General Mills steadfast in strategy in cereal category

by Eric Schroeder
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MINNEAPOLIS — Despite a trend toward more discounted products throughout the broader cereal category, General Mills, Inc. has not changed its strategy for the way it approaches its Big G business, said Ian Friendly, executive vice-president and chief operating officer.

“I think our strategy hasn’t been so much a higher priced one, it’s been in the value-added area, but cereal overall represents such a good value to the consumer,” Mr. Friendly said in a Dec. 19 conference call with analysts to discuss second-quarter financial results. “I think it really gets down to are the benefits relevant, but, again, you look at the price point of our various Cheerios extensions. I think you would see that they are very competitive within the category.

“So we don’t look at that lens. I don’t view that we need to be in ultra-discounted cereal products, but, at times, we’re very cognizant of making sure our new cereals represent a good value and in line with the rest of the category. We are not really trying to stretch it up, either.”

Mr. Friendly also was asked during the conference call how General Mills decides which cereal brands to support with more advertising dollars.

“Well, the cereal category has always been highly responsive to consumer marketing support and good ideas, as trite as that might sound, and that is kind of what we look at,” he said. “We do a lot of upfront research. We do a lot of in-market experimentation and analysis, and we try and put our money behind our best ideas.”

He said the company assesses where to spend money on a brand-by-brand basis. As examples, he cited recent successes with Multigrain Cheerios and Lucky Charms.

“A few years ago we put advertising behind Multigrain Cheerios after many years and saw that thing take off like a rocket,” he said. “The Lucky Charms story has also got something to do with finding additional targets.”

He said marketing previously child-targeted brands such as Lucky Charms and Cinnamon Toast Crunch to adult consumers has helped draw in more consumers.

As General Mills heads into the second half of fiscal 2013 the company has a strong innovation platform for its cereal business. The company will expand the Honey Nut Cheerios brand with the launch of a medley crunch variety in January.

“This new cereal has the heart health benefits and great taste consumers expect from Honey Nut Cheerios,” Mr. Friendly said. “It also has a great texture with Os, clusters and flakes. We think this is a terrific addition to the Cheerios franchise.”

The company also is adding Fiber One 80 Calorie chocolate cereal, which offers consumers 35% of the adult daily value of fiber at 80 calories per serving, and Peanut Butter Toast Crunch, which builds on the success of the company’s Cinnamon Toast Crunch franchise.

“Other players in the category had more merchandising activity in the first half of the year,” Mr. Friendly said. “We’ve got more merchandising planned for the second half, including introductory support for our new items. With a great lineup of new products and strong levels of marketing support behind new and established brands, we remain very excited about our U.S. cereal business and we expect sales growth for Big G in the second half of this year.”

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