General Mills hails global cereal venture as success

by Josh Sosland
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BOCA RATON, FLA. — Highlighted by compound annual sales growth of 11% since 2005, Cereal Partners Worldwide “ranks as one of the biggest and best new food companies created in the past 20 years,” said Christopher D. O’Leary, executive vice-president and chief operating officer, international, General Mills, Inc.

Mr. O’Leary offered an overview of CPW as part of a wide-ranging presentation by General Mills executives at the 2010 Consumer Analyst Group of New York annual conference, held at the Boca Raton Resort and Club in Boca Raton.

Established 20 years ago as a partnership between Nestle S.A. and General Mills, CPW generates net sales of more than $2 billion across more than 130 countries, producing cereal in 14 production plants with 4,000 employees. Mr. O’Leary said the company has roughly a 25% market share in cereal worldwide, excluding the United States and Canada.

Commenting on the sales growth, Mr. O’Leary noted that the acquisition of the Uncle Tobys business in Australia helped but said product innovation and marketing were the principal drivers.

“But this growth story is still in its early chapters,” he said. “We see big opportunities ahead for CPW and for the global cereal market fueled by product news and innovation, emerging market expansion, our HMM (holistic margin management) business model and marketing initiatives to drive increases in per capita consumption.

“Our global brands — Cheerios, Nesquik, Fitness, Chocapic — have driven 80% of our growth in the last four years. We also have strong regional brands like Shredded Wheat, Shreddies and Milo.”

Mr. O’Leary said CPW has intensified marketing efforts in emerging markets where the expansion of the middle class has made cereal a more affordable breakfast for consumers.

Also offering opportunities for growth will be communicating the health and nutrition benefits of ready-to-eat cereal, Mr. O’Leary said. In many instances, this communication means comparing R.-T.-E. cereal with traditional breakfast options, he said.

“We are also advertising our whole grain advantage and specific benefits like calcium and iron,” Mr. O’Leary said. “As consumers understand the benefits, we think more people will eat cereal and more often.

“There is a lot of upside here. Some markets have per capita consumption levels similar to what we see in the United States, but most other markets have a lot of room to grow.”

Looking forward, Mr. O’Leary said CPW hopes to reach $2.8 billion in sales by 2015, up 40% from 2009. Operating profits should grow even faster than sales, he said.

General Mills chief executive officer Kendall J. Powell led off the CAGNY presentation noting that at the February 2008 CAGNY, the company had projected 2010 sales of $14 billion and earnings of $4.05 per share.

“Since then our business has shown accelerating growth, and we are on track to surpass our 2010 targets,” he said. “Net sales actually reached $14.7 billion last year.”

Offering a forward look at General Mills financial expectations was Donal L. Mulligan, executive vice-president and chief financial officer.

From the base of $14.7 billion last year, Mr. Mulligan forecast annual sales growth in the low single digits, reaching $18 billion by 2015.

At the bottom line, he said General Mills expects earnings per share to grow at a high single-digit rate and will reach $6.75 per share by 2010.

“That is a 9% compound annual growth rate from adjusted earnings per share of $3.98 in fiscal 2009, and it represents 8% compound growth from the midpoint of our earnings per share guidance for fiscal 2010,” he said.

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