Food Business News - September 27, 2011 - 18

General Mills proﬁt falls 14%; sales climb 9%
Input costs, pricing efforts hinder the company’s proﬁtability in ﬁrst quarter
Mr. Friendly said. “Some of this decline reﬂects our actions to reduce trade spending and take pricing. But changes in product mix also contributed to our pound volume decline. Volumes declined for some of our heavier products, including soup, canned vegetables and dessert mixes, while our strongest volume gains came in lighter product offerings like grain snacks.” The Bakeries and Foodservice segment posted operating proﬁt of $61.4 million, down 15% from $72.5 million during the same quarter of the previous year. The segment had sales of $481 million, up 13% from $426.7 million. “First-quarter 2012 Bakeries and Foodservice net sales growth results for our business continue to outpace the food service industry as we focus on consumer segments with the best growth prospects,” Mr. Powell said. “Net sales with food service distributors grew 5% in the quarter, led by our hot breakfast products, including the new Pillsbury Heat and Eat mini-French toast for K-12 schools. “Sales in convenience stores grew 6% as we gained distribution on new snacks offerings such as Fiber One 90 Calorie Brownies and Nature Valley Recharge Energy Bars. And pricing drove sales in our restaurants and in-store bakery segments, up 18% in the quarter.” The company also reafﬁrmed its full-year ﬁscal 2012 guidance of earnings per share of $2.59 to $2.61, excluding market-tomarket effects and integration costs for the Yoplait acquisition. FBN

MINNEAPOLIS — Higher ingredient and fuel costs contributed to a 14% decline in earnings for General Mills, Inc. during the ﬁrst quarter. For the quarter ended Aug. 28, the company had earnings of $405.6 million, equal to 63c per share on the common stock, which compared with earnings of $472.1 million, or 73c per share, during the same quarter of the previous year. Sales for the quarter were $3,847.6 million, up 9% from $3,533.1 million during the same quarter of the previous year. “Our net sales grew 6% before the Yoplait acquisition, with gains across all three of our business segments,” said Ken Powell, chairman and chief executive ofﬁcer. “This reﬂects good net price realization, resilient consumer demand for our established products, and good early response to new items launched during the quarter. This start to the year has General Mills on track to achieve the key growth targets we’ve set for ﬁscal 2012.” In a conference call with ﬁnancial analysts on Sept. 21, Mr. Powell called consumer trends “a tale of two worlds.” “An increasing number of consumers in emerging markets are buying branded packaged goods as their income expands, but high unemployment, a soft housing market and concerns about the economy are pressuring consumer conﬁdence and spending in developed markets,” he said. Operating proﬁt for the U.S. Retail segment during the quarter was $585.2 million, down 5% from $614.6 million during the same quarter of the previous year. Sales for the segment were $2,510.3 million, up 3% from $2,446.6 million.

“As we have discussed before, input costs are up signiﬁcantly for food manufacturers,” said Ian Friendly, executive vice-president and chief operating ofﬁcer of U.S. retail, in the conference call. “In response, branded and private label manufacturers have taken pricing actions to offset a portion of the input cost inﬂation. Across our categories, average unit prices increased sequentially and were up nearly 5% for the ﬁrst quarter of our ﬁscal 2012.” During the quarter, General Mills experienced market share declines in its cereal and yogurt categories, and gains in grains, snacks and soup. “Our U.S. retail pound volume also declined this quarter as anticipated,”

Restaurant visits dip in second quarter
CHICAGO — Visits to U.S. restaurants slipped by 0.4% during the year’s second quarter, or the months of April, May and June, when compared to the same period a year ago, according to food service market research from The NPD Group. Consumers spent 1.5% more at restaurants over that time period this year, with the increase traced solely to higher checks. “The consumer demand in the prior three quarters wasn’t strong enough to overcome another bump in unemployment, rising gas and commodity prices and low consumer conﬁdence,” said Bonnie Riggs, restaurant industry analyst for The NPD Group. “The conﬁdence they had in the latter part of last year and the beginning of this year was eroded by bad economic news.” Visits to quick-service restaurants were ﬂat in the second quarter when compared to the same period of the previous year, according to Crest, a unit of The NPD Group that tracks consumer use of commercial and non-commercial food service outlets. Midscale trafﬁc declined by 4%, and casual dining trafﬁc declined by 2%. Fine dining showed some growth in each of the past four quarters. The NPD Group forecasts the restaurant industry will experience a 1% gain in trafﬁc in 2011. FBN

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September 27, 2011

Food Business News - September 27, 2011

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