General Mills sees rapid growth in China

by Keith Nunes
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BOCA RATON, FLA. – With a middle class and affluent population in China expected to reach 200 million households by 2020, General Mills, Inc. will emphasize growing its business in the country, said Don Mulligan, executive vice-president and chief financial officer, who reviewed the company’s activities during a presentation at the Consumer Analyst Group of New York conference taking place this week.

“We are very pleased with our business performance in China, and we see excellent growth prospects ahead,” said Mr. Mulligan. “Favorable economic trends will increase our consumer base, and geographic and product expansion will drive growth in sales and profits. Our goal is $900 million in sales for our wholly-owned businesses in China by 2015.”

General Mills’ current business in China consists of three core categories – ice cream through the Haagen-Dazs brand, frozen convenient meals sold under the Wanchai Ferry brand, and Bugles and Twix snack products. Sales during 2010 reached $310 million. General Mills has five manufacturing facilities and 8,000 employees throughout the country.

“In China our Haagen-Dazs business is primarily focused on stand-alone shops,” said Mr. Mulligan. “These locations are not your typical ice cream scoop shop. They're upscale dining destinations where consumers come to sit, relax and enjoy their favorite Haagen-Dazs treat. From $5 for a simple scoop to $40 for an elaborate dine-in creation, these products represent an affordable luxury for China's growing urban consumer segment.

“The first step in our growth strategy has been to enter new markets. The combination of large population centers and rapid growth in household income presents a great opportunity to expand. We now operate 162 Haagen-Dazs shops in 30 cities across greater China and expect to reach additional cities in the years ahead.”

Mr. Mulligan added the Haagen-Dazs retail business in China has expanded to more than 20 provinces and sales have increased at a 30% compound rate over the last five years. The brand’s penetration through the ice cream shop format also has increased demand for Haagen-Dazs products through other retail channels.

“In a recent (Nielsen) survey, the number of supermarket and convenience store locations across China increased 18% in just 12 months,” said Mr. Mulligan. “With this rapid growth, more consumers can now find Haagen-Dazs at their local grocery store.”

The Wanchai Ferry frozen, convenient meals brand has expanded, Mr. Mulligan said.

“Frozen dumplings are still our biggest business, but they represent only 36% of frozen dim sum category sales,” he said. “So we expanded into additional high-growth segments like wonton, tangyuan, baozi, and mantou.

“We have also moved beyond dim sum with the launch of frozen noodles in Shanghai last year. With continued growth from frozen dumplings and strong sales contributions from these new items, Wanchai Ferry continues to gain share in its established markets.”

General Mills’ Bugles and Trix snack business consists of products sold in small pouches at affordable prices, which makes them attractive to a broad consumer base. Product varieties include seaweed flavor Bugles and Trix milk rolls.

“This business has been a solid contributor to our growth in China, posting annualized sales gains of 20% in recent years,” said Mr. Mulligan.

He added geographic expansion will play a role in the future.

“Our distribution currently covers retail locations in over 300 cities across China; we reach some of these by bicycle,” he said. “We plan to bring our current snack products into these new markets, and we will launch new products such as the Trix fruit and milk rolls being introduced this spring.”

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