QUOTE AND NEWS
Wall Street Journal  Mar 6  Comment 
After buying furniture companies, General Mills, Masco and S&H Green Stamps creator flopped or gave up when profits proved meager.
Financial Times  Mar 5  Comment 
General Mills and Coca-Cola back plans to conserve water supplies as drought hits companies
TheStreet.com  Mar 1  Comment 
NEW YORK ( TheStreet) -- To spur a little growth, some of the world's biggest food companies should step outside of their fancy R&D labs and head downstairs to the archive room. The list of discontinued products from major food companies is...
Jutia Group  Feb 23  Comment 
[PR Newswire] - MINNEAPOLIS, Feb. 23, 2015 /PRNewswire/ -- The Munchies: People's Choice Food Awards returns for its fourth year as Tablespoon.com, a General Mills website, honors 100 of the top food experiences in America ... Read more on this. ...
Jutia Group  Feb 19  Comment 
[PR Newswire] - MINNEAPOLIS, Feb. 19, 2015 /PRNewswire/ -- General Mills has improved the health profile of 76 percent of its U.S. Retail sales volume since 2005, when it first established its "Health Metric" to encourage progress on nutrition and...
Clusterstock  Feb 18  Comment 
The Consumer Analyst Group of New York is in Boca Raton talking shop with the biggest food companies in the US. Analysts heard from General Mills, which broke down cereal eating habits by age. From 1996 to today, little seems to have...
MarketWatch  Feb 17  Comment 
General Mills Inc. on Tuesday reaffirmed its financial goals for fiscal 2015, predicting that net sales based on constant currency levels would rise in the low single digits from $17.9 billion in fiscal 2014. In a statement issued ahead of a...
Benzinga  Feb 3  Comment 
Brian Sozzi of Belus Capital Advisors recently interviewed General Mills, Inc.'s (NYSE: GIS) Executive Vice President and Chief Operating Officer of U.S. Retail Business Jeff Harmening for an article on The Street. Harmening told Sozzi that...
TheStreet.com  Feb 3  Comment 
  NEW YORK (TheStreet) -- General Mills and Kellogg's   are aiming to reverse stale results in their bread-and-butter businesses this year by offering more protein-packed nuts in granola bars or a hearty serving of exotic-sounding...




 


General Mills (NYSE: GIS) is one of the largest packaged food producers in the world by revenue.[1] The firm owns some of the most recognizable brands in the grocery store, including Cheerios, Progresso Soup, Hamburger Helper, and Fruit Roll-Ups. U.S. retail accounts for 70% of sales[2], but its international segment, helped by a joint venture with Swiss food giant Nestle SA, is growing fast as the company now operates in more than 130 countries worldwide.

Like many other food and beverage companies, General Mills faces a market marked by increasing commodities prices. The company is a large purchaser of corn and wheat, and the rise in the price of oil has hurt as well. As the costs of doing business increase, General Mills must either absorb these losses or charge higher prices at the risk of losing market share. In doing so, the company has introduced new products like lower-sodium Progresso soups and Hamburger Helper singles for the microwave, while growing its reach from grocery stores into new channels like supercenters, drug and discount stores, and convenience stores. It is also expanding into fast growing markets like China, Russia and Latin America.[3]

Company Overview

The company divides its business into three core segments: U.S. retail, international, and bakeries and foodservice. The U.S. retail division is responsible for the vast majority of the company's profits and sales.

U.S. Retail (70.8% of Revenues, 83.6% of Operating Income)[4]

The company sells a line of "Big G Cereals," such as Cheerios, Total, Chex, Lucky Charms, and Kix. It also sells a number of "convenient dinner products," including Betty Crocker and Hamburger Helper dinner mixes, Progresso soups, and Green Giant vegetables. Since its purchase of Pillsbury, General Mills has also offered Pillsbury refrigerated dough products. The company also distributes a number of other baking products under the Betty Crocker name, as well as Gold Medal flour. General Mills produces a number of snacks, including Nature Valley granola bars, Chex Mix, Fruit Roll-Ups, and Fruit By The Foot. General Mills also sells Yoplait and Colombo yogurt.[5]

International (18.3% of Revenues, 7.7% of Operating Income)[6]

General Mills' international unit generates 17 percent of the company's sales[7]. General Mills makes its products in 17 countries and sells them in more than 130. General Mills sells its cereals in countries outside the United States and Canada primarily through a joint venture with Swiss food giant Nestle. Both companies control 50 percent of Cereal Partners Worldwide, which sells the cereals around the world. General Mills also has a second joint venture with Nestle with regard to the Haagen-Dazs ice cream brand. Under the agreement, General Mills distributes Haagen-Dazs ice cream internationally while Nestle sells Haagen-Dazs products in the United States and Canada[8].

Supported by strong sales of Haagen-Dazs ice cream, popularized by the company's upscale stand-alone scoop shops, and the Wenchai Ferry frozen foods brand, General Mills is looking to rapidly expand its China revenue stream as it increases its geographic distribution throughout the country.[9]

Bakeries and Foodservice (12.0% of Revenues, 8.7% of Net Income)[10]

In its bakeries and foodservice division, General Mills sells mixes, frozen dough products, and flour to restaurants, cafeterias, food service distributors, and bakeries.


Net sales (Billions)
Segment 2005 2006 2007 2008 2009 2010 % sales
U.S. Retail $7.7[11] $8.0[12] $8.5[13] $9.1[14] $10.1[15] $10.3[16] 70%
International $1.7[17] $1.8[18] $2.1[19] $2.56[14] $2.6[20] $2.7[21] 18%[22]
Bakeries and foodservice $1.7[23] $1.7[24] $1.8[25] $2.02[14] $2.05[26] $1.8[27] 12%[28]

Trends & Forces

Rising Food & Energy Costs Pressure Margins

General Mills buys a number of commodities in order to manufacture its products, including cereal grains, sugar, dairy products, and fruit. Changes in the prices of such raw materials could negatively impact total production costs. Because General Mills operates in such a competitive environment, the fear of losing market share limits the company from charging its customers higher prices. To mitigate this ever-present risk, the company purchases commodities in advance using futures contracts and hedges the risks associated with buying commodities.

Supermarket Consolidation Reduces Bargaining Power

A steady trend toward supermarket consolidation is concentrating the buying power of General Mill's largest customers. General Mill's largest customer is Wal-Mart Stores. Although no other company made up more than 10 percent of sales, the company claims that its five largest customers in the U.S. retail division makes up over half of the segment's sales and the five largest customers in bakeries and foodservice made up 45 percent of total sales.[29] Because these large customers are so important to sales, General Mills has less bargaining power when determining wholesale prices.

New Healthy Products Draw New Customers

Increasingly, consumers are buying products that claim to promote better health. Food companies like General Mills have had to adjust their product portfolios in order to adapt to this consumer trend. In the cereal category, General Mills has added whole grains to many of its cereals and has increased the amount of dietary fiber and iron in its reduced sugar cereals. At least three of its brands, Wheaties, Total, and Cascadian Farms, are considered among the leaders in healthy cereals.

Competition

In addition, in order to compete with an increasing array of private label brands produced by private label manufacturers and supermarkets, General Mills has had to increase advertising expenditures.

Danone, the maker of Dannon yogurts, is competing with General Mills in its fastest growing business—yogurts. Yoplait controlled 40 percent of the American market for yogurt. Yoplait's sales growth was 14% vs.the overall market which grew 8%. Meanwhile, General Mills is defending its market share from Campbell Soup—which introduced a range of low-sodium soups — by introducing its own line of healthier, low-sodium Progresso soups.[30]

Company Comparison
Company Net Revenue (in millions) International Rev as % of sales Gross Margin %
General Mills $14,797 18% 39.7%
Kellogg $12,575 32.3% 42.9%
Kraft $40,386 41.4% 36.2%
Danone $20,938 N/A 55.0%


Market Share

Although General Mills is the second largest cereal maker in the United States after Kellogg, its products are still highly susceptible to price cuts and promotions by its competitors. Over the last few years, partly due to this competition, the company has lost market share in its cereal business. Kellogg now controls about one-third of the market, followed by General Mills with 31 percent and Quaker (a division of PepsiCo) and Post (a division of Ralcorp Holdings (RAH)) with a combined 30 percent.[31] Kellogg has also launched more cereals than General Mills recently. Kellogg controls 50% of the market for new cereals in the United States. New cereals are particularly important since manufacturers generally charge higher prices for them than for older products.

References

  1. GIS 2010 10-K, Item 6: Selected Financial Data, p. 17
  2. GIS 2010 10-K, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations, p. 25
  3. General Mills 2007 10-K Letter to Shareholders
  4. GIS 8-K, 6/29/10
  5. General Mills 2007 10-K Portfolio p. 6-15
  6. GIS 8-K, 6/29/10
  7. General Mills 2007 10-K General Mills at a Glance
  8. General Mills 2007 10-k General Mills at a Glance
  9. General Mills Sees Rapid Growth in China, Food Business News, 2/23/11
  10. GIS 8-K, 6/29/10
  11. General Mills 2005 10-K General Mills at a Glance
  12. General Mills 2006 10-K General Mills at a Glance
  13. General Mills 2007 10-K General Mills at a Glance
  14. 14.0 14.1 14.2 GIS 2008 10-K  
  15. GIS 8-K, 6/29/10
  16. GIS 2010 10-K, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations, p. 25
  17. General Mills 2005 10-K General Mills at a Glance
  18. General Mills 2006 10-K General Mills at a Glance
  19. General Mills 2007 10-K General Mills at a Glance
  20. GIS 8-K, 6/29/10
  21. GIS 2010 10-K, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations, p. 25
  22. GIS 2010 10-K, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations, p. 25
  23. General Mills 2005 10-K General Mills at a Glance
  24. General Mills 2006 10-K General Mills at a Glance
  25. General Mills 2007 10-K General Mills at a Glance
  26. GIS 8-K, 6/29/10
  27. GIS 2010 10-K, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations, p. 25
  28. GIS 2010 10-K, Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations, p. 25
  29. GIS 2010 10-K, Item 1: Business, p. 6
  30. General Mills 2007 10-K Portfolio p. 10
  31. Kellogg Is The Cereal Leader But For How Much Longer?, Seeking Alpha, 10/27/10
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