Milling & Baking News - November 26, 2013 - 10

Business 

Mulligan says General Mills remains
well positioned for growth
NEW YORK - In spite of numerous
challenges, the U.S. Retail segment
of General Mills, Inc. is positioned to
achieve growth in fiscal 2014 in line with
the company's long-term objectives,
said Donal L. Mulligan, executive vicepresident and chief financial officer.
Mr. Mulligan reviewed the company's U.S. retail business in a presentation Nov. 20 at the Morgan Stanley
Global Consumer & Retail Conference
in New York.
While upbeat about the company's
performance in recent years and the
outlook, Mr. Mulligan described difficulties General Mills has been facing.
"The growth rate for food and beverage sales across our key developed
markets has slowed a bit in the second
quarter," he said. "In addition, input
costs remain a headwind. We continue
to expect 3% input cost inflation for fiscal 2014. But this inflation is frontloaded with inflation in the second quarter
expected to be the highest of the year."
Mr. Mulligan was careful to draw a
distinction between commodity inflation in the second quarter and what
transpired in recent years when major
upward swings in commodity prices
caused disruptive food price inflation.
"Today's more stable in-store environment is one where product news and
consumer marketing can be effective."
In connection with Mr. Mulligan's
remarks, General Mills reaffirmed its

fiscal 2014 earnings guidance, projecting earnings per share for the year
ending May 25 of $2.87 to $2.90. But
the company acknowledged challenges in the second quarter.
The update prompted Robert Moskow, an analyst with Credit Suisse,
to lower earnings guidance for the
second quarter alone to 84c per share,
versus an analyst consensus of 89c.
General Mills' shares fell Nov. 20 in
trading on the New York Stock Exchange, closing for the day at $49.24
per share, down 2.2%.
Most of Mr. Mulligan's presentation
was devoted to discussions of the General Mills product line, category by category, beginning with ready-to-eat cereal. With retail measured channel sales
exceeding $9 billion, it is the company's
largest business, one that has gained a
full point of market share since 2008.
"But overall category sales have declined slightly over this period," he said.
General Mills is countering the
trend with product news and "effective consumer marketing," he said.
He cited a number of innovations
the company is making, beginning
with the introduction of Nature Valley Protein Granola, with 10 grams of
protein per serving, about double the
cereal category average.
Early results have been impressive,
he said.
"After just five months in the market,

Schwebel to close baking plant in Cuyahoga Falls
YOUNGSTOWN, OHIO - Schwebel
Baking Co. plans to cease operations
at its baking plant in Cuyahoga Falls,
Ohio, sometime next year, transferring production to the company's
more modern facility in Solon, Ohio.
Solon is located
about 22 miles from
Cuyahoga Falls.
The company said
it has purchased a
new bread line that
will be installed in
Solon to accommodate heavier production following the Cuyahoga Falls
closing. According to Schwebel, the
new bread line is "part of ongoing
efforts to modernize facilities, equipment and work practices to remain
competitive."
Schwebel acquired the bread
line from the old Hostess Brands,
Inc., which shut down bakeries last
10 / November 26, 2013 Milling & Baking News

year as part of its bankruptcy.
"The company has been a proud
employer in Cuyahoga Falls for more
than 30 years, but is using only 35% of
the square footage of the facility and
needs to modernize in the manner that
is most cost effective,
which the multi-story,
outmoded Cuyahoga
Falls facility cannot accommodate,"
Schwebel Baking said.
In addition to
Cuyahoga Falls and Solon, Schwebel
operates bakeries in Youngstown and
Hebron, Ohio. The company makes
bread under such brands as Schwebel's, Millbrook, Country Hearth, Roman Meal, Sun-Maid Raisin Bread and
Cinnabon Bread, and has annual sales
of approximately $159 million, according to the 2013 Directory & Buyers Guide
published by Sosland Publishing Co. MBN

it is already among the top turning granola items in a segment that is growing
17% year to date," Mr. Mulligan said.
Turning to yogurt, Mr. Mulligan
said sales of the company's U.S. Greek
yogurt "continue to significantly outpace this segment."
Yoplait Greek blended yogurt was
introduced during the summer, with
sales momentum expected to grow
throughout fiscal 2014, he said.
In the core cup yogurt category,
business has improved from challenging conditions experienced recently.
"Base unit sales on Yoplait original
have turned positive this quarter, driven in part by increased levels of advertising," Mr. Mulligan said. "In total
our U.S. yogurt business is stabilizing.
Consumer sales in Nielsen measured
outlets have been improving sequentially, and reported net sales have been
slightly above year-ago levels in the
most recent two quarters."
He predicted a turn to growth for
yogurt in fiscal 2014, describing longterm prospects for the business in the
United States as excellent.
More consistently positive news has
come from the General Mills Snacks business. General Mills has gained 10 points
of market share over the past five years,
and 2014 has started off strong, he said.
"We've added nearly 4 points of
market share year to date," he said.
"The driver here is terrific product innovation with items like Fiber
One Lemon Bars, Nature Valley Soft
Baked Oatmeal Squares and Nature
Valley Greek Yogurt Protein Bars, all
launched in the first half."
Less upbeat was Mr. Mulligan's assessment of prospects for the General
Mills dinner mix business.
While the category remains a "pantry staple" for many consumers,
"growth in this category has paused in
recent months, and we are losing share
overall in the dry dinners," he said.
The company has done well with its
Ultimate Helpers new products and
expects this part of the category to
continue to do well.
"Refrigerated baked goods is another category where we are a clear leader," Mr. Mulligan said. "We've been
finding new sources of growth recently by focusing on different consumers.
For example, we're reaching Hispanic
households with targeted advertising
and sampling. This effort is paying off
with increased household penetration
and buy rates."
Financial results for the second
quarter ended Nov. 24 will be issued
by the company on Dec. 18. MBN
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Milling & Baking News - November 26, 2013

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