Few big businesses experience a moment when demand spikes for all its products all at once. But General Mills did this spring, and its latest results Wednesday revealed both the size of the spike and the challenge of making it last.
A burst of in-home eating caused by the need to fend off coronavirus produced a 21% jump in sales from March through May for the Golden Valley-based food giant, a result not seen for decades at one of Minnesota’s oldest companies. Profit also surged as General Mills was able to keep production going, unlike some food processors, and increase it at most plants.
In the process, General Mills kept workers safe. The firm has tracked 120 or so COVID-19 cases among its 35,000 employees worldwide since the outbreak began early this year.
Executives forecast more sales gains for the next nine months, until it runs into the comparisons of this most recent fiscal quarter. But they decided not to issue precise guidance on sales and profits, saying the spread and control of the virus is too uneven.
“Away-from-home and at-home consumption is going to be determined by how the pandemic goes, and that’s really uncertain at this point,” Jeff Harmening, the company’s chief executive, said in an interview.
General Mills has seen market share growth across nearly all its product lines and everywhere it sells goods globally, he said. “We’re confident in our ability to compete.”
Before the pandemic, about 85% of its sales were to people buying food for home consumption, putting it in a strong position when people began to work and learn from home.
General Mills initially sold out of many products, particularly flour, baking mixes and soups. In late March and April, it ramped up production and adjusted its output to the most popular goods.
“I feel great about how the company met the moment,” Harmening said.
Companies of General Mills’ size usually experience sales ups and downs that are measured in single-digit percentages. Larger growth tends to happen only with an acquisition. General Mills doubled its sales by purchasing Pillsbury in 2001 and added 10% to sales with the purchase of Blue Buffalo pet food two years ago.
The year-over-year sales jumps General Mills just experienced, by contrast, came straight from consumer demand. For instance, sales of all products through U.S. stores grew 37%. Sales of flour and baking mixes rose 75%. Cereal sales were up 26%, and snacks and yogurt both 10%.
“When demand is up, as it was 37% in our retail business, people were counting on us to meet that,” Harmening said. He attributed the company’s ability to perform to its employees and suppliers and efforts to keep everyone safe.
General Mills earned $626 million, or $1.02 a share, on sales of $5.02 billion in the three months ended May 31, the last quarter of its 2020 fiscal year. Adjusted for the one-time accounting effects, the profit amounted to $1.10 a share, beating the consensus forecast by analysts of $1.06 a share.
General Mills shares fell 2% Wednesday but are up 16% for the year.
Harmening told investors in a conference call that operational changes made in the quarter “set us up to deliver continued strong results in the months and years to come.”
But in the interview, Harmening said he believed that the work to sustain the gains began two or three years ago when General Mills started to examine and refresh dozens of products.
“We have made our Pillsbury biscuits taste better, reformulated a lot of our soups, added more fruit to yogurt, started talking about heart health on Cheerios,” he said. “That’s what gives me confidence. If we were just thinking now how to maintain these gains, we’d probably be behind.”
On a separate note, Harmening said the police killing of George Floyd and the aftermath, as it did at other companies, produced a lot of discussions on multiple levels at General Mills.
One of its internal events, a Zoom-based conversation about race, drew more than 3,500 participants.
The company in recent weeks allowed all its Twin Cities employees paid time off to volunteer in ways they identified.
He said General Mills has produced an inclusive culture and that the diversity of its board and executive ranks reflect it. But he added that the company must always be vigilant about providing opportunity to everyone internally and supportive of community change externally.
“We’ve donated tens of millions of dollars to help support our community in things like education,” Harmening said, referring to its outreach in the Twin Cities.
“But if you look at education gaps or the structural issues with the police, it’s clear there’s a lot more work to do,” he added.