UPDATE: March 23, 2021: General Mills announced it entered into an agreement to sell its 51% stake in Yoplait's European business to Sodiaal in exchange for Sodiaal's 49% stake of Yoplait Canada and drastic reduction of royalties on sales of Yoplait and Liberté branded yogurt sold in the United States and Canada. According to General Mills, after the transaction closes, the company would completely own North American yogurt operations that generated $1.4 billion in net sales in fiscal year 2020. The European arm of Yoplait had $740 million of net sales in fiscal year 2020, General Mills said. The transaction is slated to close by the end of the calendar year.
- General Mills may be considering a sale of its Yoplait brand, according to reports in French media. L'Agefi, a French financial newspaper, reported the company is working with Morgan Stanley on a potential sale. General Mills did not comment on the reports.
- General Mills acquired 51% of the French yogurt company in 2011 for $1.2 billion. The remaining stake belongs to French dairy cooperative Sodiaal, which French media said would have the first opportunity to purchase the brand if it is sold. A sale of the entire brand, L'Agefi reported, could be worth nearly $3 billion.
- General Mills has had a difficult time with its yogurt business as the category has become more crowded. While U.S. sales of Yoplait were up 5% in the most recent earnings report, yogurt sales have dragged General Mills' earnings down in the past.
When General Mills acquired the controlling stake of Yoplait, the brand was the world's second largest in the yogurt category. Its products were available in more than 70 countries, and yogurt was a growing category.
In the last nine years, different varieties of yogurt entered the market, diluting Yoplait's sales and potential. Greek varieties, led by Chobani, muscled their way into the yogurt case and Greek became the biggest subcategory. Other types of yogurt — including Icelandic skyr, plant-based and Australian — have further blurred the category. According to Mintel statistics cited in U.S. News & World Report, U.S. yogurt sales peaked in 2015 at $9 billion. They've fallen every year since, and were projected to total $8.2 billion in 2019.
Falling sales, the coronavirus pandemic and a handful of divestments in the food and beverage space may be leading General Mills to feel it is the right time to look into dropping the brand, though France's Les Echoes reported through an unnamed source that the company has been considering a sale since last year.
General Mills sold its Chinese Yoplait business last March to private equity firm Tiantu Capital. Analysts said this sale was driven by more competition and slowing demand. With the U.S. economy in a recession and analysts predicting a slow recovery after the pandemic has ended, right now is a good time for companies to raise capital and prepare for the years ahead.
General Mills isn't the only company that may be looking at its yogurt business with a critical eye. Global yogurt giant Danone once had a nearly 21.3% stake in Japanese probiotic business Yakult. It sold most of its stake in 2018, and announced this week it is putting the remaining 6.61% it still owned in the company up for sale. According to a release from Danone, this sale will help the company focus on its balance sheet.
While there hasn't been much M&A in the food space since the coronavirus pandemic upended business, there are still deals involving big names that are being made. Last month, Kraft Heinz announced the sale of its natural cheese business — including Breakstone’s, Knudsen, Polly-O, Athenos, Hoffman’s and the U.S. Cracker Barrel brand — to Lactalis for $3.2 billion. And two companies — snack company Utz and indoor produce grower AppHarvest — recently merged with blank check companies as a way to go public.
While the time could be right for General Mills to divest Yoplait, the bigger question may be whether the timing is right for someone else to acquire the brand. General Mills purchased the controlling stake from European private equity firm PAI Partners, which had owned it since 2002. Sodiaal, which may have the right of first refusal, sells dairy products in 80 countries in Europe, the Middle East and Asia. It already licenses and distributes Yoplait in Europe.
If Sodiaal wants to buy General Mills' stake in Yoplait, it would be a relatively seamless transition for the brand and would bring the French dairy co-op into the U.S. market. It's unclear who other potential buyers might be. French media reports indicate Sodiaal would not sell to another European competitor, which could take companies including Lactalis or Nestlé out of the running.
But there's also always private equity firms looking for well-known brands to invest in and improve. While a lot of economic activity has slowed, private equity investments in the food and beverage space have taken off this year. Many of these investments have gone toward tech-heavy up-and-coming brands, but there is value in a brand that consumers already know and love. And regardless of lackluster sales for the Yoplait brand from a balance sheet perspective, millions of consumers buy Yoplait, with 2020 U.S. sales for the brand coming in at $919 million, according to Statista.