Q4 2023 Post Holdings Inc Earnings Call
Participants
Daniel O'Rourke
Jeff A. Zadoks; Executive VP, Interim President, CEO & COO; Post Holdings, Inc.
Matthew Mainer J.; Senior VP, CFO & Treasurer; Post Holdings, Inc.
Robert V. Vitale; President, CEO & Director (Leave of Absence); Post Holdings, Inc.
Andrew Lazar; MD & Senior Research Analyst; Barclays Bank PLC, Research Division
David Sterling Palmer; Senior MD & Fundamental Research Analyst; Evercore ISI Institutional Equities, Research Division
Jason M. English; VP; Goldman Sachs Group, Inc., Research Division
Kenneth B. Goldman; Senior Analyst; JPMorgan Chase & Co, Research Division
Matthew Edward Smith; Associate Analyst ; Stifel, Nicolaus & Company, Incorporated, Research Division
Michael Scott Lavery; MD & Senior Research Analyst; Piper Sandler & Co., Research Division
Presentation
Operator
Good day, and thank you for standing by. Welcome to the Post Holdings Fourth Quarter 2023 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, Daniel O'Rourke, Investor Relations for Post Holdings. Please go ahead.
Daniel O'Rourke
Good morning and thank you for joining us today for Post's Fourth Quarter Fiscal 2023 Earnings Call. I'm joined this morning by Jeff Zadoks, our Chief Operating Officer and Interim CEO; and Matt Mainer, our CFO and Treasurer. Jeff and Matt will make prepared remarks and afterwards, we'll answer your questions.
The press release that supports these remarks is posted on both the investors and the SEC Filings section of our website and is also available on the SEC's website. As a reminder, this call is being recorded, and an audio replay will be available on our website at postholdings.com.
Before we continue, I would like to remind you that this call will contain forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. These forward-looking statements are current as of the date of this call, and management undertakes no obligation to update these statements.
This call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. We are also joined this morning by Rob Vitale, our President and CEO. Rob would like to give a few opening remarks. However, he will not be participating in the question-and-answer session. Rob, the floor is yours.
Robert V. Vitale
Good morning. This call, as Daniel indicated, is being hosted by Jeff and Matt, I'm only going to make a few comments, and then I will head out. First, we had a great 2023, and we are well positioned to succeed in 2024. That's for Jeff and Matt to describe. What I want to discuss is a bit more personal. Since I became CEO, I've attempted to be as candid with you as possible. I will not change that now.
Recently, doctors discovered and successfully removed a malignant tumor. I feel great, and I've been participating in calls all along. However, I will now require a regimen of radiation and chemotherapy. I'm told this could wipe out my energy level for a period of time.
While I am getting this treatment, Jeff will continue as interim CEO. I have total confidence in him. He has been my partner from day 1. And I mean that quite literally. We started on the same day in 2011. He has been instrumental in every decision we have made.
Further, you've long heard me (inaudible) holding company structure. Its value is now more apparent than ever. Our business operations have outstanding leaders and won't miss a beat, and I intend to participate as much as I'm able -- and honestly, that's more for my benefit than the company. I suspect I will just be a nuisance.
So now I'm going to leave and turn the call over to Jeff and Matt, but one last thing before I do. I cannot express enough my gratitude for the outpouring well wishes I've received from all -- from you, from Post employees, from so many unexpected places, it has been quite overwhelming. I thank you all. Jeff?
Jeff A. Zadoks
Thanks, Rob. I know I speak for everyone at Post and everyone else on the call when I say that we hope your treatment goes well, and we're eager for your full-time return. Before I begin my comments on the performance of the business, I would like to share that out of respect for Rob's privacy, we will not be responding to questions for providing additional information concerning his health and treatment. Now turning to our business, 2023 was a fantastic financial year as we achieved a step change in adjusted EBITDA, increasing 28% over the prior year. This was driven by exceptional food service results, which reflected volume growth and mix improvement enhanced by a nonrecurring avian influenza pricing benefit.
Additionally, we had a very strong start to our entry in the Pet Food category and recaptured some profit margin in our domestic retail businesses through pricing, significant improvement in labor availability and supply chain performance. We believe this level of consolidated adjusted EBITDA is sustainable as we look to fiscal 2024. While the AI pricing benefit has fallen away, we will benefit from a full year of Pet Food and profit growth in all of our other retail businesses. Before I talk in more detail about each of our segments, I want to spend a few minutes on how we view the state of the consumer. The combination of inflation, higher interest rates, reduced SNAP benefits, restart of student loan payments and lower savings has caused consumers to pull back on shopping trips.
In addition, consumers are being more selective with their spend, often trading down within a category or shifting into more value categories. At the same time, we are seeing consumers prioritize convenience and on the go, especially in breakfast. When we think about these consumer trends in the context of our own business, we believe our diversification serves us well as we have meaningful exposure to value products in domestic and international cereal and U.S. Pet Food, convenience through our side dish business and out-of-home through food service. For our premium branded retail products, we plan targeted investment behind our category-leading brands like Pebbles, Weetabix and Bob Evans to help us retain core consumers, drive trial and incremental volume.
Moving to our segments and starting with Foodservice. We delivered another outsized quarter fueled by the last of our temporary AI pricing premium. Through volume growth and mix improvement, we now estimate the sustainable quarterly level of adjusted EBITDA for this business to be approximately $95 million before any impact from the ready-to-drink shake manufacturing, which is expected to come online in December. We continue to focus on improving manufacturing and supply chain to support volume growth, serve the business better and lower costs. Shifting to PCB and starting with our Pet Food business, our first 5 months of ownership have far exceeded our expectations as strong manufacturing performance allowed us to meaningfully increase our order fill rates, reduce out of stocks and replenish our customer inventories.
These variables along with lower cost of sales and SG&A drove profit well above our underwriting case. As a reminder, we will see a pullback in this run rate in fiscal 2024 as we make necessary investments in advertising and headcount and begin moving production off the co-manufacturing agreement with Smucker's.
We expect to continue to operate meaningfully above our acquisition case, just not at the level seen in these first 5 months. The acquisition of Perfection Pet, which we expect will close later in our fiscal -- first fiscal quarter, will enhance our flexibility through its capabilities, geography and capacity and greater exposure to private label and co-manufacturing. The U.S. cereal category remained under pressure with volumes down 6% in the quarter. Our expectation is that the category will return to its pre-pandemic volume trends as we lap the pullback of SNAP benefits in March. From a share perspective, we were the only branded share gainer this quarter, ending the quarter at 19.6%. Consumers continue trading down to value in private label products, and we are well positioned to capture this move given our strong share in these subcategories. While still below premium branded cereal, our profit margins on value of private label products have meaningfully increased over the past several years.
We continue to be pleased with performance of our Peter Pan brand on a 2-year basis, which removes the effect of the (inaudible) recall last year. Peter Pan has grown its dollar market share by 90 basis points. Turning to Weetabix. The macro environment in the U.K. continues to be challenged. Similar to U.S. Cereal, we are capturing trade down into private label, albeit at lower margins. UFIT continues to perform quite nicely and while still small, is becoming a more meaningful component of the business. When we acquired the refrigerated retail business, it was characterized by strong demand growth with supply side challenges.
During 2023, we improved supply, but experienced a pullback in demand due to elasticities from our inflation-driven pricing. Despite the pullback in demand, we exceeded our adjusted EBITDA expectations for the year with strong manufacturing performance and cost control. Before I turn the call over to Matt, I would like to make a couple of comments on capital allocation. We continue to actively evaluate M&A opportunities. However, with the challenging capital market backdrop, there is a high bar to clear. Outside of M&A, we remain active in share repurchases and debt repayment, and we have a robust pipeline of value-enhancing capital projects. In closing, I know I speak for Rob in thanking all of our employees for a very successful 2023, the strength of our operating model, our diverse product offerings and our exceptional management teams give me confidence in our 2024 plans. With that, I'll turn the call over to Matt.
Matthew Mainer J.
Thanks, Jeff, and good morning, everyone. Fourth quarter consolidated net sales were $1.9 billion and adjusted EBITDA was $349 million. Net sales increased 23% driven by the newly acquired Pet Food business. Excluding pet, overall retail volumes declined as pricing elasticities persisted and shifted volume to our private label offerings, although not enough to offset declines in our branded products. Food service volumes were down slightly as we lapped a very strong quarter and experienced volume headwinds due to the timing of some egg shipments. Our supply chain performance and customer order fill rates continue to improve across the business. However, we still have pockets of opportunity in both.
Inflation moderated in the quarter, especially on freight costs. And then finally, we saw increased SG&A across the business as we made targeted marketing investments in our retail businesses and had increased employee incentives given the strong consolidated performance. Turning to our segments and starting with Post Consumer brands, excluding the benefit of the Pet Food acquisition, net sales increased 3% and volumes decreased 6%. Average net pricing, excluding Pet Food, increased 10%, driven by pricing actions. We saw continued volume growth in private label cereal, which was offset by declines in peanut butter and branded cereal. Segment adjusted EBITDA increased 27% versus prior year as we benefited from the contribution of the newly acquired Pet Food business and improved net pricing.
Weetabix net sales increased 16% year-over-year, benefited by a lapping of a weaker British pound in the prior year, which led to a foreign currency translation tailwind of approximately 800 basis points. On a currency-neutral basis, net sales increased 7%, which was attributable to list price increases. Volumes increased 2% driven by growth in UFIT and private label. Segment adjusted EBITDA decreased 33% versus prior year, driven by discretionary investments in the business afforded to us by the strength across our portfolio. We continue to expect the challenging macro environment in the U.K. to keep our margins compressed, although improving incrementally throughout the fiscal year. Foodservice net sales and volume declined 9% and 1% respectively.
Revenue reflects the effect of lower grain costs in our commodity pass-through model and winding down the temporary AI price premium in the quarter. Adjusted EBITDA increased about 7%, driven by AI pricing premium and a lingering benefit of lower cost inventory accumulated in Q3, which enabled us to fill egg demand at a favorable cost. Refrigerated retail net sales and volumes decreased 6% and 8%, respectively. The decline in net sales was driven by lower volumes and was partially offset by increased average net pricing in the portfolio.
Side dish volumes decreased 9%, reflecting price elasticities and consumer shift to private label. Segment adjusted EBITDA decreased 14%, primarily due to lower volumes and increased discretionary investments. Improving commodity and freight markets and improved plant leverage were favorable offsets.
Turning to cash flow. In the fourth quarter, we generated $270 million from continuing operations, which is up significantly versus prior year and driven by improved profitability and a decrease in net working capital. One key tenet of our value algorithm is strong free cash flow, and we saw a return to just that in the second half of the fiscal year, driving us to approximately $450 million for the full year. This strong free cash flow combined with our step change in adjusted EBITDA drove our net leverage down a full turn from 4.6 -- I'm sorry, from 5.6% at the end of fiscal '22 to 4.6% at the end of this fiscal year. This reduction in leverage was achieved in spite of essentially converting our $1.2 billion Pet Food acquisition to a cash deal as our share repurchases during the fiscal year diffused 4.4 million of the 5.4 million shares issued to Smucker's. Speaking of share repurchase in the quarter, we repurchased 1.6 million shares at an average price of $87.52 per share.
In addition, we purchased approximately $150 million worth of our debt at an average discount of 13%. Capital expenditures in the quarter were approximately $100 million, driven by the expansion of our Norwalk, Iowa precooked egg facility and a new protein shake co-manufacturing facility.
Before we get to Q&A, I have just a couple of comments on our fiscal 2024 guidance. On a consolidated basis, we expect in FY '24, our quarterly adjusted EBITDA cadence to be quite balanced across the year as variations between our segments offset each other.
Specifically for Q1 and relative to Q4 FY '23, there will be a pullback in adjusted EBITDA in both foodservice and Post Consumer brands that will be partially offset by increases in refrigerated retail and Weetabix. As Jeff mentioned, we expect foodservice to normalize in the mid-90s, and we will begin making the necessary investments in our pet food business around marketing, SG&A and insourcing of production.
Further, we expect lower total PCB volumes as cereal benefited in Q4 from back-to-school seasonality and pet volumes benefited from moving customers off allocation. For Refrigerated Retail, we will have a seasonality benefit from the holidays. And then for Weetabix, we expect to realize some benefits from our Q4 investments.
Finally, our CapEx guidance includes several profit-enhancing projects within Foodservice and Pet. For Foodservice, we have the continuation of the precooked expansion which started last year and the beginning of additional cage-free conversion needed to meet customer requirements. For Pet, we began making capital investments anticipated in our acquisition underwriting case around improving plant quality and safety, expanding capacity and establishing independent R&D capabilities. Thanks for joining us today.
And with that, I will turn the call back over to the operator.
Question and Answer Session
Operator
(Operator Instructions)
Our first question comes from the line of Andrew Lazar with Barclays.
Andrew Lazar
And also thanks to Rob for his update. My thoughts are with him and his family as he goes through the treatment and looking forward to having him back very soon.
So I guess my question is really just trying to think through what the margin and run rate of Pet looks like at this stage and sort of what that means for fiscal '24. Just sort of some back of the envelope math. If we put a 25% EBITDA margin on PCB sales, excluding Pet, that would suggest me about $150 million of EBITDA for PCB, excluding Pet in the quarter? So the $405 million of Pet sales, I guess, then would contribute about $49 million of EBITDA or maybe a 12% EBITDA margin. If that math is close, obviously, as you guys have mentioned, that's way ahead of the acquisition case model, certainly, of $100 million of EBITDA annually or a 7% margin. So just that on its own, I guess, would suggest Post is tracking more towards maybe $180 million or $200 million in EBITDA annually from this business in '24.
Now I realize -- I don't think that even includes some cost synergies that start to come into play. But as you mentioned, you're going to start to reinvest more heavily in the business. So I guess I'm just trying to get a sense of whether that math seems about right. And then what you can say about the magnitude or the sort of investment that you might be making that would sort of be an offset to that in '24?
Jeff A. Zadoks
Yes, Andrew. So first off, your numbers are certainly in the ballpark. As we said in our prepared remarks, the Pet Food business is performing extraordinarily well. The run rate in fourth quarter has a couple of things that we would call isolated to the fourth quarter. As Matt mentioned in his prepared remarks, because of the ability to improve output from the manufacturing facilities, we went from -- when we inherited the business, the fill rates were in the 70% range. We're able to get fill rates closer to the low 90s because of that performance.
So inherent in that is there's a pipeline fill to replenish inventories at our customers, get product on shelves and that won't repeat itself. So there's margin in revenue that won't repeat. On top of that, we mentioned that we need to invest in advertising. I don't know that we've talked about the order of magnitude, but it's more than a few million dollars. It's $15 million, $20 million on an annualized basis is probably the ballpark for that. And then the expectation is that our SG&A is unsustainable the support costs as we're trying to fill positions as we transition off of the TSA services from Smucker -- we're not in a position in the fourth quarter where we could sustain the business on a long-term basis. So we're -- we need to add more resources in that area. And it's going to be a comparable impact to those other variables I described.
So when you add those 3 things up or 4 things up, it's a meaningful reduction from our current run rate, but still an expectation that we're going to be well above the underwriting case when we get to the other side.
Operator
Our next question comes from the line of Ken Goldman with JPMorgan.
Kenneth B. Goldman
And I will echo Andrew's sentiment. Rob, it's good to hear your voice and best wishes for a full recovery as soon as possible.
I wanted to ask just a follow-up on the question on Pet Food and in terms of some of the margin puts and takes, when you do add back some of the SG&A spending when you consider some of the onetime nature of the fourth quarter margin benefits it does obviously a pretty low still run rate EBITDA margin for now. And I guess one of the questions I've received is why is Post spending more on advertising. I guess now the number is out there, $15 million to $20 million at this time rather than maybe wait a little bit until the returns on those advertising spending -- or that advertising spend is a little better after some of the margins have been improved or maybe the answer is -- there's just enough slack capacity that just filling the plants with more volume is helping us. So I just kind of wanted to get a sense of that strategic thinking there in terms of advertising and the timing of it.
Jeff A. Zadoks
Sure -- it's a function of the health of the 2 brands that are going to be the focus of that advertising. Our premium brands, the Nutrish and Nature's Recipe, are typically the high-margin contributors to the portfolio. And it's those brands that need to be repositioned, and we believe -- and frankly, if you look at the Nielsen data, you can see that those brands are struggling the most with volume trends. So for the long-term health of that business, we need to get those 2 brands stabilized first and then returning to some modicum of growth. And we believe that they are brands that will respond to the advertising. So the first thing we wanted to do is make sure that we would be able to meet demand through stability of the manufacturing footprint before we started investing back in the brands.
We also wanted to do our own analysis of the positioning of the brand and come up with a fulsome and thoughtful program. And that's what our intent is to implement in 2024. But the punch line is these 2 brands are the margin drivers long term for the business and we need them to be healthy and we think that they deserve a greater level of investment than we've been putting into it these first 5 months.
Kenneth B. Goldman
And then a quick follow-up. If you said this, I must have missed it, but -- it was only last quarter when you talked about a more normalized Foodservice EBITDA of about 90 prior to the new plant coming online. I think you raised it to 95 today. I wasn't quite sure why that was done. Again, I may have -- I may just not have heard it, but if you could elaborate a little bit on why the increase to 95 and what you're seeing in the business that gives you that confidence? That would be helpful.
Jeff A. Zadoks
Yes. To be perfectly blunt, there's a lot of noise in the numbers. So we were hesitant to raise the bar on a run rate basis until we got more clarity as to how much was being driven by the improvements in the mix of the business versus these temporary price adders and other market dynamics. And through the fourth quarter, we think we have a much clearer visibility as to what that run rate is, and that gives us confidence in the comment we made today to say that it's $95 million. there's still clearly a lot of onetime and transitory effects in this quarter. But through the analysis that we've done over this fiscal year, we got a lot more confidence that the watermark has been raised for that business on a go-forward basis.
Operator
Our next question comes from the line of David Palmer with Evercore ISI.
David Sterling Palmer
Wishing you a quick and full recovery, Rob. Thanks for your comments. Jeff and Matt, just sort of a different angle on Andrew's question on Post Consumer Brands. The EBITDA for that segment, the margin approached 20% in that quarter. Typically, that's a little -- seasonally, it may be even lower than average for what a given year would be. I know, obviously, changes are happening with the reinvestment that you will be in marketing, some in-house production shifts. And so I'm wondering, is that a good starting point for margin for this next year? How should we think about a margin standpoint for Post Consumer brands in '24?
Jeff A. Zadoks
Grocery -- so the cereal and peanut butter business we think normalized is low 20s, low to mid-20s margin. The Pet Food business as Andrew alluded to, we inherited at 7%. But we think that long term, it can be certainly teens or above. In '24, we're not going to get fully to bright, but we would expect to be able to be around the low teens in that business.
David Sterling Palmer
So I can do the math there. If that business is maybe 1/5 of the business, maybe approaching 20 might make sense is next year. Is that how you're thinking about this next year that -- or maybe what's your consistent with your guidance. .
Jeff A. Zadoks
Yes, you're in the ballpark.
David Sterling Palmer
And then it's on the volume side, organic volume this next year, you talked about reinvesting in promotion to stabilize the core business outside of Pet, but you're also talking about trade down and fewer trips out there. I mean, how are you thinking about the prospects for stabilizing volume in '24 and Post Consumer brands.
Jeff A. Zadoks
You're talking about cereal now?
David Sterling Palmer
Cereal, please, yes.
Jeff A. Zadoks
Yes. So our view of the category, as we said in our remarks, is that it's going to be challenged -- perhaps maybe I should say even more challenged than normal until we lap the SNAP benefit decline that occurred in March of 2023. But then we expect to return to the pre-pandemic levels of flat to down a couple of percent, as we plan for '24 for our business, we use those category dynamics as a baseline. We believe that we can perform somewhat better than that but we're not counting on volume growth in our plan for next year. We would expect that there's going to be some volume declines. In fact, until we get to full bright on stabilization. It's not quite as bad as the category, but still slightly down.
Operator
Our next question comes from the line of Matt Smith with Stifel.
Matthew Edward Smith
I'll start by extending my well wishes to Rob. And Jeff and Matt, if I could ask a follow-up question on food service. So volumes were down this quarter, was that reflective of comparing against some elevated volume in the prior year due to the avian influenza dynamic? Or are you seeing lower traffic in outlets that use your value-added eggs. And then as a follow-up to that, given the stickiness of the mix shift to higher value-added products, are you seeing competition pick up in that area of the business? Are you seeing more competitive bidding processes? Or other egg producers putting in capital to compete in this higher mix category of value-added eggs.
Jeff A. Zadoks
To the first part of your question, there is some of what you described that's driving the decline this year. We were able, in the fourth quarter of last year to take advantage of AI impacting our competitors sooner than it impacted us. So we were able to pick up some volume that wouldn't have been our normal volume. Also, as Matt said in his comments, there was some timing in this quarter that we expect will leak into the first quarter of '24. But your comment about AI last year was certainly a variable.
With regard to competition, there's always been competition in precooked, which is our margin driver, as you know, in eggs. We're by far the leader in the category. We continue to be leader in the category. We're not seeing really a huge amount of change at that end of the spectrum. I would say there's probably more competition at the lower margin side of the equation at the higher end. So I would say that it's comparable to what it has been. We continue to have the majority of the share for large-scale customers, it's difficult for them to get the volume from our competitors that they need. I don't want to be too rosy about it. There's obviously competition, but thus far we've had a tremendous amount of success in maintaining our business and growing it not only recently, but over time.
Operator
Our next question comes from the line of Michael Lavery with Piper Sandler.
Michael Scott Lavery
I just wanted to touch on refrigerated retail margins. I know it's kind of the supply-constrained environment, you relied more heavily on external production -- where does that sit now? Those margins were a little softer than we had expected this quarter. Can you maybe touch on what some of the drivers are and how to think about that bouncing back or not? And am I right that at least in sort of ordinary times, the fourth quarter has a little bit of a seasonal lift. Can you just unpack some of the moving parts there?
Jeff A. Zadoks
Let me start with the second -- or the last part of that question first. Fourth calendar quarter, there is the seasonal lift for that segment, not fourth fiscal quarter. So the Thanksgiving and Christmas holiday are the peak of seasonality for the side dish business. And in fact, fourth fiscal quarter tends to be one of the lower periods of time for that segment. But to your -- to the first part of your question, the bigger drivers for the margin this quarter from where you might have thought they were going to land. It was less about the co-packing volume and more about the incremental investments that we made in the business.
So between incentives and advertising that we incrementally put back into the business is about a $6 million to $8 million hit to the fourth quarter margin in that business. So I think if you put that back in, it would be much closer to what you were anticipating? And then -- to just finish out the comment, you would expect to see a step change because of seasonality in the first fiscal quarter from where we ended the fourth quarter in that segment.
Michael Scott Lavery
Okay. Great. That's helpful. And just on Pet, can you confirm your guidance excludes the Perfection Pet Foods deal? And can you just touch on what -- any update on timing and what contribution we should expect from that when it does close?
Jeff A. Zadoks
So confirming our numbers do not include that. So we will likely with our first quarter earnings, we will update -- we will update our guidance, assuming the transaction closes. And in terms of timing, we expect it's going to close in this fiscal quarter. So sometime between now and the end of the year, you can probably guess what's the most likely date. But I don't want to jump the gun there. And was there another part of the question?
Matthew Mainer J.
I think just $25 million a year is what we called out as the run rate of the EBITDA, and that's unchanged.
Operator
Our next question comes from the line of Jason English with Goldman Sachs.
Jason M. English
And Rob, my thoughts are with you, best wishes for speed recovery. So to the business, congrats to the Foodservice team and their execution as well as the integration team on the Pet Food business, it's great to see a success, some of the soft spots, I'd rather focus there. I think you mentioned in the prepared remarks, you expect all retail businesses to be growing next year by top and bottom line. We exited the year on a bit of a weak spot within refrigerated retail and it suggests there's a price gap problem that you may have to invest in to close.
So can you elaborate on what's going on there and how you get to a top and bottom line growth trajectory next year with -- in light of those headwinds and similarly on Weetabix, I think you mentioned some margin drag from trade down, but the margin step down this year has really been astounding, particularly in the fourth quarter. Can you unpack more of the drivers there? What's caused the weakness?
Jeff A. Zadoks
Yes. So first of all, our comment was more focused on EBITDA growth, so not necessarily top and bottom line growth for those 2 businesses that you just described. Although for refrigerated retail, we do expect the side dish business to have revenue growth. So to repeat part of the response to Michael's question, in refrigerated retail the margin and frankly, this comment applies to both businesses. They are the 2 businesses where our products respond most favorably to advertising. They are the 2 businesses where we put most of our incremental spending that we previewed last quarter, that we were able to do because of the outperformance of the rest of the business.
So in the fourth quarter, both the refrigerated retail business and Weetabix had incremental spending on advertising that was above a normal run rate level. In addition, within Weetabix there were projects that we believe will kickstart 2024 that we invested in certain consulting activities for looking at our trade promotion and the effectiveness of our trade promotion and also looking at ways that we can improve the cost structure of that business.
So we would not expect those to repeat at the same level in the go-forward period. To your -- the last part of your comment about Weetabix. So fourth quarter was artificially low. But you're right, the margin in that business has suffered more than the rest of our portfolio.
We attribute that to the fact that the U.K. environment is much -- has been much tougher than the U.S. environment. So that's part of the equation. And we are a very premium product. The Weetabix brand is a very premium product in the U.K. market, if you track that market at all. Cereal has become 50% and actually slightly greater than 50% private label. So a much more dramatic move to value than we've seen here in the U.S. And what we need to do to get it back to closer to where we were pre-pandemic is we believe we need to simplify the business. We need to have a renewed focus on cost reduction. And we need to continue investing in the brand so that we maintain the premium price points that enable us to generate the margins from that business. So the combination of those 3 things are the things that are going to be the focus of our activities in 2024.
Jason M. English
Okay. I appreciate all that color. And one more real quick tactical question. CapEx, I feel like every year in the fourth quarter, you guys give CapEx guidance for next year, and I have to revise my estimate higher up, which is probably my own fault for continuously underestimating it. Can you give us a bit more line of sight, like can you give us a level for this year? Should we expect that level to be kind of the run rate as we move forward? Or could it move higher or lower?
Matthew Mainer J.
Yes, Jason, we would expect a similar run rate through '25. A couple of these investments carry over into next fiscal year as well. So there's meaningful investment behind those.
Operator
Thank you. We have reached the end of our question-and-answer session. Thank you for joining us today. You may disconnect.
