General Mills’ sales forecast is as bad as a bowl of Cheerios flooded with milk, and the packaged goods giant hopes an explosion of flavors in some flagship brands will boost demand for its cereals and snacks.
The company reported a bigger-than-expected decline in quarterly net sales, down 6% to $4.7 billion, due to lower demand for dog food and snacks. It also forecast full-year profit that fell short of expectations. Shares fell up to 7.8% Wednesday after the results were published. In addition to adjusting prices and increasing coupons to attract buyers, General Mills plans to invest in promotional activities, including Bring back the Pillsbury Doughboy…and improve the taste of its popular brands.
“In tough economic times, consumers can’t afford to waste, so they’re looking for great-tasting products that they know their families will eat,” CEO Jeff Harmening said in a statement. earnings conference call Wednesday.
“Pillsbury biscuits will be flakier, Annie’s macaroni and cheese will be cheesier and Betty Crocker fudge brownies will be fudgier,” he added.
Consumers, increasingly protective of their wallets, have recently diverted packaged goods and food conglomerates as a whole are struggling to maintain and increase their sales volumes. Kellogg I saw a 1.9% drop in net sales year-over-year in the first quarter, and Kraft-Heinz posted revenues that missed expectations given the slowdown in demand in the face of high prices.
Instead, shoppers turned to private brands like Walmart. new Bettergoods line And Kirkland Signature from Costco looking for affordability and value. Private label sales have exploded 6% this year and now account for more than 25% of market share in the food, beverage, home and beauty sectors, according to consumer behavior platform Circana. This year marked the first time that consultancy Alpha-Diver’s Snack50 report saw its entire The six best snack brands belonging to the stores’ own brand products.
But there’s another benefit to moving to private labels beyond price, according to Zak Stambor, senior retail and e-commerce analyst at eMarketer. These more affordable brands still taste great, which is pushing brands to raise their standards.
“In recent years, as a result of rising prices, consumers have been much more willing to switch to private labels,” says Stambor. Fortune“What they’ve found time and time again is that they often don’t sacrifice quality when they sell lower quality products.”
Recipe for success
But improving ingredient quality and changing recipes aren’t surefire strategies for attracting bitter customers. Pepsi has removed aspartame, a sweetener associated with cancer riskin its diet sodas in 2015 to appeal to health-conscious customers. But Pepsi fans revolted, with sales of the brand’s diet drinks down 11% in the first quarter of the year following the recipe change. The company returned to its original formula less than a year later.
Even General Mills has encountered hurdles in its own reformulation efforts, though the company has generally benefited from the changes in the long run. In fact, some General Mills products have been reformulated 20 times a year, according to Jon Nudi, president of the North American retail group.
After the company found itself in a difficult situation following a Recall of 1.8 million boxes of Cheerios regarding possible gluten contamination – although the company has claimed to make a gluten-free product since 2015 – the cereal producer made progress in 2016 to ensure that Cheerios would be gluten free. The manufacturing change to sift the oats contained in the product resulted in a slight increase in sales. In 2022, the company faced supply chain issues caused by Russia’s invasion of Ukraine, forcing the country to get creative in its supply of oils and starch.
“At the beginning of the year, it was really about our distribution centers and logistical bottlenecks,” Nudi said during an earnings conference call.
Other changes were more visible to consumers. General Mills made the controversial decision in 2016 to remove artificial colors from its Lucky Charms and Trix cereals in favor of natural colors from fruit and vegetable juices, is part of a trend within the packaged goods industry to eliminate artificial colors for health reasons. The new “natural” cereals generated exceptional sales, even though their signature cereals lacked their once-characteristic neon glow.
“We do have some data and I’m happy to report that sales are excellent,” Erika B. Smith, chief technology officer at General Mills, said in a statement. Presentation of the 2016 conference“They exceeded our expectations. We are delighted with it. We have received excellent feedback from consumers. »
Despite positive sales figures, the dull colors failed to delight consumers, who expressed outrage at the change, prompting General Mills to reintroduce the artificially colored version of the cereal alongside the alternative healthier the following year. “I feel really bad for the kids who never got to taste the old Trix cereal,” one customer said. wrote on Twitter.
