General Mills anticipates volumes will improve in the new fiscal year but achieving longer-term sales growth targets will be “tough”.

While chairman and CEO Jeff Harmening, speaking with AllianceBernstein’s US consumer foods analyst Alexia Howard during a fireside chat yesterday (29 May), does not expect a “step change” in volumes linked to any one event he said they are moving in the “right direction”.

Ahead of the US cereal to snacks and pet-food maker’s fiscal 2024 results on 26 June, Harmening gave an essence of the shift in volumes.

“We’ve lapped SNAP benefits, we have lapped pricing from a year ago, [and] effective at the end of this month, we have lapped a significant increase in private-label and small brands getting on shelf more regularly,” he said.

“I would expect that we will see a gradual improvement [in volumes] over time, both as consumers get used to pricing and as they feel economically more sound.”

The Cheerios and Häagen-Dazs brand owner saw volumes decline two percentage points in the third quarter, taking the year-to-date decline to 3%. Price/mix was up 2% and 3%, respectively, over the two periods.

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Harmening suggested consumers will eventually adjust to the new pricing landscape as costs went up due to the pandemic-linked supply chain challenges and then the war in Ukraine.

“It takes consumers a while to adjust to pricing. It’s probably a 12-to-18-month process before consumers really land on what is the true price of this good going to be. It’s particularly difficult for consumers now because we’ve seen a 30% increase in cost inflation over the past three years,” he said.

“Consumers are stressed financially right now. You see the rise in credit card debts and so forth. I think that’s why we haven’t seen a step change and that’s why I don’t think we’re going see a step change in volumes either, for our categories or for our business.”

A question was fielded from the Bernstein audience on when General Mills might be expected to dial back pricing, but Harmening said “there's not one answer” on the basis the company competes in 25 categories in the US alone.

“We'll look category by category, size by size to see what makes the most sense. The most important job we have to do, as we think about price and value, is on the value side, which is what are the benefits we're bringing to consumers,” he said.

General Mills notched up a 1% increase in organic sales to $15.1bn in the first nine months of the financial year but they were down 1% in the third quarter.

Asked by Howard to give some insight into the new fiscal year, Harmening said: “I think we'll see a steady improvement in volumes over the course of the year in a pricing environment that's going to be challenging [and] also an inflation environment that’s not going to be particularly high either.

“That'll put a little bit of pressure on our long-term sales algorithm. I’d love to say that we're going to get back to our long-term sales algorithm of 2% to 3% top-line growth next year, but given the gradual improvement I would see in volumes, I think that's going to be a little bit tough to come by.”