General Mills Looks to Stir Up Yogurt Sales
September 17 2016 - 5:59AM
Dow Jones News
By Annie Gasparro
General Mills Inc. has a mess in the dairy aisle.
The maker of Cheerios cereal and Betty Crocker cake mix has been
selling Yoplait yogurt in the U.S. since 1977. But as shoppers
switch to thicker, low-carb Greek-style yogurt, the sweeter
American varieties, including General Mills' Yoplait, are falling
out of favor.
General Mills is set to report quarterly earnings on Wednesday,
shedding light on its effort to revive yogurt sales -- one of its
biggest businesses globally.
In a July presentation to investors, General Mills called out
its $2.8 billion global yogurt business as needing a makeover,
after it spent significant time and money reviving its U.S. cereal
business last year.
The Minneapolis food giant said that while cereal sales
improved, sales of its yogurt in the U.S. fell 7% in fiscal 2016,
which ended in May -- a sharp reversal from 5% growth the prior
year.
At an investor conference this month, General Mills warned that
its sales in the recent quarter fell more than 2% on a comparable
basis, largely because of its struggles with yogurt.
Part of its problem is that General Mills doesn't have a strong
foothold in the fastest growing segments within yogurt -- namely,
organic. The company is aiming to fix that by offering more
varieties of organic yogurt under the Annie's Homegrown brand it
bought two years ago.
Chief Operating Officer Jeff Harmening has said he will also add
yogurt smoothies to shelves, since drinkable yogurts are becoming
more popular, and he is pushing new brands, such as Go Big yogurt
pouches for children that outgrow Go-Gurt tubes from General
Mills.
Still, Wall Street analysts are skeptical the company can win
back customers that are looking for more natural and more
nutritious yogurt.
For one, Yoplait doesn't sound like an authentic Greek yogurt
brand the way that Dannon's Oikos does, notes CLSA analyst Michael
Lavery. General Mills is "fighting out of a deep hole," and a
comeback "looks like a monumental challenge," he said.
On average, analysts expect General Mills to report a 7% decline
in quarterly revenue to $3.91 billion, and a 5% decline in earnings
per share to 75 cents, according to Thomson Reuters.
According to market research, the majority of its recent sales
decline was due to discontinuing various products, particularly
varieties and sizes of Cheerios and Chex cereals. RBC Capital
Markets analyst David Palmer said such moves provide a needed boost
to General Mills' gross profit margin.
While the company will likely highlight its plans and progress
in yogurt on Wednesday, investors will also be looking for details
around its cost-cutting program, the sustainability of its sales
increases in cereal, and whether it remains on track to meet its
goals for the full fiscal year.
General Mills' stock has risen about 13% this year. Shares of
several food companies have benefited from takeover talk amid an
active merger-and-acquisition environment in recent years.
Write to Annie Gasparro at annie.gasparro@wsj.com
(END) Dow Jones Newswires
September 17, 2016 05:44 ET (09:44 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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