Bottom-line results remain elusive at General Mills

by Keith Nunes
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General Mills is focused on generating productivity savings and becoming more agile in how it develops and introduces innovation to the marketplace.
 
NEW YORK — On multiple occasions during a Nov. 14 presentation at the Morgan Stanley Global Consumer & Retail Conference General Mills CEO Jeff Harmening said that while he was pleased with the company’s most recent performance, the company had not yet “arrived.” What he meant is while top-line trends are moving in the right direction, bottom-line results that meet his expectations remain elusive.

While the “destination” Harmening has in mind for the company is the goal, the trip General Mills is taking is equally interesting. Like some of its peers, General Mills is focused on generating productivity savings and becoming more agile in how it develops and introduces innovation to the marketplace.

The Minneapolis-based company’s three prong strategy focuses on being more competitive, accelerating growth differentially on its product platforms, and mergers and acquisitions. The first two pillars have required internal change at the company.

Jeff
Jeff Harmening, CEO of General Mills

“We’ve become a lot more fit,” Harmening said. “But I will also tell you that we’ve become a lot more agile. We reduced layers in the organization and we’ve increased (expanse) of control. Our operations and our execution are local, but our strategies are global. And that is interesting. Watching that has really unlocked a lot of possibilities for us …”

Harmening used the company’s yogurt business to outline the challenges the company is facing.

“We were down 20 percent at the beginning of the year,” he said. “And now, we’re down 11 percent. And, so, no one’s willing to do a victory lap for down 11 percent. Having said that, it’s a lot better than down 20 percent. And if we can cut that loss again, like in half, in the back half of the year, I think we’ll be on track to (do) what we want to do.”

One reason for the company’s improved performance in yogurt was the introduction of the Oui Yogurt line earlier this year. The line has exceeded the company’s expectations, Harmening said, and is on track to be the biggest launch in the yogurt category in the past five years.

“What’s interesting is the second-biggest launch is also in Yoplait, and it’s Yoplait Mix-Ins, and it’s about 0.5 share point,” he said. “And, unfortunately, for the brand team who's working on Yoplait Mix-Ins, no one talks about that because we talk about Oui all the time. But the fact is that General Mills has the No. 1 and No. 2 new product launches in the yogurt category so far this year, and both are far exceeding our expectations.”

Holding back the company’s yogurt business have been the markets for Yoplait Light and Greek 100.  Harmening noted the markets for those products have declined a bit faster than forecast, but that the declines have slowed recently.

Prior to Harmening’s presentation, General Mills reaffirmed its financial guidance for fiscal 2018, which ends May 27, 2018. Organic net sales are expected to decline between 1 percent and 2 percent from 2017 levels. Total segment operating profit in constant currency is expected to range between flat and up 1 percent, and adjusted operating profit margin is expected to increase over year-ago levels. Fiscal 2018 adjusted diluted earnings per share, which excludes certain items affecting comparability, are expected to increase between 1 percent and 2 percent in constant currency.

“We feel good about the progress we are making across many of our key products and geographies,” Harmening said. “We also feel good about the year, particularly the improvement we’ll deliver on the top line, but we are not satisfied. My team knows we still have much to do to get back to delivering the type of results our investors expect from General Mills over the long term, and we are moving in the right direction.”

Left unsaid is when he expects the company “to arrive.”

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