General Mills introducing 'densification' technology

by Josh Sosland
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BOCA RATON, FLA. — A proprietary technology dubbed “cereal densification” was among cost saving steps identified in the annual presentation of General Mills, Inc. at the annual meeting of the Consumer Analysts Group of New York.

The comments were made Feb. 21 by John Church, senior vice-president of supply chain at General Mills. CAGNY was held at the Boca Raton Resort & Club in Boca Raton.

The technology, which Mr. Church said does not compromise product quality, is sustainability friendly and offers benefits up and down the supply chain, he said.

Summarized as “more cereal and less air,” Mr. Church said the advance reduces packaging material, reduces the number of trucks needed to ship cereal (with accompanying fuel savings), helps customers by allowing more boxes per pallet and helps consumers through easier pouring and occupying less pantry space.

Mr. Church said the new technology initially will be rolled out with the company’s flagship regular Cheerios shipped to a club store and will be expanded in the months and years ahead from this single stock-keeping unit. He said the change is expected to generate “significant savings ahead.”

More broadly, Mr. Church said the holistic margin management process that generated the densification idea is expected to sustainably produce cost savings in coming years that will help boost General Mills profit margins.

Describing H.M.M. as “sustainable,” Mr. Church said the process is “not about reducing headcount,” noting that the supply chain workforce has been growing but al has been becoming more productive. Instead, it is about identifying costs that customers and consumer do not value, he said.

The CAGNY presentation was led off by Kendall J. Powell, General Mills chairman and chief executive officer. The unit volume weakness that prompted General Mills to lower its fiscal year sales guidance late last week is adversely affecting all food categories, Mr. Powell said.

Still, echoing a remark he made a year earlier, Mr. Powell said the food business is a good one. He noted a continued gradual increase in the share of U.S. meals prepared at home, to 73.3% in 2011, up from 72.8% in 2010, 72% in 2009 and a low of 69.4% in 2002.

Still, the input cost inflation of 10% estimated for fiscal 2012 is the highest in 30 years, Mr. Powell said.
Despite the difficult current environment, Mr. Powell expressed confidence the company would be able, in the long term, to sustain sales growth in the low single digits, operating profits growth in the mid single digits and earnings per share in the upper single digits.

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