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General Mills says demand for its Cheerios products has increased since the maker cut prices on some of its products earlier this year.
CEO Jeff Harmening said Wednesday during the company’s quarterly earnings call that the company is focused on maintaining its competitive edge despite the volatile environment. Food and beverage companies have seen volumes decline and demand weaken as cash-strapped shoppers buy fewer products. to Save your money.
Harmening said cereal and snack makers are benefiting from the growing number of consumers eating at home.
“We expected that might be the case, as we saw consumers seeking value,” Harmening said. “And in fact, now, the average meal eaten at home is four times cheaper than eating out.”
General Mills’ prices and product mix for its products fell 1 percentage point in the most recent quarter, the company said in its earnings report. The company’s quarterly net sales were $4.85 billion, down 1 percent from a year earlier.
TD Cowen analyst Robert Mosco wrote in a note to investors that the company’s results met expectations, but warned that sales would decline further if the company continued to cut prices.
One aspect of the company’s current strategy is to sell off some of its non-growth-driving assets. Earlier this month, the company announced it was selling its North American yogurt business to Lactalis and Sodiaal for $2.1 billion. The company acquired a controlling stake in Yoplait more than a decade ago. The Minnesota-based company said it would use the proceeds from the sale to buy back shares.
Harmening General Mills said it is not trying to diversify its yogurt sales away from breakfast foods and that it views cereal as a separate, unique category.
“From that perspective, it’s a business, and frankly from a manufacturing perspective, it’s relatively easy to spin off, and I don’t think the sale will have any impact on cereal,” Harmening said.
Harmening said the Nature Valley bar maker is considering a number of factors, including packaging size and marketing, to drive new product innovation. He added that the company is also considering increasing its M&A activity, particularly targeting smaller properties.
“Our focus right now seems to be more on the availability of smaller assets that can be bolt-ons to enhance our growth, as we’re actually seeing in the market,” Harmening said.
