General Mills executives told investment analysts they are focusing on new products, rather than dealmaking, to grow revenue and profits in the new fiscal year. File photo of company headquarters in Golden Valley.
Glen Stubbe, Dml - Star Tribune
New products include vanilla Chex and a cereal with Hershey’s candy.
Provided by General Mills,
Hersheys cookies and creme cereal
General Mills now sees growth in new products, not deals
- Article by: Mike Hughlett
- Star Tribune
- July 9, 2013 - 11:23 PM
Don’t look for acquisitions to generate growth for General Mills Inc. this year. Instead, executives say the company will expand via marketing and the rollout of more than 200 new products, from “artisan” soups under its Progresso brand to co-branded items with candymaker Hershey Co.
“We don’t have M&A [mergers and acquisition] activity in our plans for 2014,” General Mills Chief Financial Officer Don Mulligan said at the company’s annual meeting with Wall Street analysts Tuesday. The company also broadcast the New York session online.
Mulligan said General Mills will instead focus on continuing to integrate the two big acquisitions it made over the past two years — the almost $1 billion purchase of Brazilian foodmaker Yoki Alimentos and the $1.2 billion deal for a controlling stake in France-based Yoplait S.A., which gave it worldwide rights to Yoplait’s brands.
General Mills executives have played down further dealmaking before, but Tuesday’s remarks seemed particularly blunt, said Erin Lash, a stock analyst with Morningstar Inc. “There was definitely more of a reluctance,” she said. “They seem to be more on the sidelines.”
The two big acquisitions are largely responsible for the growth of General Mills’ international sales from $2.9 billion to $5.2 billion in the company’s past two fiscal years. General Mills, maker of everything from Green Giant vegetables to Old El Paso Mexican foods, has almost $18 billion in overall sales and began its 2014 fiscal year in late May.
“In 2014, we plan to generate growth across our businesses, fueled by strong levels of product marketing and innovation,” Ken Powell, the company’s chief executive, told the analysts’ meeting.
General Mills shares closed Tuesday at $49.53, up 23 cents or 0.5 percent.
Product innovation is the lifeblood for packaged-foods companies like General Mills: New successes boost sales. “The new products they are putting out do lend themselves to consumer trends,” Morningstar’s Lash said. They tend to be healthier or more convenient products, she said.
In cereal, the company expects continued growth from Cheerios Honey Nut Medley Crunch. The product launched in January and has seen strong sales so far, said Ian Friendly, chief operating officer for General Mills’ U.S. retail division. New cereals include a vanilla iteration of the firm’s popular Chex line, as well as Hershey’s Cookies ‘n’ Creme, a new take on a candy product. General Mills’ Reese’s Pieces cereal, based on another Hershey product, has been a big seller for years.
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General Mills also is introducing six Betty Crocker cookie and cupcake mixes that are co-branded with Hershey, as well as two Hershey-themed frostings. On the soup front, a new line of artisan Progresso soups is due out, with flavors like Masala Curry Butternut Squash.
General Mills also reiterated plans for a new version of Greek yogurt, a category in which it’s been hammered by competitors. And it plans a major relaunch of its venerable but flagging Hamburger Helper franchise. Helper has lost significant market share in the past two years to a new Kraft product called Velveeta Cheesy Skillets.
General Mills is bringing out several new varieties of Hamburger and Chicken Helper, completely revamping its packaging and reinvigorating advertising for the product.
Mike Hughlett • 612-673-7003
© 2013 Star Tribune