General Mills, which has struggled to grow its US yoghurt brands, said yesterday (30 May) it would look to marketing and innovation to revitalise sales in the increasingly promotional category.

Don Mulligan, General Mills' CFO, said the Yoplait owner's US yoghurt division missed its target of seeing sales grow again from the business in the year to 26 May, despite a raft of new products.

"For our US yoghurt business in total we did fall short of our goal of renewed sales growth this year," Mulligan told the Citi Global Consumer Conference in New York.

The US yoghurt sector has seen rapid growth in recent years, driven by the booming Greek yoghurt segment, which has taken share from the regular categories. 

Rivals Chobani and Danone have built bigger Greek yoghurt businesses than General Mills, which only launched its first product in the category in 2010 In the last 12 months, General Mills has rolled out new Greek yoghurt products in the US, including a 100-calorie Yoplait line.

Mulligan said General Mills had managed to increase its share of the Greek category and he was positive about both the company's performance in the market as a whole and its prospects in the new financial year. "We are very encouraged by the progress we're making," he said. "We achieved a number of key objectives we set for F2013, including share growth in Greek, stabilising the core, and working with our retail partners in expanding the yoghurt shelf set. We're exiting the year with momentum in yoghurt including another quarter of sequential volume improvement, and we have another terrific innovation lineup and increased marketing support planned for F2014."

In a note issued to clients last week, Sanford Bernstein analyst Alexia Howard said competition in the US yoghurt sector had intensified in recent weeks, with an increase in promotions, led by Chobani and General Mills. Howard said: "General Mills was late in introducing Greek and has been aggressively trying to play catch up since its 2010 launch. It has traditionally seen the highest level of promotions in Greek, and this has increased to around 40% of sales in recent periods up from an average of 36% last year, as the company attempts to gain share on the back of higher promotions and new product launches. We worry that General Mills might just be buying share with aggressive promotions and may be driving up promotional spend for the whole category."

The analyst also claimed the prospect of more capacity in the US yoghurt industry could lead to more promotions across the sector. She pointed to Chobani's new plant in Idaho and the new facility set to be opened by PepsiCo via its local venture with German dairy Unternehmensgruppe Theo Müller. "US yoghurt now represents circa 8% of consolidated sales and around 12% of company-wide EBIT. While the company entered the year with hopes for 'renewed net sales growth for Yoplait in 2013', the segment is down -6.3% in sales growth year-to-date," she wrote in a note issued on 20 May. "Given intensifying competitive dynamics in the segment, we believe General Mills is likely to see continued pressure in what was once one of its most profitable segments."

Yoghurt, however, is one of what Mulligan told the conference is General Mills' "five key global businesses". The General Mills finance chief said the company sees opportunity for growth in the US - and overseas. "Yoghurt consumption is still concentrated in a fairly small number of developed markets today. In Canada, per capita consumption is concentrated in the Quebec market. The US is still a developing market for yogurt, and people in China, India and Indonesia consume less than 4 kg per person per year. So we see great opportunities to expand yogurt consumption levels moving forward."

General Mills will report its annual results on 26 June. Mulligan said the company expected to report "mid-single digit growth" in net sales and operating profit. Earnings per share, he said, was expected to be at US$2.66-2.68 before one-of items. Last year, adjusted diluted EPS, which excluded certain items affecting the comparability of the results, totalled $2.56.