General Mills bets flavor will save it from soggy demand—’mac and cheese will taste better’
General Mills’ sales forecast has become as bleak as a bowl of Cheerios filled with milk, and the packaged goods giant is hoping the rise of flavors in some of its key brands will boost demand for its cereals and snacks.
The company reported a larger-than-expected drop in quarterly net revenue, down 6% to $4.7 billion due to weaker demand for dog food and treats. It also forecast annual profit below expectations. Shares fell up to 7.8% on Wednesday following the earnings report. In addition to adjusting prices and increasing coupons to attract returning shoppers, General Mills also plans to invest in promotions—including Bring back the Pillsbury Doughboy—and improve the taste of its famous brands.
“In tough economic times, consumers can’t afford to waste, so they’re looking for great-tasting products that they know their families will eat,” said CEO Jeff Harmening. earnings call on Wednesday.
“Pillsbury cookies will be fluffier, Annie’s mac and cheese will be cheesier, and Betty Crocker’s soft brownies will be creamier,” he adds.
Consumers, becoming more protective of their wallets, have recently Turned away from packaged goods and food corporations around the world are struggling to maintain and increase sales volumes. WK Kellogg see one Reduced by 1.9% in year-over-year net sales in the first quarter and Kraft Heinz announced revenue missed expectations due to cooling demand due to high prices.
Instead, shoppers have turned to private brands like Walmart’s. New Bettergoods line And Costco Kirkland Signature looking for affordability and value. Private brand sales have skyrocketed 6% this year and now accounts for more than 25% of the market share in the food, beverage, household and beauty sectors, according to consumer behavior platform Circana. This year marks the first time that consultancy firm Alpha-Diver’s Snack50 Report has seen all top six snack brands belongs to the store’s own branded products.
But there’s an added benefit to the move to private labels beyond price, says Zak Stambor, senior retail and e-commerce analyst at eMarketer. More affordable brands still taste great—putting pressure on brands to raise their standards.
“Consumers, over the past few years, because of rising prices, have been much more willing to switch to store brands,” says Stambor. Luck. “What they find time and time again is that they often don’t sacrifice quality in their purchases.”
Formula for success
But improving the quality of ingredients and tweaking recipes are not surefire strategies for attracting demanding customers. Pepsi has removed aspartame, the sweetener it was implicated in cancer riskin its diet sodas in 2015 to appeal to health-conscious consumers. But Pepsi fans have protested, with sales of the brand’s diet drinks down 11% in the first quarter of the year following the formula change. The company returned to the original formula less than a year later.
Even General Mills has experienced difficulties in its own reform efforts, although the company has generally benefited from the changes over the long term. In fact, some General Mills products are improved 20 times per year, according to Jon Nudi, president of the North American retail group.
After the company fell into a difficult situation after a recall 1.8 million boxes of Cheerios about possible gluten contamination—although the company has claimed to produce gluten-free products since 2015—the cereal maker took strides in 2016 to ensure Cheerios Will not contain gluten. The change in production to screen the product’s oats led to an increase in sales. In 2022, the company faced supply chain issues caused by Russia’s invasion of Ukraine, forcing the country to be creative in sourcing oil and starch.
“Early in the year, the real issue was our distribution centers and logistics congestion,” Nudi said on an earnings call.
Other changes are more visible to consumers. General Mills has made controversial decision in 2016 to remove artificial dyes from Lucky Charms and Trix cereals and switch to natural dyes made from fruit and vegetable juices, part of the trend in the packaged goods industry to eliminate artificial colors due to health concerns. The new “natural” cereals generate exceptional sales—even though their iconic cereals lack the once signature neon glow.
“We actually have some data and I’m happy to report very good sales,” said Erika B. Smith, chief technology officer at General Mills. Conference report 2016. “They have exceeded our expectations. We are very excited about it. We have had some great feedback from consumers.”
But despite positive sales data, the lighter colors did not please consumers, who expressed outrage at the change, prompting General Mills to reintroduce the artificially dyed version of the cereal alongside a healthier alternative next year. “I really feel sorry for the kids who never got to experience the old Trix cereal,” said one customer. Written ABOVE Twitter.
