Sonal P. Robinson - Director of Corporate Finance, Vice President of Investor Relations and Assistant Secretary Richard K. Smucker - Chief Executive officer and Director Vincent C. Byrd - President, Chief Operating Officer and Director Mark R. Belgya - Chief Financial officer and Senior Vice President Mark T. Smucker - President Of US Retail Coffee and Director Paul Smucker Wagstaff - Director and President of U.S. Retail Consumer Foods Steven T. Oakland - President Of International, Foodservice And Natural Foods

Eric R. Katzman - Deutsche Bank AG, Research Division Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division Edward Aaron - RBC Capital Markets, LLC, Research Division Farha Aslam - Stephens Inc., Research Division Ann H. Gurkin - Davenport & Company, LLC, Research Division Akshay S. Jagdale - KeyBanc Capital Markets Inc., Research Division Christopher R. Growe - Stifel, Nicolaus & Co., Inc., Research Division Charles Edward Cerankosky - Northcoast Research Jonathan P. Feeney - Janney Montgomery Scott LLC, Research Division David Driscoll - Citigroup Inc, Research Division Andrew Lazar - Barclays Capital, Research Division John J. Baumgartner - Wells Fargo Securities, LLC, Research Division Jason English - Goldman Sachs Group Inc., Research Division Kenneth Goldman - JP Morgan Chase & Co, Research Division

Good morning, and welcome to the J.M. Smucker Company's Third Quarter 2013 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded. [Operator Instructions] I will now turn the conference call over to Sonal Robinson, Vice President of Investor Relations. Please go ahead, Ms. Robinson.

Good morning, everyone, and welcome to our third quarter earnings conference call. Thank you for joining us today. On the call with me are Richard Smucker, Chief Executive Officer; Vince Byrd, President and Chief Operating Officer; Mark Belgya, Chief Financial 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. Following this introduction, I will turn the call over to Richard for opening remarks. Vince will then discuss the results for our business segments, and Mark will close with additional comments on our financial results for the quarter and our outlook for the full year. As you may know, the company will be presenting at the CAGNY Conference next Tuesday, February 19. We look forward to updating you on many of our key strategic initiatives at CAGNY. Therefore, our prepared comments today will be shorter than usual. During this call, we 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 risk and uncertainties. I encourage you to read the full disclosure statement in the press release concerning forward-looking statements. Let me also remind you that the company uses non-GAAP results for the purpose of evaluating performance internally. Additional discussion on non-GAAP information is detailed in our press release located on our website at smuckers.com. A replay of this call will also be available on the website. If you have any follow-up questions or comments after today's call, please contact me or Mark Belgya. I will now turn the call over to Richard.

Thank you, Sonal, and good morning, everyone. Thank you for joining us on this call. I also look forward to seeing most of you next week at CAGNY. We entered the important holiday season positioned for growth in many of our categories and are pleased with the continued momentum that we've seen in our company. We've -- our proven strategy of generating growth through brand building, innovation, acquisitions and productivity initiatives allowed us to deliver another quarter of sales gains and strong earnings growth. Let me summarize some of the key highlights of the quarter. Net sales increased 6% led by our strategic growth drivers of acquisitions and product innovation. Looking briefly at our 3 segments. Coffee volume increased slightly in the quarter due to the strong performance of K-Cups. The Cafe Bustelo and Pilon brands also achieved double-digit growth during the quarter. And Folgers was modestly impacted by the canister constraint we discussed last quarter. Consumer Foods net sales were up 4% as a result of increases for this Jif and the Smucker brands. Overall, reported volume declined slightly but was up 1% excluding the impact of the cake downsizing and some planned rationalization. Finally, our International, Foodservice and Natural Foods segment achieved significant sales growth, reflecting a full quarter's contribution from last year's foodservice coffee acquisition. In addition, continued growth in natural beverages and a favorable sales mix also contributed to their results. Non-GAAP earnings per share grew 20% driven by 3 main factors: first, a substantial increase in coffee segment profit, reflecting the timing of lower commodity cost; second, profit growth across the International, Foodservice and Natural Food segment and the impact of the share repurchases over the last 12 months; lastly, cash from operations continued to be strong in the quarter and increased to $684 million…

Thank you, Richard, and good morning, everyone. Let me begin by reinforcing that our momentum through the first 9 months of the fiscal year reflects the ongoing commitment to the 5 key areas we outlined at the outset of the year, which include further building our brands through increased marketing support and innovation, executing pricing leadership, continuing to optimize our supply chain, capitalizing on our recent acquisitions and focusing on sustainability. With that, let me provide further commentary on the performance of our 3 business segments. I'll start with the U.S. Retail Coffee segment, where volume was up 1% for the third quarter. As we discussed on the last call, the supplier-driven constraints for the coffee canister were expected to have a modest impact on third quarter volume for the Folgers' Red Can business. This scenario played out as expected as our coffee volume was negatively impacted by approximately 1 to 2 percentage points, primarily in our opening price point line. Overall, our team did a tremendous job, strategically managed demand based on product availability and minimizing customer disruption and the total financial impact on the company. Given these challenges, we were encouraged by our roast and ground results for the quarter. Our most recent 4-week share market within mainstream segment is also encouraging, gaining 2 share points. We are pleased to report that the canister issue is now behind us, enabling us to build inventories to more desirable levels to support the business. Our K-Cup business delivered another strong quarter with sales up $30 million over last year's third quarter, an increase of 50%. The growth rates for this business remain significant but, as expected, are moderating from the percentages realized earlier in the year. For the full year, we continue to expect K-Cup sales will approach $300 million,…

Thank you, Vince. Net sales increased $92 million or 6% in the third quarter, primarily driven by the 2 months' additional contribution of the foodservice coffee business acquired last January. Sales mix continued to be favorable in the quarter, reflecting volume growth in K-Cups and peanut butter. This helped to offset slightly lower overall volume and net pricing. GAAP earnings per share were $1.42 this quarter and $1.03 in the third quarter of last year. Special project costs as defined in our press release and reflected in GAAP earnings once again declined on a year-over-year basis as the underlying restructuring activities wind down. Excluding these costs, earnings per share were $1.47 this quarter and $1.22 in last year's third quarter, an increase of 20%. Operating income, excluding special project cost, increased $33 million or 14% for the quarter, reflecting a $59 million increase in gross profit. Overall commodity costs were lower in the current quarter compared to the prior year, as declines in green coffee were only partially offset by higher cost for peanuts. In addition, the profit contribution from the acquired foodservice business and mix contributed to the increase in gross profit. SD&A expenses were up 12% in the quarter. This reflects higher G&A expenses, primarily driven by increased incentive compensation and employee benefit costs. Marketing expense was also up in the quarter. For the full year, we now expect a low double-digit increase in marketing expense. While lower than our initial estimate, we remain comfortable with this level of spending, as we have consistently been on air supporting our key brands with TV advertising and continue to increase our digital marketing activities. The effective income tax rate was 34.1% in the third quarter, bringing the rate for the first 9 months to 33.8%. We now anticipate the full…

[Operator Instructions] For our first question we go to Eric Katzman of Deutsche Bank.

I guess first question, Vince, you talked about the 1% to 2% hit kind of in line with what you thought on Folgers. Folgers is a very profitable business for you, but you said that, I guess, the team kind of somehow managed that. So are you saying that profitability wasn't limited at all by the fact that you had a 1% to 2% volume hit on that entry level Folgers?

Eric, this is Vince, and that's correct. And I would also say that there was some compensation from our supplier that helped to offset that.

Okay. So they gave you some compensation for the fact that they weren't delivering on target?

That's true, yes.

Okay. And then I didn't hear you mention, as part of the coffee profitability, the productivity initiatives and what's been going on in New Orleans. Maybe you could -- was there anything there? And how do we think about the savings coming from that piece and how it impacts the coffee line going forward?

Sure, Eric. This is Mark Smucker. The supply chain optimization project in coffee is essentially complete. And the savings that we expected to realize, we have realized, and we are basically through that project.

Eric, this is Mark Belgya, just to add to that. We have not defined of the total $70 million that we've assigned to the overall restructuring, no, we've not went in to how much is coffee, how much is food spreads. But as Mark suggested, most of the savings have come through for coffee. There probably a little bit of a spillover, but most of those will be realized by year's end.

Okay. And then last question, I'll pass it on. Richard, I guess we've heard from 2 companies now in the industry, Kraft, really early this morning about some inventory -- trade inventory issues and de-loading and McCormick, they're a little more specialized obviously, but they also talked about it. You didn't mention it at all. Are you seeing anything from retailers, maybe in categories that you're not in? Or are your categories just somehow performing better in terms of consumption so the retailers didn't need to cut back? Maybe you could just help frame that a little bit for us.

Yes, sure. Eric, this is Richard. Your answer was really right. We haven't seen it in our categories this year. We actually saw it the prior year, but not this year in the categories that we're in. Now I'm not -- I can't speak to their categories, maybe the retailers have some de-loading on their categories, but we did not see it this year.

And our next question comes from Alexia Howard with Sanford Bernstein. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: Can I ask about the Dunkin' Donuts brand. Obviously, the volumes were down 2% this quarter. Are you seeing increased competition in the premium end of the roast and ground space, how's the shelf space and distribution developing on that brand? And, yes, maybe some comments around that.

Sure, Alexia. This is Mark Smucker. Yes, I would say, generally, the category is very competitive right now. And we are, again, competing in all tiers of that segment, if you will. We are, of course, pleased with the results that we've seen for the year. And I think as both Richard and Vince mentioned in the formal remarks, we're encouraged by the latest 4-week trends. Obviously, it's only 4 weeks, but we're encouraged to see that some of that consumer takeaway is picking up a little bit, and so we believe that, that bodes well for the Dunkin' brand. Alexia Howard - Sanford C. Bernstein & Co., LLC., Research Division: Great. And then maybe as a follow-up, there wasn't much mention in the press release around what's going on with Crisco. I was just curious about where that is in the input cost cycle and how that's developing.

Alexia, this is Paul Wagstaff, and we had a decent Fall Bake for Crisco. We were not participating in one of our key retailers, our largest key retailer, in the Fall Bake. But that being said, we were able to grow the business by 1%. So we feel it's pretty decent.

And our next question will come from Ed Aaron with RBC Capital Markets.

So I want to ask about K-Cups, sounds like you're kind of outlook hasn't really changed at all, but just didn't have a little bit of time to assess changes in the competitive landscape. And I'm wondering if it's all played out kind of right as you expected or if there have been sort of any surprises in kind of what you've seen from your competitive set there so far.

This is Mark Smucker again. I would say it's played out generally as we expected. We talked in the last couple of quarters about the deceleration of the growth, and that has been more or less as we've expected. As you can imagine, there are more players in the category than there were, say, 1 quarter ago. And -- but really, we've held our share. If you look at our dollar share on K-Cup versus the prior quarter, although we may be down slightly on the year-over-year, versus the prior quarter we're actually up slightly. So bottom line, we're very pleased with the -- with our results there. And we think that the category is still trying to settle out in how that will affect the total business going forward.

This is Vince. I guess I would add a couple of points. First of all, specifically, it is playing out. There have been some quality-related issues with the unlicensed participants that probably are affecting those results. And then I think the other thing we need to keep in mind is as the stores continue to expand their shelf space, obviously, we hope that we're growing the overall pie, but I think there will also be a continual shift of how much of those K-Cups are purchased through what we would call traditional retail channels.

That's helpful. And then just a quick follow-up for Mark. The corporate G&A number this quarter was a little kind of higher than where it's generally running and where I was expecting. Was there anything sort of unusual or nonrecurring that might have played into that?

Yes. This is Mark. Yes. The most specific item was -- and we -- it was in my comments, it was around incentive compensation. As you know, our original guidance this year, we had it $5 to $5.10 and of course, we've taken it up for a second time. So we're running ahead of where we expected. Conversely, last year, it was sort of the opposite situation. So that range of adjustment to incentive-based compensation was the primary driver.

And so just to be clear, there was basically a true-up from -- relative to kind of Q1 and Q2 where you had to catch up on your accruals?

That's exactly right.

Next we go to Farha Aslam with Stephens.

My question is regarding your commentary that volume trends in grocery and your business have been improving and particularly, last 4 weeks were strong. What do you think is driving that? Is that consumer confidence? Your ability to offer better value to consumers with commodities coming down? Could you just give us more color? And is there something that you've noticed that's particularly stronger in your business versus the overall industry?

This is Richard. A couple of things. One is we are actually seeing the consumer being a little more confident and therefore spending a little more. If you look at the actual numbers for the last 4 weeks, the industry was up about 2.8% in tonnage, which is one of the biggest increases we've seen in a 4-week period. And we're trending that way also. Also our pricing actions. Last year, we thought some of our pricing points were not where they should be versus our competition and we did a lot to adjust that in the last 12 months or so, and that has certainly helped our volume.

Okay. And then just as my follow-up, we've seen a lot of M&A happen in the industry over the last few weeks. Could you just comment on what you're seeing in the M&A picture? Have you seen kind of brand opportunities come to market recently?

Well, this is Richard again. We -- I can't say we have seen brand opportunities come to market in the last few weeks, but certainly there is more activity in almost every industry. You look at the low cost of interest today, people could go out and borrow really low rates and put that money to work. So we're going to -- we're expecting to see more M&A activity. We think that's positive for us because that helps us -- has helped shake brands loose when those transactions take place. So we see that as a positive for our long-term acquisition strategy.

Okay. And just as one addendum to that. At kind of the pricing you're seeing, are you -- with the funding cost we've seen sort of an inflation of multiples, are you comfortable with the multiples, things you're trading at? You have an amazing balance sheet. So we're just trying to figure out your kind of efforts to put your cash to work.

Farha, this is Mark Belgya. We've talked historically for transactions sort of that 7 to 10, 8 to 10 times EBITDA. Obviously, some of the transactions that have occurred recently in the food spaces, run north of that. I think it just reinforces the importance of strong brands. So I think you have followed us a while and understand our diligence as we look at brands, and we still think that's a reasonable range. We'll continue to challenge ourselves, particularly when we're looking at strong brands. But we realize that right now you're seeing some higher multiples and that may play out. But we still -- I think as Richard mentioned, we're still very comfortable with our acquisition strategy long-term.

And for our next question we go to Ann Gurkin of Davenport. Ann H. Gurkin - Davenport & Company, LLC, Research Division: I want to follow along that same line of discussion. And I'm curious if you're still reviewing products lines in your portfolio for potential disposal.

This is Richard again. We always look at that, although right now we're pretty comfortable with the categories that we have and the brands that we have. That doesn't mean we'll never make a transaction if it makes sense. But right now, we feel pretty comfortable. We'd rather add than detract from our brands. So hopefully, we'd have an acquisition sooner than we'd have a divestiture. Ann H. Gurkin - Davenport & Company, LLC, Research Division: Perfect, perfect. And then I don't know if you care to comment at all, where you've had a change in ownership in the peanut butter category, and are there any implications? You certainly have the dominant share, any strategy change we should look for or any comments at all on peanut butter?

Ann, this is Paul Wagstaff. And, no, I don't think there's any strategy change from our perspective, we respect Hormel very much. They seem to be a very good manager of brands and we would hope to see that continue. So we feel no change in our strategy.

And our next question comes from Akshay Jagdale with KeyBanc Capital Markets.

So first question just on your guidance for the fourth quarter implies a deceleration and growth across-the-board. So what -- can you just help me understand like what's happening sequentially that makes EPS growth slowdown from the level that we've seen so far this year, especially the last 2 quarters? And similarly, I mean, what -- why should margins not continue to go up, especially given what we're seeing on the commodity side on coffee and peanuts? I'm just -- I know there's probably some level of conservatism, which you usually always have. But I'm trying to understand, I mean you're making a lot of positive comments, but fourth quarter guidance seems, obviously relative to consensus, below what we were expecting.

Yes. Akshay, this is Mark Belgya. A couple of things. First of all, I think we have -- the last couple of quarters we've been pretty specific in our discussions around where we are in terms of the long-term peanut costs, so we think that, that will have some effect in the fourth quarter. Overall, commodity costs of coffee are stabilizing as well. We still expect a very strong gross profit margin percent, but we see those 2 things sort of affecting the gross profit side of things. In terms of the SD&A, I think, as Ed and I mentioned earlier on the call, the dollars were up in absolute measures for the quarter. That level of spending for the most part is a bit of a fixed overhead amount. So because the fourth quarter top line is a smaller dollar amount versus the second and third quarter, SD&A as a percent will be up as well. So -- and then the tax rate, of course, we're expecting to be a little higher and sort of below the line. So in summary, I'd say it's just 3 or 4 things that are probably driving our guidance. So Rich, I don't know if you have any...

The only thing I'll add is that the third quarter was an easier comparison than the last year's fourth quarter which is a very strong quarter, so you have that to consider also. But basically, the fundamentals of the business, the trends, are very good.

Okay. Great. And just to follow-up on coffee, sort of a bigger picture question. Being the largest coffee company, obviously, in the U.S., I'm curious to know how do you think the category is going to shape up, maybe a year or 2 down the road from perspective of the mix of the shelf. So I believe 2 years ago at CAGNY, you had put out 2 charts that I thought were interesting, saying roast and ground roughly 47% of the category, premium 31% and single serve, 22%. And clearly, your -- you are way more indexed towards roast and ground, with 66% of your sales, I believe, coming from that particular category. That's changed, but I'm curious to know how you think of it a few years down the road. Like where do you think the premium and single serve end of the category will be in terms of percentage of total pie?

Okay. Akshay, this is Mark Smucker. I think you'll see next week at CAGNY, we'll comment a little bit more on this. But generally speaking, premium is growing as, of course, K-Cup is growing and mainstream will probably have modest declines going forward. But our goal of course is to continue to play in those segments. And if a segment is experiencing a modest decline, we want to make sure that we are holding or growing our share.

Okay. And just a follow-up on the single serve side. We've stocked [ph] -- and you've mentioned the quality issues today, one of the major brands that was supposed to compete with Folgers has come into the market. I mean, can you just characterize what you're seeing in terms of the pricing in the single serve category, specifically? I mean, what are you seeing -- there is some promotional activity right now, and what is your expectation going forward?

This is Vince. I think it's playing out as exactly as we had anticipated. There are basically 3 tiers of pricing. And we sit in the middle of those tiers. And we're -- the unlicensed participants are about where we expected them to be. So it'll ultimately probably be a 3-tier pricing category.

We'll go now to Chris Growe with Stifel. Christopher R. Growe - Stifel, Nicolaus & Co., Inc., Research Division: I just had a couple of questions for you if I could, just to follow up on one earlier. I want to be clear on the sales growth guidance. It sounds like you're incorporating some potential moves in coffee, and I think the sales growth guidance is a little below where you had it last quarter. Should we assume that just based -- was if anything based on this quarter or is it more based on what you see in the fourth quarter that led to that slight decline?

Well, I think it's basically the effect of potential pricing, it's the biggest play on that. We mentioned also that volume is going to be flat year-over-year, which I think might be down just a bit from what we directed on the previous quarter. And then we're going to continue our exit of the private label roast and ground, so a combination of all 3 of those. Christopher R. Growe - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then I have further question for you in -- with regard to your price mix in the quarter. I guess, really, I'm trying to break those apart. U.S. pricing down in the quarter, I would bet across your business. Mix, it looks likes it was pretty positive and then I'm curious about promotional spending as well and how that fared in the second quarter -- third quarter, sorry.

Well, Chris, what I'd say is that pricing was basically down 1 point, mix was up plus 4%, acquisition would be plus 4% and then volume was down 1%, that's how we would get to the 6% growth. Christopher R. Growe - Stifel, Nicolaus & Co., Inc., Research Division: Okay. Then promotional spending then, is that expected to stay higher? And I guess in relation to that, with your advertising forecast for the year a little below what you expected earlier, is that getting pushed in the promotion? I'm just curious how those 2 are playing together.

Well, the promotional spending I don't think is significantly different to what we were expecting. I think just to be clear, we talk about promotions as sort of trade spend versus marketing. And then just on marketing, even though we are projecting sort of low double-digit versus the 20% for the year, we do think marketing will be up for the company in the fourth quarter pretty significantly.

We'll move now to Chuck Cerankosky with Northcoast Research.

Most of my questions have been answered, but I was wondering if you could just talk about foodservice, specifically within that international and foodservice segment, how volumes are trending there and how the consumer's behaving there. It sounds like you got a little life at food-at-home, but let's talk a little bit about "food away from home" from your perspective.

Sure, Chuck. Steve Oakland. There's a lot of moving parts in our foodservice business. As you know, we doubled the size of that business with the Sara Lee coffee acquisition and then we took on some pieces of the business that we knew we wouldn't have for the long-term. So let me give it to you sort of by business. We're very encouraged by the liquid coffee business, and we've yet to be able to do what we think we can do this year with our brands, with our technology and our agreement with Douwe Egberts. So we think, although roast, although it's up year-to-date, we think it can get better than that as we go forward. So that's great. When it comes to traditional foodservice, that business is soft in volume, just marginally. And if we think about the core casual dining customers, the places where our brands really work well, I think we've seen their macro numbers off 1% or 2%, and our business would mirror those industry trends. So we feel like we're holding or gaining share. Our margins are doing well, and we're doing at least as well as the industry. And then the coffee will be the platform that we'll grow off of into the future.

For our next question we move to Jonathan Feeney of Janney.

Just one question. You've given the strengths particularly -- you had some significant improvement in operating profit, a huge growth in one of your businesses, why the decision to shoot a little bit lower? I mean great in marketing spending, great growth year-over-year, but it seems like you changed the plan a little bit. Is that -- you just don't think it's as effective or what's behind that?

I'll start and then anyone jump in, please. I think, as I said in my prepared comments, we put 20% out at the beginning of the year and that was based upon the Sara Lee, obviously, incremental base growth on our marketing and then the reclassification of what was treated the [ph] last year back into marketing. And as we went through the year, we're quite pleased with our on-air activity, all our brands are being supported. Obviously, as you go through things, some of it is just due to efficient spending, quite honestly, and we'd bee able to recognize that through the year. But if anyone else wants to comment on the quality and the amount we're on-air, but we feel pretty good about it.

I guess just following up, I always kind of wondered about this, isn't more better? Or do you -- I mean if you -- I guess couldn't you do just that much more, if you've been more efficient? Or do you reach a point, I guess, in the saturation curve where you just make a judgment that says, "Hey, we don't want to spend anymore right now like just how it lines up with innovation," or isn't that right?

So this is Vince. So I would comment that, philosophically, we believe that we have to be the supporter of our brands and the categories. And you know we've talked historically about we have a greater share of our voice in most cases than our share of market. So we support our brands in those categories for the long-term. We just think that's the right thing to do. Now in any one quarter or any one fiscal year, the presidents all have levers that they can pull if they need to be sharper on price points or not necessarily. And so we at time to time can shift funds from marketing to trade, if need be, but that's not the case. And as you look at the entire year, where our marketing investments are going to go up. But we haven't reached a point of saturation, if that's your question. If you reach a point of we're out of any TV commercials, we obviously produce more and continue to support those brands.

We'll go now to David Driscoll of Citi.

I wanted to just to talk about K-Cups for a few minutes. The first observation I would make is that you guys deserve certainly congratulations. By our data, it appears that you have 9 of the top 20 SKUs within the K-Cup market in groceries, so terrific job. My question really is a longer term question. I sometimes feel like these earnings calls, and I'm probably guilty of this myself, may be a little too short-term-oriented. I'd really like to go against that right now and say long-term, is this K-Cup opportunity just an enormous opportunity, I think you said this is a $300 million business. In, within say a 5-year window, what do you think this is? Is this a $1 billion business? I mean, could this be fundamentally someone's entire investment thesis on Smucker's given the rate of growth and the profitability of that particular market?

David, this is Mark Smucker. We do think it's -- there's significant growth potential in K-Cup. It's -- we believe that it's here to stay. We think Green Mountain has done a great job with the system. I probably wouldn't give a longer term number, but I do think that we continue to see significant upside. Even as we're seeing the growth decelerate, we still think with new entrants, whether they are licensed or unlicensed, that is going to grow the category. And we just need to make sure that we continue to, as we grow the pie, that we continue to maintain or grow our share of it.

Can you comment on the margin structure of this as related to your overall coffee operation? I believe that you were showing incredible gains within coffee, it stands to reason that this is margin accretive to your coffee margins. Is that correct?

I think we've said in the past and it still holds true that the margins in K-Cups are more or less in line with our total coffee business. And our goal again is to continue to grow profit dollars, not necessarily margin.

Well maybe my final question on this then is can you just talk about then the factors that caused such an enormous improvement within the coffee margins? From a modeling point of view, these giant changes are reasonably tough to deal with accurately. So can you guys help us out a little bit, understand the changes that contribute to the margin improvement?

Yes. I think in the script, we talked a little bit about just the timing recall of our price decline in the beginning of the year was ahead of the moderating green coffee costs. So it really is timing-related as we realized coffee cost versus what our pricing is in the market.

So that factor trumps the K-Cup issue, is that what you're saying?

Yes. This is Mark Belgya, David. Yes, that's right. I mean, obviously, with -- K-Cups contributed an incremental $30 million, you can do the math on the contribution. But the cost or price -- the cost and price to position to that probably was the bigger contributor.

We take our next question from Andrew Lazar with Barclays.

Yes, Richard, as you -- you guys tend to think of things in a bit of a longer term time frame. This question, I'd be curious on your perspective on it. From an industry standpoint, we've -- are you surprised that maybe some of these kind of 100-year-old-plus companies are, for lack of a better term, kind of throwing in the towel, if you will, in making these large strategic changes, whether it's splitting up or Heinz selling itself yesterday, sort of doing that when the going gets a little tough on the fundamentals rather than maybe taking numbers down, making the proper investment and running these businesses for the longer term? Or has something so fundamentally changed in your view in this broader packaged food space that these more radical, structural changes are really needed? I'm curious in your perspective, because you've got obviously a longer-term perspective to draw from.

Well, that's a very good question, Andrew. And as you know our history and our heritage -- and we do take a long-term view. And we think that's right for our industry. We think it's right for the economy. But that being considered, we live in a changing world and a dynamic market, which there's a lot more emphasis on short-term goals and short-term structures. That's why we always talk about why it's more important to think to the long-term, because you can make a quick hit on return, but -- for one quarter, but we think for example at Smucker's, if you hold a share of Smucker's stock for 5 years, you're going to make much more money on Smucker's over the long-term than if you just took a premium on a very short period of time. So we think the industry is changing. We think the dynamics are changing. But we also think that our strategy of taking a long-term view at Smucker's and using this is an opportunity to take advantage of this change in the marketplace, we will see some brands come to the market because of these changes, and we think that bodes well for our company. So we're going to continue to do what we're doing. If you look at our returns over -- since we went public, some 55 years ago, I think our average return's 11% over that period of time, and that's true whether you look at a 5-, 10-, 15-, 20-, 25-year period of time. So we would rather see a long-term growth rate of 11% a year than get a quick hit for 20% in 1 quarter.

Next we move to John Baumgartner with Wells Fargo.

Just with peanut butter. Just wondering what you're seeing there in terms of the price competition, and I guess in particular, as it relates to your decision to maybe take prices down there ahead of the cost improvement.

John, this is Paul Wagstaff. And when we -- we see ourselves -- we're the leader in the peanut butter category and we felt that taking the 10% price decline which we did effective January 7, was the right time to do that for the category and to continue to see the growth that we are experiencing. So we felt it was the right appropriate time. Our competition did follow, which made sense, and we typically do lead pricing increases or declines. So overall, we feel it was the right thing to do, right timing, and we feel positioned well for ongoing growth.

Okay, great. And just a follow-up, in canned milk, can you walk through the performance there? The drop in sales in the quarter and maybe you were thinking about pricing elasticity going forward maybe in light of the dairy inflation.

Yes. John, again, Paul here. Our canned milk business, we had a little bit of a struggle overall for the Fall Bake time period. Some of that is due to the fact that we aren't seeing as much of the baking that's taking place with canned milk. That being said, we have done some things on the pricing side to get a little more competitive with our competition that we've seen, and we are very well aware of the high dairy cost. We don't see the dairy cost coming down anytime soon or at least significantly anytime soon. So that will be something we'll be working on into next year.

Now we take a question from Jason English with Goldman Sachs.

I apologize in advance if some of these have already been asked, but you guys mentioned the de-stocking effect from last year that you aren't seeing recur this year. Are you seeing any year-on-year benefit as you lap that de-stock?

That -- it's Richard. Not significantly, because I think everybody has tried to take their inventory levels down and keep them at that lower level. So it's not like they took them down the prior year and then all of a sudden went up 10% this year. They took them down and they kept them at those levels. So but we haven't seen another leveling effect.

That's helpful. One more if I can. Peanut butter, the price/cost mismatch that's resulting from your price reduction ahead of the cost relief, is that something we should expect to continue until next year's fall harvest?

Yes. Jason, Paul here. We have -- again, I think the answer is yes. We will be -- where we are priced to now really ties in with where our cost in peanuts are, and that will go into next fiscal year.

So your price, there's not really a mismatch. You're priced kind of in line with your cost and then after this 10% reduction?

It will be. Going forward, it will be. That's correct. We've leaned into it a little bit, but going forward into next fiscal year, we are aligned -- our pricing will be aligned with our cost.

We now take a question from Ken Goldman with JPMorgan. Kenneth Goldman - JP Morgan Chase & Co, Research Division: I share Jason's sentiment that if this has been asked, forgive me. But your numbers on the volume mix side were kind of meaningfully better than what Nielsen data would've suggested. And I know that Nielsen doesn't represent all of your channels and there's timing issues and so forth. And also I didn't realize that your volume number is a volume mix number. But do you think, at all, that you shipped ahead of consumption even slightly this quarter? I know it's again hard for you to tell, but I'm just curious based on your conversations with retailers and inventory levels and so forth, do you think your shipments were more or less in line with takeaway this period?

Ken, this is Vince. We do not believe so. Kenneth Goldman - JP Morgan Chase & Co, Research Division: You think they were in line?

We think they were in line, and we saw better consumption than last year's third quarter when you look at sort of our key brands and products. And it's back to some of our better pricing and narrowing price gaps. But no, we would not say that those are out of line during the quarter.

Ken, this is Mark. Just to clarify a point in your question, I think you said the mix volume was combined. It's not actually. Mix was actually a plus 4 and volume was down negative 1. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Okay. And then a separate question. Can you remind us -- there's been a lot of talk in the last 24 hours obviously about companies getting purchased in the food space. Can you remind us what percent of votes, not voting stock, but actual votes insiders would hold in the event that a potential acquirer was looking at Smucker?

This is Richard. We really don't disclose that. All that I say is it's a significant amount.

Yes. Ken, this is Mark. We really don't disclose it for a reason. It's just because of the time-phase nature of it, it's not something that is readily known at any given time. So thus, we don't like to speculate on it. Kenneth Goldman - JP Morgan Chase & Co, Research Division: Is it fair to say it's over 50% at any time as a percent of the total votes?

Well, we really don't comment on it, but...

And that concludes our question-and-answer session. I will now turn the conference call back over to Mr. Richard Smucker for closing remarks.

Well, want to thank everybody for being on the call today. We feel good about our results and more -- even better about our future and look forward to seeing everybody next week at CAGNY.

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 the passcode of 8394093. This concludes our conference call for today. Thank you all for participating, and have a nice day. All parties may now disconnect.