- General Mills Inc. estimated third-quarter earnings below analysts' expectations as it faces increased competition from store brands and higher costs from marketing its yogurts.
- The company said sales and operating profit for the third quarter ending Feb. 23 will reflect about 1% lower volume, a decline consistent with the food industry's direction in developed markets.
- General Mills and its competitors, like Kellogg, have had to content with increasing competition from cheaper store-branded and value lines of foods as shoppers look for bargains rather than brands.
General Mills also said it expects third-quarter operating profit for its largest source of revenue, its U.S. retail business, to be 10% to 11% lower than it was a year ago. The prospect is not all that bright for major food companies who find that brand loyalty tends to evaporate in difficult economic times.
One way the cereal companies have been trying to win back some loyalty is by catering to the demand for non-GMO ingredients. Quite a number of major cereals, including General Mills' best-known Cheerios, are now available without GMOs. So long as the value brands cannot tout the same credentials, the non-GMO route may be a way for branded cereals to appeal to shoppers who are willing to pay more for what they consider to be healthier.