Out of step with current food trends: General Mills dragged down by slumping snack sales
The Cheerios maker posted a 2% drop in revenue in its North American retail unit, the division that includes Annie’s Homegrown, Chex, Fruit Snacks, Fiber One and Nature Valley. Although it said sales remained steady for cereals, baked goods and yogurts, it was not enough to offset the weakness in snacks.
However, it did report that Larabar and Epic - the company's natural brands - performed well.
Organic net sales, which excludes revenue from acquisitions, fell to $2.34bn in the quarter – its lowest in nearly three years.
The company’s Europe and Australia division also saw sales dip by 10%.
Net sales rose 7% to $4.16bn, but missed analyst forecasts of $4.24bn.
The rise was largely fueled by a 38% increase in sales of Blue Buffalo pet foods. General Mills acquired Blue Buffalo last year to diversify its portfolio and reduce its dependence on snacks, cereals and yogurts.
Operating profits also soared, by 82%.
Getting back on track
According to General Mills’ CEO Jeff Harmening, the Fiber One bars have fallen ‘out of step’ with current weight loss and diet trends in the US.
There has been a shift in consumer tastes as people veer towards healthier foods.
The company said it is ramping up its R&D spend on new variations of granola and snack bars. It plans to launch a refreshed Fiber One to address the trend that goes beyond calorie counting by tracking the ratio of macronutrients like carbs, proteins and fats.
It also said it will also do a better job of capturing the back-to-school marketing moment with its Nature Valley products.
“We need to get snacks back on track,” said CFO Donal Mulligan.
“You’ll see us invest behind some really good ideas on bars and snacks.”
