MINNEAPOLIS — Net earnings and sales slipped at General Mills, Inc. during fiscal 2017 as the Minneapolis-based company dealt with what the company’s chief executive officer described as “significant change.”
Net income in the fiscal year ended May 28 totaled $1,657.5 million, equal to $2.82 per share on the common stock, down 2% from $1,697.4 million, or $2.83 per share, in fiscal 2016. Net sales also were lower, falling nearly 6% to $15,619.8 million from $16,563.1 million.
|Jeff Harmening, c.e.o. of General Mills|
“Fiscal ’17 was a year of significant change for General Mills,” Jeffrey L. Harmening, c.e.o. of General Mills, said during a June 28 conference call with analysts. “We implemented a new global organizational structure (and) continued our journey to become a truly global food company. We also accelerated some important cost-savings efforts to improve our efficiency. These efforts went according to plan, and we’re happy with those results, but it’s clear some actions did not go according to plan.
“We’ve pulled back two foreign investments in some key categories, and our overall execution was not up to our normal standards. Our sales and profits suffered as a result.”
Looking forward to fiscal 2018, Mr. Harmening said General Mills’ top priority is to make significant strides toward returning the business to sustainable top-line growth.
“Our plans call for investment and product news and innovation to accelerate growth, for businesses where we have positive momentum and to improve those that are underperforming,” he said. “We’ll also increase investment in capabilities like e-commerce and strategic revenue management, which are critical for growth today and will be in the future.”
Operating profit within the company’s North America Retail business fell 2% during fiscal 2017 to $2,303.6 million from $2,351.2 million, while sales in the unit declined nearly 7% to $10,196.9 million from $10,936.6 million.
In the company’s Convenience Stores & Foodservice business, operating profit totaled $401.2 million in fiscal 2017, up 6% from $378.9 million in the same period a year ago. Net sales, though, fell 3% to $1,870 million from $1,923.8 million.
During the call, Mr. Harmening identified four global priorities that General Mills considers critical to improving top-line growth trends.
First, the company plans to grow its global cereal platform, including Cereal Partners Worldwide, behind compelling product news, innovation and advertising investment.
“In fiscal ’18, we’re going to leverage our wellness advantage by investing behind the new campaign across the Big G franchise called ‘Good Starts with G,’” Mr. Harmening said. “We’re using TV and digital media to highlight our great taste from real ingredients, our whole grain, our fiber content and our large gluten-free portfolio. For the digital component, we’re using precision targeting to tailor our messages to individual consumers, with an emphasis on Hispanic families and empty-nesters.”
Second, General Mills expects to improve its U.S. yogurt performance through fundamental innovation. An example of the company’s efforts includes the launch of a new line of French-style yogurt called Oui by Yoplait. The recipe is inspired by Yoplait Saveur d’Autrefois, a yogurt General Mills has sold only in France for 20 years. Oui by Yoplait is made by pouring ingredients into individual glass pots that set after eight hours, producing a thick and creamy yogurt, the company said. The rigidity of the glass helps maintain the yogurt’s integrity, allowing it to stabilize without the use of added corn starch or gelatin.
“Oui by Yoplait will lead the development of an emerging yogurt segment, which we call ‘Simply Better,’” Mr. Harmening said. “This is an important step in improving our U.S. yogurt performance, reshaping our portfolio and helping the category return to growth.”
Third, General Mills plans to invest to drive differential growth across several global platforms where it has good top-line momentum already. The platforms include Häagen-Dazs ice cream; snack bars, primarily under the Nature Valley, Fiber One and Larabar brands; Old El Paso; and natural and organic brands in North America.
Collectively, the platforms represent about $4 billion in net sales, and Mr. Harmening said the company expects “great prospects for growth” in fiscal 2018.
In the snack bar category, General Mills intends to increase its innovation levels on Nature Valley, with plans to launch more than 20 new items, Mr. Harmening said.
“We’re getting behind coconut, one of the fast-growing flavors in snack bars, with the launch of toasted coconut Sweet & Salty nut bars and coconut butter Nature Valley Biscuits sandwiches,” he said.
The fourth and final global priority in place for fiscal 2018 involves managing foundation brands with appropriate levels of investment.
“We missed the mark last year on our promotional spending, on soup and refrigerated dough,” he said. “So in fiscal ’18 our goal is to be in the zone on pricing during the key season. We’re not looking to win on price, and we won’t go back to the levels of investment from two years ago, but we know we need to be more competitive this year.“In addition, we’ll continue to invest in targeted consumer news where we see strong returns. This fall, we are launching a line of organic soups under the Progresso brand, combining our organic expertise with Progresso’s top soup flavors. And we’re taking refrigerated dough out of the can with two new varieties of Pillsbury pizza dough.”