NEW YORK — The introductions of a Cascadian Farm honey crunch breakfast cereal made from the grain Kernza, Nature Valley granola bites and a Pillsbury stuffed meatball and pepperoni submarine sandwich are among new grain-based products on tap for fiscal 2019 at General Mills, Inc.
At the company’s 2018 annual investor day July 11 at the New York Stock Exchange, General Mills executives focused on stepped-up new product introductions as a key to restoring top-line growth at the Minneapolis-based company.
The event followed by about two weeks the announcement by General Mills of flat earnings (adjusted) in fiscal 2018, ended May 28, and guidance of relatively flat earnings in the new fiscal year. Organic sales are projected to be flat to up 1%.
In introductory remarks, Jeffrey L. Harmening, chairman and chief executive officer, said the bar for success is high in the hyper-competitive food market today.
“Our purpose is to make food people love, not tolerate, not like a little bit, but food that people love,” he said.
If the company is successful in achieving this objective, General Mills will overcome numerous global, macro challenges buffeting the company, the industry and the economy.
He said, “Because despite what happens with trade or logistics or what’s going on with retailers, when we satisfy our consumers, we never lose. Ever.”
Putting fiscal 2019 objectives into perspective, Mr. Harmening cited the company’s three principal priorities for growth — competing effectively, accelerating certain key platforms and reshaping the company’s portfolio for growth. In fiscal 2018, General Mills was most successful at the first of these objectives, effectively arresting an extended period of top-line weakness.
“We’re going to get to historic levels of new product growth in fiscal 2019,” he said. “We have got a terrific lineup of new products that’s even better than the one we had in fiscal 2018.”
Also important to increasing revenues in the new year will be the ability of General Mills to raise prices when needed, Mr. Harmening said, pointing to anticipated 5% cost inflation in fiscal 2019. He said the company brings greater expertise to price management than in the past.
“When people think of price, the first thing they think of is list price,” he said. “We really think of it in terms of net price realization, and that can come in product mix. That can come in trade optimization. And we’ve brought in resources from the outside that are experts in this area. We’re pleased with what we see, and combining those with General Mills experts have really improved our ability in this area over the last year.”
Divestitures of weaker parts of the company’s business also will help lift growth rates, Mr. Harmening said. The company “will look to divest roughly 5% of our portfolio,” he said.
Drilling more deeply into company plans by product group was Jonathon J. Nudi, senior vice-president and group president of North America Retail. Mr. Nudi said the company expects new products (launched in the previous 12 months) will account for about 6% of net sales across the company’s portfolio.
He said the company had a “great year in cereal” in fiscal 2018, with growth in pounds and dollars and a stronger share position.
“Most of our growth last year was behind news on our base business across a broad set of retailers, and we drove increased penetration across the demographics we invested in,” Mr. Nudi said. “Campaigns, such us Cheerios Good Goes Round, resonate with consumers, and we had a terrific partnership with Ellen DeGeneres to drive 1 million acts of good across the country. Our strong base growth was helped by category-leading innovation, including the launch of Chocolate Peanut Butter Cheerios, Lucky Charms Frosted Flakes and Shreds. And we won in-store, leveraging our news and innovation to drive better quality merchandising, including a high-single-digit increase in display, a critical sales driver for cereal. “
For fiscal 2019, General Mills will continue its partnership with Ellen DeGeneres and will increase its focus on Honey Nut Cheerios.
“We launched a new Good Goes Round heart health campaign, focused against the growing boomer demographic to remind consumers of the heart healthy benefits of oats,” he said. “We’re introducing a new Cheerios Oat Crunch product that brings a new taste and texture to the Cheerios line with the simple benefit of oats on oats.”
In the company’s “taste brands,” Mr. Nudi said General Mills has marketing plans for Cinnamon Toast Crunch aimed at extending the brand’s reach to new occasions such as snacking and to new consumers, such as Hispanic families.
“In the back half, we’ll bring exciting new snackable products to the Cinnamon Toast Crunch franchise,” Mr. Nudi said.
For Lucky Charms, Mr. Nudi said General Mills will follow the brand’s “biggest year ever” with “exciting marshmallow events throughout the year.” To boost Reese’s Puffs, General Mills will increase its focus on young adults, partnering with NBA 2K, a video game, for media and on-pack promotion.
“We also have a great line of product news and innovation across the portfolio,” Mr. Nudi said. “Over 20% of our portfolio will have improved taste news, which is improving growth driver, and we'll continue to launch compelling innovation, including Cheerios Oat Crunch, as well as two new seasonal Dippin' Dots cubes that feature popular ice cream flavors over the summer period. Cereal remains a very competitive category, and with the plan built on big growth ideas and strong fundamentals, I'm optimistic about our outlook for the fiscal year ahead.”
In snack bars, Mr. Nudi said General Mills was addressing a soft spot in its portfolio — Fiber One. Toward that end, the company will introduce a protein line with low sugar and high fiber. The company also will look to accelerate growth in its other brands, beginning with Nature Valley.
“In the first half (of fiscal 2019), we'll introduce new granola bites, nut butter coated in chocolate and granola,” Mr. Nudi said. “One of the flavors is our recently launched Layered Bars, and we’ll bring flavor news to our crunchy and protein lines.”
Sales of the company’s Larabar brand have nearly doubled over the past two years to $170 million at retail, Mr. Nudi said. In addition to a new Larabar Kid introduction, the current nut and seed bar will be updated this year for a “unique crunchy texture” and as a grain-free options for consumers seeking “paleo benefits,” Mr. Nudi said.
Also in fiscal 2019, General Mills will launch Epic Performance Bars and will expand the GoodBelly bar, a snack bar with digestive benefits.
Noting that General Mills is the second-largest natural and organic food company in the United States, with more than $1 billion in sales, Mr. Nudi said strong growth is anticipated in the new year.
“Annie's is our largest natural organic brand and will continue to be a significant driver of our growth,” he said. “Our fiscal ‘19 plan for Annie's starts with growing the core. Mac & Cheese is the foundation of our Annie’s portfolio. It’s the way many consumers are introduced to our brand. We have a terrific taste improvement on our Blue Box Mac & Cheese rolling into market this summer.”
He also cited limited-edition items “leading in the regenerative agricultural space” that will be introduced this year. The products — Mac & Cheese and Bunny Grahams — have generated “incredible media response” and in-store displays.
“In addition to improving the taste in some of our (Cascadian Farm) cereal and bar items and bringing great new items to market like Cascadian Farm granola, we returned to our roots on this fantastic brand,” Mr. Nudi said. “We partnered with farmers to bring Kernza to market this fiscal year. Kernza is a long-rooted perennial, which helps its sustainability because it reduces tilling and drives more carbon into the earth. We’ll launch a new Kernza honey crunch cereal in January, but this product has already earned its coverage in everything from National Geographic to Food & Wine magazine.”
Discussing the Pillsbury brand was Shawn P. O'Grady, group president of Convenience & Foodservice and senior vice-president of global revenue development.
“We really like the strength of the Pillsbury brand because it gives us credibility here and an advantage in the frozen space,” he said. “And we like the frozen space because it moves further up the... the convenience continuum.”
He said General Mills has eliminated baking mixes as one of its six product platforms, replacing it instead with frozen baked foods. The other platforms are cereal, snacks, yogurt, frozen biscuits and frozen meals.
“We believe that there’s more opportunities for growth going forward” in frozen baked foods, he said.
In intuitional sales of ready-to-eat cereal, General Mills gained share over the past year, Mr. O’Grady said.
“The secret here really is to help operators increase the participation in school meal programs,” he said. “We continue to have success with schools by expanding our gluten-free opportunities, as students express more dietary restrictions, and we’ll be growing our portable pouch cereal options as kids increasingly eat on the go as they head to class. This also opens up cereals of snacking opportunities in other dayparts later in the day.”
Turning to the convenience store sector, Mr. Nudi said opportunities to compete with quick-service restaurants have emerged.
“Last year, we entered the category with the Pillsbury Stuffed Waffle at 7-Eleven stores, which continues to be one of their top-turning breakfast items,” he said. “We recently expanded our stuffed waffle offering nationally. We’ll build on this success with the introduction of the Pillsbury stuffed meatball and pepperoni sub at 7-Eleven stores this fall, which will get us into the lunch and dinner dayparts. And I’m just as excited about our first major push to offer the on-the-go package of our Totino’s Pizza Rolls in convenience stores nationwide.”