ITEM 1A - Risk Factors
Our
business
is
subject
to
various
risks
and
uncertainties.
Any
of
the
risks
described
below
could
materially,
adversely
affect
our
business, financial condition, and results of operations.
Business and Industry Risks
The
categories
in
which
we
participate
are
very
competitive,
and
if
we
are
not
able
to
compete
effectively,
our
results
of
operations could be adversely
affected.
The
human
and
pet
food
categories
in
which
we
participate
are
very
competitive.
Our principal
competitors
in
these
categories
are
manufacturers,
as
well
as
retailers
with
their
own
branded
and
private
label
products.
Competitors
market
and
sell
their
products
through
brick-and-mortar
stores
and
e-commerce.
All
of
our
principal
competitors
have
substantial
financial,
marketing,
and
other
resources.
In
most
product
categories,
we
compete
not
only
with
other
widely
advertised
branded
products,
but
also
with
regional
brands
and
with
generic
and
private
label
products
that
are generally
sold
at
lower prices.
Competition
in
our
product
categories
is
based on
product
innovation, product
quality,
price,
brand recognition
and loyalty,
effectiveness
of marketing,
promotional
activity,
convenient
ordering
and
delivery
to
the
consumer,
and
the
ability
to
identify
and
satisfy
consumer
preferences.
If
our
large
competitors
were
to
seek
an
advantage
through
pricing
or
promotional
changes,
we
could
choose
to
do
the
same,
which
could
adversely affect
our margins
and profitability.
If we
did not
do the
same, our
revenues and
market share
could be
adversely affected.
Our market share
and revenue growth
could also be
adversely impacted if
we are not
successful in introducing
innovative products
in
response
to
changing
consumer
demands
or by
new product
introductions
of our
competitors.
If
we
are unable
to build
and
sustain
brand
equity
by
offering
recognizably
superior
product
quality,
we
may
be
unable
to
maintain
premium
pricing
over
generic
and
private label products.
We may be unable to maintain our profit
margins in the face of a consolidating retail environment.
There has
been significant
consolidation in
the grocery industry,
resulting in
customers with increased
purchasing power.
In addition,
large
retail
customers
may
seek
to
use
their
position
to
improve
their
profitability
through
improved
efficiency,
lower
pricing,
increased
reliance
on
their
own
brand
name
products,
increased
emphasis
on
generic
and
other
economy
brands,
and
increased
promotional
programs.
If we
are
unable
to use
our
scale, marketing
expertise,
product
innovation,
knowledge
of consumers’
needs,
and category
leadership positions
to respond
to these
demands, our
profitability and
volume growth
could be
negatively impacted.
In
addition, the loss
of any large
customer could
adversely affect our
sales and profits.
In fiscal 2025,
Walmart
accounted for 22
percent
of our
consolidated net
sales and
31 percent
of net
sales of
our North
America Retail
segment.
For more
information on
significant
customers, please see Note 8 to the Consolidated Financial Statements in Item 8 of this
report.
Price
changes
for
the
commodities
we
depend
on
for
raw
materials,
packaging,
and
energy
may
adversely
affect
our
profitability.
The
principal
raw
materials
that
we
use
are
commodities
that
experience
price
volatility
caused
by
external
conditions
such
as
weather,
climate
change,
product
scarcity,
limited
sources
of
supply,
commodity
market
fluctuations,
currency
fluctuations,
trade
tariffs
(including
recent
tariffs
imposed
or
threatened
to
be
imposed
by
the
United
States
on
China,
Canada,
Mexico,
and
other
countries and any retaliatory
actions taken by such
countries), pandemics, war
(including sanctions imposed
on Russia for its
invasion
of Ukraine),
and changes in
governmental agricultural
and energy
policies and regulations.
Commodity prices
have become, and
may
continue
to be,
more volatile.
Commodity price
changes may
result in
unexpected increases
in raw
material, packaging,
energy,
and
transportation costs. If we
are unable to increase
productivity to offset
these increased costs or
increase our prices, we
may experience
9
reduced margins
and profitability.
We
do not
fully hedge
against changes
in commodity
prices, and
the risk
management procedures
that we do use may not always work as we intend.
Concerns with the safety and quality of our products could cause consumers
to
avoid certain products or ingredients.
We
could
be
adversely
affected
if
consumers
in
our
principal
markets
lose
confidence
in
the
safety
and
quality
of
certain
of
our
products
or
ingredients.
Adverse
publicity
about
these
types
of
concerns,
whether
or
not
valid,
may
discourage
consumers
from
buying our products or cause production and delivery disruptions.
We
may be
unable to
anticipate changes
in consumer
preferences and
trends,
which may
result in
decreased demand
for our
products.
Our
success
depends
in
part
on
our
ability
to
anticipate
the
tastes,
eating
habits
(including
the
impact
of
weight
loss
drugs),
and
purchasing
behaviors
of
consumers
and
to
offer
products
that
appeal
to
their
preferences
in
channels
where
they
shop.
Consumer
preferences
and category-level
consumption
may change
from time
to time
and can
be affected
by a
number of
different
trends and
other factors. If we fail
to anticipate, identify or react to
these changes and trends, such as
adapting to emerging
e-commerce channels,
or to
introduce new
and improved
products on
a timely
basis, we
may experience
reduced demand
for our
products, which
would in
turn
cause
our
revenues
and
profitability
to
suffer.
Similarly,
demand
for
our
products
could
be
affected
by
consumer
concerns
regarding
the
health
effects