General Mills profits drop 16%: ‘We can learn a lot from entrepreneurs’, says CEO
Net profits for Q3 were down 16.4% to $343m compared to the previous year. Net sales dipped 1% to $4.35bn.
Despite performances in US cereal and snacks improving slightly, Ken Powell said a ‘consumer first’ new product development strategy, inspired by start-ups, could be the ticket to a turnaround.
“Over the last half dozen years, we have been looking very closely at the entrepreneurs that we compete with; the smaller companies that we compete with, and we have studied in detail how those kinds of small companies develop and bring their products to market,” he told analysts in the company’s earnings call this week.
Downsizing product testing
Powell said such research had served up key learnings for General Mills.
“...Entrepreneurs who develop those products are very, very, very close to the ultimate consumer who will buy the product. Sometimes, the consumer is themselves or family members.
“And so, that learning has really underscored our desire to put our marketeers and our consumer research specialists in the homes of the people who will be buying our products.”
Moving away from big and broad-scale product testing, he said, meant marketing teams were better included in the NPD process and, most importantly, were closer to the consumer.
Fast prototypes
In addition, Powell said General Mills had sped up its prototype product development.
This, he said, meant the company could get something tangible in front of the consumer at an early stage helping to be more “on target” with developments.
“These are the lessons that we’re learning form these small companies… We have changed quite a bit the approach that we take on new product development, very much learning from small companies and entrepreneurs.”
Yogurt shines, protein cereal follows
Powell said results of the ‘consumer first’ NPD approach could be seen best in yogurt where brand renovation, new products and marketing investment had driven a 43% Q3 rise in Greek yogurt sales, for example.
“Our cereal business is following a similar playbook. We’re investing in core brand renovation, innovation and consumer marketing to keep our cereal brands relevant with evolving consumer preferences,” he said.
Retail sales of Nature Valley, Cascadian Farm and Chex granolas, for example, were up 26% in the last quarter and protein cereals were in growth.
“We’re developing plans for fiscal 2016 that are designed to build on this momentum and expand the impact of our consumer first strategic focus,” he said.
