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Ultra-discounting in extended US cereal portfolio unlikely, says General Mills

By Oliver Nieburg+

21-Dec-2012

General Mills plans to launch new cereals in January, but won't change strategy to compete with discounters
General Mills plans to launch new cereals in January, but won't change strategy to compete with discounters

General Mills plans to introduce a host of new ready-to-eat cereal products to the US in 2013, but seems unlikely to heavily discount its range to line up with competitors.

The company announced during its second quarter results conference call that it will launch new varieties for its Cheerios, Cascadian Farm and Fiber One brands in January.

Analyst David Driscoll of Citigroup said during the conference call that General Mills had the highest prices of all major cereal producers and was not really focused on the lower end of the market. He wondered if the company would change its strategy.

Lowering prices?

Ian Friendly, chief operating officer of US Retail at General Mills, said: “if you look at the price point of our various Cheerios extensions, I think you'd see that they're very competitive within the category."

“…I don't view that we need to be in ultra-discounted cereal products. But at all times, we're very cognizant of making sure our new cereals represent a good value and in line with the rest of the category. We're not really trying to stretch it up either.”

He said that a lot of General mills’ cereal portfolio was Cheerios, a puffed product that it is price compared on a weight basis.

“…In general, it's always shown us to be a bit more higher priced per ounce,” he said.

New products

According to Friendly, General Mills aims for 4.5% to 5% sales from new innovations every year.

In January, it will launch Honey Nut Cheerios Medley Crunch, which it claims carries heart health benefits, and a berry cobbler variety to its granola brand Cascadian Farm made from ancient grains.

Other new cereal products include Fiber One 80 Calorie, a low calorie chocolate cereal and Peanut Butter Toast Crunch, which builds on the firm’s successful Cinnamon Toast Crunch franchise.

Upping marketing spend

During the conference call, Friendly said to analysts and investors that first half cereal sales and market share were lower than the same period last year.

"Other players in the category had more merchandising activity in the first half of the year. We've got more merchandising planned for the second half, including introductory support for our new items," he said.

He said the company expected sales growth for its whole grain cereals, that it calls Big G, in the second half of the year.

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