General Mills aims to reverse the declining market share trends it has seen in the US over the past 12 months in key categories with its brands to be supported by a strong product development pipeline.
The company yesterday (26 June) booked a 1% increase in organic sales, excluding the impact of acquisitions, for fiscal 2012/2013.
Speaking to analysts during a conference call, CEO Ken Powell conceded the growth rate equated to a market share decline in some of its core US categories, notably cereal and yoghurt. However, Powel emphasised General Mills expects to rejuvenate these businesses over the coming year as the group feeds in its line-up of new products.
On Big G, the US cereal business, Powell said: “After an extended period of sales and market share gains for our US cereal business, we gave up a bit of ground in 2013. Category sales also declined modestly for the year. In 2014, we’re bringing a stronger new product line up, and stronger advertising to the cereal aisle, and we expect to generate annual sales growth.”
Meanwhile, turning to the US yoghurt category, Powell said the business – which saw overall sales for the year decline – had nevertheless achieved an improvement in its performance from quarter to quarter. “In the US, we fell short of our goal to renew annual sales growth in 2013. However, we did post a modest increase for the fourth quarter of the year, and we intend to build on that momentum in 2014.”
Powell said the company would focus on innovation and advertising to drive improved sales. He added the group is confident investments made in price positioning during 2013 will continue to reap dividends.
On the overall economic outlook for the US, Powell said the recovery “has been slower than we all would have liked”. While General Mills had “felt [its] share” of the weak consumer sentiment during 2013, Powell struck a more upbeat note on the prospects for the coming year, when the company expects to grow sales in the low single-digits.
“The important thing… is that we are seeing steady improvement. We saw sequential improvement in our categories over the course of the year, particularly in the second half, and so the category and trends are improving. And as we enter fiscal 2014, our situation basically is the categories generally are better.
“With this slow improvement and the steady improvement in the category fundamentals, we feel in quite a bit better position as we enter 2014 both for the industry and also for our portfolio of brands and categories,” Powell said.
However, Deutsche Bank Eric Katzman emphasised, given the improvement in General Mills’ categories, the group’s sales guidance suggests the firm is targeting largely flat market share across its business.
“If you’re forecasting, on the core business, low single-digit sales growth, but at the same time you’re saying that categories are better, you’ve seen sequential improvement, your mix and baseline business is stronger, you’ve got a lot of confidence in your new products that you’re introducing… it seems the organisation is targeting market share kind of flat, and not market share gains,” Katzman observed.
“We’re looking for flat-to-up on market share,” Powell confirmed, stressing the highly competitive nature of the market.
“It continues to be very, very competitive out there,” he said. “While we’re seeing recovery, the recovery is still pretty slow. So we feel good about the fundamentals as we enter the year. We feel our guidance is prudent, given the continuing challenges of the environment.”
Click here to view General Mills’ line up of new products for 2014, or click here to for our initial news story on General Mills’ 2012/2013 results.