General Mills Profit Falls -- Update
September 21 2016 - 2:04PM
Dow Jones News
By Annie Gasparro
General Mills Inc.'s sales fell 7% to $3.9 billion in the latest
quarter as its yogurt business plunged in the U.S., where shoppers
are trading Yoplait for Greek-style brands.
Minneapolis-based General Mills has struggled to keep up with
its customers rapidly changing eating habits, hurting brands such
as Cheerios cereal and Betty Crocker cake mix.
Chief Executive Ken Powell has prioritized revamping the U.S.
cereal business recently, eliminating artificial colors or gluten
and adding protein to draw buyers back. But now the dairy aisle has
become an equal challenge. Yoplait Light sales are down almost 30%,
according to Edward Jones analysts.
"In general, consumers are migrating away from low-calorie kinds
of light products," Mr. Powell said in an interview. "We need to
broaden and balance our portfolio."
Still, the company expects sales trends will improve over the
remainder of the year, and General Mills' profit for the quarter
came in better than analysts expected.
Edward Jones analyst Brittany Weissman said switching to simpler
and trendier ingredients was wise, but reviving cereal and yogurt
brands will take time in those highly competitive niches. Investors
might not have the patience to wait and see if General Mills
succeeds.
"They have been able to keep profits up by cutting cost, but at
some point sales have to matter," she said.
U.S. shoppers are buying more Greek-style yogurt, which has more
protein and less sugar, and organic varieties that don't use
artificial sweeteners. General Mills doesn't have a strong brand
recognition for such products. Instead, its Yoplait Light brand is
built on fans of low-calorie diets and 100-calorie snacks that have
gone out of style.
"The Yoplait brand isn't damaged any more than the Cheerios
brand was damaged before we made them gluten free," Chief Operating
Officer Jeff Harmening said. "Consumers still love the Yoplait
brand, we just have to give them what they want."
General Mills is adding more varieties of organic yogurt under
the Annie's Homegrown brand it bought two years ago and plotting
new products such as yogurt drinks and snacks that come in
different containers than the traditional yogurt cup.
General Mills' cereal overhaul appears to be working, with
retail sales of cereals without artificial colors and flavors up 3%
in the U.S. in the recent quarter.
"Consumers have changed relatively quickly," Mr. Harmening said
in an interview. "Certain fads come and go, but satiety, the focus
on protein -- we know these things aren't fads. They are trends
that are here to stay."
Excluding the sale of its Green Giant vegetable brand and other
items that affect comparability, sales fell 4% globally for the
three months that ended in August. General Mills' U.S. retail sales
fell 8% to $2.33 billion, including a 5% drop in comparable
sales.
The company has also been hurt recently by a strong U.S. dollar
that has cut into the value of international sales, which fell 6%
to $1.13 billion in the latest quarter.
General Mills reported a profit of $409 million, or 67 cents a
share, down from $426.6 million, or 69 cents a share, a year
earlier. Adjusted for certain restructuring costs and other
one-time items, per-share earnings fell to 78 cents from 79 cents.
Analysts expected 75 cents a share, according to Thomson
Reuters.
Joshua Jamerson contributed to this article.
Write to Annie Gasparro at annie.gasparro@wsj.com
(END) Dow Jones Newswires
September 21, 2016 13:49 ET (17:49 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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