General Mills is positive about the global cereal market.
Chief financial officer Donal L. Mulligan stated that although General Mills, Inc. may not be looking to its U.S. cereal sector to lead its development, the Minneapolis-based firm remains optimistic about the cereal category abroad.
During a presentation on June 11 at the Deutsche Bank dbAccess Global Consumer Conference in Paris, Mr. Mulligan informed analysts, “Our joint venture with Nestle, with (Cereal Partners Worldwide), is back to low single-digit growth globally.” In the United States, our away-from-home business is growing by mid-single digits. Additionally, our U.S. retail business is back on the rise, even in Nielsen channels, where we have seen some increase over the past 52 weeks that is likely to be 50 or 100 basis points higher when you include itunmeasured channels. We therefore feel optimistic about our current momentum.
According to Mr. Mulligan, General Mills does not anticipate its U.S. cereal business to grow at the fastest rate, but it does anticipate steady growth and the high cash generation margins that are typical of that industry. Regaining some degree of growth in U.S. cereal is “encouraging,” he said.
“It’s especially comforting as we move forward because we’ve been doing it for a few years in a row now,” he said.According to Mr. Mulligan, a variety of variables, such as product reformulation, innovation, developing alliances, and environmental changes, are driving the rise in the cereal industry.
“There was a decline in American households with children following the recession,” he clarified. “Cereal consumption is high among households with children, which was a challenge for us for several years. Now, it’s starting to balance out and even take a slight positive turn. Thus, that not only helps now but also gives us some hope for the future.
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However, Mr. Mulligan noted that more than only the surroundings had altered. In recent years, General Mills has also taken action to reformulate its goods in order to eliminate artificial flavors, colors, and sweeteners—what Mr. Mulligan called “the veto votes.” He claimed that General Mills’ reformulation initiatives have made it easier for consumers to reach out to them when they had previously expressed concerns with particular cereals, which has led to growth.
Marketing alliances have also helped General Mills. According to Mr. Mulligan, the company’s Cheerios business has been successfully supported by a two-year agreement with talk show personality Ellen DeGeneres. The collaboration, he said, is centered on doing good deeds.Finally, innovation is a growth-promoting force.
According to Mr. Mulligan, “We’ve got some good innovation, whether it’s in, like, smaller pockets of the business, like our granola and muesli, consumers looking for satiety in breakfast.” We are the industry leaders in Nature Valley and Cascadian Farm brands. And then I said that the number of American households with children is rising, and that the rise in Hispanic households with children is a major factor in this growth. Thus, we were able to get in front of them very directly by using a variety of channels and being present in the appropriate stores, but we also see innovation as a chance. We produced a Churros variant of the highly popular product Cinnamon Toast Crunch, which is enjoyed by a wide range of American consumers. Thus a little bit more accustomed product shape, which has aided in encouraging more uptake.
Thus, “we believe there are still a lot of legs to go in the marketing, innovation, and product reformulation efforts that have all underpinned that growth.”