General Mills looks to gain back ground in cereal category
June 26, 2013
by Eric Schroeder
MINNEAPOLIS — After an extended period of sales and market share gains in its Big G cereal business, General Mills, Inc. “gave up a bit of ground in 2013,” said Ken Powell, chairman and chief executive officer.
Despite some of the struggles during fiscal 2013, Mr. Powell told analysts participating in a June 26 earnings conference call that the Minneapolis-based company in 2014 will be “bringing a stronger new product line-up and stronger advertising to the cereal aisle, and we expect to generate annual sales growth for Big G.”
In the first half of fiscal 2014 General Mills will launch Vanilla Chex and Hershey’s Cookies ‘n’ Cream, which will join the recently introduced Honey Nut Cheerios Medley Crunch, Mr. Powell said. Additional new cereal products are slated for the second half of the year, he added.
General Mills also plans to spur growth behind “significant ad campaigns” for several Big G brands, including Lucky Charms, Reese’s Puffs and Cheerios.
“We will be focusing across our great portfolio,” Mr. Powell said. “We are bringing a lot of marketing news on our Cheerios franchise, fresh new advertising on yellow box and Honey Nut. We are already seeing some nice improvements in baseline on yellow box in response to new advertising there. So that when we get that right that kind of marketing innovation always works for us.”
The company also plans to continue to get a boost from its brands that traditionally have been marketed toward children but now are being sought out by adults.
“One of the things we are seeing here over the last year is as we advertise those products to this traditional kid brands to adults we are seeing nice bounces in baseline just by telling adults — reminding them that they love how these products taste,” Mr. Powell explained. “So we’ve got a lot of good penetration driving marketing initiatives in Big G next year that we believe will restore that division to growth.”
Another area of growth for the Big G brands may come from outside the United States, where Mr. Powell said the company continues to seek opportunities. In Canada, the company is expanding the Cheerios franchise with new Honey Nut Cheerios Hardy Oat Crunch and expanding the Fiber One franchise with an almond and cluster variety. Overseas, the company’s Cereal Partners Worldwide business has a full slate of product news and marketing innovation planned for fiscal 2014, including new varieties of Fitness, Chocapic and Nesquik.
“Add it all up and we see excellent growth prospects for our global cereal business in 2014,” Mr. Powell said.
Also during the conference call, Mr. Powell discussed whether the company’s recent launch of BFast, a shelf-stable liquid breakfast drink for consumers on the go, and Kellogg’s introduction of Kellogg’s To Go shakes are signs that cereal makers are hedging on breakfast.
“There are so many innovation and messaging opportunities around health and taste in cereal that we are quite confident that we can find messages that will resonate and that will restore that category to growth,” he said. “We really strongly believe in the category and that we can do that.
“Something like BFast, people — breakfast is a huge category. It’s a huge occasion. I mean, I’m going to guess $100 billion or more of products (are) consumed at breakfast, so that is a big ocean. And people drink beverages at breakfast and are interested in convenience. And so, we just see an opportunity there and are simply capitalizing on it. It is too soon to say how big it is, but clearly we think it is interesting.
“And in terms of where it might get its volume from is probably everything from fruit and yogurt to coffee — you name it, it probably sources a little bit from everything. But we simply see it as a good opportunity on its own. Obviously we have very strong breakfast equities and credentials at General Mills. And so, we want to pursue that opportunity and we think there may be something there.”
Don Mulligan, executive vice-president and chief financial officer, added cereal traditionally has targeted younger children, teenagers and adults 45 and older, and with BFast the company is able to go after the “breakfast skippers” in the middle of the age demographic.
“We have seen just in the testing that we have done so far this to be highly incremental to our key cereal business,” Mr. Mulligan said.