General Mills plots a return to growth with new products, enhanced advertising & merchandising

The snack and cereal giant plans to generate organic net sales growth between 2% and 3% in the coming years by holding market share across its current mix – a strategy that may sound simple but which eluded the company last year.

“We did not distinguish ourselves on share performance last year, and there are a lot of reasons for that,” Dana McNabb, group president for North America Retail at General Mills, told investors and analysts last week at Barclays Global Consumer Staples Conference.

She explained General Mills suffered in part because it “priced first and ahead of our competition” to offset inflation, which created difficult year-over-year comparisons, and it faced an unexpected increase in competition from private label and smaller brands that returned to shelf earlier than expected. It also faced difficult year-over-year comparisons when the emergency benefits allotted during the pandemic to recipients of the federal Supplemental Nutrition Assistance Program ended.

But, she added, the company is taking steps to return to growth – and while it is not there yet, she said, “We are putting the right things in the marketplace and we are focused on progress and getting better quarter after quarter.”

In the period ending in August, the company improved pound share in seven out of its 10 biggest categories and improved dollar share in six out of its 10 categories, she said.

Part of this comes from shifts in consumer behavior, including an uptick from 86% to 87% of shoppers eating at home more and a related return to growth of the categories in which the company plays.

“Before the pandemic, our categories were growing in the 2% to 3% range. And we have regained momentum in most of our categories so they are actually back to growth. In fact, in North American retail categories … they are at about the 1% growth range. So they are back about where they were pre-pandemic,” CEO Jeff Harmening said.

He added the company also has a history of maintaining and gaining share in the majority of the categories in which it plays.

“We are confident we can at least hold our share in our current categories, because we have done it five out of the last six years,” he said.

A new playbook for a new competitive landscape​

While that may be, the current market is very different than in recent years and the company will need a different playbook to win, suggested McNabb.

For General Mills to grow going forward, she argued, it will need to “have the most remarkable total product offering across our mix” and be “better than the competition.”

To do this the company will focus on meeting consumer taste and health demands, increasing advertising, diversifying its price points and generating buzz in stores through enhanced merchandising.

“Parents today … simply cannot afford to bring something into the house that the whole family is not going to like. They are looking for really good taste. They are looking for macro health benefits, like high protein, low carb, and so we have been focused on in our biggest and most profitable brands in making sure that we have news that they value,” McNabb explained.

This includes launching more new products. Last year, about 3.5% of General Mills net sales came from new products. This year it is targeting 5% of sales from new products, including launches such as fruity Cheerios, flakier biscuits and a Fiber One brownie that “tastes great,” she said.

In addition, “we are going to increase our advertising spend a little bit ahead of our net sales growth. We are going to make sure our marketing is more efficient and effective with our data driven marketing tools, so we will have something really meaningful to say and the ideas are great,” she said.

For example, she noted, the company is bringing back its beloved Doughboy to support its Pillsbury business, and it is working with the Kelce brothers who created waves in the cereal space with its podcast last year in which the hosts rated their favorite products, including offerings from General Mills.

The company will support its advertising and innovation with increased in-store activations.

“I look at our distribution this first quarter of the year, we are gaining distribution share in eight of our top 10 categories, and that tends to be an indicator of share growth to come. We are getting really good display. We are seeing our lift on our merchandising ahead of our categories. We are going to bring back instore events that we have not been able to do through the pandemic across our snacks and cereals that will be effective for us, and then continuing to partner with the retailers on online and retail media,” said McNabb.

The price was not right, but will be​

General Mills will complement its product development with packaging innovations to ensure it has the “right product in the right size” and at the right price, McNabb said.

“We run 25 categories in North America retail, and it is logical to assume that we did not get the pricing on everything right,” in recent years, McNabb acknowledged. “And so there are three or four places where we are adjusting the pricing. But where I am more excited is we are focusing on using our strategic revenue management toolkit, and particularly price pack architecture” to ensure products are priced accessibly.

For example, she said, General Mill is doubling the price pack architecture coming to market in snacks compared to last year, including more smaller packs and opening price points as well as larger ones that offer more value.

Through these efforts, McNabb said she is optimistic about the company’s outlook, including its ability to grow alongside the broader categories and maintain or increase market share.

“We will start to see our performance get much stronger,” she said. “It is not coming at all the same time. It is not all going to work, but again, it is about progress.”