"As we take a step back from the day-to-day dynamic, we see consumer behaviors evolving in ways that we think will stick beyond the pandemic. First, we think consumers will be eating more at home in the 'new normal'," said General Mills CEO Jeff Harmening on the company's Q2 2021 earnings call.
"Many consumers have told us that they’re enjoying the benefits of home-centricity in their lives, including flexible work environments, more family time, and more balance, driving a better quality of life. We expect more time at home, including more work from home, to be an ongoing part of consumer routines, meaning more opportunities for at-home eating occasions."
Since the onset of the pandemic, consumers have been seeking out brands they “know and trust” and General Mills has been able to meet that demand with consumer-relevant brands and strategic innovation launches, said Harmening during the company’s Q2 2021 earnings call.
Harmening noted how the company was able to drive further household penetration for its existing portfolio of well-known brands including Pillsbury, Betty Crocker, Old El Paso, Yoplait, and Cheerios with brand-specific marketing campaigns.
"As many consumers are experiencing a non-traditional holiday season, our marketing has been respectful and empathetic to what is a more challenging time," said Harmening.
"Our Betty Flippin’ Crocker campaign encourages families that they can create the solutions they need to make cooking and baking easy, affordable and full of joy this holiday season," said Harmening.
Innovation performance
While many companies slowed down their innovation cycles in the past six months, General Mills has continued to roll out new products under its established brands this year.
“We launched a number of successful new products in the first half, including: Cinnamon Cheerios, the top new item in the US cereal category; convenient new Progresso Toppers; Nature Valley Packed sustained energy bars; our re-launched Dunkaroos snacks; and Old El Paso tortilla pockets,” said Harmening.
New Product Innovation
General Mills has more innovation planned for the back half of fiscal ’21, said Harmening, including Multigrain Cheerios with Strawberries, Ratio Protein dairy snacks delivering 25 grams of protein with three grams of sugar, Nature Valley Protein Crunch bars, and Muddy Buddies pretzel bites.
Pet food organic net sales grew by more than 18% for the quarter driven by strong consumer demand in wet food and treats.
“The premiumization of pet food and the humanization of pet food is a trend we see coming… and so we're pretty bullish about our ability to continue to compete effectively given what we see in our innovation pipeline,” said Harmening.
‘The process for unlocking growth starts with data’
“Data-driven digital marketing is beginning to fuel every aspect of the General Mills brand experience, from strategy through conversion, in a holistic, connected approach,” added Harmening.
To drive further household penetration and unlock growth, Harmening noted how General Mills is building “rich data sets” with data captured through its Box Tops for Education and BettyCrocker.com and Pillsbury.com websites, which interact with 8 million unique users each month.
“We connect those data sets and use our advanced analytics capabilities to identify previously untapped growth spaces. From there, we segment consumers and then rapidly test multiple iterations of personalized marketing messages, and with the direct link between our digital marketing and e-commerce purchases, we can quickly measure sales impact and assess effectiveness,” he said.
“This agile marketing process is providing in-market learning four to six times faster than our normal process,” he said.
Elevated at-home food demand?
Despite better-than-expected financial results for the first half of the 2021 fiscal year, analysts at Bernstein question if General Mills will be able to sustain its current level of growth and wonder how sales and margins will evolve heading into Q4 2021 and into FY22 as the industry laps the onset of the pandemic.
“Gross margins were up only 20 basis points year-over-year this quarter and investments in incremental capacity are likely to increase next quarter even as promotional spending, which was reduced in the first several months of the pandemic, begins to normalize,” noted Bernstein analysts.
Commenting on the months ahead, however, Harmening said he expected consumer desire for well-known legacy brands in its portfolio to endure well past the pandemic.
“Because of the current state of the virus in the US and across our major markets, we expect consumer demand for food-at-home will remain elevated, relative to pre-pandemic levels, through the remainder of our fiscal ’21.
“We also believe the current recession will last beyond the pandemic, and what we have learned from past recessions is that the first and most significant way consumers economize in their food budgets is by eating more at home."