- General Mills reported a 6% decrease in net sales to $16.6 billion during the release of its fourth quarter and full-year fiscal 2016 earnings Wednesday. The dip reflected the impact of currency headwinds, one less week in the fiscal year, and the Green Giant divestiture. Fourth quarter net sales fell 9% to $3.9 billion but beat analysts' estimates of $3.86 billion.
- General Mills announced a plan to focus growth investments on brands and segments with the "strongest profitable growth potential" in fiscal 2017 and fiscal 2018, according to a news release. In the U.S. retail segment, the company's focus includes cereal, snack bars, the natural and organic portfolio, Totino's hot snacks, Old El Paso Mexican products, and yogurt.
- The company's operating profit jumped 30% to $2.7 billion in FY 2016, and diluted earnings per share came in at $2.77, a 41% increase over $1.97 last year. Fiscal fourth-quarter earnings excluding items were $0.66 per share, beating analysts' estimates of $0.60 per share.
The company raised its annual savings target for its cost-reduction and organizational efficiency initiatives, including Projects Century, Catalyst, and Compass, to $600 million per year by fiscal 2018. That's up from the former target of $500 million. The company also announced an increased and accelerated operating profit margin target, now at 20% by fiscal 2018, an increase of 400 basis points over fiscal 2015 levels.
Last week, General Mills announced that 22-year company veteran Jeffrey Harmening would be the company's president and COO, effective July 1. Much of his career has revolved around the cereal platform, which is an area General Mills has struggled in recently. With its first new cereal brand launch in 15 years, removing artificial colors and flavors, affixing gluten-free labels to select brands, positioning cereal as a snack food, and the recent announcement of an oats research partnership, General Mills' cereal efforts could benefit from Harmening's experience in the category.
But cereal isn't the only category challenging General Mills at the moment. Yogurt, the company's second-largest category at 13% of company sales, has been in a free fall since Chobani and Greek yogurt upended the yogurt industry over the past decade. Once holding 30% of the yogurt market five years ago, General Mills now claims about 20% of the market as of May, with steep declines over the last 10 months, according to Nielsen data cited in a Bernstein Research report.
General Mills was slow to adapt to the surging popularity of the Greek yogurt category, unsure of its staying power at first, according to analysts. Low dairy costs have also opened the doors for startups and smaller companies to enter the segment and enabled competitors to make larger investments in the category, including advertising and shelf space deals with retailers.
General Mills named yogurt as one of its "growth" investment categories, which means the company recognizes the importance of the segment to its sales and consumers. The company will likely continue to expand efforts by Yoplait, Annie's, and investments made by 301 Inc., including its leading contribution to an $18 million investment round closed by plant-based dairy producer Kite Hill last month.
In its fiscal 2017 outlook, the company said it sees organic sales growth remaining flat to a 2% decline while operating profits and margin continue to rise. But by fiscal 2018, General Mills said organic sales may return to modest growth as the company hits its margin targets. General Mills' targeted growth investments and trimmer portfolio, aligned with its "Consumer First" mantra, will return the company to "sustainable topline growth," chairman and CEO Ken Powell said in a statement.