General Mills reaffirmed its guidance for 2019 financial performance on Tuesday and promised faster innovation to keep pace with changing consumers.
The Golden Valley-based food maker delivered the opening presentation at the Consumer Analyst Group of New York’s annual conference, a four-day meeting in Boca Raton, Fla., of large investors and executives from the biggest names in consumer goods.
Jeff Harmening, chief executive of General Mills, said the company will deliver on its mission of making food people love — and creating financial returns for its investors — by having a “relentless focus on the consumer … especially in the highly dynamic environment we find ourselves in today.”
The event, known as CAGNY, brings together the major consumer-packaged goods companies, from Clorox to Conagra Brands and PepsiCo to Procter & Gamble. Each company has 50 minutes to outline its business strategy, vision, challenges and strengths for analysts and investors. But unlike a quarterly earnings update, the audience includes executives from its industry peers.
General Mills outlined its long-term view for the company’s growth — which hinges on its ability to make new products consumers want to buy — while acknowledging its near-term challenges, like the rising cost of freight, balance-sheet adjustments to accommodate the acquisition of Blue Buffalo Pet Products and a fragmented media landscape that makes it harder to market foods en masse.
The food industry, facing the rise of small challenger brands, has been under pressure for many years. Its old model of making and selling foods no longer ensures strong future growth. The industry has been trying to reinvent itself to better match the modern realities.
More than two years ago, around the time Harmening became CEO, General Mills shifted from a focus on cost-cutting initiatives, including plant closures and a 12 percent reduction in its global workforce, to jump-starting sales growth.
To do that, the company has to generate great ideas, Harmening said. The bureaucracy of innovation at a large food maker often gets in the way, which is why the company is trying to implement its “consumer-first design” for getting new food products into the marketplace faster.
“This mind-set favors speed over perfection,” said Jon Nudi, the company’s president of North America Retail, “by launching the product in the market and getting consumer feedback much earlier in the development cycle.”
The company is still in the early stages of adopting this more “agile approach,” Nudi said, and “we see great opportunities to improve the speed and effectiveness of our innovation moving forward.”
In April, General Mills will mark one year since buying Blue Buffalo for $8 billion. Billy Bishop, the brand’s founder and president of General Mills’ new pet-food business, said Blue Buffalo is the number one brand in pet specialty stores and in online sales.
General Mills is aggressively expanding the line into the food, drug and mass channel — which is a catchall term for general merchandisers and other mainstream, big-box retailers. Blue Buffalo is the number one brand at Target stores and is launching in Walmart this spring.
Don Mulligan, General Mills’ chief financial officer, said the company is on track to post net sales growth of between 9 and 10 percent, while organic net sales growth, which excludes the effect of the Blue Buffalo acquisition, will be flat to up 1 percent.
Adjusted operating profit growth is expected to be up 6 to 9 percent, while earnings per share is forecast to range between flat to down 3 percent because of accounting changes from the Blue Buffalo acquisition.
“The primary focus we have as an organization is to return General Mills to consistent, profitable sales growth,” Harmening said. “And while we are pleased with our progress, we know that there is still work to do to achieve our long-term goals.”
General Mills’ stock rose nearly 1.6 percent in trading Tuesday, closing at $45.74. This continues a two-month run-up from about $36 per share in mid-December.