, we were single mindedly focused on liquidity as we learned each day how to operate in this new environment. Today, we are much better equipped to manage challenges and we're being more aggressive with respect to our share repurchases and our consideration of M&A opportunities. While we can never be assured of success, we're actively evaluating opportunities where we may find value. The market for such opportunities is more rich than it has been in quite some time.
I want to return to where I began, it's been an extraordinary year. All of us have been tested. Together, we have risen to the challenge. While we can now see some light at the end of this ordeal, our result must and will remain as we navigate what we hope to be the final stretch. I am deeply grateful to all my colleagues for the efforts large and small across the world in each community we serve. At last before turn the call over Jeff, I want to specifically thank Jay Brown, who decided to retire from the board this year. Jay was one of the initial directors when Post separated from Ralcorp in 2012. Over the years, his support, his challenges to us and his council, helped make Post a better company and a better investment. We thank him for his contributions.
Thanks, Rob, and good morning, everyone. Adjusted EBITDA for the fourth quarter was $274.8 million and consolidated net sales were $1.4 billion. Although, the COVID-19 effect was less pronounced when compared to the second and third quarters, each of our businesses continue to be impacted by changes in consumer and customer behaviors.
Starting with Post consumer brands, net sales and volumes decreased 3.2% and 6.3% respectively. Legacy Post branded cereals, such as Honey Bunches of Oats, Pebbles and Great Grains, continue to show strong volume growth up 5% in the aggregate this quarter. This strong performance was outweighed by declines in private label and government business Malt-O-Meal bag cereal and licensed brand cereal. Surged demand from Malt-O-Meal bag cereal products and prior periods caused challenges in our supply chain and impacted our bill rates this quarter. Moreover, we saw channel shift and category demand for mass to traditional grocery and these products over indexed to mass.
Partially offsetting these volumes declines was a 3.3% improvement in average pricing, resulting from reduced promotional activity and favorable product mix. Gross profit margins meaningfully improved over the prior year, driven by improved net pricing and $5 million in cost savings from implementing our new integrated business planning process. These benefits were only partially offset by input cost inflation, increased compensation and costs for health screening and personal protective equipment. The net result of these factors was segment adjusted EBITDA of $121 million, which is relatively flat with the prior year.
Weetabix net sales increased 8.5% over the prior year. Volume growth of 5% was driven by extruded products as we lapped the prior year capacity constraint and cereal biscuits. This growth is partially offset by lower volumes for on the go breakfast drinks. The stronger British pound to US dollar exchange rate resulted in approximate 450 basis point tailwind to the net sales and adjusted EBITDA growth rates. Overall, Weetabix segment adjusted EBITDA increased 12%.
Our foodservice business continue to be significantly impacted this quarter with net sales and volumes both declining 23%. Our recently completed acquisition of Henningsen Foods is a slight benefit to these results. These declines reflect lower way from home demand in reaction to COVID-19, particularly in the morning day part within the full service restaurant, quick service restaurant, education and travel and lodging channels. Foodservice volume recovery remains highly correlated with the degree restrictions are imposed on mobility and gathering. We continue to anticipate a full recovery will likely take through fiscal 2021. Adjusted EBITDA declined 69% to $23.7 million, primarily resulting from loss contribution margin on reduced volumes, unfavorable customer product and channel mix, some payroll fixed costs absorption was significantly reduced production volumes and lower net pricing. The lower net pricing was caused by unfavorable mix, lower market-based pricing and temporary price reductions to move excess and short dated inventory.
Moving to refrigerated retail. Net sales increased 2%. Volumes decreased 5.5% as growth in sausage was offset by declines in egg and cheese products. Side dish volumes were relatively flat overall, as 9% growth in Bob Evans branded products was offset by declines in exited private label side dish business. Overall, net pricing improved reflecting favorable mix, targeted side dish price increases and higher branded cheese pricing. Segment adjusted EBITDA grew 11.6% benefiting from higher net pricing and an improved price cost relationship for sausage products. Our side dish manufacturing costs and lower profitability for cheese products offset this growth.
BellRing net sales increased nearly 32% while adjusted EBITDA increased 21%. Sales of premier protein branded products increased 37%, benefiting from RTD shaped distribution gains for both existing and new products, incremental promotional activity and lapping prior year reductions and customer trade inventory levels. Dymatize and PowerBar net sales grew 15% and 1% respectively. You can hear further details about BellRing’s results on their conference call later this morning.
Turning to cash flow. We had a very strong quarter generating $217 million from operations, including $70 million from BellRing. Reduced working capital was a key contributor to this quarter’s performance. For the full year, we generated $626 million in cash flow from operations, netting $391 million of free cash flow after deducting capital expenditures. Solid working capital management, lower cash taxes and reduced capital expenditures largely offset the negative cash flow impact COVID had on our adjusted EBITDA. As a reminder, we report leverage statistics for Post’s independent of BellRing net debt and adjusted EBITDA. Post pro-forma net leverage on this basis was approximately 5.5 times as of September 30th.
Turning to share repurchases. During the quarter, we purchased approximately 1.5 million shares at an average price of $86.69 per share. For the full year, we purchased approximately 6.1 million shares at an average price of $97.65 per share. Since year end, we have acquired approximately 700,000 additional shares at $90.51 per share. Our remaining share repurchase authorization is currently approximately $230 million. In closing, we continue to maintain significant liquidity for strategic actions and remain confident in our ability to continue to generate strong cash flow during the pandemic.
With that, I'm going to turn the call back over to the operator for questions.
Thank you [Operator Instructions]. Our first question comes from the line with Andrew Lazar of Barclays.
Maybe to start with, you mentioned the decision to exit some low margin business, some of which was private label and I guess both PCB and refrigerated segments. And guess what drove the decision to start doing this, what seems like more significantly this quarter? Was it primarily just managing limited capacity, or is there something more sort of structural behind that? And do you expect or should we expect another three quarters of this sort of negative impact in these segments until the dynamic is lapped?
No, it's predominantly around managing right capacity and different lines and different segments to make sure that we have a supply chain that can be resilient through what we're anticipating as a challenging period upcoming. So it's entirely about supply chain management.
And Rob, you mentioned some M&A opportunities, pipeline that seems more rich. I think the words you used then you’ve seen in some time? Is that -- would you say that's a broad statement across the various segments or do you think those opportunities are really coming about in one or specific segments to your business?
Interestingly, it's a fairly broad commentary. I think there's two buckets there. Foodservice opportunities that have been under stress and there are branded opportunities that have naturally seen what has happened and are seeking to capitalize on it. So I think it's two very different buckets and quite a bit in between from companies doing pruning and portfolios. So I think it's a wide range of what I would characterize as monetized opportunities with potentially good value.
And I think -- I would think it would be tough you have to balance sort of what COVID benefit is to some of these businesses that you may ultimately look at versus what more normalized would be and then what you sort of pay for that. I guess how do you -- this is the last thing. How do you balance that? How do you manage that internally when you think about those offsets as you think about valuation for some of these assets?
Well, I would think everybody on the phone is doing that exercise that we are trying to make some assessments as to what the volume list at retail have been with regard to COVID and try to adjust for them and adjust the financial impacts for more of a pro forma normalized. And I think frankly, our expectation is that there will be a COVID stick trying to judge that category by category in the arc.
Your next question comes from the line of John Baumgartner of Wells Fargo.
I guess I wanted to come back to the Bob Evans business heading into F '21. At this point, has the visibility into household penetration at retail? I know at the time of the deal, one of the opportunities was to sort of build out from that core in the Midwest. Any sort of notable data at this point on trial or repeat purchases across those emerging geographies?
We have been adding about 1 percentage point to household penetration and our repeat buy rate is north of 50%. So very attractive repeat buy, a decent household penetration growth. So we feel very good about Bob Evans, as you saw. We had really quite substantial growth on the side dish business, solid growth as well on the sausage business, which combined both good volume growth and attractive pricing.
And then maybe a follow-up for Jeff. On the foodservice margin in light of the sequential recovery in the foodservice margins, presumably, there was some benefit from a reduction of obsolescent cost there. But can you walk through any other contributors, specifically any related impact from more, I guess, permanent cost adjustments in that business at all? Thank you.
John, there really wasn't much in the way of permanent cost reductions. As we've talked about before, we're trying to be reserved in our approach to that. So we are taking actions to minimize the amount of idle workforce to the extent possible while maintaining the workforce. Really, probably the thing I would comment most that's hidden when we talk about the top-level volumes is the impact of mix on that business. So as we talked about before within that business, we have a food ingredient component and a foodservice component. The food ingredient component is actually up year-over-year and that's a low margin business generally, but during COVID even more low margin business as we have to price to move product. So that's the biggest thing I would highlight to you is don't necessarily stop at the headline number of volume down 23%. There are some margin pressures that are more into details as you decompose the components of that business.
Our next question comes from the line of Chris Growe of Stifel.
I just want to ask a question, if I could, first on PCB and refrigerated retail. As you're kind of getting production pared back to your brands, trying to get away from government bid business or private label, those kinds of things. Is that an ongoing drag to volume in, say, the first half of '21? I assume that's incorporated your guidance if so. But do you have any frame of reference for how big that could be and just to keep in mind the limitations of growth in those divisions?
Well, we called out approximately $15 million of revenue, contributing about $2 million of EBITDA for the quarter.
That was in PCB…
That was in PCB. The numbers are smaller dollar-wise, the pounds are more like about GBP7 million in Bob Evans and the average per pound is lower. So it's more like $4 million or $5 million in the refrigerated retail platform.
And that should come back to continue in the first half of the year. Is that what you're saying then?
Yes, and it's baked into the guidance…
And then just a second question on the phasing of EBITDA through the first half of the year for Post. I think you said a little higher in the first quarter versus second quarter. Is that a function of comparisons? And I see PCB had some shifting around of profitability in the year ago period. I just want to get a sense of what could be different? Is it COVID cost or anything related to that or is it more about the comps year-over-year in the business?
No, it's just a really very interesting forecasting dynamic right now, in that obviously, we have the most visibility into the quarter we are in. And then we have, in some respects, greater visibility as we go out and anticipate vaccine and distribution. The hole in that donut really is second, early third quarter, because we don't know what's going to happen with stimulus as it relates to impacting particularly restaurants in the foodservice channel. We don't know what's going to happen with the pace of distribution and with the case counts where they are now, the potential for mobility restrictions. So we're taking a fairly cautious well, I hope it is a cautious outlook with respect to the impact on foodservice and we have not taken a particularly aggressive stance on there being a similar repeat and certify. So the trend line that you're referring to is more just a matter of trying to mask -- not mask, match uncertainty with cautious outlook.
Our next question comes from the line of David Palmer of Evercore ISI.
I wanted to talk about EBITDA. Looking out, I'm trying to look out past COVID and try to find a year pre COVID that might be a good discussion point for par, if you will. If you look back to 2019, your EBITDA was $1.2 billion-ish. And then if we were to look out to fiscal '22 to just pick a year that might be somewhat more clean of COVID in terms of your business. How would you think about that versus the par that is fiscal '19 in that $1.2 billion in terms of each of your businesses' earnings power? I would imagine the refrigerated retail BellRing, Weetabix could be significantly higher, maybe foodservice still a touch lower. So how are you thinking about that? And then I have a quick follow-up.
Well, I think that's the question of the day, maybe the question of the year. And the way we think about it is very much in line with the way you prophet the answer, which is that we expect that there will be a stickiness with the retail products as a result of the trial experience that we have all endured, and we may see additional stickiness because of some lifestyle changes around spending more time in homes. So for the 70%-ish of the business that serves retail channels, we feel very bullish.
We believe that there will be a substantial recovery of current levels in foodservice and whether that gets back to bright on the first day of our FY '22, which is October 1st, whether it takes more time than that, much harder to answer because it requires us to understand exactly the trajectory of the distribution, how people psyches respond, how people's behavior accommodates the new realities of technology and how they react to what we expect to be pretty significant pent-up demand to get the hell out of their houses for a while. So it goes back to what I responded to Chris and that we're in this very strange shape of our forecasting visibility in that the longer you give us to answer that question, the more bullish we're going to be. We think that foodservice recovers. We think that retail continues to benefit from the trial experiment but trying to put a fine-tune on exactly when that occurs is more of a challenge.
No, I don't mean to badger on the witness on this one, but there's not just macro stuff that's going on around you, which are all fair and good and create lower visibility. But I mean you have some things internally that you've been doing. Obviously, you've been under pressure from a cost perspective. You probably found some efficiencies. You have the Weetabix integration and efficiencies, BellRing's growth. Refrigerated Retail does seem like it's not just a cyclical upturn, but on a multiyear one, two, and three years will have passed from '19 to '22. So I guess I'm trying to framework it out to think about how you might be thinking about your true earnings power versus that par aside from the trial and repeat stuff that we all have to kind of take on ourselves from an analytical risk standpoint, we all have to make our own minds up. But internally, in terms of generation of profit, what are your thoughts there?
Well, and I'm shying away from being too precise around given what would accommodate to at least what would result in some directional guidance for years beyond 2021 when we're not even giving full year '21. But I think broadly, I would tell you that we are quite bullish on the macro and we are quite bullish on the internal micro activities that we're taking to drive the leverage in that recovery, as I called out in my script. We're not withholding investment spending behind each category of our business, including foodservice. It might be the intuitive response to cut back capital spending into a business that right now appears to be as weak as it is, but we think the more appropriate activity is to lean into it and make sure that as we come out, we come out in a stronger position across our supply chain, which has been under pressure.
We've had hundreds of unfilled positions that we've been navigating around at the same time that we were navigating COVID. So we want to invest in projects that result in automation. We want to improve projects that result in better latent capacity release. We think that there's an array of projects that we can invest in that will improve the overall outcome of the business. And again, I'm very bullish longer term. But we are trying to temper that bullishness with the reality that we face challenging -- I'm going to say 90 days, it could be 60 days, it could be 120 days, who really knows, but we got to get through the next period of time. And then I think we will start to unlock some of these opportunities which I think are substantial and stacking.
Our next question comes from the line of Bill Chappell of Truist Securities.
Just kind of a general question. Can you help us understand what, if anything, was a major surprise in the quarter or even kind of for the outlook and the understanding of everything would be surprising if we were talking a year ago and to what actually happened? But it feels like a lot of things in terms of trends have already been going for the past six months, especially last quarter. And so just trying to see did anything really run outside your expectations, or is everything kind of what we saw the prior quarter?
No, I feel like this was a very highly controlled quarter. It came very much in line with our expectations. I think it landed on consensus expectations with respect to EBITDA. Some different ways of getting there in terms of which business and margin versus revenue. But from our internal perspective, this is exactly what we expected the quarter to shape up to. I think the surprise is that we are heading into a very challenging environment just from a case count perspective, because I think that while we all feel better about where we are on treatment and mortality and those things, what matters from a keeping the supply chain running is the number of case counts and the resulting quarantines. So you start throwing 200,000 cases a day and multiply that across the quarantine number, it starts affecting the overall workforce of the country.
And it's just something that we're going to have to navigate and be aware of and hopefully appropriately cautious in our expectations management with respect to what could happen in the very short term. But in this particular quarter, I would say it was a very -- it was a quarter that came out very much in line with how we expected. And we're just making sure that we've been thoughtful that’s how we look at the quarter we’re in and the upcoming months thereafter.
And then also, just a follow-up on Weetabix. Any changes in kind of thoughts on not just the branded business but the sheer amount of like private label business you do for -- with Weetabix and as that market changes, or have you seen more of a migration to branded versus private label in the UK, any -- the pandemic kind of change your outlook for that total business, not just the branded Weetabix side?
It has not changed our outlook. The business has been performing exceptionally well. There's a current thinking or perhaps consensus that as we went into lockdown earlier in the year that consumers reengaged with nostalgic brands and comfort food, et cetera. I have somewhat of a counter thesis that the brands were able to flex production in a manner that private label was not simply as a result of the greater SKU count, such that there was a migration to brands because of a supply phenomenon more than a demand phenomenon. And I think that is true in the UK as well. We have been able simply by virtue of long run been able to keep output of our base yellow box product in an easier manner than the array of SKUs required to support private label. So there has been a migration to branded in the UK the same way there has been in the US.
Our next question comes from the line of Michael Lavery of Piper Sandler.
You called out a decline for the licensed cereal brands in the quarter. I know there's been some new launches there that you get the initial boost and maybe just lapping some of that. But can you give us a sense of what that runway looks like and what we should expect looking ahead a little bit?
So just to give you some perspective, a couple of years ago we were early in the introduction of a family of licensed brands, and there was a very rapid run-up to a point where we had about a full share. Our competitors followed suit with different families of similar oriented products and that demand pool got redistributed. And I think what we have ultimately had was some rented share that was really not ours and so on. And so we have surrendered a good reportion of that share and are seeking to replace it with some more fundamental innovation, including things like our more adult oriented products around Dunkin' coffee-based products and some -- they happen to also be licensed brands, but they're more targeted and nuance brands. That launch has gone quite well.
We have, at the same time, launched a Tim Hortons signed in Canada. It has been one of the best launches in Canada in recent years. So we feel quite good about the runway for each of those products. We feel equally good about some of our bolder innovation that we should be, hopefully, speaking of in the not-too-distant future, innovation that had been slated for 2020, but got delayed because of the desire of retailers to keep a more simplified merchandising assortment.
And just to clarify, I don't know if I heard this right. I think when you were giving some sense of the first half, you said that you were trying to take a conservative or just a little bit cautious approach, but that you didn't think Consumer Brands EBITDA would be down year-over-year. And so did I hear that right and would that be for each quarter or for the half in total?
No, I think you heard it just a bit off. What I was trying to suggest is that Consumer Brands and Weetabix and Refrigerated Retail would not trail off in the second half compared to the first half, because we think we've baked in sufficient caution that increased mobility, while it would drive some growth in our foodservice businesses should not materially draw from the base performance in our retail businesses.
Our next question comes from the line of Ken Zaslow of Bank of Montreal.
Just my two questions. One is, if you think that the supply chain is really the reason for the increase in demand rather than the affinity for consumers to go to like a big brand. How do you assess the COVID stickiness for your PCB and retail business?
Well, I think the virtue of that move to brands is a trial, which would have been -- that level of trial would have been extremely expensive and challenging to obtain. So it's very hard for me to accept that after all of that trial, the result will be a complete reversion to pre-pandemic consumption patterns with none of it sticking. So I'm not going to try to quantify that stick, because it's very challenging right now, but my expectation is that because we've had such a significant trial that there will be some stick to it.
My second question is, as you go through the COVID experience, what opportunities do you have or have you seen that you can improve the efficiency of your supply chain? And how much stick of that in 2022, 2023 and beyond, like how much have you done of the SKU rationalization, streamlining your supply chain that all you come in and say, hey, look, we have another $5 million, we didn't realize, how do you assess that and how much is it?
I'm not prepared to put a number to it, but qualitatively, I'll answer the question, in that we've kind of joked that anything that was still on a shelf on about April 30 needs to be immediately rationalized, because if we didn't sell then it will never sell. But what we all did was take SKU rationalization to its ultimate extreme by trying to narrow our assortment to the longest run. And we're actually now going in the opposite direction of rebuilding the SKUs. So SKU assortment, which is a natural ongoing process, almost like a horsepower process, had this nonlinear interruption by COVID, such that we took a dramatic reduction. We'll now rebuild and then return to a normal process of assortment management. I think with the greater insights around what the profit impact of better assortment and better velocity it produces. So I think that it will have a lingering impact how exactly it balances out, I'm not sure.
I think the other area that we are able to focus on -- I think you asked about supply chain specifically is in automation and trying to drive productivity. And we have, for years, had challenges with labor, obtaining it, not challenges managing it, but just we've had problems with turnover and retention or recruiting, I should say. And I think that as we go through this and invest more in productivity, it will take some of the pressure out of that. But these are multiyear trends, not something that will just be a binary outcome as we enter 2022.
You're not worried that the SKU, I would say, proliferation but return of that is similar to the merchandising where everybody cut merchandising, there seemed to be some rational behavior in that, then all of a sudden that didn't actually last. Is that possible that could happen with SKU or will you bump that trend? And I'll leave it there. Thank you very much.
Yes. I would not say that we are not worried. I would say that that is -- these things tend to behave a bit like a pendulum and never exactly get to the right equilibrium. We'll probably go from a bit extreme narrow to wider and have a permanent effort of getting to the idealized mix, the perfect shelf, we call it. But yes, I expect there will be some overreaction and then there will be a correction.
Ladies and gentlemen, we have reached the allotted time for questions and answers. Thank you for participating in the Post Holdings fourth quarter and full year 2020 earnings conference call and webcast. You may now disconnect your lines, and have a wonderful day.