Release Date: December 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- General Mills Inc (GIS, Financial) has seen broad-based improvements in volume and market share trends, driven by increased investments in product renovation, brand building, and promotional support.
- The Blue Buffalo Pet Food business has returned to growth, supported by strong brand campaigns and innovation.
- The US cereal business has achieved pound share growth, aided by successful brand campaigns and product innovation.
- The company has accelerated retail sales performance in key US categories, including food snacks, Mexican foods, soups, and snack bars.
- General Mills Inc (GIS) is confident in its strategy and investments, positioning the company for stronger growth in fiscal 2026 and beyond.
Negative Points
- The increased investment in the business is impacting the profit outlook for the back half of the fiscal year.
- There is a need for further work in the US refrigerated dough segment, requiring adjustments to plans to bring more value to consumers.
- The company is experiencing more prolonged value-seeking behavior from consumers than anticipated, necessitating higher investments.
- Input cost inflation has been raised to 4% from the previous 3% to 4%, driven by ingredient costs and lapping of advantageous contracts.
- The Haagen-Dazs business in China is facing challenges, with double-digit declines in retail stores due to tough macroeconomic conditions.
Q & A Highlights
Q: Jeff, as you mentioned, this fiscal year was always meant to be about improving in-market competitiveness across the portfolio. What learnings have you taken from the initial efforts, and how are these informing your back half expectations, particularly with the planned incremental spend?
A: Jeffrey Harmening, CEO: We've learned that consumer value-seeking behavior is more prolonged than anticipated. Consumers are doing more at home, benefiting our categories. Our investments in renovation, advertising, and promotional activities are working, but require more than initially expected. Investments are targeted across categories, with specific focus areas like pet food and North America retail.
Q: Dana, is the incremental investment in the back half targeted or broad-based? How do you ensure these investments are sufficient?
A: Dana McNabb, Group President - North America Retail: The price investments are targeted in areas like refrigerated baked goods, Totino's, and fruit snacks. We believe our investments, based on analytics, will provide the best return. We'll monitor responses and adjust as needed.
Q: Can you provide more color on the drivers behind the increased input cost inflation to 4% from 3% to 4% last quarter?
A: Kofi Bruce, CFO: The increase is due to ingredient costs, labor-linked conversion costs, and lapping large contracts in packaging and dairy. We also face pressure from cocoa and fats. We're driving 5% HMM this year and are confident in addressing inflation through supply chain digitization and efficiency improvements.
Q: What are your thoughts on the broader pet food industry, given muted pet population growth and recent regulatory changes in New York State?
A: Jon Nudi, Group President - Pet, International and North America Foodservice: The pet food category is returning to pre-pandemic trends with growth in premium segments. We don't expect a surge in adoption like during COVID, but the category remains healthy. We're seeing premium bounce back and are well-positioned with Blue Buffalo and the acquisition of White Bridge brands.
Q: How do you view the regulatory environment and its potential impact on your business?
A: Jeffrey Harmening, CEO: We comply with all regulations and have a strong R&D team to navigate changes. For example, with USDA nutrition standards changing, we've historically grown share by reformulating products effectively. In California, 85% of our cereal portfolio is already compliant with upcoming regulations, and the rest will be by 2027.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
