Strategy

Weak Yogurt Sales Add to General Mills’ Woes

The company's sales fell for a ninth straight quarter, reflecting consumers' shift from packaged foods to fresh, organic products.
Matthew HellerSeptember 20, 2017

General Mills shares fell sharply on Wednesday after the company reported disappointing quarterly earnings amid weak demand for cereal and yogurt.

For the first quarter, General Mills’ overall sales declined 4% to $3.8 billion, reflecting not only a 7% drop in U.S. cereal sales but also a double-digit decline in U.S. yogurt sales.

On the bottom line, the company earned an adjusted 71 cents per share, missing analysts’ estimates of 76 cents per share.

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“Our number one priority in fiscal 2018 is strengthening our topline performance,” CEO Jeff Harmening said in a news release, predicting a 200 to 300 basis point improvement in organic net sales trends for the full year.

But General Mills shares were down 5.7% at $52.20 in trading Wednesday, bringing the stock’s losses for the year to 15%.

The company’s sales have now declined for nine consecutive quarters. “U.S. packaged food makers, including General Mills, Conagra Brands and Kellogg, have been facing falling demand as consumers increasingly prefer fresh, organic products over packaged and frozen food,” Reuters noted.

“The sector is expected to come under renewed pressure with the entry of online giant Amazon.com into the brick-and-mortar grocery stores business through its deal to buy Whole Foods Market,” the news service added.

Overall demand for sales in the U.S. has dropped 9% since 2012. But adding to General Mills’ first-quarter woes, sales of its new Oui by Yoplait French style yogurt were not enough to compensate for the sluggish performance of its other yogurt products including Yoplait Greek and Yoplait Light.

Harmening said the company had “anticipated a slow start to the year on the bottom line, and we continue to expect sequential improvement in profitability in the coming quarters. The strategy for boosting sales, he said, includes growing cereal globally, improving U.S. yogurt through innovation, and investing in natural and organic food brands.

“We’re taking deliberate steps through innovation, brand building, and increased organizational agility to position the company for long-term top- and bottom-line growth, in line with our shareholder return model,” the chief executive said.