PARIS — As it closes out fiscal 2023 and heads into fiscal 2024, General Mills, Inc. will focus on regaining momentum on productivity, or, as the company calls it, holistic margin management, said Jeffrey L. Harmening, chief executive officer of the Minneapolis-based company.
“Over the last few years, we have been spending most of our time just trying to get product to market,” Mr. Harmening told analysts during a June 7 presentation at the Deutsche Bank dbAccess Global Consumer Conference in Paris. “And so our productivity efforts have lagged with what we would normally do. Usually, we're kind of industry-leading in productivity, and we look to get back to that, which I think is what should be a welcome byproduct of getting supply chains back to normal.”
Asked by research analyst Stephen Robert R. Powers of Deutsche Bank AG whether the supply situation is such that General Mills is now able to focus on regaining that momentum on productivity, Mr. Harmening said the company is “clawing” its way back but is “most of the way there.”
“Our service levels are currently in the 90s, including pet food,” Mr. Harmening said. “So we've made a tremendous recovery in pet food, but also on the rest of our portfolio as well. … I think maybe sometimes it's underappreciated what getting our supply chain back to those kind of levels, what it can do for our business.
“For starters, during the pandemic, we incurred a lot of cost because our supply chain wasn’t operating as efficiently as it could. We couldn’t get materials on time, then we have people at our plants that were employed kind of waiting around for products to arrive or we’d ship half loads of trucks. But with supply returning, that will allow us to drive more cost out of our systems. It was not even inflationary, just added cost in our system.
“It also allows us to focus on productivity efforts like holistic margin management. And then even some things you might not normally think about. But our salespeople spend a lot of time as logistics planners and with customers on supply. Now we can spend our time on in-store execution and everything that goes along with driving innovation and distribution, the things that we would normally do.”
Mr. Harmening also stressed it will be important for General Mills to prioritize, whether that is the categories the company competes in, the geographies it plays in or the ESG initiatives it pursues.
“Prioritization is critical,” he said. “And it’s going to be just as important in the coming 12 months as it has been in the last 12 months.”
Mr. Harmening told analysts he believes the company’s strategy is working and will continue to work.
“One of the things that we know is that in times of volatility and even in tough economic times, the companies that invest in their business, whether it’s consumer innovation or in investments in new product innovation or data and technology, the ones that can invest and do that effectively are the ones that get ahead,” he said. “So we'll continue to do all of those things.”
But even as it continues with what’s working, General Mills will be looking to get back to increasing its productivity, Mr. Harmening said.“We have a good line of sight to do that,” he said. “We’ve been world-class in that for the last decade or more. And getting back to that should be a help to our margins.”