QUOTE AND NEWS
Reuters  Aug 27  Comment 
Snack food company B&G Foods Inc is in late-stage discussions to acquire General Mills Inc's Green Giant frozen and canned vegetable business, people familiar with the matter said on...
TheStreet.com  Aug 25  Comment 
Search Jim Cramer's "Mad Money" trading recommendations using our exclusive "Mad Money" Stock Screener. NEW YORK (TheStreet) -- Did you miss last night's "Mad Money" on CNBC? If so, here are Jim Cramer's top takeaways for today's trading. GIS...
New York Times  Aug 22  Comment 
A petition drive on Change.org is calling for General Mills to feature the diver Greg Louganis, quite possibly the greatest ever at his sport, on the Wheaties cereal box.
TheStreet.com  Aug 18  Comment 
NEW YORK (TheStreet) -- General Mills , founded in 1866, has paid dividends for 116 consecutive years, and it still offers investors stability and double-digit expected total returns. A business can't thrive for nearly 150 years without having...
New York Times  Aug 14  Comment 
Wheaties says it is teaming with a craft brewery to create a limited-edition beer, to be called HefeWheaties.
NPR  Aug 13  Comment 
For years, the Wheaties slogan — "breakfast of champions" — has been invoked by beer lovers who pop open an adult beverage before noon. Now the company's putting its name on a beer.
OilVoice  Aug 7  Comment 
Even though direct extraction of oil and gas from the shale source rock is currently only actively developed in America United States Canada and Argentina other nations have the geological capabil
TheStreet.com  Aug 5  Comment 
NEW YORK (TheStreet) -- TheStreet's Jim Cramer turned his attention to Kellogg's . during CNBC's "Stop Trading" segment Wednesday. Kellogg's is ending its use of artificial ingredients in its cereals, another nod to the natural and organic...
The Hindu Business Line  Aug 4  Comment 
The National Dairy Development Board (NDDB) on Tuesday said it has won the Esri Special Achievement in GIS Award 2015 for exemplary work in Dairy Geographical Information System. The awa...
The Hindu Business Line  Aug 4  Comment 




 


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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