Dive Brief:
- Cheerios maker General Mills said it aims to cut $3 billion in costs over the next four years as part of an aggressive plan to return the food giant to profitable growth.
- The company plans to save approximately $2 billion in part through a more targeted focus on products and trends that most resonate with consumers. The other $1 billion in savings is an acceleration of a previously announced restructuring program aimed at improving productivity.
- CEO Jeff Harmening said in an earnings call that the cost-savings plan is "critical to help offset inflation, to fund our growth investments, and support stronger earnings." General Mills expects to deliver $750 million in savings for fiscal year 2027.
Dive Insight:
Harmening said General Mills will have to "make our own success this year" as he acknowledges that inflation has continued to weigh on consumer spending for longer than many in the industry expected.
The Betty Crocker maker reported flat organic net sales for the fourth quarter but a 2% decline for the full year, saying weaker consumer sentiment drove more consumers to buy items at discount. The company said its operating loss in its most recent quarter totaled $2.1 billion after investing to lower prices in an attempt to attract cash-strapped consumers.
With a rebound in spending not likely anytime soon, General Mills is investing more to increase the "remarkability" of its brands and help them stand out on shelves by adding in-demand attributes like protein.
"What we are anticipating is that as we go into this new fiscal year, the consumer is going to continue to be pressured," Dana McNabb, chief operating officer, said on the earnings call. "But even as we say that, we know that consumers are still willing to pay for benefits that matter most to them — think, functional nutrition, bold flavors, etc."
The company is planning to sharpen its focus on innovation and offset costs through the premium price that comes along with more in-demand offerings. It's also looking to transform its supply chain to take out costs and better support faster innovation and packaging flexibility.
"As we look ahead, our assumption is the consumer will remain pressured, and we'll stay focused on the levers that we can control," McNabb said.
