General Mills has revealed that it expects top-line growth in its cereal and international businesses to translate to strong bottom-line gains over the next five years.
Speaking at the CAGNY investor conference in Florida today (22 February), General Mills CEO Ken Powell revealed that the company is targeting earnings per share growth of about 7% to over US$3 per share by 2015.
General Mills’ portfolio of brands in growth categories that are on-trend and benefit from a global reach mean that the company is well-positioned to report profit gains at the top end of its peer group, Powell suggested. “All branded food businesses are not created equal,” he insisted.
While General Mills’ programme of Holistic Margin Management (HMM) was both “working well” and “sustainable”, Powell said that the company expected future profit growth to be driven by sales expansion, particularly in the company’s largest category – cereals – and at its international operations.
“The US is still the single-largest cereal market in the world and demographics supports continued single-digit growth,” Powell said. However, he added: “Outside the US, growth is faster.”
Powell predicted that international sales will grow in importance as the category expands in emerging markets such as Russia, Brazil and China.
Both domestic and international cereal category growth is being driven by consumer trends, such as health and wellness, demographic shifts and marketing and NPD, Powell said.
In emerging markets, a growing middle class is becoming increasingly aware of the cereal category and – significantly – brands within that category, Powell suggested.
“Emerging markets represent the future for ready to eat cereal growth as the number of middle-class consumers increases,” he said.
For example, Powell said, while General Mills still only has 20% household penetration Russia is its largest market for Nesquik cereals and there remains a “great opportunity for growth”.
In order to drive brand awareness, General Mills has increased its advertising and product development spending, both domestically and internationally, Powell continued.
“We expect the combination of cereal product innovation, health and wellness, growing incomes, and marketing to produce category growth,” he said.
General Mills revealed that it is targeting cereal sales growth in excess of US$1bn over the next five years, with the aim of reaching sales of $5bn in the category.