MINNEAPOLIS — General Mills, Inc. plans to expand its “Consumer First” initiative to help it adapt to changing tastes while also reviving its U.S. Retail business, which struggled during fiscal 2015.
“Where we embraced Consumer First in fiscal 2015, we saw our business respond whether that is with protein cereals in U.S. retail, Yoplait yogurt in U.S. retail and food service channels, or Old El Paso dinner kits around the world,” Ken Powell, chairman and chief executive officer, said during a July 1 conference call with analysts. “Our plan for 2016 is to expand our Consumer First efforts worldwide to generate sustainable top-line growth.”
The company’s plans for 2016 reflect struggles that arose during fiscal 2015. In the year ended May 31, operating profit in the U.S. Retail segment fell nearly 7% to $2,159.3 million from $2,311.5 million, while sales eased 0.9% to $10,507 million from $10,604.9 million.
Heading into fiscal 2016, Mr. Powell said General Mills has identified four clear priorities for the U.S. Retail segment: To grow cereal; to accelerate performance in better-for-you snacking; to drive double-digit growth in the natural and organic portfolio; and to deliver Consumer First value on select brands in a way that generates positive returns for the company’s business.
In cereal, Mr. Powell said General Mills gained 30 basis points of value share in fiscal 2015 and has grown share in seven of the past eight years, gaining 1.6 share points during that time. But the company’s share growth in 2015 did not translate into sales growth, leaving General Mills with “more work to do,” he said.
That work includes a broad investment plan designed to renovate the company’s Big G portfolio for today’s consumers. The introduction of gluten-free Cheerios scheduled for later this summer is the first step in that plan. The company also plans to make Lucky Charms gluten-free later this year.
“Between Cheerios, Lucky Charms and our Chex franchise, we have gluten-free news on products representing over half of our cereal sales and 17% of total category sales,” Mr. Powell said.
Another major step for cereal was the announcement last week that the company would remove artificial flavors and colors from artificial sources from all of its cereals.
“Nearly half of U.S. households are making an effort to avoid artificial flavors and colors and we are responding,” Mr. Powell said. “Seventy-five per cent of our Big G portfolio will meet this claim by January with the remainder targeted by the end of calendar 2017.”
In addition to renovation, General Mills also is focused on innovation. Nature Valley Protein Soft Baked Granola bites, a portable granola for consumers on the go, will add two varieties later this year. General Mills also will look to capitalize on interest in muesli with the launch of Nature Valley Toasted Oats Muesli in original and blueberry flavors. The company also will add a new honey oat crunch variety to its line of Cascadian Farm organic cereals and granolas later this summer, and will extend its Nature Valley protein hot oatmeal line with maple pecan crunch and toasted coconut almond crunch varieties.
“These are all first-half launches, and we have more new items planned for the back half,” Mr. Powell said. “In fact, our lineup of news is as strong as I have seen from Big G in a very long time with core renovation that impacts the entire portfolio, compelling new product innovation, strong promotional events and increased consumer directed marketing all rooted in a deeper understanding of what our consumers are looking for today. Add it all up and we expect to deliver share growth and sales growth for our U.S. cereal business in 2016.”
A second priority for General Mills in 2016 will be accelerating performance in better-for-you snacking in both yogurt and grain snacks.
Mr. Powell said core brand renovation is at the heart of the company’s 2016 growth plan for original style Yoplait.
“We recently rolled out a 25% sugar reduction across the entire line and early response has been positive,” he said. “In Greek, we have a new line called Yoplait Plenti. These eight varieties include whole grain oats, flax and pumpkin seeds. We are also launching two new flavors of Yoplait Greek 100 Whips — coconut macaroon and chocolate cherry — and we will grow our kid yogurts by partnering with movie equities like Disney’s Frozen and by leveraging our Go-Gurt Get The Last Drop advertising campaign.”
Core brand renovation is also a central part of General Mills’ 2016 grain snacks plan, Mr. Powell said. In the second quarter, the company plans to roll out an improved Nature Valley Crunchy Bar that Mr. Powell described as “easier to bite.” He said General Mills will be marketing 20% of the Nature Valley portfolio as gluten-free.
Other new grain snacks products on the horizon include two new Fiber One cheesecake bars in salted caramel and strawberry flavors, and a pair of new Nature Valley simple nut bars featuring whole, simple ingredients for consumers interested in less processed snacks.
The fact that General Mills’ natural and organic portfolio of brands ended 2015 on a strong note with net sales nearly doubling to $200 million in the fourth quarter has Mr. Powell optimistic that the company can achieve its third priority of driving double-digit growth in the portfolio.
“We will use General Mills sales strength in traditional channels and Annie’s strength in the natural channel to grow distribution across our natural and organic portfolio,” he said. “On the innovation front, we are launching a line of Annie’s soups later this summer. These are five organic soups packaged in Tetra Pak cartons featuring flavors that kids will love and a brand that moms trust. This new platform will be in stores only nine months after we closed on the acquisition.”
Other news in the category includes the upcoming launch of two new Food Should Taste Good Real good bars and a doubling in the company’s consumer investment on Larabar.
The final priority for U.S. Retail is to deliver Consumer First value on select brands in General Mills’ portfolio, Mr. Powell said.“On Helpers, we are launching a 20% more initiative to better meet the needs of larger families,” he said. “On Totino’s Pizza Rolls, we are adding value with a crispier crust product improvement. On Betty Crocker desserts, we are making a clearer distinction for consumers between our everyday value products and our more premium value-added mixes.”