Kristen S. Wenker – Senior Vice President-Investor Relations Donal L. Mulligan – Executive Vice President and Chief Financial Officer Kendall J. Powell – Chairman and Chief Executive Officer.

Eric Katzman – Deutsche Bank Securities, Inc. David Palmer – RBC Capital Markets LLC Andrew Lazar – Barclays Capital, Inc. Alexia Jane Howard – Sanford C. Bernstein & Co., LLC Matthew C. Granger – Morgan Stanley & Co. LLC David C. Driscoll – Citigroup Global Markets Inc. Ken B. Goldman – JPMorgan Securities LLC Kenneth B. Zaslow – BMO Capital Markets.

Ladies and gentlemen, and thank you for standing by. Welcome to the General Mills Q4 2014 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Wednesday, June 25, 2014.

I would now like to turn the conference over to Kris Wenker, Senior Vice President, Investor Relations. Please go ahead..

Thank you, operator. Hello, everyone. I’m here with Ken Powell, our Chairman and CEO; and Don Mulligan, our CFO, and I’ll turn the microphone over to them in just a minute. First, I got to cover my usual housekeeping items. Our press release was issued over the wire services earlier this morning. It’s also posted on our Web site, if you need a copy.

You can also find slides on our Web site that supplement our remarks this morning and our remarks will include forward-looking statements that are based on management’s current views and assumption. The second slide in the presentation lists factors that could cause our future results to be different than our current estimates.

And with that, I’ll turn the call over to Don..

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In the fourth quarter, promotional spending in developed markets was less effective than we planned and input cost inflation was a bit above our forecast. Net sales and adjusted gross margin fell short of our targets. Our fourth quarter results are summarized on Slide 5. Net sales totaled $4.3 billion, down 3% versus last year.

On a constant-currency basis, net sales were down 1%. Adjusted segment operating profit, which excludes a charge associated with Venezuelan currency devaluation, totaled $733 million essentially even with year ago results. Net earnings and diluted earnings per share were both up double-digits as reported.

As we indicated on the third quarter call a significantly lower tax rate and lower shares outstanding were strong contributors to EPS growth in the final quarter.

Our reported results also include a $0.09 per share charge for the Venezuelan currency devaluation, a $0.06 per share gain on the sale of several Idaho grain elevators and a $0.01 gain for mark-to-market valuation of certain commodity positions.

Adjusted diluted EPS which excludes these and certain other items affecting comparability, increased 24% to $0.67 per share. Slide 6, use of the components of our fourth quarter net sales growth. Foreign exchange reduced sales growth by two points. Pound volume was 2% below last year levels.

And sales mix and net price realization added one point to sales growth. Slide 7, shows fourth quarter net sales results by segment. For U.S. Retail, net sales declined 1% overall. Pound volume for U.S. Retail grew by 1%. This was offset by negative price and mix. International segment net sales declined 7% as reported and 2% on a constant currency basis.

Pound volume declined 6% from last year’s levels, which included one extra month of results for Europe and Australia. Price and mix added 4 points to the segment’s net sales growth. Net sales for our convenience stores and food service segment, grew 1% overall in the quarter, with pound volume essentially matching year ago levels.

However, looking at just our six priority platforms, which are snacks, cereal, yoghurt mixes, biscuits and frozen breakfast, combined net sales grew 5%. On Slide 8, you can see that adjusted gross margin, showed a slight decline in the fourth quarter.

This primarily reflects lower net sales and higher input cost inflation than anticipated in the quarter. For 2014 in total adjusted gross margin was down 80 basis points to 35.4%, reflecting the change in business mix with incremental months results for new businesses added in 2013, as well as higher input costs.

Our input cost inflation for the full year totaled 4%, higher than we planned, primarily driven by dairy costs. Our full year results are summarized on Slide 9. Net sales for 2014 grew 1% to reach $17.9 billion. On a constant currency basis, net sales increased 2%. Adjusted segment operating profit fell 2% to $3.2 billion.

Net earnings attributable to General Mills, totaled more than $1.8 billion and diluted earnings per share were $2.83. Adjusted diluted EPS grew 4% to reach $2.82. U.S Retail net sales in 2014 essentially matched prior year results at $10.6 billion and operating profit decreased 3% to $2.3 billion. Slide 10 shows you the sales results by division.

Snacks, Small Planet Foods and Big G cereals led performance for this operating segment. For convenience stores and food service net sales declined 2% in 2014, driven by a 2% decline in pound volume. Operating profit for the segment was also down 2% to $307 million.

Net sales performance was essentially in line with our plan, reflecting our ongoing strategy of focusing business mix on key product platforms and the most resilient customer channels. Net sales for our six priority platforms grew 4% for the full year.

2014 net sales for our international business segment totaled $5.4 billion, up 4% as reported and up 8% in constant currency. Adjusted segment operating profit grew 4% to $535 million and increased 10% in constant currency. On Slide 12, you can see international constant currency net sales rose in three of our four geographic regions.

Sales in the Europe and Australasia region declined 4% to $2.2 billion reflecting the comparison against 13 months of results in fiscal 2013. Canada sales totaled $1.2 billion, up 5% in constant currency. This reflects low single-digit growth in base business net sales and three incremental months of Yoplait.

Latin America sales crossed the $1 billion threshold was strong growth and the base business and a full year of Yoki reported results. And in Asia Pacific region constant currency sales grew 9% to exceed $980 million driven by another year of double-digit growth in Greater China. Slide 13, summarizes 2014 joint venture performance.

On a constant currency basis net sales for Cereal Partners Worldwide were flat and Haagen-Dazs Japan sales grew 9%. After tax earnings from joint ventures, total of $90 million, a decline of 4% in constant currency reflecting increased consumer spending at CPW. Turning to the balance sheet, Slide 14 shows the components of core working capital.

We continue to make solid progress in this area, with core working capital down 9% in fiscal 2014. Since fiscal 2011 we reduced core working capital by 19% while growing net sales by 20%. Cash flow from operations totaled $2.5 billion for the year, compared to $2.9 billion last year.

This decline primarily reflects a decrease in other current liabilities due to year-over-year differences and accruals for trade promotion and income tax. Fixed asset investments totaled $664 million for the year resulting in free cash flow of $1.9 billion.

We return more than $2.7 billion of cash to shareholders through stock buybacks and dividends in fiscal 2014. Dividends per share increased by 17%, the current annualized rate of $1.64 per share represents a yield of 3% at recent prices for GIS stock. We have a strong track record of returning cash to shareholders.

In recent years, our dividends per share have increased at a 13% compound rate, and our average shares outstanding have declined 1% per year, that’s despite causing briefly on share repurchases to fund the strategic acquisitions of Yoplait and Yoki. Fiscal 2014 was a good year for General Mills’ shareholders.

A combination of share price appreciation and dividends resulted in a 13% total return for the year. That’s some of the very tough returns generated by our peer group, and it’s consistent with our goal of delivering double-digit shareholder returns. Let’s now shift to fiscal 2015.

General Mills now generates 35% of our sales and a meaningful share of our profit outside the U.S. And we expect this international waiting to grow in the years ahead. So, we’re transitioning to providing our guidance to you in constant currency. Slide 19, summarizes some of the key assumptions we build into our fiscal 2015 growth plans.

We believe it’s prudent to assume food and beverage industry growth in developed markets improves at a very modest pace over the course of the year. Our fiscal 2015 includes a 53rd week, which is where it’s roughly two points of top line growth. We are targeting mid single-digit, constant currency net sales growth including that extra week.

We’ll continue to generate cost savings and reinvestment funds to our robust pipeline of HMM issues. This business discipline has been our first line of defense against input cost inflation for many years. In fiscal 2015, we are targeting more than $400 million in COGS in HMM alone. This should offset inflation, which we estimate at 3% this year.

We are targeting mid single-digit constant currency growth in segment operating profit. We plan to reinvest the profit benefit of the 53rd week to support increased media spending and start-up expenses related to several key fiscal 2016 product launches. One example of the start-up expenses for our new Yoplait factory in China.

Finally, we are beginning to work a new cost reduction initiatives designed to boost our efficiency and sharpen business focus behind our key growth strategies. We began a formal review of our North American manufacturing and distribution network, with the goals of streamlining operations and identifying potential capacity reductions.

We’ve initiated efforts focused on further reducing overhead costs. Together these new initiatives are targeted to generate $40 million in free tax savings in fiscal 2015, with additional savings in fiscal 2016. We’ll share more details with you in the coming months as we determine our specific action plans.

Let me say a quick word about pension expense. We continue to include pension expense in our reported results. In fiscal 2014, the return on our planned assets was 15% in the overall funded status at the end of the year was 100%. Our fiscal 2015 pension expense will be down modestly versus last year driven by our actual asset returns.

The discovery for fiscal 2015 is unchanged from last year at 4.5%. Slide 21 provides a summary of our guidance for 2015. We’re targeting mid-single digit sales growth in constant currency. Adjusted gross margin is projected to improve modestly from 2014 levels. We expect our media investment to grow faster than sales.

We project our segment operating profit will grow at a mid single-digit growth on a constant currency basis. Our plan assumes a high single-digit increase in interest expense, reflecting a shift to more long-term debt and our expectation of rising interest rates over the course of the year.

We’re assuming adjusted tax rate comparable to last year’s 32.2%. We expect joint venture earnings to grow at a high single-digit rate in constant currency due primarily to sales growth and lower levels of input cost inflation for CPW. We plan to continue returning cash to shareholders through share buybacks.

In May, our Board approved a new 100 million share repurchase authorization with no expiration. For fiscal 2015, we are targeting a 3% to 4% net reduction in average shares outstanding. And we expect high single-digit constant currency growth and adjusted diluted earnings per share.

At current exchange rates, we’d estimate a three set headwind to full year adjusted diluted EPS growth in 2015. One other guidance note. We expect our first quarter adjusted diluted EPS to be below year ago levels.

That primarily reflects our plans for increased merchandising expense with a higher number of new product launches in the period along with tax rate phasing. We’re excited about our operating plans for 2015. We plan to deliver consumer-focused renovation, product news and innovation across all elements of our portfolio..

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Cinnamon Nut, Cocoa Coconut and Berry can be consumed as a snack, a topping or as a cereal with milk. We’re broadening the Food Should Taste Good brand with the introduction of Pita Puffs. This crisp snack delivers the satisfying crunch of a pita chip in an innovative new puffed form.

And we’re bringing the culinary appeal of Food Should Taste Good to the cracker aisle with a new line of gluten-free brown rice crackers in delicious flavors like sea salt, peppercorn blend and tomato basil. We’re also launching Fiber One cookies nationally this quarter.

This is a great tasting product for consumers looking to satisfy their cookie craving without the guilt. These cookies have just 120 calories and 20% of your daily value of fiber. Our better-for-you snacking businesses have clear momentum and so do several other key businesses in our U.S. Retail portfolio.

Retail sales for Totino’s hot snacks have grown 10% in the last two years to reach over $0.5 billion in measured sales alone. In fiscal 2015 we’ll work to build on that success with our Zero to Pizza Pronto advertising campaign. We’re also innovating with new barbecue chicken and spicy taco style varieties.

Old El Paso is leading the Mexican category with measured sales up 4% and share up half a point in fiscal 2014 and this is thanks to differential innovation like our Stand ‘N Stuff tortillas.

This year we’re bringing bold nacho cheese flavor to our Stand ‘N Stuff taco shells and we’re significantly increasing our media investment to accelerate momentum on this very exciting brand. On our Baking Products businesses, we’ll continue to invest in the digital advertising efforts that Ann Simonds shared with you on our third quarter call.

We’re addressing consumer desires for affordable indulgence with the launch of Pillsbury filled cookies and Cinnabon bakery-inspired cinnamon rolls. And we’re expanding the successful Immaculate Baking brand from the refrigerated dough case into the dry mix aisle. So that’s a taste of the very full marketing plans we have in U.S. Retail.

You will hear much more on this business from Jeff Harmening in July. We finished fiscal 2014 with good sales momentum in our Convenience Stores and Foodservice business. For fiscal 2015, we’re targeting renewed top line growth for this segment with net sales forecast to grow at a mid-single digit rate, again including the 53rd week.

Positive mix and strong HMM delivery are expected to help segment operating profit grow at a high single-digit rate. Let me give you a few examples of how we’ll be driving net sales growth in fiscal 2015.

First, McDonald’s recently announced that they will be offering Yoplait Go-Gurt in Happy Meals at more than 14,000 locations across the U.S., beginning in July.

We’ve developed a new snacking product for the K-12 channel, new snacking products for the K-12 channel, like Nature Valley Crisps and Simply Chex, products that meet the USDA’s new snack nutrition regulations. We’ll continue to drive growth in the Convenience Stores channel with innovations like Chex chips and Totino’s Pizza chips.

Bethany Quam who was recently promoted to President of the Convenience Stores and Foodservice segment will share more details with you next month. For our International segment, plans call for a high single-digit constant currency growth in net sales and operating profit in 2015.

Our consumer first approach is as important in our International business as it is in the U.S. Let me share some highlights of the great product news and innovation we have planned starting in our developed markets. In Canada, we’re bringing relevant innovation to the cereal category.

We’re targeting healthful foodie consumers with our launch of an ancient grains variety of Cheerios. We’ve just introduced Nature Valley protein granola to Canada following fast on the heels of its successful introduction in the U.S. And on Lucky Charms and Cinnamon Toast Crunch we’re investing in taste focused advertising targeted to adults.

Our Liberté yogurt holds a leading position in Canada’s Greek yogurt market. We’re launching a new sublime of Liberté Greek featuring higher fat indulgent flavors. We’re also introducing new Yoplait Source yogurt with stevia, capitalizing on growing consumer interest in natural sweeteners. We’ll continue to tap the U.S.

snacks innovation pipeline to bring new products to Canada. Nature Valley breakfast squares are launching this month. And Old El Paso is bringing some new restaurant quality entrees to the Mexican aisle.

In Europe, we’re adding new fruit varieties to the core Haagen-Dazs portfolio and we’re launching Haagen-Dazs triple sensations, a breakthrough innovation which delivers three layers of indulgence in every bite. We continue to play a leading role in developing the Greek style yogurt segment in Europe.

We’re supporting our recent launches of Liberté Greek in the U.K. and Yopa!, high protein yogurt in France with new flavors and pack sizes in the first half of this year. And we’re expanding our Old El Paso Stand ‘N Stuff tortillas and dinner kits throughout the regions.

So let’s shift to emerging markets where our focus on the growing middle class consumer is driving strong growth for our businesses. Fiscal 2014 was another year of double-digit growth for us in China and we intend to keep our foot on the gas in 2015. We’re expanding the Haagen-Dazs retail line with new flavors like blueberries and cream.

We’ll reinforce the super premium equity with increased media investment in existing geographies and we’ll continue to expand the brand with new shops and retail outlets in new cities across the country.

On Wanchai Ferry, we’ll strengthen our brand leadership in the dumpling segment by inviting consumers to taste the best of the season with new varieties like asparagus and shrimp. And we’ll drive differential growth in the tangyuan segment by expanding our breakthrough crystal tangyuan innovation.

We’ll also continue working toward key milestones, including the plant commissioning and regulatory certification that will enable us to launch Yoplait into the fast growing yogurt category in China. In Brazil, our fiscal 2015 plans call for another year of double-digit net sales growth.

We’re capitalizing on Brazilian consumers’ passion for the World Cup with Yoki’s Bring the Party to your Home campaign. This leverages our annual Festa Junina in-store merchandising event. And we’ve launched a line of world flavors, Yoki snacks, featuring flavors from many World Cup countries.

We’re increasing media investment behind compelling messages like Kitano seasonings Clean Plates campaign. And we’re investing behind the recent launch of Betty Crocker dessert mixes. After the U.S., the Middle East is the second largest market for Betty Crocker in the world.

Our team there is building on consumer interest in sweet snacking with new varieties of Betty Crocker mixes, including molten chocolate cake and chocolate cheesecake, supported with high levels of consumer spending.

In India, we’ll drive trial and awareness of Pillsbury value-added mixes and Parampara meals by more than doubling consumer support while expanding distribution. Emerging markets continue to lead CPW’s growth.

Next month we’re adding Fitness Chocolate to our market leading brand portfolio in Southeast Asia, targeting consumers seeking permissible indulgence. And we have big nutrition news rolling out across our kid cereals line in Latin America centered on less sugar, same great flavor message.

That gives you a sense for the strong growth plans we have across our international business in 2015. Christ O’Leary will share details with you in just a few weeks. So in summary, General Mills fiscal 2015 plans are centered on the objective of faster top line growth fueled by sharper consumer focus news and innovation.

We have a very robust slate of product news, renovation and innovation that we’re bringing across each of our business segments. We’re maintaining our strong HMM focus and we’ve launched new efforts designed to contribute $40 million in pretax savings this year with more to come in fiscal 2016.

And above all, we’re focused on our commitment to deliver earnings growth and strong cash returns to our shareholders. So we look forward to talking more review about these plans during our investor event on July 8. So with that, I’ll open the call for questions.

Operator, would you please get us started?.

Thank you. (Operator Instructions) And our first question comes from the line of Eric Katzman with Deutsche Bank. Please go ahead..

Hi, good morning, everybody..

Hi, Eric..

Two questions, I guess. Ken, you clearly have stated with all the details on the new products that top line is the focus. It looks like promotional spending just for pretty much everybody, including yourself, has not been as effective.

So could you kind of talk a little bit about the comment that like media spending is going to be up, I think you said greater than sales? Kind of how does promo fit into that? And then I have a follow-up on the cost savings restructuring effort..

Okay. Well, good morning, Eric and thanks for the questions. Let me make a few comments.

We continue to be very focused, as you point out, on innovation, new products, renovation of core brands and of course the advertising that’s necessary to really communicate those ideas to consumer and of course when we get that combination right that’s when we see top line growth, clear benefits coupled with very compelling advertising.

So that is core to our plan and continues to be core and I described I think a number of instances of how we’ll play that out. On the merchandising side of your question, I’d make a couple of points about sort of what we saw in the fourth quarter and our focus going forward.

First of all, while we did not see the efficiency that we’d hope for I just want to underscore we’ve seen relatively stable merchandising price points. So it’s not a question of that price point erosion or more aggressive levels of promotion. It really for us related to execution.

We just see more and more of the players interested in getting merchandising. There are limited number of places in the store to get that high quality that we want, which is really good placement on end-aisle displays coupled with the feature support that we know drives efficient merchandising.

So as we look at those metrics and variables, particularly in the second half and fourth quarter of year, we saw some slippage there. So we look at it as why we are quite disappointed, we kind to analyze and think our way through these things. We think it’s an executional issue.

We just have to make sure that we’ve got our customers focused on the right big brands and executing in the right way with high quality display support in store and the right level of communication. So we’re going to – and recognize it’s more competitive, focus on execution.

We’ve got very good sales capability and that’s sort of how we’ll approach that as we go into 2015.

Does that get at it for you, Eric?.

Yes. That’s helpful. Thank you. And then, I guess on the review on the cost side of things, obviously, kind of similar, everybody is looking at what is the right cost structure, capacity utilization. I guess it’s early days, but it just seems that $40 million relative to your EBIT, which is kind of approaching $3 billion, is kind of relatively modest.

Should we think about this as being a much bigger kind of program or is this really kind of just adjusting some utilization rates in select businesses?.

So, Eric, I mean, let me make a comment and then I think Don wants to jump in. I mean you should think of that number as a partial year number and I think as we’ve noted we’ll expect that to grow in out years.

Beyond that in terms of more detail on how we’re approaching this and what we’re thinking, we don’t have those to share with you today and so we’ll come back at those later, but I think it would be correct to say that’s a partial year that we’re capturing there and we expect that to increase going forward..

Yes, Eric. What I’d add is as you’re well aware we have been under HMM discipline for close to a decade now. That has allowed us to continue to drive efficiencies in both our supply chain as well as our overheads, which has avoided the need to take a lot of large scale restructuring actions.

That said, on a very target basis we do think we see some opportunities. To Ken’s point, we expect to be back to you in 90 days or so with more specifics on portions of it. It will play out beginning this year.

Think about those savings falling more in the back half and then they will expand in F16 and we’ll give you a line of sight on that when we’re revealing out more specifics..

Okay. I’ll pass on. Thank you..

Our next question comes from the line of David Palmer with RBC Capital Markets. Please go ahead..

Hi, David..

Good morning. U.S. Retail has been at the center of the shortfall in the last few years versus your high single-digit targets. It seems to be key to the turn in your fiscal 2015 guidance in addition to the impact from cost reductions and the extra week. Assuming that is fair, what areas of U.S.

Retail do you expect to improve the most into the next year and why would those be the areas that you expect to improve? Thanks..

David, thank you for the question. There are three focused areas in U.S. Retail. One area focuses to continue really and accelerate our very strong momentum in snacks. We’ve had great success there. We have a very strong innovation pipeline. You’ll see more of that innovation in the first half.

I will tell you there is more good innovation coming in the second half. So first things first is to keep the momentum going in a very, very successful part of our portfolio. The next two priorities Yoplait yogurt and cereal. Let me talk about each of those a little bit.

In the yogurt category, I would say that the dynamics of that category are shifting in our favor right now. While Greek yogurt is obviously a very big part of the category now, it’s been stable at 46%, 47% of the category now for 6 months or 7 months. And that means a couple of things, I mean first of all we have terrific Greek offering now.

We have a full slate of Greek products in many styles and formats. We introduced a number in the second half of last year. We are introducing 20 more in the first half of this year. And we are seeing – and these are very, very good products, consumers like them.

We are seeing our share expand, and so we’re finally getting real traction in that large Greek segment. On the other hand, the fact that the growth of the Greek segment has stabilized, it really means that there is room for these other segments, I think to get traction now.

And so, we are clearly seeing that in our core cup business on these Yoplait brands. We saw Yoplait Original grow last year. We’re seeing that momentum continue behind reformulation, and a very effective advertising. We’re going to be renovating and reformulating Yoplait Light.

In the first half of this year, we’ll be taking aspartame out and putting Stevia in, which we think our consumers are going to like a lot, and gives us some good news to talk about. We’re seeing some traction in our kid brands.

So overall, as we look at that yogurt category, we just think that the dynamics are going to be a bit more in our favor, in our full portfolio. And then finally, on cereal, we’ve got a very clear point of view on what’s happening there. Taste brands are doing really well.

So whether it’s Honey Nut Cheerios or Lucky Charms or Cinnamon Toast Crunch, big great tasting brands. Those are all growing for us behind product quality, and very good in advertising. And so, we’re going to keep doing that and we’ll build on that. The consumer definition of health is changing in the cereal category.

Clearly, they are interested in protein, clearly there are things that they – some consumers want to avoid like gluten, and so you’re going to see us build on those trends with new product offerings and continued renovation. And remember, we grew our cereal business this year.

And we believe strongly that we’ll grow it next year, and that we understand what’s happening in that category very well. So anyway, long answer to your question, but those are the three priorities. And we’re very focused on them, and we’re optimistic that we’ll be able to make those gains..

Thanks. And see you next week. .

Our next question comes from the line of Andrew Lazar with Barclays. Please go ahead..

Good morning, everyone..

Hi, Andrew..

Andrew..

Ken, I want to come back just for a minute to the promotional efficiency question from before.

I’m trying to get a sense of whether this is other sort of companies in the grocery space having up their game in terms of sort of in store selling capabilities that’s allowed them to be more successful in getting some high quality space or is it just that, in the environment we’re in, they’re just pushing with more, let’s say moneys are spending to get some of it, which will fade at some point.

And have you seen something like this dynamic sort of in your experience before? And then I’ve got a follow-up..

Okay. Andrew, I mean I would say, look we have a very good competitive set in our space. And so, as you know very well. Our view is just the sheer number of new items and number of new competitors certainly in a – for instance in yoghurt space, just lots of people coming in with new items.

And so the competition for a limited number of quality display options, I would say is increasing. And so we continue to have very, very high confidence in our sales capability. We’re really good at what we do there, and we think we know the ingredients to successful execution.

I mean it always boils down to getting the right, really category driving products on display in the right way at the right price point, which we know what that is, and again those are, we’re not pressing harder. We know what the right price point is; and with the right kind of feature support. So we know what to do.

We’ve diagnosed that Q4, and we think we can go out and get it. There is just more competition and demand. So we’ll have to up our exceptional game..

Okay, that’s helpful. I appreciate that. And then, with respect to pricing in yogurt moving forward, I guess particularly in Greek, you’ve got a couple of things you’ve got, obviously higher dairy prices or costs. You’ve got a financial owner that now has a stake in one of your competitors.

You’ve got perhaps some of the growth in Greek, filling out some of – all of this significant capacity that’s come on stream over the last couple of years. Those factors would suggest to me the opportunity for pricing to stabilize or kind of move in the right direction as we move forward.

And I think there have been some moves already to that effect by some players in Greek. Some of you may have suggested that, maybe they’ve taken pricing and General Mills has not yet moved in that regard.

So trying to get a sense on, would you expect that to kind of move in the right direction, and is that part and parcel of how General Mills thinks about it too?.

Well, Let me just say that, I would agree with your observation that we’re seeing price stability. Obviously we don’t comment prospectively on pricing and that sort of thing, but I agree with your observation.

We also of course are seeing some moderating dairy inflation; and it’s always hazardous to predict what commodity prices are going to do as well, as you know. But we’re encouraged by what we are seeing on that front. So dairy inflation will be a key variable for us next year.

And we like the direction it’s going in now, and I think we’re observing price stability in that Greek segment right now..

Yes. I think Andrew, I just add a few, if you look at the Nielsen in the fourth quarter, pricing in Greek was stable and we were very much in line with that on both the movement in $1 per cup basis. So we feel good about our pricing competitiveness, and where it is, and the stability in the category..

Thanks very much..

Our next question comes from the line of Alexia Howard from Sanford Bernstein. Please go ahead..

Good morning, everyone..

Hey Alexia, how are you?.

Good, thank you. I’ve two questions. Firstly, it looks as though comparing the third quarter results with the data that came out today is, those cereals and the Frozen Foods have declined quite sharply over the last quarter.

Given that you’re expecting to get back to growth at least in cereals, how quickly do you expect that to happen during the course of fiscal 2015. And then, I have a follow-up..

Okay. I don’t know that I have sort of quarter-by-quarter outlook for you right now, Alexia. Again going back to fundamentals, we feel encouraged by the fact that we were able to grow that business this year in the down category, and I won’t repeat for you the litany of innovation that we’re bringing fundamentally.

We think that these things are – they work and that’s why we are doing more of them. I mean they effective for us. So we are going to stay on that game of product renovation, we’ll be very focused on advertising that works and all these things that I’ve talk about and we expect over the course of the year to see that business grow.

And as I talk with merchandising support, we’ll sharpen our focus on execution there. And our goal is to grow that business again in 2015..

And then just hopping back to Eric’s question about the promotional effectiveness declining this quarter, do you think it’s partly to do with some consumer shifting to less heavily processed products, and if so, what do you do with the promotions on that brand, those brands, do you step it up and try to chase more volume even if the volume response isn’t there or should you maybe be taking the prices upwards, and using that extra cash to channel into products that you are seeing grow like the snacks area?.

Well, I think your last point, Alexia, let me sort of address several of the points, certainly we’re observing where the growth is coming across our portfolio. And we continue to increase the pace of innovation and the level of support behind our snacking business because that’s a real growth opportunity.

Having said that though, again, we have – we know where the growth is in the cereal category right now, and we think we know how to get it. And just to repeat myself, high taste indulgent products are performing very nicely for us. And so we are going to add support to those.

So, Honey Nut Cheerios are the biggest brand in the category grew for us, this year. Lucky Charms and Cinnamon Toast grew, so we will keep renovating these highly differentiated products and we will support them well and we will add to them, because they work.

But to your other point, we also know that consumers are interested in more protein, and we do see more breakfast going to for instance Greek Yogurt, as an example, or our other protein based breakfast. That’s why we were expanding our range of protein based cereal offerings. Nature Valley protein granola has been quite successful for us.

So, we are going to shift resources to that kind of innovation. It’s early days and I mean, literally we are just weeks into this, but it looks like Cheerios protein will strike a chord. So, to your point Alexia we are – we do really study the market closely.

We look to see how consumer preferences are shifting and our innovation plan and approach is very coherent and how it follows those trends and those preferences, and which I think is the core of your question. So, thank you..

And Alexia the only thing I would add to that is you touched on median and where we are going to put our investments. And you had mentioned and you noted that it is going to be up faster than sales next year.

But I think you’ll also see it, be more differentially put against those ideas U.S our old businesses for example that Ken touched on behind cereal, behind snacking, behind yogurt to potentially more differentiated step than we had in past years..

Thank you, very much, I will pass it on..

Our next question comes from the line of Matthew Granger with Morgan Stanley. Please go ahead..

Hi, good morning everyone. Thanks for the question..

Hi, Matthew..

Good morning, Matt..

Hi, just one clarification, I guess on the guidance for operating profit growth. First, you highlighted an expectation of mid single-digit segment operating profit growth, but you’re also coming off a fairly significant decline this year in corporate expense.

Can you just walk through some of the drivers of lower corporate expense this year and whether some of those might revert going into 2015?.

Yes, first of all to be clear obviously the corporate items of the unallocated are outside of the segment operating profit, segment operating profit will grow in line with sales. It’s going to be –it’s going to improve off the growth rate this year, driven partially by the higher sales growth that we are projecting for next year.

And the lower inflation, so greater gross margin expansion. So that is the fundamental driver in next year’s number. In terms of this year, our corporate unallocated was corporate items was down for a few reasons, compensation incentive was down year-over-year that is surprising given the results.

And then there was the miscellaneous other corporate items benefit rate et cetera, that were beneficial – that were captured in F14 numbers..

Okay. Thanks, Don. And just one question on Yoplait, I mean China specifically. I know you’ve talked a few months ago about breaking ground on a manufacturing facility there and planning a gradual roll out. Just wanted to see if you could give any update on what type of progress you’re expecting for this year.

And whether there is any prospect of having a product to commercialize at some point later in the year?.

Yes, it’ll be Matthew it’ll be later in the year. I mean we’re making – we were building a plant. I mean we’ve been very clear on that and we are – this is an exciting multibillion dollar category. In China we’ve great capability to bring there and we will obviously have more details to share with you as we get closer to the launch.

But we’ll have very good capability and we intend to launch very high quality, very competitive offerings into that market. And we will start as we always do in the specific region in China and prove out the business model and make sure that we’ve got our capabilities aligned the right way and then we will expand.

But we are obviously very enthusiastic about this opportunity and I think it’s a great growth platform for General Mills in China. .

Okay, all right, thanks very much, Ken..

Our next question comes from the line of David Driscoll with City Research. Please go ahead..

Thank you, good morning everyone..

Hi, David..

Good morning, David. .

Don, I wanted to go to the gross margins in the fourth quarter. In late March on the third quarter call, you laid out an expectation of pretty substantial fourth quarter gross margin improvement, and I thought you were pretty clear back then about strong expectations for HMM delivery and favorable input cost.

Today it seems like the miss is being more explained like it was a revenue issue because of these promotional items kind of what happened and why did the gross profit margin miss your expectations by so much?.

Thanks for the question and that was where the miss was in the quarter. It was not HMM or productivity that came in as expected. It was inflation came in a bit higher and our trade expense related to the promotions that we talked about the promotion efficiency or inefficiency obviously not only hits the top line but impacts gross margin as well.

So there is really those two items which didn’t play out in the quarter as we had expected in March. And they’re probably both responsible about half of the miss those two items are equally responsible for the miss in the quarter..

Okay, can you give us some color on the drivers of inflation in fiscal 2015?.

Yes, we have 3% inflation as you know we have a fairly broad market basket, I guess one thing to note, it probably was highlighted by the fact that we identified dairy is the driver of the F14 variances. Dairy is becoming a larger piece of our basket not quite as large as grains, but in that same 5% to 10% range.

Yes, we looked and because of that breadth of input cost and again, we talked about inflation is really all of COGS that we’re talking about. It’s very broad grains of 5% to 10%, dairy 5% to 10% many other products in the 5% range including energy both from packaging and distribution.

And so we’re seeing some favorable movements on grains, whether it’s energy, sugar, even dairy, as of today versus a year ago are still higher and we see them driving that inflation for next year. .

Final quick one, sorry thank you.

Final quick question 53rd week is that – is it correct to say, it’s two points to the revenue line no impact to the profit line and as a consequence of that second statement, we should not have any negative issues related to this particular 53rd week affecting F16 because always we have to deal with that right now, so is that all fair?.

Yes, we expected the extra week will generate about $0.05 of EPS which as we said we’re investing back this year to help drive top line growth..

So, no impact to profit and then that would be true then on the F16 there is no reason to call that out as a factor affecting that particular year?.

We expect to reinvest this year. Yes.

Okay, thank you. .

Our next question comes from the line of Ken Goldman with JPMorgan. Please go ahead..

Hey, thanks for the question. Not just for Mills, but across a lot of larger US-based food names, we are in a bit of a challenging cycle here.

I guess I am wondering in your view how do you break this trend? What is the smoking gun? Do we need better innovation, stronger marketing, more efficient promos? Is it all of the above I guess? I am just trying to understand, Ken, in your review, what is the main problem we are all experiencing across packaged food at the moment and maybe how you go about fixing it?.

Can I – I wish there was one silver bullet, it would make it easier for us, but I think it depends on the category, I mean clearly snacking is a trend, a positive trend, and so maybe that is a key factor of that and we’re very focused on the snacking trend, and it’s not just the snacks in our snack businesses, we see yogurt becoming more and more of a snack food and in fact one of the reasons for the resurgence of our core Yoplait businesses is that we’re seeing more snack usage and we’re actually talking about the product and its snack versatility in advertising.

And so we’re seeing it play out there, we are seeing our hot snack products, Totino’s do very well. We are seeing our natural and organic snack. So I think that there is a snacking play.

I think that as I said I think that consumer definitions of wellbeing or health are changing, and so we need to be very in tuned to that, and we’ve talked about the protein trend not just in yogurt, but across the number of categories and how that’s playing out and how we are looking to capitalize on that.

And we talked about how consumers are look to avoid some different things and some things that maybe weren’t on their radar several years ago with gluten being exhibit one. So, we are in changing times.

We are marketing company so our job is to understand the change and capitalize on it, find opportunity there, and so I think it’s more than one change, as I tried to say.

But it’s more snacking, it’s changing definitions of health and wellness, but as we get clear, I think, understanding of those and better understanding of what exactly the consumer wants there, we will get better at giving them, giving those products to her and these again should become opportunities for us..

Thanks and then one really quick follow-up. Advertising spending in the fourth quarter, very basic math here and this easily could be wrong.

Was it down low double digits, high single digits? Could you just confirm that it was down fairly meaningfully in the fourth quarter?.

Yes, that’s right. We had some add-ins last year, late last year that we are rolling over and just from an accrual base ends up catching up with you in the quarter. The full year numbers are more important number to look at it. It was not about if 3% and that also included within our U.S.

business some shift for media to other consumer like sampling behind our yogurt business, which had a fairly significant impact on that number..

Thanks, we will see in a couple of weeks..

Operator, can we sneak one last one in here..

Certainly, our final question comes from the line of Ken Zaslow with Bank of Montreal. Please go ahead..

Hey, good morning everyone..

Hey, Ken..

Hey, Ken..

Ken, you changed up the leadership in North America.

So my question to you is what are you looking to accomplish under the changes and what will be the greatest strategic changes? Are we going to start to see something different? And just kind of putting it all together is moving people around versus inserting new talent from outside, what was the thinking on this because it seems to be maybe a strategic evolution here.

Is there something going on? Can you help us out?.

Yes, so what I’m looking for thank you for the question. I think what you will see is greater focus, greater prioritization, more fluid allocation of resources, and some of your the earlier questions on the call alluded to that, and higher pace of activity.

I mean it’s clear that, it’s just its more competitive out there with innovation and ideas coming from both small, very small companies and big companies and so. So along with the way we focus and prioritize, it’s important for us to just pick up the pace and so of innovation and so, you will see all of those things..

Was there any thought about bringing in outside talent or anything like that or do you think you have the right team for this North American leadership?.

Yes, we have quite a strong team and we are developing and moving and promoting people based on the results that they have achieved over time, and so we have a very effective leadership team in North America well led and I think you will see these points that I made just a minute ago..

And my last question, usually you talk about acquisitions where there is priority using cash flow. You didn’t talk about that at all. Can you just – I know last year you guys said that you were not thinking about acquisitions. Is it back on the table? Just talk about it broadly.

Obviously you are not going to give exact examples, but I just want to know broadly..

I’m happy to talk about it and you are right we are not going to give exact examples, but yes, M&A is still part of our strategy. We were clear that F14 was the year of consolidating some large acquisitions we done, and then returning cash to shareholders, and if we did both of those things very effectively.

We have continued to work during F14 to look at new opportunities in the same markets, the same areas that we have talked about previously getting deeper in emerging markets and better -- snacking in the U.S. or in developed markets more broadly, and as things eventuate we will certainly share with you..

Great, thank you..

Thank you, everybody. Give me a shout if you still have questions. I appreciate it..

Ladies and gentlemen that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines..