General Mills continued to flourish during the summer months, though its growth slowed from the spring when the initial burst of at-home eating created huge demand for its products.
Social distancing and more eating at home have led more people to try the hundreds of products General Mills produces, creating what Chief Executive Jeff Harmening called a "once-in-a-generation opportunity" for the Golden Valley-based company.
In disclosing its latest quarterly results, Harmening and other executives on Wednesday faced questions from investors about whether General Mills can sustain the momentum. In an interview, Harmening said the way General Mills uses this moment to increase its long-term customer base is what should define its success.
"Yes, at-home demand is higher, so we have to recognize that is a big driver of our growth. But what we are really proud of is that we are gaining share and we are doing that throughout the world," Harmening said.
Within the U.S., where the vast majority of its sales are, General Mills held or grew market share in eight of its top 10 food retail categories, he said.
General Mills' sales grew 9% in the June-through-August period, the first quarter of its new fiscal year. While that's down from the 21% growth it experienced in the March-through-May quarter, it's still far above the company's normal pace of quarterly growth, which tends to be flat to 2%.
The company reported a 27% jump in per-share profit to $1 for the latest quarter, far above analysts' consensus expectation of 87 cents a share.
General Mills also said it would raise its dividend 4% to 51 cents per share, the first such increase in four years.
"It shows they have long-term confidence even in these uncertain times," said John Boylan, a consumer staples analyst with Edward Jones.
General Mills stock, already up 8% so far this year, traded better than the broader market Wednesday on the news. Its shares closed down about a half-percent on a day when broad market indexes fell 2 to 3%.
Alexia Howard, an analyst with Bernstein Research who for years has tracked the way that changing eating habits have pressured big firms like General Mills, said the longer-term uncertainty hasn't gone away entirely.
"Despite the strong beat this quarter, the big debate is around whether [General Mills] can retain some of the new households gained going into [calendar year] 2021 or whether the structural headwinds will resume post-COVID," Howard wrote in a note to investors. "Health and wellness may become a greater focus for consumers as this is a health-oriented crisis."
For now, the sudden burst in sales and profits have allowed General Mills to pay down debt faster than anticipated, putting the firm about a year ahead of schedule, said Kofi Bruce, the company's chief financial officer.
Meanwhile, the company added processing capacity and helped vendors do the same to meet increased demand.
It has also increased its marketing spending and shifted it toward digital channels where more consumers are spending time these days.
Sales in U.S. retail — the company's largest segment, currently representing three-fourths of its sales — grew 14% during the quarter. Meals and baking, a category that includes brands like Totino's, Gold Medal flour and Betty Crocker, grew sales 31%, followed by the company's hallmark cereal category, which was up 10%.
Its food service and convenience store business continues to experience lower sales, down 12% in the latest quarter, as the pandemic keeps people from eating at restaurants, and institutional cafeterias such as schools and hotels.
General Mills and other makers of consumer staples tend to be countercyclical to the broader economy. That means they are sleepier during strong economic periods but thrive during recessions and crises.
While that pattern suggests General Mills' performance will slow as the economy recovers, Harmening said, "I'm more confident than ever that General Mills is poised to emerge from the pandemic a stronger company and in a position to generate consistent, profitable growth and top-tier returns for our shareholders."
Food-processing plants have been hot spots for coronavirus transmission, but General Mills reported minimal disruption to production.
More than 98% of its plant and logistics workers are showing up to work globally, Harmening said.
The company implemented a more flexible leave policy that allows plant workers to take time off by the hour to care for children or family members.
As a result, Harmening said, "Our supply chain is running really effectively and the reason it is is because we've taken care of our workers."