Milling & Baking News - December 28, 2004 - 18

F I N A N C I A L

R E S U L T S

In-store bakery boost, robust new
product lineup help General Mills
MINNEAPOLIS - Improved in-store
bakery demand was among many positive
trends witnessed by General Mills, Inc. in
the second quarter ended Nov. 28. In a
Dec. 21 conference call, Stephen W. Sanger,
General Mills chairman and chief executive officer, said that low-carb dieting that
had been hurting many parts of the General Mills business "is not a factor."
This improved environment, together
with a lineup of 30 new product intro-

ductions slated for coming months, fueled Mr. Sanger's optimism about the
company's prospects.
Net income of General Mills in the
second quarter ended Nov. 28 was $367
million, equal to 99c per share on the
common stock, up 19% from $308 million, or 82c per share, in the second quarter of fiscal 2004. Net sales were $3,168
million, up 3.5%.
Results included restructuring and
related charges of $3 million in the fiscal
2005 second quarter and $9 million in the
fiscal 2004 period.
The U.S. Retail business of General
Mills had operating profit of $567 million in the second quarter on sales of
$2,276 million, up 5% and 3% from $541
million and $2,203 million, respectively.
"Pillsbury USA and Baking Products
made the strongest contributions to secondquarter unit volume growth," the company
said. "Pillsbury unit volume was up 4% led
by refrigerated dough, frozen baked goods
and Totino's pizza and hot snacks. Baking
Products volume, primarily Betty Crocker
desserts, increased 8% driven by effective
merchandising programs."
Big G cereal volume was flat for the
quarter, and Snacks unit volume fell
1%, reflecting high levels of competitive
product activity.
"Consumer retail purchases of the
16 / Milling & Baking News, December 28, 2004

company's products grew 1% in the
quarter, despite strong year-ago performance when composite consumer sales
for the company's major product lines
increased 4%," General Mills said.
New product introductions featured
prominently in the company's secondquarter success, Mr. Sanger said during
the conference call. Refrigerated dough
sales were up 5% through the first half of
the year, driven by double-digit growth
in ready-to-bake cookies.
He credited the success of
new varieties, including
Turtle Supreme and sugarfree chocolate chip.
Frozen baked foods also
have performed well, led
by the company's freezerto-microwave line. Two
products doing well regionally will be rolled out
nationally, Mr. Sanger said.
The company's Perfect Portions biscuits, refrigerated
biscuits packaged in pairs
rather than tubes of eight,
have been in distribution in
the South and Southwest.
The company's rolled pie
crust, which Mr. Sanger said has generated an 8% increase in pie crust sales,
was not available in the West. Both
products will be available nationwide
beginning in January.
In Snacks, the company will introduce
several new products in January. Nature
Valley is rolling out several varieties, including two new sweet and salty granola
bars and a pecan flavor of the company's
traditional bar. Three new varieties of Chex
mix aimed at children will be introduced.
Mr. Sanger described innovation in
several of the company's other categories, including soup, dinner mixes and
yogurt. In the latter category, Yoplait
has enjoyed solid growth but has been
losing market share. New product introductions, including yogurt smoothies
for children, are aimed at reversing this
trend. Another new yogurt product is focused on heightened consumer interest
in health and wellness.
"Yoplait Healthy Heart yogurt contains plant sterols which are clinically
proven to lower cholesterol and reduce
the risk of heart disease when consumed
in a diet low in saturated fat and cholesterol," Mr. Sanger said.
Still, the company's largest "health
news" surrounds its well-publicized
move to incorporate whole grains into
all of its ready-to-eat cereals. Mr. Sanger

referenced the expected U.S. Dietary
Guidelines for Americans recommendation for an increase in daily whole grains
consumption to three servings.
"Right now only about 10% of Americans meet that consumption objective,"
he said. "Big G's initiative is important
because of the broad appeal of cereal.
Cereal currently accounts for about 30%
of all whole grain consumption in the
United States and is the No. 1 source
for kids between the age of 2 and 18. We
think our efforts, combined with the new
food guidelines when they come, will
result in an even higher awareness and
consumption of whole grains."
Beyond the whole grains reformulation and the marketing effort surrounding this initiative, Big G will be introducing two cereal brand extensions in the
months ahead. In January, chocolate
Lucky Charms will be introduced.
"It appeals to kids, of course, but it
also appeals to parents who grew up
eating regular Lucky Charms," he said.
"Lucky Charms is our best-selling brand
on college campuses. We think this will
be strong there, too."
General Mills also is introducing a
honey clusters variety of its Fiber One
cereal.
"It's a flake cereal with honey and
almond clusters, adds taste appeal to a
high fiber cereal," he said.
Operating profit of the Bakeries and
Foodservice business in the second
quarter was $46 million on sales of $456
million, down 12% and 3%, respectively,
from the second quarter of fiscal 2004.
Unit volume overall was down 7%,
though this decline was mitigated by
higher price and improved product mix,
General Mills said. While still weak, the
results were viewed by the company as
an improvement from recent disastrous
results.
"Unit volume in bakery channels was
down 5%, an improving trend compared
to an 11% decline in the first quarter," the
company said. "Operating profits totaled
$46 million, up from the first quarter but
below last year's second-quarter results
of $52 million."
In the conference call, James Lawrence, executive vice-president and chief
financial officer, said General Mills has
tough work ahead.
"We need to achieve our goal of
stabilizing Bakeries and Foodservice
earnings," Mr. Lawrence said. "Through
the first half, this segment is $12 million
behind last year. We need to make that
back in the second half."
Mr. Sanger agreed, but saw considerable cause for optimism.
"We are seeing some improvement in
our supermarket bakery business," he
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - December 28, 2004

Table of Contents for the Digital Edition of Milling & Baking News - December 28, 2004