Dive Brief:
- Following flat North American retail sales for fiscal year 2018 and a similar scenario projected for 2019 in organic net sales, General Mills is focusing on debuting product innovations and potentially divesting businesses making up roughly 5% of total sales, according to Food Business News. The company, however, said it has no specific timeline in mind.
- Jeffrey L. Harmening, chairman and CEO of the CPG company, said at a July 11 annual investor day that divesting weaker segments of the business will improve growth rates, Baking Business reported. He added that General Mills anticipates 5% cost inflation during the current fiscal year. He also announced plans to shed as many as 625 jobs by spring 2019.
- The company plans to introduce new products in 2019, including Cascadian Farm honey crunch breakfast cereal made from Kernza (a type of wheatgrass), Nature Valley granola bites, and a Pillsbury stuffed meatball and pepperoni submarine sandwich.
Dive Insight:
As the company looks to reinvigorate its profit picture for 2019, General Mills is pouring its investments into innovation. But its focus does not appear to be appealing to the growing number of health-conscious consumers, like many other CPG companies.
Since its more sugary cereals like Cinnamon Toast Crunch Blasted Shreds and Lucky Charms Frosted Flakes have recently done well, General Mills seems to be at least partially banking on indulgent products holding the key to greater profitability. The Minneapolis-based company plans to invest more in its popular Honey Nut Cheerios and Chocolate Peanut Butter Cheerios. In contrast, its competitor, Kellogg, pledged in November to reduce sugar by up to 40% in kids cereal in the U.K.
While its cereals may be getting sweeter, its yogurts are not. The company recently released YQ by Yoplait, made with ultra-filtered milk and featuring less sugar. General Mills likely hopes the new line, combined with innovations in its Oui yogurt brand, may help the company's disappointing U.S. yogurt sales, which continue to drop amid tough competition from Chobani and Danone.
In the snack segment, General Mills is rolling out Nature Valley granola bites, an Epic Performance Bar with 12 grams of protein and a lineup of Larabar Kid products focused on the children's market — and it's expanding the Goodbelly probiotic bar and its Fiber One product. In the ready-to-eat segment, General Mills has introduced a Pillsbury Stuffed Waffle at 7-Eleven stores and will bring the Pillsbury Stuffed Meatball and Pepperoni Sub there this fall. The company is also planning to debut Totino's Pizza Rolls nationwide in convenience stores.
General Mills could be gambling that both indulgent treats and some with less sugar — like the YQ yogurt — are a smart way to approach innovation and appeal to a wider range of consumers looking for novelty coming from a well-known, legacy brand. Innovation could hold the key if the tried-and-true products are not enough to maintain its bottom line.
If and when the company divests any of its businesses — its Betty Crocker baking mixes, for example — it could free up resources for additional research and development and investment in product marketing, which might further boost the overall financial picture and please shareholders. Meanwhile, General Mills' recent spate of innovations, with a lot more coming, could be just the ticket to reengaging consumers, re-energizing profits and positioning the longtime cereal company as a brand on the move.