General Mills Focuses On Marketing Efficiency
General Mills is slowing its media spending growth but increasing its reach efficiency, the company reported at the Morgan Stanley Global Consumer and Retail Conference.
During its last three fiscal years, General Mills increased its U.S. retail media spending by 85%, with spending up 17%, 30% and 22% in 2008, 2009 and 2010, according to Ian Friendly, COO of the company's retail business.
In the first quarter of its fiscal 2011, retail media spending rose 6%, and Q2 spending is somewhat below that level -- versus a hefty 29% spending increase in last year's second quarter. However, the company's gross rating points for this year's second quarter grew by double digits, and are also projected to increase by double digits for the total year, Friendly said. (General Mills will report fiscal 2011 Q2 financials on Dec. 16.)
General Mills' investment in digital media has tripled over the past three years, and newsletter subscribers and visits to its core Web site are up 26% and 42%, respectively, versus last year, according to the COO. "Digital media allow us to sharply target those consumers who most want to buy our products, so it offers a very high return on investment," he noted.
One current emphasis is on reviving Progresso soup growth -- in part through "taste-focused" consumer marketing, such as the new "You Gotta Taste This Soup" TV campaign showing soup lovers calling Progresso's soup kitchen via soup-can phones. Beefed-up Facebook and other social media efforts, and a recent in-store sampling program, also helped drive a 3% increase in the soup brand's retail sales during the 13 weeks ending Oct. 30, according to Friendly.
The company is also "staying disciplined" on the trade spending front, he said: Trade cost-per-case declined in each fiscal between 2006 and 2009, and rose just 1% last year, despite heavy promotional activity. This year's trade spending level will be comparable to last year's. Friendly noted that retailers have ranked General Mills No. 1 on the growth/profitability metric in the Kantar PoweRankings for two years in a row.
Higher input costs -- jumps in grain and other commodities prices -- are keeping the company focused on cost savings, pricing and product mix management, Friendly said. The company's total input costs were down 3% in fiscal 2010, but are projected to rise 4% to 5% in the current fiscal.
General Mills recently raised prices on some cereal brands and baking products, and competitive food makers are expected to do the same. Rising input cost pressures will reduce the heavy promotional activity that has driven down cereal prices and hurt the category's sales performance, Friendly said.
General Mills' U.S. cereal sales were flat last year, and were down 5% in this year's first quarter and 1% in October, according to AC Nielsen. The company's average unit price for the 52 weeks ending in October was down two cents, and the average for the category as a whole was down eight cents. However, General Mills' dollar share in the category rose 0.4 points in the 12 months through September, to 31.4%, and gained another 0.4 points in October.
The company expects positive cereal sales for this year's first half, reflecting both pricing and product innovations such as the chocolate and multigrain varieties of Cheerios, said Friendly, adding that the category as a whole is expected to return to low single-digit sales growth. Product launches supported by marketing will continue to drive growth, he said. For example, in January, the company will debut a national media campaign promoting Big G Cereals as sources of whole grain and another national campaign promoting gluten-free varieties of Chex cereals, and introduce Cinnamon Burst Cheerios (positioned as "fiber with all-family appeal").
Private-label competition in key General Mills categories is also less intense. Dollar sales of private-label cereal and dry packaged dinners were down 7% and 6%, respectively, and private-label yogurt, refrigerated baked goods and soup sales were down between 2% and 3% during the 52 weeks ending in October, according to Nielsen.
Now and longer-term, General Mills and other food manufacturers should also benefit as continued economic pressure and demographic trends result in continued growth in food eaten at home, stressed Friendly. At-home consumption accounted for 51% of food expenditures in 2008 (versus 49% spent on away-from-home meals) and is projected to grow to 53% by 2015, according to Technomic.
General Mills' overall first-half fiscal 2011 performance is in line with "strong performance" in last year's first half, Friendly reported. The company has reaffirmed its full-year EPS guidance of $2.46 to $2.48.