General Mills wants to keep gaining market share.
CEO Jeffrey L. Harmening describes the company’s brands as “a once-in-a-generation opportunity to drive trial,” and General Mills, Inc. is hoping to take advantage of it. Seventy-five percent of the business’s sales come from the United States, where General Mills holds or maintains a share in eight of its top ten categories. The company wants to continue growing in these markets.
During a conference call with analysts on September 22 to discuss first-quarter fiscal 2021 results, he said, “When you look at our US retail business, where we have the most robust data, not only are we attracting new consumers, but early signs indicate they have been satisfied with what they have tried and we are retaining them.” “In nine of our top ten categories in the US, our repeat rates are higher than pre-pandemic levels, and this holds true for both new and returning customers to our brands.”
One way to retain some of the new customers is to build on previous product redesign initiatives that prioritized convenience, nutrition, and flavor. Mr. Harmening also mentioned the significance of innovative projects.
“We think it’s critical to sustain our innovation pressure during the pandemic and recession, so you’ll see us introducing new products throughout the fiscal year 2021,” he stated.
Lastly, the business is keeping up its investments in e-commerce.
“We’re fueling e-commerce growth with compelling partnerships and activations because we know e-commerce purchases are extremely sticky,” Mr. Harmening remarked. “In order to retain these new customers in the Blue brand, we are contacting first-time Blue e-commerce shoppers in Pet and urging them to switch to subscription-based purchasing. We are increasing foot traffic to our stores in China by using e-commerce for pickup and delivery.
“In our US retail company, we are using historical purchase data to go out to customers who have fallen out of favor, which is increasing the frequency of purchases and increasing household penetration. We are certain that these steps will enable us to optimize the number of customers we retain in the General Mills franchise, which will result in higher long-term growth, even though we don’t anticipate keeping all of the new customers we’ve acquired in the last six months.
With any luck, management’s efforts will enable them to produce sales and earnings comparable to the first quarter of fiscal 2021, which concluded on August 30. In comparison to the same time last year, net income increased 21% to $638.9 million, or $1.04 per share on common stock, a 23% increase.
According to the firm, the North American Retail Segment of General Mills saw a 14% growth in sales, totaling $2.7 billion, mostly due to higher at-home demand. Sales of the business unit increased 31% in the US for meals and baking, 10% in the US for cereals, 5% for yogurt, 3% in Canada, and 2% in the US for snacks.
The North American Retail business unit has acquired roughly 30 additional external manufacturers, adding about 25% more external capacity, in light of the unstable market conditions.
“Even though these sales have a lower profit margin, we still like their profitability because it comes at a higher cost in our internal capacity,” Mr. Harmening stated. “More importantly, in the event that demand moderates, we can reduce costs by utilizing external capacity.”
Sales increased for General Mills’ Pet and foreign business divisions during the quarter. At $392 million, sales in the Convenience & Foodservice business decreased by 12%.
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Although the management did not provide full-year guidance, it did provide its observations on the performance of the second and fourth quarters.
Chief financial officer Kofi A. Bruce stated, “We expect our North America Retail categories to grow in the high single-digit range, similar to the rate of growth we saw in August.” “As we look further out, we anticipate lower net sales in the fourth quarter, primarily due to the challenging comparison to the same period last year, when net sales grew 21% behind the initial surge in at-home demand driven by the pandemic, the 53rd week, and the additional month of results in our pet segment.”
Mr. Harmening continued, saying that the business will use its “lessons” from the previous recession to support General Mills’ brands and expansion strategies.
He stated, “We anticipate higher year-over-year brand investments in fiscal ’21, including media and investments in capabilities like data and analytics, e-commerce, and strategic revenue management.” Lastly, we keep budgeting for continuous pandemic-related health and safety costs. Although they have decreased since the fourth quarter, we anticipate that they will persist until the 2021 fiscal year.