Good morning, and welcome to The J.M. Smucker Company's Fourth Quarter 2011 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in listen-only mode. [Operator Instructions] I will now turn the conference over to Chief Financial Officer, Mr. Mark Belgya. Please go ahead, sir.

Good morning, everyone, and welcome to our fourth quarter earnings conference call. Thank you for joining us. On the call from the company are Tim Smucker, Chairman of the Board and Co-CEO; and Richard Smucker, Executive Chairman and Co-CEO. Also joining us and reflecting their new titles that became effective on May 1 are Vince Byrd, President and Chief Operating Officer; Steve Oakland, President, International, Foodservice and Natural Foods; Mark Smucker, President, U.S. Retail Coffee; and Paul Smucker Wagstaff, President, U.S. Retail Consumer Foods. After this brief introduction, I will turn the call over to Tim for an overview of the year. I will then review the financial results for the quarter, and Richard will provide our outlook for 2012 and closing remarks. At the conclusion of these comments, we will be available to answer your questions. Questions specific to one of the business segments will generally be addressed by the president responsible for managing that business in 2011. If you've not seen our press release, it is available on our website at smuckers.com. A replay of this call is available on the website. If you have any follow-up questions or comments after today's call, please feel free to contact me or Sonal Robinson, Vice President of Investor Relations. During the call today, our team may make forward-looking statements that reflect the company's current expectations about future plans and performance. These forward-looking statements rely on a number of assumptions and estimates, and actual results may differ materially due to risks and uncertainties. I invite you to read the full disclosure statement in the press release concerning such forward-looking statements. I also want to remind you that the company uses non-GAAP results for the purpose of evaluating performance internally. Additional discussion on non-GAAP information is also detailed in our press release located on our website. I will now turn the call over to Tim.

Thank you, Mark, and good morning, everyone, and it's great to have you join us this morning. Let me begin by summarizing some of the key highlights of this past fiscal year. As we continue our purpose of bringing families together to share memorable meals and moments, we delivered another year of record sales and earnings. These results were achieved against the backdrop of a challenging economic environment. Sales grew 5% to $4.8 billion while non-GAAP earnings per share increased 7% to $4.69. Our total Coffee Business continued its strong performance with sales growth of 14% for the year. Innovation contributed significantly to the company's growth, including new products such as Folgers Gourmet Selections and Millstone brand K-Cups, Jif Natural, Dunkin' Donuts seasonal varieties and Pillsbury sugar-free baking products. We successfully managed through a volatile commodity cost environment, demonstrating the strength of our brands and our ability to implement. Significant progress was made on the supply chain restructuring project as key milestones and cost savings targeted for 2011 were achieved. Demonstrating our commitment to enhancing shareholder value, we repurchased 5.7 million common shares, representing over 4% of shares outstanding. Also benefiting from 2 increases in the quarterly dividend rate, dividends paid per share increased by a total of 17% for the fiscal year. In March, we announced changes to our executive management structure that are consistent with our long-term succession plans and the further development of leadership. And lastly, in May, we acquired the coffee brand and business operations of Rowland Coffee Roasters, including its leading brand Cafe Bustelo and Cafe Pilon. With that, let me provide a few comments on each of our business segments starting with the Coffee segment, which realized another strong year. Sales and segment profit for 2011 grew 14% and 11%, respectively, driven by the…

Thank you, Tim. Let me begin by summarizing a few highlights from the fourth quarter. Sales and volume were up with contributions from many of our key brands. Operating income, excluding charges, grew 4% while comparability between years has been impacted by a number of one-off items including a gain on divestiture in 2010 and income taxes. We are pleased with our fourth quarter results. Net sales increased $118 million or 11%, primarily reflecting the impact of pricing taken during the year. Volume contributed 2% of the sales growth with gains realized by the majority of our brands, including Pillsbury, Jif and Folgers. The impact of sales mix and foreign exchange was also favorable. GAAP earnings per share were $0.82 this quarter and $1.01 in the fourth quarter of last year, including restructuring and merger and integration costs, which I will refer to as special project costs. Excluding these charges, earnings per share were $1 this quarter and $1.07 in last year's fourth quarter. Operating income, excluding special project costs, increased $7 million for the quarter, reflecting an increase in gross profit and a decline in SG&A expenses due to lower marketing. Higher raw material costs were primarily driven by green coffee and soybean oil. Price increases taken earlier in the year offset higher costs, but did not result in gross margin gain. Unrealized mark-to-market adjustments on commodity instruments were not material for the quarter. The effective income tax rate for the quarter was 36.7% compared to a low 27.9% in the prior year. The effective tax rate for the full year increased from 32.4% in 2010 to 33.1%. The increase in both the fourth quarter and full year rates reflect higher current and deferred state income taxes and reduced tax benefits associated with our Canadian operations, partially offset by…

Thank you, Mark, and good morning, everyone. After achieving another year of strong financial results, we remain confident in our ability to execute our long-term strategy while focusing on key initiatives that are critical to continuing our momentum into 2012. Before providing our financial outlook for 2012, let me highlight some of the priorities as we enter the new year. First, we remain committed to growing the business with contributions from all 3 of our growth drivers: new products, market share gains and acquisitions. We continue to invest in our brands and are encouraged by our product launches and marketing initiatives planned for the year. Second, while managing through the volatility in commodity cost environment, we remain -- the primary focus areas are as follows. We are incurring significantly higher costs in 2012 for nearly all of our key commodities with the largest increases in coffee, soybean oil, flour and peanuts. As a result, we currently estimate year-over-year increases in cost of goods sold of approximately 25%, excluding the addition of Rowland Coffee. To offset higher costs, we have utilized a combination of price increases and cost saving initiatives to protect profit dollars, recognizing that margin percentages will decline. Third, we expect to make significant progress on the supply chain restructuring initiatives. During 2011, the Sherman, Texas coffee facility was closed, while the remaining operations at the Kansas City coffee facility and the Canadian condiments facility are scheduled to conclude over the next year. In addition, the construction of our new fruit spreads manufacturing facility in Orrville, Ohio is well underway with initial production in the new plant scheduled for the summer of 2012. We recognize the impact on the affected employees, and we thank them for their support. Looking ahead, all key milestones and targeted cost savings remain on…

[Operator Instructions] Our first question will come from Eric Katzman from Deutsche Bank.

I guess my 2 questions. First one, given the amount of pricing that you have, kind of how should we think about the -- I know you don't like to talk about the quarters, but how should we think about the quarterly flow of the year with the pricing? And I mean, is that -- I mean, it sounds like it's going to be an acceleration as we kind of progress through the year based on how you've lifted prices. And then the second is can you talk a little bit more about peanut butter and the, I guess it was like a 20% or so price increase that Unilever put through and kind of how you're positioned given such a short crop in terms of just actually producing the amount of jars that you're going to need?

Eric, this is Vince. I'll take the first question, and Steve will take the peanut butter question specifically. But I think as mentioned in the script, the majority of our pricing was taken through last fiscal year through '11. But then we announced virtually every product category had yet another round of price increases that will take effect in the first quarter at various stages. So from a quarterly perspective, I would say that you'll see more pricing actions take effect in the second through the fourth quarter than you will in the first quarter.

Yes, Eric, this is Mark Belgya. The other thing would be, of course, we will lap the -- one of the coffee increases in February that we took, a double digit one. So there you'll start seeing some moderation in the fourth quarter.

Eric, Steve Oakland. I'll comment on the peanut butter business and the actions that we've taken and what's going on in the industry. As you know, we are the largest peanut buyer, right, globally. And so as we work with those key suppliers and shellers, it became evident to us very early on that this year's peanut crop was short, frankly. And so as we worked with them, we started to prepare our Lexington facility and prepare our supply chain to assure we can continue the growth of that business. And if you look at that business grew last year by 5%. Frankly, it grew the year before by a little more than that. So we anticipate that business growing again this year. So we've discontinued, and there's been some writing about this that maybe was a little misunderstood. But we discontinued some tiny items that were complex and that gave that facility even more capacity, so that it could deal with a short crop. So if you combine those efforts with frankly our position, we feel great about our key promotional periods of back-to-school fall bake. Our price increase that we took that went into effect just last month is about half what some of the competitors that you listed mentioned. But we think it's adequate to cover our needs, and the actions that we've done are going to get us through another great year on Jif. Remember, we also took a 5% price decline that the market didn't take a year ago. So the Jif business continues to grow, and we get a lot of that business on regular everyday shelf turns. And we think that's very, very healthy. So keeping that price close, giving the consumer value every day not just on deep deals has been the success of that business, and we intend to continue it.

Moving on, we'll take the next question from Farha Aslam from Stephens Inc.

And then my 2 questions. First of all, could you just detail for us the level of pricing in each of the categories that you took effective for the first quarter? And my follow-up would be this is the first we actually get to talk to you about the Rowland Coffee acquisition. You've highlighted that sales are about $110 million for that business. Could you share with us the EBITDA that business produces and roughly what that growth rate of EBITDA is?

So we'll take the pricing question first, Farha. On coffee, we announced the price increase in May of around 10% to 11%.

On oils, it was about 8%. On baking, it was a range between 4% and actually 20%. On milk, 5% to 10%. On peanut butter, it was 8% to 10%. Fruit spreads, 5%. Our pancake mix and toppings businesses went up 5% as well.

Great. That's helpful. And then Rowland?

Farha, this is Mark Belgya. We have not disclosed the EBITDA numbers, but we did put in our release in year one, our first full year would be a $0.05 of earnings. And that number will increase in a few years as we consolidate the operations into our New Orleans facility and move much closer to the rest of the company. But right now, because of the fact that we're running the operation separately, it's a little bit under the corporate average.

Farha, maybe we could provide a little more color on Rowland. Mark, do you want to handle that?

Sure. Hi Farha, this is Mark Smucker. Again we would say that the Rowland acquisition obviously is very complimentary to the business, and one of the key points that it's a very unique consumer. And it's typically a consumer or a set of consumers that does not consume our mainstream products across a number of different Hispanic demographics. And so as you may know that business is focused predominately in the northeast and Florida and because of that unique consumer base, we think it's critical that we maintain the product integrity and ensure that, that brand and that product taste profile doesn't change as we integrate the business. So we do think, however, there's going to be significant opportunity for growth across a number of Hispanic demographics nationally. And remember, too, that we've only owned the business for about 3 weeks and so we're right now very focused on learning the business and integrating that business. And we only closed on May 16. So again, we remain very confident that we can grow that business and it fits a very unique niche in the consumer base.

Moving on, we'll take our next question from Chuck Cerankosky from Northcoast Research.

Mark, could you talk a little bit where the depreciation restructuring line came from in the operating activities? Is that mainly tied to the Sherman, Texas plant?

Well, the charges -- yes, Chuck, most of the charges we've had during the year it's deceleration on all the plants that are closing but clearly with Sherman having the shortest time period, the majority or at least the large percentage of the noncash charge would be affiliated with that. But the other plants are also -- we're accelerating depreciation on those as well.

All right. And then a bigger picture question. Somebody mentioned that you felt the higher prices of coffee that you've gone to on the shelf are being reasonably well accepted by the consumer. I would imagine oils are at the other extreme when you're raising prices. Can you talk about what sort of in the middle, how consumers are reacting to these price increases? And are you trying to price to maintain a certain level of volume growth or are you trying to simply pass through costs?

Chuck, this is Vince. Well, first of all, as you know, it's unprecedented times across all commodities. And I think as Jim or Richard mentioned in their formal remarks, we're trying to do everything we can to delay or have other costs offsets to ultimately pricing decisions. Also as mentioned, we are though passing on pretty much a $0.01 per $0.01 type pricing as opposed to increasing margin percentages. They have been accepted pretty much from the trade. They have not all been reflected, of course, on the shelves. So the consumer has not seen the full impact of our pricing actions most -- and particularly those that we did announce over the last month or so. But again, for the most part, we feel our products and brands will be able to withstand the pricing actions we've taken.

This Paul Wagstaff. The only thing I would like to add to that is when we think about the oil pricing, our competitors have also taken the price up to similar amounts. So we feel that on shelf, we're going to be in pretty good position. And so far we have seen a significant drop-off in volume.

This is Richard. I might just add 2 comments. One is, as Paul mentioned, our competitors have all taken these price increases also, so we are on a level playing field. We just believe that we have to play harder. And second is that the consumer, for example, on coffee, still a cost per serving on coffee is very low. It's still only $0.05 or $0.06 a serving. So even if it goes up to $0.07 a serving, it's still going to be a pretty good bargain, and that's true in most of the products that we are involved in.

That's a great point.

Moving on, we'll take our next question from Ken Goldman with JPMorgan. Kenneth Goldman - JP Morgan Chase & Co: Has the tone of the conversation changed much with the retailers about pricing? It sounds from what you're saying like it hasn't. But in the last week, a couple of retailers, Wal-Mart, Dollar General, Fresh Market, have really come out and said they're pushing back or they're not taking pricing. And it seems like there's been a shift in their tone. I'm wondering if in your conversations with them they've pushed back any farther than usual or whether anything has really changed there that maybe we could be aware about.

Yes, Ken, I think the answer is yes. Clearly, they are very concerned about their customers and concerned about price points. And so yes, I think those conversations are properly harder than maybe what they had been. And also we have to provide more data or justification sometimes to ensure that we're not passing on more than maybe what's clearly justified. But again for the -- we're able to get our price increases through. But I think it goes back to our credibility and our transparency of our pricing that we have with our customers whether we move up or down. And so we've earned that over the years, and I think that we're well regarded in the industry. Kenneth Goldman - JP Morgan Chase & Co: And then separately, the Rowland amortization or total amortization next year, if we're trying to figure out cash earnings. Can you remind me again what the guidance is for amortization next year versus this year? I think you've touched on it, but I wanted to make it clear.

Ken, this is Mark. I think it was in the scripted comments, it's $0.50 a share roughly. Before it was around $0.45 -- $0.73. So it's about $7 million or $8 million specific to Rowland.

Moving on, we'll take our next question from Jon Andersen, William Blair. Jon Andersen - William Blair & Company L.L.C.: I just had a question on -- first question on marketing versus promotional spending. It sounds like maybe reallocated somewhat towards promotional spending in the fourth quarter. At this point, are you happy kind of with the mix of marketing versus promo? And do you expect that to change next year?

I think we'll do that by segment, but we'll start with Coffee. This year's fourth quarter was different from last year. I think you may recall that we almost doubled our marketing budget in last year's fourth quarter and we actually reduced our trade spend last year. This year was more normal on a going forward basis, and that's what we'll see I think going forward into fiscal '12. Although marketing was lower this year in our fourth quarter versus last year, it was actually higher than the 2 previous fourth quarters. So we continue to invest in the brands. We did increase a little of the trade this year versus last year because we wanted to ensure that we delivered a very strong Easter promotional period.

Yes, this is Paul. Regarding the oils and baking side of the business, we did want to make sure that we did have a strong Eastern time period. And we did take some of our marketing and really put it towards the promotion -- price promotion and felt that we did have a very good time period, a good fourth quarter.

And Steve Oakland with the consumer numbers. As we reported, we had a very strong volumes in the fourth quarter. Peanut butter, up 8%; fruit spreads, up. So our year-to-date marketing was flat. We did postpone a few activities because we knew what was happening in the peanut butter category. We knew we had very strong bookings on that business, and we didn't want that to be any stronger frankly, putting more pressure on that business. So some of the Jif Natural things, some of those Jif To Go things went into the next year. So marketing for the year was flat, but fourth quarter it was prudent to maybe postpone a few activities. Jon Andersen - William Blair & Company L.L.C.: That's helpful. Just one last one on kind of the Rowland acquisition. Is there any more color you might be able to provide on both the timing of top line opportunities such as distribution expansion or -- and also on the cost side kind of consolidation into New Orleans?

This is Mark Smucker. As you know, we're still integrating the business and learning it. And as I think in the scripted comments, we mentioned that we will be integrating the customer-facing activities in the next several months. But we do expect that in the second and third quarters, we will be putting some efforts against increasing that distribution. So realistically, flowing through our P&L, you would probably start to see some growth, I would say, in this third quarter.

Moving on, we'll take our next question from David Driscoll, Citi Investment Research.

Wanted to start off in the Coffee. Can you just talk a little bit about the implications of current green coffee prices? So you mentioned in your prepared comments the 34-year highs. Of course, we've come off those highs now, and as the curve -- it's different than anything that we've seen for many months now where it only did basically just go straight up. I don't know who wants to answer this one, but would love to hear your thoughts on how this evolves going forward.

Sure, David. This is Vince. Basically for the fourth quarter, our costs were up nearly 50% if you compare to the prior year. There's been tremendous volatility, and in fact, it's traded in the last 3 weeks about $0.60 or over 25% change. I would just say from where our current position is, and we're public that we're typically 18 to 22 weeks. And based on where the market is today, we're in a range that we're comfortable with our pricing. It's very difficult, of course, to predict what the market will do going forward. But I think a lot just depends upon the world events and the flow of money. You've heard us say before that we don't think it's driven by the fundamentals or some issues going on in Brazil and Colombia we've discussed. But it's not driven necessarily by supply and demand as much as it is financial markets. But we feel we're in a good position as we sit today.

That's very helpful. You made comments just a moment ago I think on marketing spend for the fourth quarter. I might have missed it, but did you say what your expectation was for fiscal '12?

David, it's Mark Belgya. We did not, but I think again it was in our stated scripted comments that our SD&A is going to be up next year. And we're going to -- although clearly, marketing won't be up to match the top line growth, it will be low double-digits as a company.

So marketing spend up low double-digits?

Yes.

And then final question. Just productivity savings, can you guys quantify that for F '12?

Yes. Just to refresh everyone's memory, our restructuring project including everything that's been discussed previously including Canada will ultimately be about $70 million in fiscal 2015. That will be the first year that we have a full year of benefits. And we've tried to direct everyone that it's kind of a stair-step approach that ties into the construction projects and the closing of the plant. So in fiscal 2012, we would expect about $25 million in total savings to be reflected in the P&L.

We'll take our next question from Scott Mushkin from Jefferies & Company. Mike Otway - Jefferies & Company, Inc.: This is Mike Otway, in for Scott. I was wondering if you could just delve into the baking business a little bit. Volumes improved quite nicely relative to last quarter on a sequential basis. Maybe could you comment on what's changed outside of Easter, including Easter? And then more broadly speaking, could you give us an update on where you see the trends competitively and with that business heading into fiscal '12?

Yes, Mike, this is Paul Wagstaff. Just stepping back on the baking business, when we started out the year, it's been a tough year overall. Competitive pressures on the disruptive pricing has been significant, but we started out the last -- past year with one of our key retailers really eliminating us from part of the key promotional time period. And so as we moved into the fourth quarter, we were able to gain some of that promotional business back from a couple of the retailers. And we really were able to pass some of the pricings. We took some of our marketing and pushed into some pricing and key promotions. And really we grew the business by about 15% fourth quarter. So we felt very good about that. Going into this upcoming year, we are still seeing the competitive pressure exist in the marketplace. That being said, we've already locked in a few key retailers for the fall bake time period, and I would say we feel optimistic that should be a good year. All things being considered, we still know there's going to be some disruptive pricing out there. But we feel pretty good. Mike Otway - Jefferies & Company, Inc.: Great. And then maybe this one is for Mark. Just kind of following up on some of the other questions on the supply chain. Could you give us a sense for the cadence of costs on the cost side this year spread more evenly or weighted to any one quarter in particular?

No, I don't think that -- I don't think I would give any specific quarter any weighting. Obviously, the costs that we've priced to have all occurred. So it would be pretty even across the 4 quarters.

This is Richard. But I'm not sure of the question, but if the question relates to pricing versus where the costs are associated with, we've -- if commodity costs remained where they are today, we've taken all the pricing we need to take. No one knows what's going to happen on commodity costs, but we're in pretty good shape going into the year.

I think also -- I maybe misunderstood the question, sorry. Are you talking about the cadence of the restructuring costs or benefits? Mike Otway - Jefferies & Company, Inc.: The supply chain project costs and if there was any -- if they are more evenly weighted throughout this year on a quarterly basis.

Yes, they're fairly evenly weighted, particularly on the noncash side because the depreciation is monthly. The only times you'll see a little bit of cash spike is when we do get around to incurring some of the cash charges. But I think for your modeling purposes, an even cadence across the quarters is probably reasonably fair.

Moving on, we'll take our next question from Jane Gelfand from Barclays Capital.

A quick question for you just regarding Dunkin' Donuts. I realize there's a really tough comp in the year-ago period and so some of that decline makes sense, but we all know that there's lots of kind of moving parts such as the premium coffee subsegment in general. So you've got the Starbucks brand being taken back at retail by Starbucks and Kraft is pushing a different premium coffee strategy. So I'm just curious more about kind of broader observations. How is that competitive environment? I know that there have been kind of flareups over the past year. And how do you feel going into fiscal '12?

Jane, this is Mark Smucker. I'll start. Basically, although the Dunkin' brand was down in the quarter, we still feel very good about its growth potential. Essentially in the quarter, there was some promotional activity in the prior fourth quarter that did not reoccur this past fourth quarter. And so that was the primary driver for Dunkin' being down. But as we go forward, we think the brand has great legs and that there is still some opportunity in distribution and also some opportunity in new products to continue to grow that brand. So overall, I think over the course of this next fiscal year, we would continue to see growth on that brand.

And then in terms of just the kind of the dynamics in general, are you seeing any disruption as the brands shift hands or anything like that?

No, there's been no fundamental change if you're speaking specifically to the specialty coffees. Obviously, we have very high regard for Starbucks and taking over the ownership of their brand at retail. Again, though, there's been no fundamental shift other than, of course, the pricing price points that we're all now facing versus where we were a year ago.

Perfect. And then just -- maybe just a question on the EPS range for fiscal '12. It's a little bit wider than I think you've usually gone. I realize it's a tough environment. But as I kind of listen to some of the moving parts for next year, it seems like pricing has more or less caught up to where it should be given the cost situation. You've got a decent read on elasticity being maybe even a little bit better than you anticipated. So as I think about getting from $5 to $5.15, I know that there was a $0.10 charge last year, you've got some buyback working to your advantage, and of course, the accretion from the deal. So what's the swing factor that can kind of help us bridge why $5 might even be in question versus the higher end of the range?

Jane, this is Mark Belgya. I'll start and then if anyone wants to jump in. I guess, first of all, in terms of the range itself, it is a $0.10 wider that I think we've done in the last couple of years. Obviously, the EPS amount grows just percentage-wise, the range will grow a little bit. But more specifically, importantly around what could drive it to the lower end of that. Everything you mentioned -- clearly, we have been hitting on. We talked about the savings around the restructuring. Obviously, there are savings associated on EPS in terms -- or benefits of the EPS in the share buyback. The impairment charge is a nonrecurring charge, and all of that would help support the high end of the range. As we've said several times this morning though, the consumer still has to see the on-shelf pricing. There's a lot of volatility. And when you talk about the 25% increase in cost, the 20% top line growth, those are somewhat staggering numbers, we feel confident. But if you are looking for something that would point us to the lower end of that range, just some of the uncertainty around that. And clearly, as the year progresses, we'll have a better view and add more site to that. But we felt at this point in the year, it was appropriate to recognize at least some of that uncertainty in our range.

That makes sense.

Moving on, we'll take our next question from Alexia Howard, Sanford Bernstein. Alexia Howard - Sanford C. Bernstein & Co., Inc.: Can I ask about what's going on in measured versus non-measured channels? It looks as though the coffee volumes were very strong, in the data that we saw I think about 8% up in the quarter, but the reported numbers were flat. And so that suggests that non-measured channels, it was down quite a bit. Can you just talk a little bit about the dynamics there?

Sure. I'll take coffee. In a macro sense again, you have to be careful about how much is even recognized as measured versus non-measured, and we've said that many, many times. So although it's an indicator, it is not necessarily a full read of our business. I would also say that majority of the Dunkin' decline might have been -- or was in non-measured channels. So that's the primary driver from that perspective. But overall, I would say for fiscal year '11, clearly, there's been some shifting of our volume to the alternative channels group whether it'd be club, mask, dollar channels, et cetera. Alexia Howard - Sanford C. Bernstein & Co., Inc.: Great. And then just a quick follow-up or a broader strategic question. At the CAGNY conference in February I think, you mentioned that you were reviewing options for entering emerging markets, particularly China. I noticed in the press release this morning, I think you reiterated the focus on North America. Where are you at in that decision making process at the moment? Is it still something you're exploring or are you refocusing on the North American opportunities?

Alexia, Steve Oakland. As we look forward to China, obviously, you just can't ignore that market. It's such a fast-growing middle class and the demographics -- the western retail practices and everything are just booming there. So we have been studying that market for some period of time. We're starting to understand categories. We're starting to understand the consumer. We started to add some people to our team that are both in China and here that have spent a lot of time managing similar product businesses in China. So I think we want to enter that market. We want to do it right, and we're trying to put the building blocks in place to do that, and I think we're well on our way.

And I think -- I'd just mention, as we were at CAGNY, nothing has changed from that strategy. Our shift is the same as we're still focused on North America, but China is an area of keen interest for us.

Moving on, we'll take our next question from Judy Hong, Goldman Sachs.

A couple of questions. First, just on the K-Cup contribution. I think you said in the quarter, it was 5% contribution. In Q3, I think it was up -- it was about 4%. So you did see some improvements. But if you look at the retail data, it looks like consumption is actually growing at a faster pace just on a sequential basis. So as you think about that business in fiscal '12, can you give us a little bit of color just in terms of how big the contribution can actually get based on what you're seeing in the retail data?

Sure. Again, we would expect to continue to grow. I would just start by saying that we have a great relationship with Green Mountain. And as you've heard us say before, it's our charge to grow the system or the overall pie. We're the first natural brand to launch. And we did roughly, as you know, about 3% of sales for the 6 months, I believe, the most successful new product launch in our company history. There are some new competitors that's going to be entering into the market come fall, and those are very public. So they'll provide incremental opportunities for consumers to buy K-Cups at different channels. But we remain very, very bullish about the continued growth of that business.

Okay. So are you -- just in terms of what's embedded in your guidance, are you looking at sort of that 3 6-month number continuing in fiscal '12 just in light of some of the competition? Or as you kind of build that business, that contribution actually does get greater?

Yes. So I mean, we hope that it'll continue to grow between at least -- going to be between 3% and 5% of our overall coffee business.

Got it. Okay. And then I may have missed it and maybe I've got 2 different numbers here. But Mark, just in terms of your SD&A guidance for next year, I think at one point you might have said 10% and then at another point low double-digits. And then I think you said marketing might not be growing at a -- as fast. So can you just reconcile or just clarify what you've said.

Yes, Judy. We said that our SD&A would be up 10% and then within that marketing, we would also be up in low double-digits as well. So pretty comparable to the SD&A increase.

We'll take our next question from Ed Aaron from RBC Capital Management.

I wanted to ask you about coffee more from just kind of a macro perspective. You've stated a number of times, and I think other coffee companies have as well, but you think that the -- what's happened with the commodity is more kind of speculative and fundamental. But as we look at it, there really hasn't been much evidence of demand destruction in the category. And so assuming you agree with that, I'm just wondering if there's really a fundamental reason for those costs to really come down.

Well, again, we would hope that depending on what happens in the financial markets that they could come down. But I guess, I'll just say what I said earlier, there are some fundamental issues going on in the world when you look at the amount of demand in Brazil or the supply availability in Colombia. But again, those are not what's driving coffee to the 34-year high. It's primarily driven by financial markets. You see that we have a $0.60 trading range in a 2-week period. That is not supplier-demand driven. That is financial markets driven. And so I don't think we can predict anything about what will happen. But we would hope that they will come down over time. However, whether they'll go back to the levels that we saw a year or 18 months ago, most likely it will not occur unless there's some major shift in the financial markets.

And then my follow-up, just on the Coffee segment in the quarter. It was about, I guess, a 500 basis point sequential margin decline. I'm just trying to bridge that a little bit. I think obviously you had some inflation catch up but you also had a 10% price increase that came into effect I think at the start of the quarter. So just can you help me understand how to bridge that 500 basis points of sequential change?

It just depends on what the timing of our price increase, the promotional spend and our green coffee costs that happen to fall within that particular quarter.

Moving on, we'll take our next question from Robert Dickerson from Consumer Edge Research.

I just have a couple of easy questions. I guess the first question, I think someone may have touched on it briefly earlier, but I just want to follow up on the commodity cost side. Just with respect to kind of rollout quarter-to-quarter fiscal '12. So I mean, obviously coffee prices are up. You've obviously hedged coffee costs some. But as some of the hedging rolls forward, it would just seem intuitively like if I'm thinking about fiscal year '12 that basically the back half of the year should be a little bit stronger than the front half of the year, just because of the year-over-year changes in coffee costs. Does that sound right?

Yes, that's probably right. And clearly, from a year ago this time, cost of green in particular would have bigger disparity than later in the year. And I would say, at the back half of the year we saw pretty high costs more comparable than what we're having in place today.

Okay. Great. And then secondly, I just -- I don't think I heard anybody ask a question on the reclassification of the statements. But did I hear you right early on when you said it would be Coffee and Consumer, and then you're basically combining Oils and Baking with retail? I mean, sorry the Oils and Baking with Special Markets?

No, what we're going to do is we'll have 3 segments and we'll have U.S. Retail Coffee, which would be comparable to what we've had in the past. We'll have U.S. Consumer Foods, which for simplicity is the addition of what was Consumer and Oils and Baking. So for your purposes, you could just add the profit and sales results together. We will formally reclass or restate that in the coming weeks. And the International, Natural Foods and Foodservice business, which we previously called Special Markets, well, that will just be the new name for that business.

Okay, great. All my other questions were answered.

Moving on, we'll take our next question from Mitch Pinheiro, Janney Montgomery Scott.

Just a couple added-in questions. First, back, if you -- sales guidance 20% growth, and I think you said flat volume. So if you back out Rowland, make some assumption about Rowland, it looks like pricing is in the high teens. Is that about right?

Yes, Mitch. Clearly pricing is the majority. There is some mix, but pricing is by and large the bulk of that 20%.

Okay. Okay. In terms of the K-Cup outlook, is there pricing in the K-Cups as well?

Yes, it was included in the price increase that we announced earlier this or last month.

Okay. And in terms of -- any plans for new SKUs in the K-Cup side?

Yes. This is Mark, Mitch. We are in the process of launching 2 new items in the K-Cup area. So we're excited about that.

Under the Folgers or Millstone?

Millstone.

Folgers Gourmet Select.

Okay. And then finally, can you talk about 2 more things. One, what does your -- of your total K-Cup sales, what does the sort of growth look like outside of the food, drug and mass channel? Do you have penetration outside of that channel?

Outside of food.

Yes, alternative channels plus are you in office coffee, et cetera?

No, we do not have the right to distribute the K-Cups in what we would call Foodservice or office coffee channels. Our channels are primarily limited to what we would call our U.S. Retail channels.

So office.

Well, Canada just launched...

Well, Canada's just launched -- yes, do you want to...

Yes. This is Steve Oakland. We are excited to launch K-Cups in Canada as well, and those presentations are being made to trade literally as we speak. So there's a new -- relatively newer segment in Canada, but getting just as much enthusiasm from all of the classes of trade as it is in the United States.

Okay. And in terms of like the Staples, Office Depot segment, are you authorized for that channel?

No.

Okay. And then finally, in terms of Coffee, are you 100% Arabica or do you use any Robusta coffee?

Oh, no. We use a very, very significant amount of Robustas, and we're not public with that exact blend but I can tell you by a significant amount.

Okay, and Robusta has moved a lot less than Arabica? It is that right? Am I seeing that correct?

On an absolute amount, that is correct. And the difference between the 2 has significantly increased over the past year between Arabica and Robusta and so there have been some competitive actions of maybe revising their blends. I mean, we have resisted doing that.

This is Mark. If you look at the movement of Robusta relative to Arabicas, even though the spread is significant as Arabicas have come down slightly in the last several weeks, Robustas have not. And in fact, in the last week or so have actually strengthened on strong demand for Vietnamese Robustas.

Okay. Very helpful. Final question. Acquisitions, do you anticipate -- I mean, I know what your pipeline looks like. But you obviously have Rowland working this year. Is anything -- I don't know how you would describe your acquisition outlook?

This is Richard. And as we always say, we got a lot of lines in the water. We just don't know when the fish are going to bite. So we're probably in the same position we were about a year ago in terms of that, but we're always looking.

Moving on, we'll take a follow-up question from Eric Katzman from Deutsche Bank.

Tim, I was neglect in not recognizing your contribution and good luck.

Thank you. Thank you very much, Eric.

I guess just kind of a -- maybe somewhat of a broader follow-up, but a question on the specialty markets area. I think in the last couple of calls, despite the economy, you've highlighted the fact that your natural and organic products, which sells at a premium price point, has done very well. And I don't remember whether you've kind of mentioned that. And are you detecting any change in the high end? Or does that continue to be the intent?

Now this is Mark Smucker. Yes, it is a good channel, and we do -- and from an industry perspective, we are seeing continued growth. And I would say overall, we would continue to see that area grow. If you look at naturals, the natural channel, which now is starting to get into some of the mainstream areas in a bigger way. Organic is part of what we call natural. It is a smaller piece, of course, of the pie. But organic seems to grow very rapidly from an industry perspective, and our growth continues as well.

Can you say out of the -- I guess you ended up the year with a little over $900 million in sales. How much of that is like focused on the organic and natural channels?

It's in the order of about $125 million to $130 million in sales.

Okay. All right. And then just to check on, Richard, did you say that you expect interest expense of about $60 million? So despite the addition of the debt and the working capital usage, that you're still expecting interest -- you're expecting expense to be down year-over-year?

Eric, this is Mark Belgya. The number is $60 million. That is a net interest number. And we have moved some of our fixed debt to variable through some swaps that will benefit both from a cash perspective and the P&L during '12.

Gentlemen, I will now turn the conference call back to you to conclude.

Okay. Well, this is Tim again, and I want to thank everybody for your interest today, great questions. And again, thank the team, our Smucker team, a great team. We really appreciate it. It's a great year. And again, I'm humbled to be part of this great team. So thanks a lot. Have a great day.

Ladies and gentlemen, if you wish to access the rebroadcast after this live call, you may do so by dialing 1 (888) 203-1112 or 1 (719) 457-0820, with a passcode of 3383522 or by accessing the website for a downloadable MP3 format. This concludes our conference call for today. Thank you for participating, and have a nice day. All parties may now disconnect.