General Mills has posted a 24% increase in its fiscal Q4 net income.

General Mills has enjoyed an upbeat final quarter. Despite struggling to come to terms with its belated entry into the low-carb segment, the company will be looking to continue growth in the new fiscal year. If it focuses on the overall health benefits of its products, without getting too sidetracked by low-carb products, it may be able to do just that.

General Mills announced a 24% net income increase for the fourth quarter of its fiscal year, as an extra week of sales contributed to positive growth. Despite this positive growth, General Mills faces difficult times in the coming fiscal year. Costs of energy and other commodities are expected to continue rising, with costs for the company forecast to reach US$165m in fiscal 2005.

Due to these rising costs, General Mills has already announced plans to raise wholesale prices by 9% on Progresso soups, Yoplait yogurts, and snack products. While it is too early to determine the effect these price increases will have on sales, General Mills has already lowered its sales growth forecasts for the next year by 2-3%.

The low-carb trend is adding to General Mills’ woes. Rivals Kellogg, Hain Celestial and Danone introduced low-carb products months before General Mills. Slipping sales and increasing competition prompted the company to accelerate development of its own low-carb range. The breakfast cereal Total Protein was released in March 2004, follow by Yoplait Ultra a month later, helping the firm regain market share lost to rival Danone. General Mills’ Carb Monitor Brand, a line of dinner kits, mixes and frozen dough launched in early 2004, has also contributed to sales.

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Despite these developments, the low-carb trend continues to be a weakness for the company. Facing increasing competition in the marketplace, General Mills is already considering removing its Total Protein from supermarkets due to slipping sales. Rather than focusing on the low-carb trend, General Mills should continue to leverage its nutritious products such as yogurt, cereals and fruit snacks in response to consumers’ interest in healthy eating.

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