General Mills to keep expanding international unit

Images (showing 1 of 2 photos)

Cheerios and Betty Crocker maker General Mills Inc. said Monday it plans to keep expanding its international business, the company's fastest-growing segment, and increase its marketing to offset the soft economy.

Chief Executive Ken Powell told shareholders that the international growth strategy will focus on premium ice cream Haagen-Dazs, found in 60-some countries around the world, as well as cuisines like Mexican food brand Old El Paso and healthy snacking such as Cheerios snacks.

"We believe our greatest opportunities still lie ahead," he said at General Mills' annual meeting in Minneapolis.

International sales doubled to $2.6 billion in the 2008 fiscal year from $1.3 billion five years earlier, Powell said. They grew 21 percent from last year, outpacing domestic retail sales growth of 7 percent to $9.1 billion.

The international growth comes as General Mills faces a slumping domestic economy. Costs are up for all food producers, since the price of key ingredients like grain and fuel are high. So foodmakers are passing along those costs to customers.

But the silver lining, food companies and analysts say, is that more consumers are abandoning pricier restaurants and instead buying their food at grocery stores. That means more business for General Mills and other food companies.

Powell said the company plans to drive growth by increasing its marketing — with ads on TV and through Web sites targeting consumers — and by coming up with new products.

Both abroad and domestically, General Mills plans to introduce 300 items in fiscal 2009, he said. New products, like Progresso light soup and Fiber One bars, are helping fuel growth. The light soup, introduced last summer, notched $100 million in retail sales in its first year, Powell said, while the Fiber One bars are now worth more than double that annually.

The company is also focusing on productivity as a way to keep up with high costs. General Mills has said it expects input cost inflation to stay at 9 percent in fiscal 2009.

Price increases passed on to consumers have been keeping up with inflation, he said, but increasing productivity helps prevent those costs from getting too high for consumers.

"We really believe that our very high focus on productivity is allowing us to keep those consumer prices to a minimum," Powell said. "Taken together they are allowing us to offset those costs and maintain those margins."

Last week the Golden Valley, Minn.-based company, also known for Yoplait Yogurt and Pillsbury products, reported that revenue rose 14 percent in the first quarter but that profit fell 4 percent because of high commodity prices. But General Mills still raised its full-year profit outlook, saying it now expects sales to grow in the mid-single-digit rate for the year.

Analysts say the company, with its stable of well-known brands, is in a good position to grow even as consumers pull back on their spending. UBS analyst David Palmer wrote in a research note that the trend of people eating more meals at home bodes well for General Mills.

"Mills' portfolio of brands/categories holds up well in this framework since many of its best margin categories — soup, dough, cereal and yogurt — enable easy preparation and low cost/serving," Palmer wrote.

Back To Top