BOSTON — Selling Green Giant to B&G Foods was only the beginning of General Mills’ growth strategy heading into the coming year.
“It’s a great brand,” said Jeff Harmening, executive vice-president and chief operating officer of General Mills’ U.S. Retail division. “But with the investment that it was going to require we felt like we had better growth opportunities in other places.”
During a Sept. 9 presentation at the Barclays Global Consumer Staples Conference in Boston, Mr. Harmening outlined four pillars of the Minneapolis-based company’s plan to deliver improved growth in retail in fiscal 2016.
Net income in the fiscal year ended May 31 was $1,221.3 million, equal to $2.02 per share on the common stock, down 33% from $1,824.4 million, or $2.90 per share, in fiscal 2014. Operating profit fell nearly 30% to $2,077.3 million from $2,957.4 million.
Going forward, General Mills’ priorities include growing cereal sales, accelerating performance in yogurt and snacks, driving double-digit growth in the natural and organic portfolio, and improving value on select brands.
In the cereal category, Mr. Harmening said trends are improving, but more work needs to be done to restore growth in retail channels.
|Jeff Harmening, executive v.p. and c.o.o. of General Mills’ U.S. Retail division|
“First, branded manufacturers need to renovate established brands to keep them relevant with today’s consumers,” he said. “Second, the branded players need to bring new innovation that addresses areas of growing consumer interest, like higher protein, less processed, and gluten-free foods. And third, manufacturers need to increase consumer investment to grow cereal’s share of voice versus competing breakfast categories.”
For General Mills’ part, the company plans to expand its gluten-free options, which began earlier in the year with the launch of five varieties of gluten-free Cheerios and will soon include gluten-free Lucky Charms. The company also recently committed to removing artificial flavors and colors from all of its cereals, with 75% of the portfolio meeting this claim by January and the remaining products targeted by the end of 2017.
“We’re renovating our existing cereal portfolio to meet changing consumer interest,” Mr. Harmening said. “At the same time, we’re innovating in growing segments of the cereal category. For example, Nature Valley protein granola has delivered strong growth since we launched the brand two years ago. This year we’re building Nature Valley cereal into a power brand. We launched soft baked granola bites and toasted oat muesli in the first half and we’re coming back in the second half with Nature Valley baked oat bites and two varieties of oat clusters.”
Other plans for the cereal segment include a new variety of Cascadian Farm organic cereal and special-edition products with promotional tie-ins.
“General Mills has been leading performance in the $10 billion U.S. cereal category,” Mr. Harmening said. “We’ve grown share in seven of the last eight years, gaining 1.6 share points during that time…. We expect our efforts will lead to net sales growth for our cereal business in 2016.”
To accelerate growth in yogurt and snacks, General Mills is reformulating existing products and launching new products. Mr. Harmening said retail sales for original Yoplait increased by double digits following the removal of artificial colors and flavors. The company also has gained share in the Greek yogurt segment behind new product lines like Yoplait Greek 100 and Greek 100 Whips.
“This year our biggest yogurt innovation news is our new line of Yoplait Plenti Greek yogurts,” Mr. Harmening said. “These eight varieties include whole grain oats, flax, and pumpkin seeds for consumers seeking a hardier yogurt experience.”
General Mills’ grain snacks business also has gained share in recent years on a “continuous stream of innovation that has been on trend with consumer interest,” he said. In the coming months, the company will debut an improved, “easier to bite” Nature Valley crunch bar.
“We’ve also launched two new platforms in the first half of fiscal 2016,” Mr. Harmening said. “Fiber One cheesecake bars are a guilt-free way for consumers to satisfy a craving for cheesecake, and Nature Valley’s simple nut bars appeal to consumers interested in less processed snacks.”
A key to driving double-digit growth in General Mills’ natural and organic portfolio, which includes such brands as Larabar, Food Should Taste Good and Annie’s, is increased distribution. Top products under the Annie’s brand averaged 30% distribution in traditional U.S. food outlets in the past year. Achieving 80% distribution on those items, Mr. Harmening said, would translate to $50 million in net sales growth.
“The figure would be even greater if key Annie’s s.k.u.s (stock-keeping units) were moved from the natural and organic section to the mainline section of the store,” he said. “Beyond increased distribution, we have a wealth of new Annie’s products hitting shelves this year. We’re bringing Annie’s into the soup category with a new line of organic soups that started shipping this summer.”
Additionally, General Mills is launching two nutrition bars and bean snack chips under the Food Should Taste Good brand.
“We like the growth prospects for these brands in the coming years,” Mr. Harmening said of the company’s natural and organic portfolio. “We think this business can reach more than $1 billion in sales by 2020, and we’re keeping our eye out for additional acquisitions in this space, which would be incremental to this target.”
Finally, General Mills is focused on improving value for such brands as Helper dry dinners, Betty Crocker cake mixes, Totino pizza rolls and Old El Paso taco shells.
“We lost share on both dry dinners and dessert mixes in 2015 because we weren’t delivering competitive value for consumers,” Mr. Harmening said.
Additionally, the company’s soup performance during the year “were not up to our expectations,” he said.
In addition to tweaking pricing for key product lines, including Betty Crocker, the company is rolling out improved products and new innovations. Forthcoming launches include Totino's Pizza Rolls with crispier crust, Helper dinners with 20% more pasta, and new Progresso stew varieties and cooking stock.
As for the Green Giant sale, Mr. Harmening said the company plans to use the proceeds for share repurchases and debt reduction. He said the transaction reinforces General Mills’ strategy to shape its portfolio for faster growth.