General Mills: Innovation having ‘fuller impact’

by Eric Schroeder
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NEW YORK — General Mills, Inc. continues to see “pricing trends moderating and volume trends improving” in the United States as the company laps last year’s significant price increases, Don Mulligan, executive vice-president and chief financial officer, told participants at the Morgan Stanley Global Consumer & Retail Conference held Nov. 14 in New York.

“This more normalized price environment means our product news and innovation efforts have a fuller impact,” Mr. Mulligan said. “We’ve got a number of great examples in the market right now.”

Those examples span General Mills’ portfolio of yogurt, cereal, soups, grain snacks and organic and natural foods.

In yogurt, Mr. Mulligan said recent trends in the company’s Greek business have encouraged General Mills.

“Yoplait Greek 100-calorie yogurt was launched in August,” he said. “Distribution is ramping up nicely and all six s.k.u.s (stock-keeping units) are turning in the top third of the total yogurt category. In September, we began to activate our fully-integrated marketing campaign and dedicated advertising across the Greek yogurt business. Results are good. We have added 3 points of segment market share in each of the last two months.”

At the same time General Mills has gained share in Greek, the company has seen signs of stabilization in its Yoplait Original and Yoplait Light brands, Mr. Mulligan said.

“We have improved Yoplait Original by adding fruit and taking out artificial colors and flavors,” he said. “And Yoplait Light is down to 90 calories per serving and now carries the Weight Watchers endorsement. We are seeing a nice improvement in core cup unit volume as a result.”

Growth plans in 2013 include regional expansion of two yogurt brands: Liberte Mediterranee and Mountain High. Liberte, a Canadian brand, has transitioned to U.S. production and is now available in larger East coast markets. Mountain High, which is available in about one-third of the United States and leads the large-size yogurt segment on the West coast, has begun expanding to the remaining two-thirds of the United States, including the Northeast, Mr. Mulligan said.

“Overall, we are encouraged by recent trends in our U.S. yogurt business,” he said. “We are outpacing Greek segment growth with product news and innovation, core cup is stabilizing and our expansion plans for regional brands are just getting started.”

In soups, product innovation and taste-focused advertising have driven growth for Progresso, Mr. Mulligan said. Progresso has a 40% share of the ready-to-serve soup category, up from 25% when General Mills acquired the business in 2003.

Mr. Mulligan said the brand’s new line of Recipe Starters cooking sauces is off to a solid start in fiscal 2013, but the primary driver of year-to-date performance has been the core ready-to-serve soup business.

“Twelve of the top 20 turning s.k.u.s in the R.-T.-S. segment are Progresso varieties,” he said. “We’ve launched two new Progresso Light items. Both are turning in the top quarter of this category.”

In total, Progresso retail sales have increased 9% year to date, and General Mills has added 2 points of market share in the ready-to-serve segment, he said.

Results within the company’s cereal, grain snacks, and natural and organic foods businesses also have encouraged General Mills.

Mr. Mulligan said Nature Valley Protein Bars are on track to be as big as Fiber One 90-calorie Brownies, which generated more than $100 million in retail sales in 2012. Additional flavors and formats of Nature Valley Protein Bars are set to hit the market in January, he said.

Meanwhile, the company has experienced double-digit sales growth in its Cascadian Farm line of organic cereals.

“We are currently expanding this terrific line with an ancient grain variety and increased marketing support,” Mr. Mulligan noted.

In the natural and organic foods segment, General Mills has been encouraged by double-digit sales growth for Larabar all-natural fruit and nut bars. The addition of Uber Bars, which contain large pieces of fruit and nuts, has contributed to a “truly differentiated expansion” of the Larabar line, Mr. Mulligan said.

Mr. Mulligan also noted at the event that second-quarter performance “is broadly in line” with expectations. General Mills will wrap up its second quarter on Nov. 25 and report financials for the period on Dec. 19.
He added General Mills is on track to achieve its key financial targets for the fiscal year ending May 2013. The company reaffirmed guidance for 2013 adjusted diluted earnings per share of approximately $2.65.
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