A: We want our fair share, which would certainly be 20 percent, and we’re almost half way there. A little bit of context on the yogurt category. Part of the challenge there was inflation we saw last year. We took pricing on our core business, which frankly was not accepted by the consumer.
Q: So you raised prices, and this time it just didn’t work.
A: It didn’t work. So we basically returned those businesses to the pricing levels they were at recently. As we have done that, the core business, which would be Yoplait light, Yoplait original, has improved. As we’ve taken those prices down, we’ve seen the turns, the momentum kind of return to that business. We’ve got the value part of the equation fixed now. The other challenge has been — as you pointed out — that we were late into the Greek segment. Partly that’s just because it’s a product that’s made in a different way, so the capacity and the technology that you have to have is different than what we use to make Yoplait light. It took a while to get that. As we’ve built capacity, we’ve started to launch products that are very, very good and that are very competitive — Yoplait Greek 100, for instance. It will be a winner for us. We’ll keep innovating and launching new products in Greek as we go forward because it’s a big segment now and it’s a huge opportunity.
Q: Was Greek one of those deals where you kind of thought, “this is just going to be a fad?”
A: We didn’t think it was a fad because we were monitoring it. Greek was running along at a relatively small level within the overall yogurt category and I think what happened is it reached a tipping point, and then it really took off in a way that we didn’t expect. So then, we went from “this is an interesting category” to “wow, this thing is exploding, we’ve got to be in.”
Q: Is yogurt more of a fragmented marked than it was a few years ago?
A: I think the first thing to say is that it continues to be a market that grows nicely. And the second thing is that it’s a market our retail partners really like. o that means they are expanding shelf space for it. It’s just a category that’s very responsive to innovation. There’s something for everybody. We started out with our traditional products, then the light segment came in. Then the industry developed a lot of products targeted for kids, which have been very successful -- all kinds of formats. Digestive health products. Products with fiber.
Now you have Greek products coming in. Yogurt continues to be for us -- globally and in the
U.S. – one of our highest growth categories. And we have got a lot of effort focused on how can we continue to innovate and get growth in this category.
Q: Let’s turn to cereal. In the last two quarters, you’ve had declining U.S. sales
A: And share, yes.
Q: What’s behind that, and how are you going to change it?
A: Primarily, it has to do with price and promotion. As we came into last summer, the promotional dynamics, the promotional intensity within the category just got higher among the competitive set. So the promotion level was going up. It takes a while to adjust to something like that. We don’t want to over-adjust. We’re not out there winning by having more promotion than the other guy, but we do need to be competitive. Several competitors increased and ours was a little bit lower than it needed to be. We have to adjust. So we will do that. We have great, strong brands.
Q: There’s a Goldman Sachs analyst -- I’m sure you saw it -- who put a “sell” rating on your stock and I don’t see “sells” on your stock very often. One of the things he mentioned about cereal, and these are his words, is “innovation is failing to drive growth and velocity declines are accelerating,” and he was particularly looking at Cheerios and its various line extensions.
A: Cheerios has been by any measure over the last five or six years an incredible success for us. We’ve grown that brand from less than 10 percent market share to over 13. In response to core brand innovation, good messaging, good advertising, good new products, whether it’s Multi-Grain Cheerios or Chocolate Cheerios, it’s a very broad-shouldered franchise that’s been very responsive to innovation. We’re very confident we can continue to grow it. We’re good at bringing flavor variety and proliferation that people like. We’ve been very successful at that throughout cereal, and we’ll continue to do that, as well as bring out uniquely new products.
Q: With General Mills’ opposition last fall to the marriage amendment to Minnesota’s constitution (which would have banned gay marriage), the company was boldly out there making a public statement. Has that stance affected sales in any way, either positively or negatively? What’s the fallout?
A: Clearly this was a divisive issue. We recognized it was something people have strong feelings about on both sides. And we heard from people on both sides, including, obviously, from within General Mills — people who disagreed with me and with us. We encouraged people to express their views on both sides, inside the company. But I will say we didn’t get as many contacts as we thought we might.