Although General Mills knows it has a yogurt problem and has been scrambling to catch up with its more nimble competitors, its sales in the category plummeted 15% in June-to-August period, its 2017 fiscal first quarter, the company reported yesterday. It’s telling consumers — and investors — to hold on, things will get healthier.
“General Mills was clobbered on Yoplait Light and Yoplait Greek 100, reports Kristen Leigh Painter for the Minneapolis Star Tribune. “Low-fat and low-calorie foods have fallen out of vogue with younger consumers who are looking for nutrient-dense foods that are more filling. Many of the low-calorie products that soared in popularity in the 1980s and 1990s replaced fat content with sugar. Now, sugar is the dirty word among many U.S. consumers who are looking for foods rich in protein and not afraid of fat, like Greek.”
“We were the first to market in the light Greek segment and built a strong early position. However with significant competition in this segment, our products have become less differentiated,” says GM CEO Ken Powell in a transcript of the earnings call on Seeking Alpha. “Our reformulated line of Yoplait Greek 100 products will contain up to 40% more protein, but are still only 100 calories and contain just nine grams of sugar, and we have dramatically improved the taste of these products while adding more protein, which is not an easy thing to do.”
The new products will be available “in time for weight management season in January,” Powell added. Indeed, “by the end of the fiscal year, 60% of the company’s yogurt portfolio will have been renovated,” Bridget Christenson writes in a company blog post that contains five positive “takeaways” starting with “natural and organic businesses are driving excellent growth.”
GM “came out a few weeks ago and were pretty abject that they just didn't have the horses when it came to yogurt,” The Street's Jim Cramer pointed out on CNBC's “Squawk on the Street” yesterday. “And the release comes out today and they don't have the horses because of yogurt.”
Overall sales fell 7% to $3.9 billion in the quarter but GM’s 4% drop in net profit was better than analysts expected “as lower expenses and cost-cutting programs helped limit the impact of weak sales in the United States,” writes Reuters’ Gayathree Ganesan. “The maker of Cheerios cereal has been cutting jobs and selling less profitable brands — such as the Green Giant frozen vegetable business — amid falling sales as customers increasingly shift to foods perceived as healthier. Cost of sales for the first quarter ended Aug. 28 fell 6% to $2.5 billion, while selling, general and administrative expenses were down 12%.”
Like Campbell Soup CEO Denise Morrison before him, GM CEO Ken Powell says his company “is paying close attention to the ‘shifting values’ of customers, and making sure it's giving people what they want,” writes the AP’s Candice Choi.
“These changes in attitude are not elusive,” Powell tells Choi, recognizing that the “food industry has become more ‘entrepreneurial’ … with an increase in the number of smaller brands vying for customers.”
On the positive side, “most of General Mills’ organic and natural products saw immense growth” in the quarter, the Star Tribune’s Painter reports. “Larabar, a line of snack bars made entirely out of fruits and nuts, grew a staggering 48% and Annie’s Homegrown organic products were up 28%. In fact, the company’s snacking business, which includes other brands like Nature Valley, was the only U.S. segment that saw positive year-over-year growth in this category.”
Also, “General Mills’ cereal overhaul appears to be working, with retail sales of cereals without artificial colors and flavors up 3% in the U.S. in the recent quarter,” Annie Gasparro reports for the Wall Street Journal.
“We think we can continue to drive improvement in our cereal business” through the renovation process, Powell said in the company blog post.
“Consumers have changed relatively quickly,” president and COO Jeff Harmening tells Gasparro in an interview. “Certain fads come and go, but satiety, the focus on protein — we know these things aren’t fads. They are trends that are here to stay.”
Then again, as the AP’s Choi points out, “keeping people interested in products isn't always about jumping on health trends.” Making Cocoa Puffs “more chocolatey” boosted sales 20% in the quarter, Harmening tells her. And adding more cinnamon to Cinnamon Toast Crunch also proved popular.