General Mills sees mixed results in cereal

by Eric Schroeder
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General Mills gluten-free Cheerios
Gluten-free Cheerios helped drive sales growth for General Mills.

MINNEAPOLIS — Retail sales for General Mills Inc.’s cereals were down 3% in the second quarter versus a year ago, but the Minneapolis-based company believes compelling Consumer First messaging is resonating with consumers in the category.

Jeff Harmening, General Mills
Jeff Harmening, president and c.o.o. of General Mills

“For example, our gluten-free Cheerios news and removal of artificial ingredients continues to drive growth in baseline or full-price sales, and consumers still love great tasting cereals,” Jeff Harmening, president and chief operating officer, said during a Dec. 20 conference call with analysts. “More cocoa in Cocoa Puffs are driving double-digit retail sales growth for this brand, and more cinnamon news continued to drive good performance on Cinnamon Toast Crunch.”

 Despite the successes in the Cheerios, Cocoa Puffs and Cinnamon Toast Crunch brands, Mr. Harmening said overall, General Mills didn’t get the quality of merchandising it expected and didn’t have enough marketing pressure to drive better results for its cereal business in the quarter.

To spur a rebound in the second half, he said the company plans to add incremental consumer spending to support news that is working, like gluten-free Cheerios and the removal of artificial ingredients. General Mills also will look to improve its in-store execution and is securing better merchandising events with key retailers on some of its largest established brands.

General Mills Cocoa Puffs and Cinnamon Toast Crunch Cereal
More cocoa in Cocoa Puffs and more cinnamon in Cinnamon Toast Crunch resulted in good performance for the cereals.

“In total, we expect to continue to drive positive net price realization for our cereal business in the back half of the year,” Mr. Harmening said.

New products also will have a role in the recovery, he said. One new product on tap for the second half is a Very Berry variety of Cheerios.

“It contains strawberries, blueberries, and raspberries, with no artificial colors or flavors, and, of course, it’s gluten-free,” Mr. Harmening said. “Watch for it in the stores beginning next month.”

General Mills Very Berry Cheerios
Very Berry Cheerios will contain strawberries, blueberries and raspberries.

Net income at General Mills in the second quarter ended Nov. 27 was $481.8 million, equal to 82c per share on the common stock, down 9% from $529.5 million, or 88c per share, in the same period a year ago.

The company sustained a 7% decline in net sales, falling to $4,112.1 million from $4,424.9 million a year ago. Sales were bogged down by lower organic net sales and the company’s divestiture of the North American Green Giant business. 
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