General Mills sees three keys to top-line growth

by Eric Schroeder
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Reese's Puffs different pack sizes, General Mills
General Mills plans to expand availability of Reese's Puffs in different pack formats.
 

BOSTON — Can General Mills, Inc. return to consistent top-line growth? That question, Donal L. Mulligan, executive vice-president and chief financial officer, said, is one that the Minneapolis-based company is asked a lot by the investment community.

In a Sept. 7 presentation at the Barclays Global Consumer Staples Conference in Boston, Mr. Mulligan took several minutes to answer the question, identifying three keys to returning the business to sustainable net sales growth.

Don Mulligan, General Mills
Don Mulligan, executive vice-president and c.f.o. of General Mills

“The first thing we need to do is to win where we play, and most importantly, we need to win in our global growth platforms,” he said. “These platforms represent three-fourths of our business, and Euromonitor projects each of them to grow over the next five years. Now these are global growth rates while our business is more heavily weighted to slower-growth developed markets. If you overlay our current geographic exposure with these global growth rates, it equates to low single-digit growth for our current category-geography combinations. With growth available where we play, we’re focused on leveraging our innovation, consumer insights, marketing and selling capabilities along with our leading brand positions to maintain or grow our market share.”

Mr. Mulligan said fiscal 2017 was not a year in which General Mills won where it played. Heading into fiscal 2018, though, the company is focused on delivering a 200- to 300-basis point improvement in its top-line growth trends. To achieve its goal, he said the company has identified several opportunities, including “leaning into” the taste trends on ready-to-eat cereal, reaching Reese’s candy lovers by expanding availability of Reese’s Puffs in different pack formats, launching Oui by Yoplait and adding new flavors to its Nature Valley line.

Oui by Yoplait yogurt, General Mills
General Mills debuted Oui by Yoplait yogurt in late June.
 

Second, Mr. Mulligan said General Mills sees opportunities to expand its footprint and add more category market combinations that will enhance top-line growth. The company recently expanded the Annie’s brand into Canada and in 2016 launched Hӓagen-Daz in Australia.

“The reality is that while General Mills operates in more than 100 countries, the bulk of our business is focused in just a few,” he said. “We’re underdeveloped in Europe outside France and the U.K. And while China and Brazil are our largest emerging markets, we still have plenty of room for growth and expansion of our current categories in those two countries. Beyond China and Brazil, we have significant opportunities to build scale in other emerging markets in Asia and Latin America where large populations, a growing middle class and a consumer base with an appetite for great-tasting, value-added packaged foods presents a tremendous opportunity for General Mills.”

The third component of returning General Mills to consistent top-line growth is to capitalize on opportunities to reshape the portfolio for growth through mergers and acquisitions. Specifically, the company is focusing on adding businesses in faster-growing categories or geographies or on divesting businesses whose growth profile under indexes that of the company’s broader portfolio.

General Mills acquisitions - Annie's, Epic, Carolina yogurt
In the past three years, General Mills has acquired Annie's, Epic meat snacks and Carolina yogurt.
 

“Over the past three years, we’ve made moves on both of these fronts with the acquisitions of Annie’s organic foods, Epic natural meat snacks and Carolina yogurt in Brazil and the divestiture of the North American Green Giant business,” Mr. Mulligan said. “Each of these actions improved our organic net sales growth profile with Annie’s alone adding more than 50 basis points to our fiscal ‘17 organic growth rate.

“We remain clearly on the lookout for attractive acquisition candidates with our top focus areas being bolt-on acquisitions in North America and Europe, especially in the natural organic space, as well as businesses that would enhance our scale in emerging markets. We also regularly take a close look at our portfolio to assess whether we are the best owner for each of our brands. And across all of our M.&A. activity, we’re sharply focused on each investment thesis to ensure we’re creating shareholder value.”
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