10 June 2009 - After having enjoyed a profitable financial year 2009, General Mills is well positioned for further growth in its new financial year 2010, which started on June 1st.
Sales, including foreign exchange, for the first nine months of FY09 increased 8%. A good operating performance in Q4 is also expected when the company reports its full year results on July 1st.
General Mills explains this by the increase of consumers eating more at home, a market in which the company sells its best-selling brands in a wide range of categories, and in which it invests heavily when it comes to marketing these brands.
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“We compete in food categories that line up with consumer demand for nutritious foods that are quick and easy to make, and represent good value. Our business is truly a portfolio for all seasons”, said Kendall Powell, General Mills CEO at an investor meeting in Paris yesterday.
The eating at home trend is viewed by Powell as a “tail wind”. 67% of the company’s sales (USD 9.1 billion) are generated through the US retail sector, where it sells its wide range of products with many occupying number 1 or number 2 positions in the market . |
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General Mills saw market share growth in its US retail segment with particular growth for frozen hot snacks (+0.9%), ready-to-eat cereals (+1.2%), grain snacks (+2%), and dry dinner mixes (+3.3%).
Powell also highlighted the fact that consumers, who are eating more and more at home, need advice on the products they choose and hence go to the web for ideas and information.
General Mills has its entire portfolio on the web and offers free services, such as recipes, menus, or coupons. Powell said that the General Mills websites have recorded 34 million visits so far in 2009.
In addition, the CEO foresees input cost inflation, such as wheat and corn prices, in FY010 to be quite low and, as a result, General Mills’ net sales growth will be more volume driven with little contribution from product price changes.
However, General Mills’ Bakeries and Foodservice segment, which accounts for 15% of the company’s net sales, will be less profitable in FY010 than in FY09 due to the eating at home trend but also due to the divestments in this category in FY09.
General Mills’ CFO, Don Mulligan, pointed out though that the company has a strategy in place to offset the people eating at home trend’s impact on sales in foodservice, bakery and vending segments, thanks to a focus on its branded products.
So far, this has been successful with outlet sales up 11% for cereals, up 9% for yoghurt and up 13% for snacks.
General Mills also caters for schools, universities, hotels, healthcare facilities, areas which are not impacted by the people eating at home trend. Mulligan views canteens and vending machines as more resilient in the current economic context.