General Mills 'bullish' about cereal category

by Eric Schroeder
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BOSTON — Despite recent reports questioning the near-term growth potential for ready-to-eat cereal, Kendall Powell, chairman and chief executive officer of General Mills, Inc., told analysts at the Sept. 8 Barclays Back-To-School Consumer Conference that the Minneapolis-based company “continues to be very bullish about the cereal category.”

“Dollar sales may be pressured a bit by price promotion, but we are still seeing unit volume growth when we look at the data across all channels,” Mr. Powell said.

Mr. Powell attributed the volume growth to cereal’s relevancy for today’s consumers, ranging from its value as a low-calorie breakfast option to its standing as a good source of vitamins, minerals, nutrients and fiber.

“Cereal eaters consume less fat, less cholesterol, fewer calories and more fiber than non-cereal eaters, and importantly, more frequent cereal eaters tend to have healthier body weights and lower body mass index measures than non-cereal eaters,” he said. “This is true of men, it’s true of women, it’s true of kids, and it’s true whether your favorite cereal is Cheerios or Trix.”

Even as household penetration holds steady — about 90% of U.S. households, or about 110 million households, buy cereal — there’s still room to grow, Mr. Powell said, and General Mills is excited about its prospects for building its brands across the Big G cereal business.

“We expect Big G to show modest net sales growth in this year’s first quarter despite a tough comparison to 9% net sales growth last year,” he said. “Consumer movement was strong a year ago as well with dollar sales growth of 4% in Nielsen measured channels and even stronger pound volume increases. Despite that difficult comparison, our market share is holding up pretty well in the first quarter.”

Leading the charge for Big G is Chocolate Cheerios, which launched in January and is on track to deliver first-year sales of $65 million to $70 million.

“That would put it among the biggest new product launches in the category over the past decade,” Mr. Powell said. “It’s a terrific addition to our category-leading Cheerios franchise.”

Another staple of the Big G franchise, Wheaties, has received a boost from the launch earlier this year of Wheaties Fuel, the first cereal created specifically for men.

“It’s doing well and it’s helping to increase sales for original Wheaties, too,” Mr. Powell said. “We found that sampling is a key driver of baseline sales for this new product, so we are planning to deliver 2.5 million samples next week at the start of the new N.F.L. season.”

In general, health news has played a role in the success of many different Big G brands, particularly in the adult cereal segment. To that end, General Mills recently extended its Total franchise with the introduction of Total Plus Omega-3. The new cereal offers 100% daily value of 12 essential vitamins and minerals, as well as 10% of the daily value of omega-3 fatty acids from ground flax.

“According to the NPD Group, 50% of adults in the U.S. are trying to get more omega-3s in their diets and there aren’t many other cereals available that offer this benefit,” Mr. Powell said.

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