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General Mills CEO: ‘It’s been a challenging year for the food industry’

By Kacey Culliney , 27-Jun-2012

Cereals and snacks on General Mills' list for global growth
Cereals and snacks on General Mills' list for global growth

While US food heavyweight General Mills reported a 12% rise in sales for the 2012 fiscal year ending May 27, it said growth had been constrained by cost pressures in a difficult economic environment.

The food firm pulled in $16.7bn in total for the fiscal year with international sales comprising around 30% of this at around $5bn.

Within the US market General Mills reported a 15% sales surge in snacks and 3% in baking products.

In today’s conference call, Ken Powell, chairman and CEO of General Mills, said the 2012 fiscal year had been a “challenging environment for the food industry.”

It was “the highest input-cost inflation we’ve experienced in more than three decades,” he said, and these cost pressures constrained the firm’s earnings growth.

However, the company “sustained a high level of new-product activity worldwide and we made several acquisitions that expand our participation in fast-growing food categories and emerging markets,” he added.

The firm snapped up four companies in the 2012 fiscal year, the most significant - international yoghurt firm Yoplait - that contributed to 9% of Q4 sales growth. It also bought US salty snacks company Food Should Taste Good, Indian convenient meals business Parampara Foods and most recently Brazilian snacks firm Yoki Alimentos for around $853m.

“We expect slow economic growth to continue and we think the packaged foods sector will remain competitive,” he said, but “we’re focused on continuous improvement.”

Innovative expansions

There are five key global categories that General Mills will be focused on over the next fiscal year, the CEO said - ready-to-eat (RTE) cereal, snack bars, premium ice cream, convenience meals and yoghurt.

These five segments account for over 60% of overall global sales, he noted, with the largest business RTE cereal.  Euromonitor data pegged 2011 global sales for this segment at $25bn and estimated a 5% growth over the next five years.

Investments in innovation, health education and new product development (NPD) will be made to drive cereals forward both in the US and internationally, Powell said, with 25 new items launched since January.

With established brands, health benefits will be promoted through increased marketing budgets, he detailed.

The snacks segment also holds global potential, he said, and there will be significant investment in ‘wholesome snack bars’ over the coming fiscal year with new product launches and varieties across the US and globally, as “wholesome snack bars are a hit around the world.”

“Innovation will play a key role in driving these categories,” he said, and “we see the prospects as very bright.”

While the focus is to drive these segments globally, “we remain very committed to driving growth in our core US market,” he said.

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