General Mills to raise cereal prices, reduce box sizes

by Staff
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MINNEAPOLIS — General Mills, Inc. announced plans to raise prices on its line of Big G cereals beginning June 25.

Tom Forsythe, a spokesman for General Mills, said that while customers should actually see lower prices per box, the boxes will be smaller, so the effect is a price increase of a few percentage points.

The move by the maker of Cheerios and Wheaties follows a similar price increase by fellow cereal maker The Kellogg Co. earlier this year.

In response to the action, Bear Stearns analyst Terry Bivens lowered his rating to "peer perform" from "outperform."

Mr. Bivens said there are several risks to the plan, including retailers simply refusing to cut prices. If the plan does not dramatically increase sales, he added, a failure could be damaging.

"Trade sources with whom we spoke were unsure whether volume would pick up as Mills anticipated," Mr. Bivens said. "They also were not confident that grocers would, in every case, decrease the prices on shelves."

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