MINNEAPOLIS — General Mills, Inc. is looking to capitalize on what chief executive officer Jeffrey L. Harmening calls “a once-in-a-generation opportunity to drive trial” of the company’s brands. In the United States, which makes up 75% of the company’s sales, General Mills held or maintained share in 8 of its top 10 categories and the goal is to keep that growth.
The company reported increased net sales for its pet segment, up 6.5% to $391.7 million compared to $367.8 million in year-ago sales. Operating profit totaled $90.3 million, up 11.6% from $80.9 million in its first quarter of 2019.
These increases were driven by positive volume growth and partially offset by unfavorable net price realization and mix, the company reported in a press release.
“I would say we are actually quite pleased with our pet growth in the first quarter and ended up almost exactly where we thought that it would end up,” Harmening said in a Q&A session on the company’s first quarter earnings on Wednesday, Sept. 23.
General Mills addressed the initial stock-up of pet products in spring 2020, when the COVID-19 pandemic hit the United States, saying its sales were understated in the first quarter due to a sudden increase in sales followed by a decrease in sales.
“…In the fourth quarter of last year, there was a big stock up and we actually saw that flow through to June,” Harmening explained. “And so our retail sales out in June were probably low single-digits and they accelerated dramatically in July and August to high single-digits. That tells us that… the stock-up the consumers had in the fourth quarter is actually now behind us and that it did have an impact on our first quarter, and were it not for the impact… from the fourth quarter and the carryover, we probably would have seen… high single-digit sales of our pet food business on a reported basis in the first quarter.”
The company’s focus on the Food, Drug and Mass (FDM) retail channel has drawn some sales away from the pet specialty channel, but Harmening reported this decline is gradually improving.
“…We have grown through growing same-store sales, where we already are, we have grown it through our e-commerce business,” Harmening added. “The drag from pet specialty has actually reduced from where it was before.”
Harmening went on to explain the company is seeing growth in market share for both dog and cat products, as well as their subsegments. Blue Buffalo drove double-digit sales growth for wet pet food and treats, which are rising in popularity in the North American market.
“We feel very good about our pet business, and I would think that in the second quarter, we will see strong growth in pet,” Harmening concluded.
Overall net income for General Mills rose 23% to $638.9 million, equal to $1.04 per share on the common stock, and 21% over the same period of the previous year. Quarterly sales rose 9% to $4.4 billion.
“In an uncertain environment, our job is to stay focused on what we can control,” Harmening said. “We are positioned to compete and win in our categories this year, regardless of the level of demand. And we’ll do that while driving efficiency, reducing our debt leverage, and investing for long-term success.”
While the company declined to offer full-year guidance, it did provide some insight on where the company is headed in fiscal 2021.
“As we look further out, we expect net sales to be down in the fourth quarter, driven by the difficult comparison to year-ago period when net sales grew 21% behind the initial pandemic-driven surge in at-home demand, the 53rd week and the extra month of results in our pet segment,” said Kofi Bruce, chief financial officer.
Harmening added the company plans to take “learnings” from the last recession and invest behind General Mills’ brands and growth ideas.
“In fiscal ‘21, we expect brand investments, including media and investments in capabilities like data and analytics, e-commerce and strategic revenue management, will be up year-over-year,” he said. “Finally, we continue to plan for ongoing health and safety expenses related to the pandemic. While these have moderated from the fourth quarter, we expect they will continue throughout fiscal 2021.”
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