Feb 19, 2013 • By

General Mills ‘top 10’ from CAGNY

Consumers are weathering headwinds like never before – but the latest retail sales report last week indicates consumers are hanging in there with modest growth in consumer spending.

The consumer was the focus today at the annual conference of the Consumer Analyst Group of New York (CAGNY), where analysts covering the consumer products sector listened to companies like General Mills, Kraft, and ConAgra discuss consumer and business trends in the industry.

At General Mills, we know that many consumers are financially strapped and anxious. However, we also know consumers tend to be resilient and come up with their own solutions to make their lives and choices fit their values. At the grocery store, consumers are seeking health, convenience, taste, and above all, value. And as the analysts at this week’s conference can attest, shareholders are seeking value in their investments as well.

Today at CAGNY, General Mills Chairman & CEO Ken Powell said introducing an array of new food products is job one for a branded food company.

“It’s up to us to generate the consumer sales that make our categories grow,” said Powell. “So we’ve focused on creating high quality, great-tasting foods. And we’ve put particular focus on ideas that appeal to the fastest-growing U.S. consumer groups. These are older adults, the millennial generation and multicultural families.”

Powell said products General Mills has introduced in just the last 20 months have generated well over a billion dollars in U.S. Retail sales – including products like Fiber One 90-calorie brownies and Peanut Butter Multigrain Cheerios.

Other General Mills presenters today included Don Mulligan, chief financial officer; Ian Friendly, chief operating officer and executive vice president, U.S. Retail; and Chris O’Leary, chief operating officer and executive vice president, International.

I spoke to Don about our presentations, in this video interview:

Much ground was covered during today’s investor presentation, so I thought I would provide a fun “General Mills CAGNY Top 10” to give readers a flavor of what our executives told investors:

1) We see the operating environment as much improved from when we met here at CAGNY a year ago. We compete in 25 food categories across the refrigerated, frozen, and center sections of the store. In our categories, volumes overall have improved as pricing has stabilized.

2) Nearly half of all U.S. consumer food spending is on food eaten away from home, and our profitability in this $2 billion business segment for General Mills has more than doubled in recent years. We’ve launched innovative new products, and we’ve invested in a powerful direct-selling organization – now one of the top-rated sales teams in the foodservice industry according to Kantar.

3) Cheerios is by far the largest franchise in the U.S. cereal market, with 13 percent of category sales. But the strength of our cereal portfolio extends to other brands as well:

  • Chex is one of the fastest-growing brands in the cereal aisle, thanks to several varieties that are gluten-free. Retail sales have increased at a double-digit annual rate in recent years, and are up another 9 percent this year.
  • Cascadian Farm organic cereal is growing at a double-digit rate, and is approaching $100 million dollars in retail sales.
  • Both Lucky Charms and Reeses Puffs are growing at a mid-single-digit rate. So we are seeing terrific performance on many of our established brands.

4) Launched last fall, all six original flavors of new Yoplait Greek 100 are currently turning in the top third of the total yogurt category. Year-to-date, our Greek yogurt sales are significantly outpacing growth of the segment, and we’ve picked up nearly 3 points of market share.

5) Our sales are leading growth of the grain snacks category – since 2008, we’ve added 9 points of market share. New Fiber One Protein bars have at least 6 grams of protein per serving, and 20 percent of the adult daily value for fiber – at 140 calories or less per bar. And in the convenience store channel, our Nature Valley Oats and Honey bar is the top-turning grain snack bar.

6) International segment sales will exceed $5 billion dollars this year. And if you add in our proportionate share of joint venture revenues, total International sales will be north of $6 billion dollars. In our international business, we’ve made several acquisitions over the past 20 months – most notably, the international Yoplait yogurt business and Yoki. But growth from our base business has been the real story. Excluding acquisitions, our sales have been growing at a high single-digit compound rate over the past five years.

7) We expect our sales in China to reach $900 million by 2015. Our Wanchai Ferry frozen foods line has been growing at a 26 percent compound rate over the past five years, and is now available in more than 130 cities across China. We’ve expanded the product line beyond dumplings to include frozen noodles, tangyuan and wonton. And we’re opening 50 new Häagen-Dazs cafes in China this year, while our annual mooncake business continues to expand.

8) New businesses acquired since 2011 generate more than $2 billion in annualized net sales. In fiscal 2014, we expect the new businesses we’ve acquired to contribute approximately 15 cents worth of operating earnings per share. Our recent acquisitions give us new products that are a good fit with our company portfolio. We’ve gained infrastructure and scale in key emerging markets.

9) Over the most recent five years, return to General Mills holders significantly outpaced the broader market. Over these last four quarters, stock price appreciation and dividends combined to generate a double-digit return to holders of General Mills stock. Our dividends have increased at an 11 percent compound rate in recent years. I can confirm today that our plans for 2014 include a further dividend increase.

10) We see stronger growth in our immediate future. In December, we raised our earnings outlook for fiscal 2013, to a range of $2.65 – $2.67 per share. And in fiscal 2014, our plans call for high single-digit earnings-per-share growth, consistent with our long-term model. We expect this business growth, coupled with an attractive dividend yield, will result in double-digit returns for investors.