The conference call occurred within the same week when Hershey and Campbell Soup decided to acquire Amplify Snacks and Snyder’s-Lance respectively. Analysts consider both deals as large-scale acquisitions, and they signal that big food companies are tapping into smaller, craft, and artisanal brands to up their innovation.
“The scale [of our business] is what’s important,” Harmening said. “We think that having leading positions and good categories is really what drives growth.”
“M&A is part of our growth strategy, but is only one of the three pieces,” he added. “The first piece and most important piece is being competitive in the markets we currently compete in… The second piece is accelerating some certain categories.”
Harmening mentioned General Mills is “increasingly confident” in its ability to execute M&A thanks to its previous acquisition efforts and the current financial capacity.
“Whether it’s Annie’s or Carolina yogurt, which we acquired recently… we have demonstrated our ability to grow businesses. And in the case of Annie’s, we’ve actually accelerated that growth,” he said. “With a lot of our restructuring behind us, we feel like our ability to integrate businesses will certainly be improved.”
Q2/half-year financial performance
General Mills’ net sales totaled $4.2bn in Q2, 2018, increasing by 2% compared to the same period last year, while its organic net sales increased 1%, driven by sales mix and net price realization, according to the company.
The company’s joint venture with Nestlé, Cereal Partners Worldwide, saw a 2% decline in net sales during the quarter due to volume declines in the UK, yet partially offset by “strong performance in Asia, Middle East and Africa region,” said General Mills.
For first-half fiscal year, General Mills posted total net sales $8m, decreasing by 1% year-over-year. Additionally, its US e-commerce business grew 82%.
“As we turn our attention to the second-half of fiscal 2018, we expect to continue to drive strong seasonal merchandising performance, as the soup and baking key seasons extend through the third quarter,” CFO Don Mulligan said.
“We have an excellent back-half innovation lineup and we expect our new products sales will continue to outpace last year,” he said.
North America retail
General Mills reported its North America retail’s net sales in Q2 grew 1% year-over-year to $2.77bn thanks to a 7% increase in US cereal, and a 5% increase in US snacks.
However, fiscal year-to-date, US cereal net sales and retail sales are “roughly flat” to last year, said Jonathan Nudi, president of General Mills North America retail segment.
“US snacks net sales increased 5% in the quarter, with growth on Lärabar, Nature Valley, and fruit snacks, partially offset by declines in Fiber One,” he said. “Canada net sales are up 1% in constant currency and net sales for the US meals and baking operating units were down 2%.”
Fiber One is a “challenging” brand, Nudi pointed out.
“We’re working to rebuild the innovation pipeline of Fiber One, including the launch of eight new items in January , featuring four flavors of Fiber One Bites and we’re supporting these launches with our TV and digital advertising,” he said. “We have some great new indulgent offerings on Nature Valley as well.”
For full fiscal year 2018, General Mills’ organic net sales growth is expected to be in a range between flat and down 1%.