CEO of General Mills says business will continue to be conservative in M&A
Minneapolis, Minnesota Chairman and CEO Jeffrey L. Harmening stated that General Mills, Inc. will only make purchases “at pricing that makes sense for our investors.”
Mr. Harmening made the remark on September 16 in response to a query from an investment analyst pointing out that Hostess Brands, Inc. was implicitly but clearly mentioned when it was mentioned that General Mills was reportedly interested in purchasing a significant snacking company. An analyst questioned whether snacking was a “key area” that General Mills intended to expand in, given that J.M. Smucker Co. emerged as the victorious suitor for Hostess (at a price of 3.3 times sales and 17 times EBITDA).
General Mills’ merger and acquisition goals “really haven’t changed,” according to Mr. Harmening, who declined to comment on “a rumour or what has or hasn’t transpired in the marketplace.”
He continued, “I will also remind you that we have also stated that we have been disciplined and that we are disciplined.” Therefore, if we find something in an acquisition that interests us, we will definitely pursue it—but only at a price that benefits our investors. Therefore, I want you to know that our position hasn’t really altered despite everything that has happened in M&A over the past few months. I’ve also noticed comments asking whether food firms, whose sales are declining, are suddenly considering M&A. No, is the response. We don’t engage in short-term gaming, by the way. We purchase the brands we enjoy and keep them for a long period. For 165 years, we have been growing, and we will keep growing in the future. We consequently need to fill in the gaps because it won’t be the case that we observe volumes moving in a particular direction. It really isn’t in the cards for us.
Indirect remarks on another impending industry transaction—the division of Kellogg Co.’s breakfast cereal business into two companies—were also made by the General Mills officials during the call. In response to a query on General Mills’ ability to “continue to gain share” in the future in a category that is not seeing much growth, they provided their thoughts.
Breakfast cereal continues to be the most popular option for breakfast in the morning, making up around 25% of breakfast sittings, according to Mr. Harmening. He added that the business has increased its market share for five years running, with a 20% growth rate throughout that time.
“I believe it is 47%, but we have almost 50% of the category’s new product volume,” he stated. And General Mills is the source of four of the previous five significant items. Thus, our innovation is sound. We’re growing and doing a good job of developing our stocks. My goal for our cereal company is to gradually expand each year and, ideally, gain a little portion of the market.
“You’ll have to ask the rest of the competitors” was Mr. Harmening’s response when asked what other people thought of the category.
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However, we enjoy cereal, he added. “We take pride in our brands. I adore the way we have been battling.
Cereal was described as a “great category” by Jonathan J. Nudi, president of North American Retail, who also pledged that General Mills will “keep investing.”
He went on, another common query we field is, “What would happen if one of our main rivals narrows their focus? And we would inform you that this is very advantageous. Historically, the category has performed better when its two main rivals have provided marketing and innovative support for the category. Thus, we sincerely hope that everyone participates and that as time goes on, we can expand those categories.