General Mills is forecasting a drop in sales this fiscal year as many Americans continue to cut back in the grocery aisle.
The Golden Valley-based food company lowered its outlook in the face of “historically low consumer sentiment, heightened uncertainty and significant volatility,” CEO Jeff Harmening said at the Feb. 17 Consumer Analyst Group of New York conference.
“The cumulative impact of inflation, SNAP [food stamp] benefit reductions, geopolitical uncertainty and other factors have led to significant consumer stress, especially for the middle- and lower-income groups,” he said.
After initially projecting organic net sales to land between a 1% loss and a 1% gain, General Mills is now anticipating a loss of 1.5% to 2% for the fiscal year ending Sept. 30. Year-to-date growth in cereal, snacks and dog food, in particular, fell below expectations, Harmening said.
Though the U.S. economy is growing, economists are increasingly describing a “K-shaped” economy, in which a small upper class accumulates wealth and drives spending while everyone else falls to the bottom. It’s a sharp turn from the early post-pandemic days, when a hot job market and stockpiled savings fueled consumer spending despite high inflation.
General Mills has recently zeroed in on the idea of “value,” including lower prices, to keep people buying Cheerios, Chex Mix and pizza rolls. Still, Harmening said, the company is seeing budget-conscious shoppers buying more products on sale.
“The prevalence of financially stressed consumers only reinforces our view that working to bring consumers more value is the right approach, and it’s important to reinforce that price is just one aspect of how consumers define value,” he said.
The company is expecting net sales from new products to rise about 25% this fiscal year. Harmening said the company plans to focus on “bold flavors,” the growing appetite for protein and fiber, and “increased demand for familiar and fun food experiences that help consumers find joy and comfort amid ongoing uncertainty.”
