General Mills’ baking unit ‘on trend’ with consumers

by Eric Schroeder
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Betty Crocker Hershey's baking mixes

MINNEAPOLIS — Consumers are interested in baking, and General Mills’ products are “on trend” with the needs of growing consumer groups, baby boomers, millennials and Hispanic families, said Ann Simonds, senior vice-president and president of baking products at General Mills, Inc.

Speaking to analysts as part of a March 19 conference call held in conjunction with the release of third-quarter financial results, Ms. Simonds described a baking products business that is leveraging its extensive baking knowledge and driving efficiencies across R.&D., manufacturing and marketing.

“These efficiencies, along with our market-leading positions, put our division’s profitability well above the company average,” Ms. Simonds said. “Dessert mixes and refrigerated dough enjoy high household penetration rates and people shop these categories nearly every month because baking is on trend. That is particularly true with growing consumer groups in the U.S. Millennials are a great demographic for us.”

Ms. Simonds painted a picture of a consumer environment where people are starting families and are showing a tendency to do more cooking and baking. Today’s consumers are willing to try new things and are developing an interest in scratch baking, even if their definition of “scratch” includes the use of baking mixes to spark their creativity, she said.

Elsewhere, boomer households may be downsizing, but they still like baked goods, Ms. Simonds said.

“They are looking for smaller package sizes,” she said. “We have introduced a variety of small pouch baking mixes and five count packages of fresh dough to appeal to these consumers.”

The growing Hispanic population also represents a great opportunity for the company’s products, she said.

“Hispanic moms like to bake for their families and it is a tradition to have bread with an evening meal,” she explained. “But refrigerated dough is not familiar to them. So in our advertising and packaging we are showing them how to use Pillsbury dough — particularly biscuits — to complement a meal. We are seeing increased household penetration for refrigerated baked goods among these consumers.”

Ms. Simonds said retail sales for General Mills’ baking products business grew 4% in the third quarter of fiscal 2014 ended Feb. 23, as overall competitive price promotion led to a decline in retail sales for dessert mixes, but retail sales for refrigerated baked goods grew 6% and sales for Gold Medal flour were up 15% as the company sharpened its price points on the brand.

General Mills’ success in the refrigerated baked goods segment may be traced to refrigerated dough, where the company’s market share is 70% and growing, Ms. Simonds said. Leading the way are sweet rolls and biscuits.

“We are showing consumers creative new ways to use our biscuit dough from crusts for single-serve pizzas to pockets for sloppy Joes,” she said.

General Mills also is bringing new product innovation to the baking products category.

“We launched Hershey’s baking mixes and frostings earlier this year giving consumers an affordably priced line of premium products,” she said. “We are working to bring news for our baking categories year round — not just around the winter holiday season. For example, our Pillsbury place-and-bake cookies in Easter shapes are in stores right now. Seasonal products like these contribute to good year-round sales growth and they are highly incremental to our regular business.”

With data from the NPD Group showing about 30% of households are trying to limit gluten in their diet, General Mills has addressed the trend head-on, despite encountering difficulties.

Betty Crocker Gluten Free baking mixes

“Formulating great tasting gluten-free baked goods is a challenge, but we are doing it,” Ms. Simonds said. “We launched our first Betty Crocker gluten-free dessert mixes back in 2010. In 2011 we introduced a gluten-free version of Bisquick baking mix and this year we added sugar cookies and rice flour to the Betty Crocker line, contributing to 23% retail sales growth for our gluten-free mixes so far this year. We also introduced our first gluten-free fresh dough products this year. More than 60% of the sales are incremental to the refrigerated dough category. So watch for more varieties to come.”

Overall, net income at General Mills in the third quarter ended Feb. 23 was $410.6 million, equal to 66c per share on the common stock, up 3% from $398.4 million, or 61c per share, in the same period a year ago. Net sales fell 1.2% to $4,377.4 million from $4,430.6 million.
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