General Mills said demand for its products rose after the Cheerios manufacturer rolled back prices for some items earlier this year.
CEO Jeff Harmening said on the company’s quarterly earnings call Wednesday it is focused on maintaining its competitive edge despite the volatile environment. Food and beverage companies have faced lower volumes and softer demand as cash-strapped shoppers purchase few products to save money.
Harmening said the cereal and snack maker is benefiting from an uptick in consumers eating meals at home.
“We did anticipate that might be the case as we see consumers seeking value,” Harmening said. “And the fact is that now food at home is four times less expensive than food eating out, on average.”
Price and product mix for General Mills’ items were down one percentage point in its most recent quarter, according to its earnings report. The company’s net sales in the quarter were $4.85 billion, down 1% year-over-year.
TD Cowen analyst Robert Moskow said in a note to investors that the company’s performance was in line with expectations, but warned of a further drop in sales if the company continues to lower its prices.
One facet of the company’s current strategy involves offloading some of its assets that are not driving growth. Earlier this month, the company announced the sale of its North American yogurt business to Lactalis and Sodiaal for $2.1 billion. It previously obtained a controlling stake in Yoplait more than a decade ago. The Minnesota-based company will use proceeds from the sale to repurchase shares, it said.
Harmening said the yogurt sale does not indicate a move away from breakfast foods at General Mills, with the company viewing cereal as its own distinct category.
“It’s a business from that standpoint and frankly from a manufacturing standpoint that’s relatively easily separable and I wouldn’t see an impact on cereal from that divestiture,” Harmening said.
For new product innovation, Harmening said the Nature Valley bar maker is considering many things, including pack sizes and marketing. He added that the company is also considering enhancing its M&A activity, particularly with smaller assets.
“It seems like our focus right now, and what we see in the marketplace really, is probably more availability of smaller sized assets that we could bolt-on that would enhance our growth,” Harmening said.
