Cold front coming
Refrigerated, frozen foods show General Mills’ strength, innovation in a season of change.
Talk to Minnesotans and they’ll tell you. It may be the “Land of 10,000 Lakes” but it only has two seasons – winter and road construction.
Truth is, though, these hearty Midwesterners realize there are four natural seasons. And General Mills officials acknowledged even more last September when the Minneapolis-based company held its fiscal 2010 first-quarter earnings webcast and conference call. A 58-slide presentation concluded that the business has “a portfolio for all seasons.”
Are there seasons of economic change? You bet. Even during a recession – with private label sales surging and foodservice sales declining – General Mills has fared quite well.
For the record, Big G is just that – a big, global company with more than 100 brands and businesses serving every channel of distribution. Although known for its leading shelf-stable brands in baking, cereal, snacks and meals (see chart, left), General Mills also competes in retail and foodservice with such leading refrigerated and frozen food brands as Pillsbury, Yoplait, Green Giant and Totino’s.
Officials credited several of those refrigerated and frozen food businesses for helping 2009 net sales rise 8 percent to $15.9 billion during General Mills’ fiscal year ended last May 31. Officials said total volume (measured in pounds) contributed two points of sales growth and that segment operating profit increased 10 percent to exceed $2.6 billion. Diluted earnings per share (EPS) grew 2 percent to reach $3.80.
Fiscal 2010 first-quarter net sales grew 1 percent to $3.52 billion during a 13-week period ended August 20, 2009. Most importantly, General Mills said first-quarter gross margin increased at a double-digit rate – reflecting strong operating performance in the company’s manufacturing facilities as well as recovery from depressed year-ago margin levels. Segment operating profit grew 21 percent to $768 million.
When he concluded the company’s first-quarter webcast, Chairman and CEO Ken Powell talked about the plan behind General Mills’ portfolio.
“Over the last few years, we’ve focused intently on a business model that uses supply chain productivity, sales mix management and other cost-savings efforts to protect our margins from the pressure of rising input costs,” he said. “This helps us limit price increases and also allows us to direct significant resources back into our businesses in the form of ongoing product innovation and increased consumer marketing support.
“This reinvestment fuels continued strong sales trends for our brands. That’s helping us drive growth for our food categories in markets around the world. This model is working well, it’s sustainable and so we’re sticking with it.”
That message wasn’t lost on investment analysts and media who have recently showcased General Mills’ performance. Among those was Fox Business News, which visited the company in mid-November for its “American Icons” look at top business performers. Not surprisingly, an interviewer asked about how the company weathered recessionary impacts.
“The key to a company like General Mills – [when] you go back decades, 30, 40, 50 years – our performance is very consistent, very resilient in times that are good and times that aren’t that good,” said Powell.
“We’ve seen economic cycles. We’ve seen the up’s and we’ve seen the downs and all of us have been through this,” he continued. “We’ve seen how resilient these brands are. We know how loyal consumers are, so we don’t get rattled by these situations. We continue to play our game.
“We’re focused on fundamentals, productivity, innovation and investment in our brands. We know that recessions can be the best time to innovate so we’ve launched 200 to 300 new products this year – because we know consumers are looking for new things in the store.”
Speaking of new products, it’s clear that there’s a cold front blowing into Minneapolis. Refrigerated and frozen foods are helping the company take new ground.
Powell tells Refrigerated & Frozen Foods, “Increasingly, more consumers are eating at home. General Mills is well-positioned for this trend, as our products can be found in virtually every aisle of the grocery store, across three different temperature states.”
“We’re in advantaged categories,” he continues. “Over the last year, the categories where we compete are growing more than two times faster than food and beverage categories in total. To keep up this momentum, we’re focused more than ever on innovation on a challenging economy - and we are staying ahead of consumer demands for healthy products that taste great, are convenient, and a great value.
“For example, we recently introduced the Yoplait brand into the freezercase with new Yoplait Smoothies, and we’ve expanded our Wanchai Ferry brand of shelf-stable dinner kits with new Wanchai Ferry frozen entrees – ready in just 14 minutes.”
Read on for a look at how several General Mills divisions are introducing entirely new refrigerated and frozen food brands and strengthening existing lines with value-added new offerings.
AT A GLANCE:
Top executive: Ken Powell, chairman, CEO
FY ’09 sales: $15.9 billion
In the pantry: Brands include Betty Crocker, Old El Paso, Progresso, Nature Valley, Cheerios, Wheaties, Hamburger Helper
In the fridge: Pillsbury, Yoplait
In the freezer: Green Giant, Cascadian Farm, Pillsbury, Totino’s, Jeno’s, Wanchai Ferry, Yoplait
On the menu: Refrigerated, frozen offerings include Pillsbury, Yoplait, Nature Valley