General Mills Totino's, Old El Paso, Yoplait yogurt
Businesses that fall into General Mills' growth category include cereals, snack bars, natural and organic, yogurt, Totino’s and Old El Paso.

MINNEAPOLIS — As General Mills, Inc. enters fiscal 2017, the company is segmenting its product portfolio into growth businesses and foundation businesses. Growth businesses will receive greater investment and drive profitability while foundation brands will be managed with an eye toward product mix and targeted investments.

Businesses that fall into the growth category, which make up 75% of sales, include cereals, snack bars, natural and organic, yogurt, Totino’s and Old El Paso. Foundation businesses include refrigerated dough, desserts, soup in U.S. retail and bakery, including flour and frozen dough products in the company’s Convenience and Foodservice business unit.

Don Mulligan, General Mills
Don Mulligan, c.f.o. of General Mills

“Our growth businesses, that 75% of our portfolio that we expect to grow low single-digits in 2017; we expect that rate to accelerate slightly because we expect our U.S. yogurt business to be improving as we get out of 2018 into 2019,” said Don Mulligan, chief financial officer, during a conference call with securities analysts on June 28 to discuss the company’s fiscal 2016 financial results. “China and Brazil, we expect to strengthen as well. So those businesses we both have a strong base today but we have very strong plans in place and reasons to believe that we’ll see some slight acceleration in the growth.”

Mr. Mulligan called the brands designated as foundation businesses the “stable core” of General Mills that are “receptive and reactive to targeted investments.”

In response to an analyst’s question, Ken Powell, chief executive officer, said the pace of change in the food and beverage industry is “as fast as we’ve seen in many, many years.”

Ken Powell, General Mills
Ken Powell, c.e.o. of General Mills

“… That’s really the reason why we really have changed so many things about our approach within our businesses around the world, our super high focus on consumer first, just to acknowledge how rapidly consumers are changing their values around food,” he said. “We have to make sure that we stay even with that.”

Mr. Mulligan added that foundation businesses are not necessarily on the block for divestiture.

“… Those foundation brands are very profitable, cash generative and, quite honestly, generally have a low tax basis,” he said. “So they’re very much core.”

For fiscal 2017, Mr. Mulligan said the company expects growth businesses to contribute sales growth in the low single-digits. That growth will be offset by mid-single digit declines on the remainder of the company’s portfolio where management is currently prioritizing profitable volume.

General Mills Pillsbury dough, Progresso soup
General Mills' foundation businesses include refrigerated dough, desserts, soup in U.S. retail and bakery.

For the fiscal year ended May 29, General Mills recorded net income of $1,697.4 million, equal to $2.83 per share on the common stock, and an increase of 39% when compared with fiscal 2015 results.

Sales for the year fell 6% to $16,563.1 million compared with fiscal 2015.

Net income improvement may be attributed to cost reduction initiatives and the divestiture of the Green Giant business to B&G Foods, Inc., Parsippany, N.J.

“We made important progress strengthening our business model and bringing our Consumer First strategy to life in our brands in fiscal 2016,” Mr. Powell said.  “Most importantly, we returned the business to organic sales and operating profit growth, while continuing to drive improvement in free cash flow.

General Mills Annie's cereal, Epic meat bars
The expansion of Annie's into new categories and the acquisition of Epic Provisions helped General Mills reshape its portfolio.

“Our renovation and innovation efforts helped improve top-line momentum on many businesses, and our productivity and cost-savings initiatives drove strong margin expansion, delivering profit and e.p.s. ahead of our expectations. We also took important strategic actions to reshape our portfolio for growth, including the divestiture of the Green Giant vegetable business in North America, the expansion of our recently acquired Annie’s brand into new categories, the launch of Yoplait yogurt in China, and the acquisitions of Epic Provisions meat snacks in the U.S. and Carolina yogurt in Brazil.”

During the fourth quarter, General Mills’ net income increased 103% to $379.6 million, or 63c per share on the common stock, due to the divestiture of Green Giant.

Sales for the quarter fell 8.6% to $3,927.9  million.