The company beat profit expectations but faces continued challenges in its key Yoplait business.
General Mills Inc. said Wednesday that it will invest savings from a recent round of job cuts and restructuring into its struggling U.S. Yoplait yogurt business.
The investments come on the heels of a tough fiscal year for General Mills, one marked by the meteoric rise of Greek yogurt -- which has threatened Yoplait's dominant U.S. position.
In response, the Golden Valley company said it will plow money into yogurt in the United States and Canada, as well as investing in brands in promising emerging markets.
Yoplait plans to launch 35 new U.S. items during the first half of its fiscal 2013. It's boosting marketing to support those products, the cornerstone being a 100-calorie version of Greek yogurt.
"It has the protein you'd expect with Greek yogurt but with 40 or 50 less calories," Chief Executive Ken Powell said in an interview with the Star Tribune. "We are launching some really strong new products, and we think our share of the Greek segment will be substantially higher than it is now."
The packaged foods giant recorded fourth-quarter net earnings Wednesday of $325.4 million, or 49 cents per share, up 1.6 percent from a year ago. Profits adjusted for one-time charges were 60 cents per share, a penny above the consensus forecast of analysts polled by Thomson Reuters.
General Mills, maker of everything from Green Giant vegetables to Nature Valley snack bars, posted fourth-quarter revenue of $4.1 billion, up 12 percent from a year ago and in line with analysts' estimates.
It said it'll save $75 million annually from a restructuring announced last month -- one that will cost 850 jobs, half of them in the Twin Cities.
Greek yogurt has not been the only challenge at General Mills, which has seen its overall ingredient costs rise at rates not seen in more than three decades.
The company expects input costs to increase much less rapidly during its new fiscal year, by 2 to 3 percent instead of the 10 to 11 percent rate of last year. Still, its fiscal year 2013 profit outlook was cautious at $2.65 per share, 10 cents below Wall Street expectations.
The muted outlook reflects a rise in noncash pension expenses combined with tax rate increases and costs related to a recent acquisition. General Mills stock was down 60 cents or 1.6 percent Wednesday, closing at $37.55.
The company's U.S. retail operation, its largest business, saw fourth-quarter sales grow 3 percent to $2.4 billion as General Mills reaped the benefit of higher prices. However, U.S. sales volume as measured in pounds sunk during the quarter -- as it has for much of the packaged foods industry.
Yoplait was the biggest culprit in the decline, Powell told stock analysts in a conference call. "Yogurt has been a drag this year" on the company's U.S. retail sales, he said.
Yoplait's U.S. dollar sales were down 5 percent in fiscal 2012, which ended May 27, while cereal sales were up 3 percent, Pillsbury sales rose 3 percent and snacks climbed 15 percent. Only the meals division, which includes Hamburger Helper, posted flat sales.
Yoplait has been waylaid by Greek-style yogurt, which commanded a 35 percent share of the overall U.S. yogurt market in May, compared with around 15 percent at the end of 2010, according to a recent report by Bernstein Research analyst Alexia Howard.
Yoplait's Greek product suffered from "poor positioning" and a late start in the Greek market, dominated by upstart brand Chobani with a 47 percent share in May, the Bernstein report said. General Mills had 6 percent of the Greek market for the four weeks ended May 12.
Meanwhile, protein-rich Greek style yogurt has been gobbling market share from traditional yogurt, particularly Yoplait's offerings. Since the end of 2010, Yoplait's overall U.S. yogurt market share has dropped from around 30 percent to 25 percent, the Bernstein report said, adding, "We believe that General Mills has likely missed out on Greek."
In addition to the 100-calorie Greek yogurt, other launches at General Mills include "Fruplait," a yogurt with more fruit, and "Simplait," a play on the food trend towards simpler and fewer ingredients.
Calories will be cut in Yoplait Light by about 10 percent. And the company is expanding its Liberte yogurt brand from Canada into the United States.
"The only thing they can do is to keep attacking [the yogurt market] with new products," said Jack Russo, a stock analyst with Edward Jones.
Mike Hughlett • 612-673-7003