CAGNY: International to drive General Mills growth
Chris O’Leary : "We expect our international business to lead General Mills’ growth"
General Mills has indicated that expansion in markets outside its core domestic operations will drive growth at the US food group over the next five years.
Speaking at the CAGNY investor meeting in Florida today (15 February), management revealed that the Cheerios maker has targeted long-term net sales growth in the low single-digits, segment operating profit growth in the mid single-digits and diluted EPS growth in the high single-digits.
General Mills said those targets would be fuelled by both top-line growth and margin expansion, with sales gains weighted to the company's international markets.
According to Chris O'Leary, the head of General Mills' international operations, over the next five years the company expects to book sales growth in both developed markets, such as Canada and Western Europe, and developing markets - particularly China, Brazil and India.
“As look ahead to 2015, we expect our international business to lead General Mills' growth,” O'Leary suggested.
“In developed markets we've laid a strong foundation, but our businesses are still relatively young,” O'Leary said. “We see continued opportunity to grow our core brands with strong marketing. In Western Europe, we see an opportunity to grow sales through increased brand penetration... we are confident we can increase these penetration levels.”
In Greater China, where General Mills expects to generate half of its international sales growth over the next five years, O'Leary said that the company intends to triple sales of its Hargendas, Wanchai Ferry, Bugels and Nature Valley brands.
General Mills will fund its brand-building through its holistic margin management (HMM) programme, with profit gains expected to outstrip sales growth, O'Leary revealed.
General Mills will also focus its international expansion on products categories and brands that deliver returns that are above the group's average margin, chief executive Ken Powell added.
In particular, General Mills will concentrate on convenient meals, ice creams, healthy snacking and cereals. These categories, Powell suggested, are likely to benefit from global demographic trends – particularly the rapid emergence of a growing middle class in developing countries.
While General Mills' growth in the US is likely to lag its expansion overseas, Powell said that the company is cashing in on key demographic trends and emphasised that all the categories in which it operates are delivering growth above the total market.
General Mills has targeted three consumer groups in the US for its product development and marketing, US retail head Ian Friendly revealed. The company is eyeing the over-55s or “baby boomers”; “generation Y” or “millennials”; and “non-white” consumer groups, particularly Hispanics.
In order to appeal to America's ageing population, the company has also focused product development on healthy and better-for-you categories, such as cereals or Progresso soups, where it is offering high-fibre and low-calorie options.
Meanwhile, the General Mills emphasised that it is the market leader on marketing spending through channels dedicated to non-white ethnic groups such as Hispanics.
With over 40% of “gen Y” consumers consisting of non-white ethnic groups, and 85% of US population growth in non-white groups, Powell suggested that this consumer focus would position the company's brands for future growth in its domestic market.
Companies: General Mills
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