Changing Consumer Trends Boost General Mills' Sales

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Researched by Industrial Info Resources (Sugar Land, Texas)--General Mills Incorporated (NYSE:GIS) (Minneapolis, Minnesota), the manufacturer of such popular food brands as Cheerios and Lucky Charms cereals, Yoplait yogurt, Pillsbury products, and Progresso soups, released its earnings report for second-quarter 2009. Despite a year-over-year decline in quarterly net earnings of 3% to $378 million, the company's net sales were $4.01 billion, an 8% increase from 2Q08. Net sales have increased 11% year over year for the first six months of the 2009 fiscal year.

"Through six months, we've recorded sales gains in every division and segment of our business, with more than half of them growing at double-digit rates," said CEO Ken Powell in a conference call regarding the company's earnings. General Mills' U.S. retail sales were up 10% for the quarter, and while total international retail sales were up only 2%, significant gains appeared in sales in developing economies. Latin American and South African sales were up 15%, while sales in the Asia-Pacific region were up 25%.

Much of the U.S. sales growth seems to stem from changing consumer habits. "We are operating in a challenging environment," said Powell, "yet we're still seeing growth for our categories and for our leading brands as consumers shift some of their food spending into more meals eaten at home. This trend is a good one for General Mills overall because at-home food is our biggest business."

General Mills enjoys a large U.S. customer base, with an estimated 93% of U.S. households purchasing a General Mills ready-to-eat cereal and 81% purchasing General Mills frozen vegetables. Among General Mills brands, some of the largest growth was seen in Totino's brand pizza and pizza rolls, net sales of which grew 12%, and Yoplait yogurts, which showed a sales increase of 14%.

Industrial Info is currently monitoring $205 million of General Mills' projects in the U.S. Among these projects is the expansion of the company's breakfast cereals and snacks plant in Albuquerque, New Mexico. The expansion has an estimated cost of $100 million and involves adding a 160,000-square-foot building and necessary equipment to expand the plant's production to include health bars and fruit snacks. Construction is scheduled to begin in March of 2009, with completion planned for early 2010. Information on this and other industrial projects can be found in Industrial Info's North American Industrial Database.

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