General Mills has insisted it is “confident” it can drive growth from its US business in the long term in spite of “disappointing” sales volumes in the market during December and January.
The company, which was forced to negatively revise its full-year EPS estimates and issue a profit warning for the third quarter last week, said volumes across its US businesses had fallen as consumers reduced spending in response to rising retail prices and lower merchandising levels.
Speaking at the Consumer Analyst Group of New York (CAGNY) conference today (21 February), General Mills chief executive Ken Powell suggested the company was having to increase prices in response to a year of exceptional input price inflation. However, he added that prices were expected to moderate in the longer term.
Powell also highlighted the “significant decline” in merchandising that was witnessed across the industry, particularly in January. This, coupled with fewer product launches over the last few months, also accounted for near-term soft volumes, he suggested.
“The issue is focused on Q3 comps and will become much more manageable in the fourth quarter,” Powell predicted. “Long term, we continue to feel very good about the growth potential of our US business as we continue to invest in innovation and marketing. We continue to be positive about the outlook for the US.”
In its domestic market, General Mills said it intends to drive sales growth by building its brands and its relationships with retail customers as well as focusing on innovation.
In US cereals and grain snacks, management insisted that innovation has fuelled “consistent sales and market share growth” over the past four years.
The company also highlighted the strong growth of US yoghurt, with the increasing popularity of Greek yoghurt drawing new consumers to the category and prompting retailers to allocate it more shelf-space. Again, General Mills, the owner of Yoplait, suggested that this “strong growth” is being “fuelled by innovation”.
Meanwhile, in convenient meals in the US, Powell conceded that the environment is “very competitive” in 2012. “This is making it difficult for our new items, like our Restaurant Favourites, to break through,” he observed.
Nevertheless, Powell insisted that convenience staples – such as Hamburger Helper – were continuing to perform well, while Progresso soups has increased retail sales by 3% and household perpetration by 1% over the past year.