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December 17, 2009

INSIGHT: Gen Mills bullish on US brands growth

General Mills, the US group behind Cheerios cereals and Yoplait yoghurts, said today (17 December) that it expects to continue to growing the distribution of its brands among US retailers.

By Dean Best

General Mills, the US group behind Cheerios cereals and Yoplait yoghurts, said today (17 December) that it expects to continue to growing the distribution of its brands among US retailers.

The company said its products had thrived despite efforts by retailers in the last year to reduce the number of brands on sale in favour of own labels.

Speaking to analysts as General Mills reported its second-quarter results, Jeff Rotsch, the company’s executive vice president for worldwide sales and channel development, cited Nielsen data that showed the business had grown its US distribution in the year until 28 November.

Rotsch said General Mills had achieved US distribution growth of 1.8% in measured channels – against a market that dipped 0.4%.

He added that the data also showed the company was the only one of the country’s top ten food makers that saw their distribution increase amid retail pressure to cut SKUs.

“There is pressure in every category. There is SKU rationalisation is going on. Our categories are still growing quite nicely and contributing very good bottom-line profits. We’ve actually fared quite well. We’ve gone up in the number of items this year and not down,” Rotsch said.

“That has been across a number of key categories – cereal and grain snacks have been a beneficiary of that,” Rotsch said. “My sense is that it will continue for us. We have a number of new items we are introducing and our established brand items are turning quite nicely, so they are not in jeopardy.”

Chairman and CEO Ken Powell (pictured) added: “This is an environment where, with leading brands that turn well, we will gain distribution and that is exactly what is happening.”

Rotsch also said that General Mills had been able to gain distribution at a faster rate in non-measured channels – including Wal-Mart and discount stores like Target Corp. and Dollar General.

“We’ve seen some high single-digits across different channels that we have not been as strong in in the past. Our drug, dollar and discount business is also up double digits,” Rotsch revealed. “I see that growth continuing as we move forward.”

Earlier today, General Mills raised its raised its full-year earnings target today after the company saw second-quarter earnings climb 13%.

The Big G cereals maker said its annual earnings per share forecast, excluding any mark-to-market impact, was now US$4.52-4.57 – up from $4.40-4.45. Operating profit rose 13% to $880m; net sales inched up 2% to $4.08bn.

During the second quarter, General Mills increased its advertising and media costs by 37% and Powell said investment in marketing its brands would continue in the second half of the company’s fiscal year.

“Our additonal advertising and merchandising investments are expected to fuel sales growth for the remainder of this fiscal year and provide momentum going into 2011,” Powell said.

“We think the current operating environment represents a great time to innovate. We’ve got a good line-up of new products to come next year.”

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