A day after General Mills Inc. said it would begin $100 million in new cost reductions due to flagging sales, it announced the closing of two manufacturing plants in California and Massachusetts.
The Golden Valley-based company expects to close a cereal factory in Lodi, Calif., near the end of 2015. The plant employs about 430 employees and has been in operation since 1947.
Sales of cereal, its largest U.S. retail business, fell 9 percent in the first quarter. The category as a whole is no longer lucky nor charmed. It peaked in the mid-1990s, according to the consumer research firm the NPD Group, although cereal still remains the largest breakfast food category. General Mills sells a dozen brands of cereals, with Honey Nut and regular Cheerios being the No. 1 and No. 4 bestselling cereals in the country.
General Mills will also close a yogurt manufacturing facility in Methuen, Mass., that employs 144 people. The plant has been operating since 1993. The company plans to consolidate yogurt production at three other plants, including several varieties of Yoplait and Mountain High.
The announcement came as the Yoplait yogurt division had experienced several quarters of decline, although it was up 1 percent in the most recent quarter.
Still, some analysts think that food companies won't be exiting their challenged environment soon. The "lack of income growth across the country," one reason given by General Mills' CEO Ken Powell for the lackluster results, is holding down consumer prices.
"Too many food companies are unfortunately are running a bit of a race to the bottom by discounting either too broadly and/or too deeply," Ken Goldman, analyst at J.P. Morgan, wrote in a report Thursday.
The company's net sales for the quarter ended Aug. 24 were $4.27 billion, about 2.6 percent less than analysts' predictions, adding to several quarters of lagging sales in the packaged food industry.
