General Mills cutting 625 jobs as yogurt, baking brands struggle
- Cereal titan General Mills expects to eliminate up to 625 jobs by next spring as it strives to reduce costs and improve performance in its baking and yogurt products, according to a company release. Most of these positions were cut in the latest financial period, including positions that were open at the time, as well as layoffs and reassignments, according to The Wall Street Journal.
- The company's fourth-quarter earnings beat analyst expectations, with profit falling 13% to $354.4 million from $408.9 million in the year-ago period. U.S. yogurt sales fell 5%, and the U.S. meals and baking segment's sales fell 2% for the period.
- Net sales rose 2.2% to $3.89 billion for the period, driven by stronger-than-expected convenience store and foodservice sales — which offset flat North American retail sales. The parent company of Haagen-Dazs and Betty Crocker expects net sales, including the impact of its purchase of pet food maker Blue Buffalo, to rise from 9 to 10% from a year earlier.
- "We are committed to competing effectively across all our brands and geographies, increasing investments to accelerate our differential growth platforms, and maximizing the growth opportunities for Blue Buffalo," CEO Jeff Harmening said in the release. "We are also keenly focused on maintaining our efficiency in this more inflationary cost environment, and we have initiatives underway to help protect our profitability."
As a growing number of mainstream shoppers leave the center store for trendier, better-for-you products on the perimeter, General Mills has been struggling to adapt.
Cereal has long been a pain point for the legacy company, but this quarter the beleaguered segment's net sales actually rose 2%, as did the company's snacking unit. This slight performance improvement was likely driven by the company's investments in deeply indulgent cereal products, such as Dippin' Dots cereal, Lucky Charms Frosted Flakes and Cinnamon Toast Crunch shredded wheat.
General Mills' yogurt segment, however, is still sour. Its U.S. yogurt sales slipped 5% in the fourth quarter, and while this is an improvement from the unit's 8% and 11% sales declines in the third and second quarter 2018, it reflects the company's struggle to stay relevant in a yogurt case crowded with powerful newcomers.
To check brands inspired by global yogurt varieties such as Chobani and Siggi's, General Mills rolled out a French-style Yoplait yogurt called "Oui." Earlier this month, the Big Food giant rolled out YQ by Yoplait, a protein-rich, low-sugar variety that caters to health-conscious consumers' desire for simple, clean ingredients — and reflects rival Chobani's value proposition. These investments appear to be slowly making an impact, as the company grew its yogurt market share for the first time in three years, despite its negative sales results.
Beyond R&D and product innovation in underperforming categories, General Mills has also entered the fast-growing pet food space with its $8 billion-purchase of Blue Buffalo in April.
"While higher costs related to the acquisition will be headwind for earnings growth next year, we believe the acquisition should add to earnings growth longer-term," Edward Jones analyst Brittany Weissman wrote in a note. "While we were pleased to see continued progress in sales and believe the recent Blue Buffalo acquisition has the potential to further boost sales growth, General Mills faces a challenging operating environment from a dynamic retail environment, increased competition and higher input costs."
The question now is how the elimination of 625 employees will impact General Mills' ability to weather these dynamic challenges and maintain a competitive edge. The company stated the move is part of its global cost savings initiative "designed to administrative costs and align resources behind growth initiatives." It could also free up cash for the company's growing marketing spend.
General Mills' isn't the only major food company cutting jobs to improve efficiency. Kellogg has been trimming its employee workforce through its Project K initiative in an effort to generate $425 million to $475 million in annual cost savings by this year. The cereal maker's efforts have improved its top line growth in its most recent quarter, though this strategy could be undercutting its long-term growth potential. It will be interesting to see if General Mills' job cuts will yield similar results, and if further staff reductions are necessary to improve performance in the short-term.
- General Mills General Mills Reports Fourth-Quarter And Full-Year Fiscal 2018 Results; Provides 2019 Outlook
- Reuters More on General Mills' Q4 results
- The Wall Street Journal General Mills Job Cuts To Total 625
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