Good day, ladies and gentlemen, and welcome to the Kraft Foods Incorporated report Second Quarter Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I’d now like to introduce your host for today’s conference Chris Jakubik, Head of Investor Relations. Please go ahead.

Good afternoon. Thanks for joining our business update for the second quarter of 2014. With me today are Tony Vernon, our CEO; and Teri List-Stoll, our CFO. During our remarks, we will make some forward-looking statements that are based on how we see things today. Actual results may differ due to risks and uncertainties and these are discussed in our press release. We'll also be referring to some non-GAAP financial measures during the call today, and you can find the GAAP to non-GAAP reconciliations within our press release and in the Investor Center of kraftfoodsgroup.com. Now, I'll hand it over to Tony and Teri to discuss our second quarter results, as well as the current state of our business.

Thanks, Chris, and thanks everyone for joining us today. Hopefully you’ve had a chance to review our financials and the press release we issued about an hour ago. As expected our quarter two results were driven by the shift in Easter-related shipments to the second quarter this year as well as the implementation of some significant pricing actions across a good portion of our portfolio. Kraft the second quarter brought a rare confluence of activity. We appropriately addressed rising commodity costs with price increases on 50% of our portfolio, the right move for the long-term. But in the short-term we took those actions in the face of an intensely promotional holiday quarter with the late Easter, Memorial Day and July 4th add periods. When you combine that with our retail customers need to market and price aggressively, the strapped families across America. You have the recipe for an increase in trade spending versus the second quarter of last year and that indeed is what happened. We also saw mixed execution in certain parts of the business, which held back our potential year-to-date. We will talk more about that in a moment. That being said, we’re on track for another solid year of growth and earnings and cash flow consistent with what we initially laid out to you in early February. As you’ve heard, from almost every one of our peers, the ability to drive profitable growth in the food and beverage industry is challenged by a number of headwinds. For Kraft we remain focused on executing against our playbook. And today we will provide more details on what’s working, what needs improving and what we’re doing about it. We will start with our financials. And I’ll turn it over to Teri, to talk you through the results we just reported and where we stand versus our goals for the year.

Thanks, Tony, and good afternoon, everyone. Let me start by briefly building on Tony’s comments regarding our second quarter results. Organic net revenue was up 1.5, reflected the expected benefit of the Easter shift, but also combined softness as we implemented significant pricing in response to input cost increases. On the profit side, when we take out the market based impacts from post-retirement plans in last year’s numbers as well as the change in spending on cost savings initiatives and the unrealized gains and losses from hedging in both years, that’s the way most of you look at it. Three things, gross profit dollars were down as the significant run up in input costs outpace the pricing and productivity benefits we realized today. Operating income dollars were up mid single-digits as we continue to deliver progress in overhead. And our earnings were relatively flat versus the prior year largely due to an unfavorable tax impact. As we said on our first quarter call, our first half results will be a much better indictor of where we stand against our expectations and our industry then looking at either quarter one or quarter two in isolation. So in the interest of time and relevance, we’re going to focus our upfront comments today on our first half results. aggressively in the: We responded with price increases of between 5% and 12% across most of our cheese portfolio. These actions took effect at the end of March and we are seeing competitors priced off at the run up in their input costs on a typical lagged basis. And in meat, beef, turkey, and pork prices for our cold cuts have continued to increase and are at record high as we speak. If you remember from our last call, Oscar Mayer announced pricing across approximately…

Thanks, Teri. I wanted to spend some time today talking about the operating environment and the challenges we continue to face both as Kraft and as an industry. You have been hearing a lot from our industry peers and the news hasn’t been great. I'm often asked what’s our take on the situation, and what are we doing about it? As an industry, top line growth and more specifically profitable top line growth has been and is likely to remain challenging in the near-term. Many of you have written about this. Right now, industry returns on promotional activities, innovation, and even product renovation are lower than what we’ve seen in the past. You’ve seen the numbers on promotion. During the first half of 2014, of the largest 100 food and beverage categories, which represent over 80% of total food and beverage, nearly two-thirds increase the percent of dollar sales from promotions. Yet, the promotional efficiency to drive incremental sales did not hold pace with only 45% of these categories, showing improved promotional efficiency and Kraft is right inline with those numbers. In light of these trends, we're going back and taking a harder look at some of our smaller innovations, smaller SKUs, and marginal marketing programs to decide where we continue to fish and where we need to cut bait, and make sure we are living the principal of fewer, bigger, better. In our view, it’s driven by the seas of change that we outlined at CAGNY, in February. Consumers focused on value and nutrition and well-being, our customers coming to terms with change in shopper patterns and channel shifting. The rise of digital media, breaking established marketing principles and best practices. And it's not just the confluence of changes, but the pace of the change. Even in the two…

(Operator Instructions) Our first question comes from the line of Bryan Spillane with Bank of America. Your line is open.

Hi, good afternoon.

Hi, Bryan.

I guess a question is for both Tony and Teri. Tony, you spent a lot of time talking about a lot of the headwinds that the industry has faced and that you face this year, and Teri you spoke about some of the execution issues. But at the same time you’re still talking about being -- the year being in line with your expectations you had going into the year. So, can you talk a little bit about first, in terms of expectations, if I recall it correctly was to grow in line with your algorithm and then there were some onetime items that would sort of be layered on top of it? So just understanding that, that’s still what we’re talking about. And I guess second to that, as we just start to look forward, it was remarkable that you delivered the earnings you did this quarter with gross profit dollars actually being down. So if you could talk a little bit about just how you would think about gross profits tracking going forward. And I’m assuming just the pricing catching up to the cost of goods sold and how you would look at margins or gross margin improvement going forward?

Okay, well we’ll start Bryan and if we miss some things you’ll come back and tell us whether we missed it or not. And maybe the place to start is to reiterate what we said which is that. We are committed to our plan and we feel good about the prospects we have remaining. If you look at our first half delivery, it is consistent with the seasonality we typically see which is about half of our revenues and a little more than half of our profits in the first half of the year. So, when you look at that we are on pace to what we promised in February and that’s the plan that we’re committed to. We did say upfront that we would have a slow start to the year. On the top line we came into the year with a bit of an inventory build with the customers that we had to work through and we saw that in the first half. And on the bottom line basis, we’re climbing up pretty steep commodity cost curve and so we have those cost impacts and the pricing benefits tend to lag some of that and you also get some of the volume dislocation we talked about in the quarter. So, I think in most respects what we’re seeing is largely what we expected could play out at the beginning of the year when we talked to you. And you talked about okay, well what happens in the second half. We did talk about the fact that we do have with the cost savings initiatives, we have lower spending this year than last year. So that’s a bit of a reconciling item that we put to the side and we focus on the underlying excluding that. And so, our views on the year really haven’t changed. We’re committed to the long-term growth algorithm. We have a plan. We’re executing the plan. We need to execute it better and that’s really what we’re committed to.

Thank you.

Our next question comes from the line of Ken Zaslow with BMO Capital Markets. Your line is now open.

Hi, this is Vishal Patel in for Ken. I wanted to ask about cost restructuring, well I understand that cost restructuring is ongoing at Kraft. It seems like it maybe expanded towards attacking overheads, and can you talk a little bit more about that? Thanks.

Well I’ll let Teri help me, but we’ve done a good job on overheads as you know. I think we’ve cut 500 basis points over the last three years. You know that we set out with our scale and size to be the leanest most nimble company around the nature players and we’re doing a good job against this. If there is more to get we’re going to get it. And so my comment in the script was saying that we’re always looking at this and benchmarking it, and we think there are opportunities to get leaner and we’re going to go get them over time.

When we rolled out the evolution of our playbook into playbook 2.0 at CAGNY, we broadened our focus from just productivity to total cost management for the very reason that we do want to drive a culture of productivity all throughout the company. So that focus on simplification and efficiency in cost savings stands all elements of our cost structure and that’s really what we want to convey as well.

Okay. Thanks.

Our next question comes from the line of Robert Moskow with Credit Suisse. Your line is open.

Hi. Thank you. SG&A in the quarter was well below what I had expected and you talked about Tony falling into the trap of short-term discounting. Can you give us a sense as to what's happened to the advertising budget for the year? And just speak broadly, you’ve talked very passionately about the need for reinvesting into the business and that is the -- that is part of your long-term plan. So, to what extent is this year going to be kind of a maybe a step backwards I suppose in those types of brand investment.

Yes, you read me right, Rob. Our objective is to continue building out share of voice to competitive levels. We were relatively flat in Q2, but we were up in the first half consistent with our algorithm. I’m not going to give you a number going forward, but we do want to make sure that the advertising we put out there is returning profitably. And so, with an eye to efficiency we’re going to continue to invest in these brands.

And just to complete this, that SG&A line is also benefited from a reduction in overhead spending. So we do have that benefit flowing through as well.

Now the difference between this year and last year is pretty vast Teri. Is most of that -- some of it must be the restructuring spending too, but is most of the reduction overhead cost and should we reflect that in our second half as well?

So, if you take out the differential in the cost savings initiatives the restructuring spending, the remaining change in that is more attributable to overhead.

All right. Thank you.

Our next question comes from the line of Andrew Lazar with Barclays. Your line is open.

Good afternoon everybody.

Hi, Andrew.

Two things Tony stood out to me a little bit from some of your prepared remarks. The first one, I guess was this, the promotional and couponing activity that you fell into a little bit in the quarter. I guess, one of the things that so, I guess critical to the way Kraft laid out your growth algorithm over time was a much more modest and reasonable sort of top line growth algorithm. Let’s say you could focus a lot more on profitable sort of volume and not just go after share for share sake. So the first question is, how did this couponing process happen and how you keep it from happening again going forward? And the second was productivity is such clearly a huge part of the thesis around Kraft at this stage. So to be running behind on that because of executional issues, I guess is somewhat troubling. So I’d love a little bit more perspective on what specifically were the issues? Was it going after productivity in too aggressively or too quickly or in the wrong places, a little bit more perspective there would be helpful because these just seem like they’re sort of key issues around the stock really as I think about it.

Okay. I’ll take part one and Teri is going to take part two. I think it was an unusual quarter for all of us in the industry. And I think you have to be careful when looking at it relative to the fact that in the same quarter we took price on 50% of our brands as we dealt with retailers who had three holidays in the quarter. And so, while I feel that we probably let too much coupon and price happen in a few categories. I think overall we were quite disciplined. I think the few that we probably feel into the trap a bit was especially dinners. Dinners as you know is probably the most important segment in the center of the store. We have an incumbent competitor who is pricing very aggressively and you have a retailer who needs to build traffic in dinners because it is so critical to the overall performance of the store. And with all of the action and the price we took, we dealt back some of that price during the quarter. So you saw a big impact on meals. We also so it honestly in Capri Sun which I think you know is one of the very important seasonal items in the Kraft line and we held out price at a level that we felt would grant us the merchandising. Two lessons learned. As we go forward we’re going to look hard at the returns we get for these things. But I don’t think we’re going to have this, what I call the rare confluents of events for quite a few years and we’ll get more disciplined to ensure that we continue to manage the algorithm you described. I’ll turn it to Teri for the second one, if that’s okay.

Yes. Thank you.

So, on the productivity side Andrew, as we talked about in the base part of the cost, a lot of -- substantially all of the differentials we’re seeing between out long-term goal and productivity and what we’ve seen so far in the first half the year has been these more executional issues where we’ve had start up issues with some of renovations. We have had the recall impact. And that does have a pretty significant impact on our net productivity. So it has nothing to do with what we see as the population of opportunities in terms of drill sites and the ability to deliver productivity in the long-term. We continue to feel as Bob Gorski described that that is a very, very long ball game ahead of us to go after. But in the quarter and in the half we haven’t delivered that largely because of poor execution which is as I said imminently fixable. We just need to buckle down and deliver with excellence.

And Teri are you still looking for $150 million in restructuring for the full-year because you’re still running obviously well low below half of that through the first half of the year?

Yes, that’s still our best guess at this point. We new that it was going to be more back half loaded and so, we’re pretty much on where we expect it to be, and that is I think a reasonable estimate at this stage.

Thank you.

Our next question comes from the line of Matthew Grainger with Morgan Stanley. Your line is open.

Hi, everyone.

Good morning, Matt.

Just two questions if I could. One just to come back to the issue of profitable reinvestment. Could you talk a little bit more about progress on Maxwell House during the quarter? You talked about higher promo spend in beverages which seemed largely attributable to Capri Sun, but there was clearly some activity and some advertising earlier in the quarter on Maxwell House, its not clear whether that’s continued sort of fully into Q3. So, could you just give us an update and sort of whether you’re happen with the initial results of the marketing campaign there? And then, just a quick follow-up. Could you talk a bit about operating dynamics in Canada? We have heard about some of your larger retailers becoming more active and asking for discounts and promotional support. I know you had unfavorable PNOC there. So just what you’re seeing in the market and whether it’s a cause for concern?

Yes, good question, Matt. I think we’re making significant strides in rejuvenating coffee across all three segments, Pods, Premium, with Gevalia and Maxwell House. And I think Maxwell House has got the nice positive run year. The team has done a good job making sure it’s the combination of the playbook, innovation with better best pricing and the full application of positioning and advertising. So, I feel quite good about our coffee progress overall and Maxwell House in particular. Second part of the question. Remind me -- it was Canadian retail?

Yes.

Yes, I mean we have a pay for performance system in Canada. We have a very similar trade relationship that we have tier and we haven’t seen impact we’re the biggest player in grocery. We haven’t seen the impact of what you’re describing. Clearly it’s a consolidated market and clearly we have to continue to execute our playbook to maintain over leverage with what are very good customers and shop customers.

Okay, great. Thanks, Tony.

You bet man.

Our next question comes from the line of Alexia Howard with Sanford Bernstein. Your line is open.

Good afternoon everyone.

Hi, Alexia.

Hi. You called out JELL-O a couple of times as being problematic in that particular segment. In addition to the category declines it looks as though you’re looking out to Kozy Shack by land of Land-O-Lakes, and it looks like a 500 basis point shift year-to-date. Is that one of the issues that they seem to be pushing their simple ingredient message quite hard? Do you need to reformulate in the -- given the issues or is it just not worth it because the category is declining so rapidly. So, just a little bit on the strategy in there and how do you avoid being caught out like that in some of the other categories that are out there? Thank you.

Yes, and I did mention this in the script. The smaller players who are innovating quickly and frankly quite well are getting a receptive audience in our retailers because of the need for innovation. And I do think in the short-term it has an impact. I do think JELL-O is a very important brand and we have to continue on all fronts, improve it. Mostly the pressure is coming from the sweet yogurts and the Kozy health and wellness play clearly in our playbook across all of our brands. We got to make sure that the health and wellness benefit that our R&D group has done such a good job with in many of our cheese categories that we exercise it in our center of store categories. On the JELL-O business we have got to increase the velocities to give the customers what they’ve come to depend on from JELL-O. We’ve got fresh eyes on the business and we’ll get back to you with progress reports as we go.

Great. Thank you very much.

Yes.

Our next question comes from the line of David Driscoll with Citi. Your line is open.

Great. Thank you and good afternoon.

Hi, David.

So just two questions. One is just a numeric question and then a question for your, Tony. You mentioned that net productivity was behind. Can you actually give us an update as to what the number is? So if you target 2.5% and you’re running behind. Is this zero or is it -- what's the ball game that we’re looking at for 2014? And then the second question relates to the coffee business. And specifically Tony, I love your comments about the $200 million business from the standing start in K-Cup, but we’ve got the big launch of the Keurig 2.0. Are you expecting to loose shelf space and/or are you going to launch a compatible product? Thank you.

I’ll handle the productivity question and let Tony take the other one. On the productivity we’re not going to disclose the specific number, we don’t get down to that level of detail. But I can tell you we did have productivity benefit in the quarter in the first half, but running below the 2.5%. As we look forward to the year, that’s really what we’re focused on delivering against the 2.5%. Its got some challenges and getting to that number given the start to the year, but with the plans we have in place the idea is we have identified that’s clearly exactly what the team is fully focused on delivering.

And David to your great question on Keurig. We’re very excited about the $200 million plus that we got and we don’t see that momentum stopping in this new environment that everyone is anticipating. We like being in control of our destiny. It’s all about the profitable growth in that category and we think in any scenario we’ll continue to do about quite well and build share.

Thank you.

Our next question comes from the line of David Palmer with RBC Capital. Your line is open.

Thanks. That’s RBC. Good evening. You noted that competitors that materially follow the un-pricing on some categories. I assume that that would center on the cheese business perhaps you can confirm on that. And you mentioned that its still early, but it looks like its been a couple of months where you’ve been running high on price and having some volume issues within cheese. Does it feel like the competition is taking a relatively long time? Any color on that and what's going on in cheese would be helpful.

Yes, the only color is, this isn’t within standard timeframes we have seen. And we feel quite good about how cheese has hung in there given the situation. It’s nothing out of the ordinary. So, I feel great about our cheese business overall.

Just one last one, you’ve been making an effort to remove artificial colors, flavors, preservatives. Where do you stand on this effort and has that had any measurable positive impact you can share?

I think it’s an important developing renovation for our business and the industry. And it started for us with Oscar Mayer selects that I’ve talked about many times in previous calls where we removed the chemical preservative and replaced it with a natural. It did very well in that business and have really expanded it across the line. Yes, we feel great about the recent moves we made including removing preservatives from Kraft Singles, and yes we do believe its going to have a material impact on our business and our health and wellness profile. We owe it to the consumer to offer these options.

Thank you.

Our next question comes from the line of Jonathan Feeney with Athlos Research. Your line is open.

Good afternoon, thanks. Couple of questions and just a clarification, please. First, when you make the decision to participate in discounting activity in a category like that, you must believe that’s going to drive purchase behavior somewhere, but you’re not getting a lift. So, does your data indicate that volumes will be even worse if you didn’t discount or does it kind of indicate that maybe there is a more optimal way to kind of comment at that tradeoff? And just secondly related to that, do you worry that when you discount within a category, again this is again just an example but I’m really trying to get the philosophy here that your trader reactions outside that category within say the dinner occasion, so its category by soup or frozen foods and can foods that are actually going to feel some pressure and respond in time in pricing. Does that weigh on your thought process as you think about a decision like that?

Yes, good question Jonathan. Part one, its all about profitable growth in the equation. And remember decisions about pricing promotion have a lot to do in our world and big brand world with productivity in plants, and how much you can push through an efficient plant system and with Lean Six Sigma we become much more efficient. So, we weigh it all in the equation. I did quote the industry data on the impact of promotions and its declining. So, I think we’re all getting much sharper in this. As to the second part of the business, we do measure Kraft Macaroni and Cheese against the broader category definition and we do think about the competitive environment as we take our promotional decisions.

And I guess you’re comfortable with the affect that’s having?

Yes, we are comfortable I would say; we got to sharper. And meals is so important in that center of the store and I’m talking broader meals. I think if you’ve talked to any retailer they’d say they’re depending on us and some of the other big players to bring the consumer back to the store with that meals business.

Got you. And just one clarification, Teri you mentioned -- I just want to make sure I know all the cash flow goals. Your cash flow targeted 90% of earnings, right? Are there any other cash flow targets that I don’t know about?

No. That we shifted to a free cash flow productivity measure as a better way for us to drive the organizational behavior.

Thank you very much.

Thanks, Jonathan.

Our next question comes from the line of Chris Growe with Stifel. Your line is open.

Hi, good evening.

Hi, Chris.

Hi. I just had two questions if I could as well. A bit of a follow on to Jonathan’s question on promotional activity. There was a comment in the release it says that there was something like lower expenditures on in-store activity, that’s obviously not promotional related spending you’re referring to there, is that correct or if you could define what that refers to?

I think in that release it refers to display activity.

Okay. So you’re getting less display activity, but you’re promoting more heavily. I’m just trying to understand the balance there.

Yes, and maybe I’ll -- at the risk of getting two accountants like here, I’ll tackle that question and tell you why it’s important. That in-store activity that Tony described is largely part of our advertising marketing spend which was a below the line item. As we have shifted some of that money intended for those kinds of activities to promotional activities, pricing related couponing activities those actually show up as a deduction from gross revenue to come to our net revenue. So, you get kind of a double whammy of its turning out that spending isn’t as efficient as we would like it to be and its showing up as a deduction from gross revenue to get to net, because if we step back on the quarter our gross revenue really was about in line with where we expected. But when you take all that shift to couponing activity from what was thought to be in the marketing line, you get an additional hit on revenue.

Okay, that’s helpful. And actually, leading into my second question which was, is the intention then Tony to have less promotion and more advertising. So a matter of getting that mix to switch back is that the idea? And then I guess related to that is the promotional spending in the quarter that occurred. Did it reduce; obviously does it reduce the price realization you’re going to show. I guess I had modeled more price realization in the quarter. I see it in cheese, but I didn’t see across some other divisions. Is it because the promotional spending was so much higher?

Yes, there’s two pieces to that. One is this couponing shift of dollars. The other is as Tony mentioned the Easter shift brings a lot of promotional programming into the quarter. So the combination of those will give you a larger gap. And then the last piece is on pricing even though we have taken a lot of pricing in the quarter, the actual Cold Cuts pricing didn’t take effect until May 25th. So, quite late into the quarter from that revenue standpoint.

Okay. Thank you.

Thanks Chris.

Our next question comes from the line of Eric Katzman with Deutsche Bank. Your line is open.

Hi, good evening.

Hi, Eric.

Okay. Couple of, I guess follow-ups at this point. So, free cash flow productivity is running through the first half using your numbers at 45%. So, can you talk a little bit about -- you kind of highlight the growth in free cash flow but the efficiency so far this year is way below your goal. So, kind of how do I like get to anywhere close to 90% for the year with that kind of number in the first half?

I guess if I just said trust us; that probably wouldn’t be adequate for you.

Right now, say again.

Two things. One it definitely is below the goal for the year, but it isn’t unexpected or inconsistent with our seasonal pattern. So, typically the second quarter in particular is where we have the biggest working capital demand. And so, the second half cash flow generation historically is much better and that’s exactly what we had predicted and expect for 2014.

Second question, I guess related to the free cash flow, your debt is about the same versus the year end. You said that you’ve grown your free cash flow, yet there didn’t seem to be any stock buyback and so -- I’m kind of in reference to comments Tony, do you think like M&A is that something that’s on the plate because it doesn’t seem like you’re buying that stock and the dividend -- essentially?

So, just as a point of clarification. We actually did buy back stock. So, so far in the first half we bought $235 million in shares. You don’t see it if you just look at the shares outstanding because we’ve had -- with the stock price increase we’ve had a higher degree of option exercises, so that kind of mitigates the fact a little bit. But we do have $235 million of share repurchases so far this year. That program didn’t start until I guess late February is when we really got it put in place. So, you’ll see continued activity over the remainder of the year there.

And regarding M&A Eric, obviously the environment is heated up. Our approach is the same as we said. We consider everything. We’re never going to say never, and we talk about nothing.

Okay. I just want to follow-up on this promotion question. I never realized there’s been a lot of that. But when you talk about coupons, are you talking about basically price allowance to the retailers because and more and more coupon redemption is like 1% or 2% in the industry. You raised prices, call it $230 million versus a year ago if I say 50% is up 10% and I mean you would have to be like a -- assuming like a, either a massive amount of couponing to the consumer or just a massive redemption rate if half of that spend back of your pricing was coupons?

Yes, so just a clarification on couponing. Our SSI redemption in the big brands is multiple folds higher than your number. But the most important dynamic in couponing today is the stacking that’s going on enabled by the internet. And really all of us are working through what is an incredible change and how the consumers able to process the coupon and stack them up even with a retailer loyalty program and FSI maybe one they had from another offer, buy this many Kraft’s and get this off. You can stack them all together now and if we’re not careful the consumer is getting a discount that’s more than they need and that was really happening. Keep in mind on the price, your price calculation (indiscernible) the comment about the price realization was scattered throughout the quarter. Oscar’s price didn’t take until late May. So you're not seeing nearly as big a number as you quote, but I think the coupon dynamic is worth all of us looking at and its something we got to get very disciplined about.

And then so that’s -- I'm sorry to take this up, so that’s where kind of the lack of control kind of hit because you got so much digital coupon redemption above what you had probably assumed historically that, that’s hitting full across so many products?

Yes, we will probably use those words called lack of control, but its certainly where we saw some of the activity escalation and we’ve -- as Tony said, as you get that stacking, you do get lower efficiency and so that’s exactly what we need to tackle. We have the visibility to it. It was the magnitude of it, I guess, is what took us by surprise and we need to go after it.

And keep in mind Eric, its attracted from the gross revenue line.

Yes. Okay. That’s all. Thank you.

Okay. Thanks. One more question.

Our next question …

Two more questions? Two more.

Our next question comes from the line of John Baumgartner with Wells Fargo. Your line is open.

Thanks for the question. Good afternoon. Tony, just coming back to price promotion and view from a different angle, we’re continuing to hear about how promotion is being met with disappointing volume response. I think just now after the holidays we’re seeing center of store buy and get one, 10 for 10, buy the brand we see the private-label for free type of offers. So yes, it sense for whether we’re going to see retailers begin to shoulder more of the investment and promo in the back half of the year. Is this more manufacturers just doubling down as baseline bonds are still weak, just your thoughts there?

Yes, I think you have to look at the consumer. The strapped consumer is driving retailers actions. And the consumer is shopping channels for best price and it is very important to the retailer that they maintain their share of those families frankly. That’s what’s driving it. I think all of us have to realize that its not the long-term way to run a business. A long-term way is to innovate and offer a real value to a consumer and that’s where we got to go.

Thanks, Tony.

Our final question comes from the line of Diane Geissler with CLSA. Your line is open.

Hello.

Hey, Diane.

Hi. I wanted to ask about the behavior in the packaged meat business. So obvious there are some activity there on the deal side. You took your pricing sort of late-ish in the quarter, any read on what is going on with your competitors just in terms of do you expect them to follow you at some point, because certainly the input costs have risen pretty aggressively and I guess to the extend that maybe there is something going on with either private-label trying to make more share, what do you expect to see in terms of your volumes in the back half of the year, the price gap remains sort of as wide as it is today?

Yes, its -- they have -- its not out of the bounds of the typical timing we see. And keep in mind our price increase didn’t hit until late May. Obviously, I can’t comment on where they will go with price, but there is -- this category has been -- is starting up all over the years. I don’t necessarily believe if you’re getting a vertical integration that it stay -- it’s a synergy that’s going to drive disadvantage to Oscar. We’ve competed effectively with other vertically integrated players over the time. Smithfield is long been vertically integrated and they hasn’t hurt the Oscar Mayer business to any disadvantage. ConAgra used to be vertically integrated with Armour and Swift, clean results. I think just like any other business, maybe especially in meats, because the protein is a trend positive win, innovation, renovation and great marketing really matter. And so to us Oscar Mayer is a jewel and we like our chances.

Okay. I will leave it there. Thanks.

Great.

And I’m not showing any further questions at this time. I’d like to turn the call back over to management for closing remarks.

Well, thanks everybody for joining us. For the analysts who have any follow-up questions, Doug DuMars and I will be around to take them. And for anybody in the media with a follow-up question Basil Maglaris will be around for you. So thanks again everybody for joining us and have a great week.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program and you may all disconnect. Everyone have a good day.