Dive Brief:
-
General Mills has made impressive progress in introducing healthier products over the past year, reports Food Business News, but these improvements have yet to translate into higher sales.
-
The company reported its seventh straight quarter of declining sales last month, but it hopes to turn that streak around with a promise to rethink as much as 60% of its business.
-
Its strategy is to provide a response to a wide range of consumer trends, including revamping existing products to make them healthier, expanding its gluten-free range, moving to more organic ingredients and removing artificial colors and flavors.
Dive Insight:
General Mills is a strong player in the cereal, yogurt and traditional snack aisles, but it has discovered over the past couple of years that it needs to branch out and innovate beyond these consumer staples. After Chobani ousted General Mills' Yoplait brand from the top spot in the yogurt category last year, company executives conceded that they needed to make some big changes to align with current consumer trends.
For a food giant like General Mills, the speed at which it has made these changes has been striking. However, it's arguably not fast enough, as smaller companies are claiming a larger portion of supermarket shelf space than ever before.
The company claims that 79% of its U.S. sales volume has been nutritionally improved since 2005. In the past year, it has increased whole grains in its cereals, increased the number of gluten-free products to more than 1,000 — up from 850 in 2014 — and revised its supply chain to ensure long-term availability of organic ingredients. In 2015, it also launched a venture capital arm, 301 INC., to invest in promising food start-ups and diversify its portfolio. So far, this has proved to be a slow-burner in terms of return on investment.
Diversification makes sense, as declining yogurt sales were a big factor in the company’s decision to lower its sales and earnings targets in February — targets that were reaffirmed last month.
It also needs to revise its pricing. CEO Ken Powell told investors in a conference call that some of its products were not priced competitively enough and that more discounts were needed than it had anticipated.