MINNEAPOLIS — Net sales for General Mills’ pet segment, Blue Buffalo, were up 14% to $436 million in the third quarter of the company’s fiscal 2021, ended Feb. 28. Operating profit for the segment was up 9% to $102 million.

Nine-months sales for the segment grew 13% to $1.29 billion, with operating profit up 22% to $312 million.

Growth for the Blue Buffalo brand was driven by positive volume growth and market share gains, and partially offset by investment costs for its new BLUE Tastefuls wet cat food portfolio — officially launched in mid-March — unfavorable net price realization and mix, and increased media investment, the company reported.

“One of the most compelling growth opportunities in our portfolio resides within our pet segment,” said Jeff Harmening, chairman and chief executive officer of General Mills. “…Next month marks the third anniversary of our transformational acquisition of Blue Buffalo. As we think about continuing to reshape our portfolio for enhanced growth, we look to our performance with BLUE as evidence of our ability to successfully acquire, nurture and grow brands and businesses where we can leverage the power of General Mills’ team and capabilities.”

Since its acquisition of Blue Buffalo in 2018, General Mills has delivered significant growth for the pet food and treat brand. From 2017 to the end of February 2021, annual net sales were up $450 million at a more than 10% compounded annual growth rate (CAGR), and annual operating profit has grown $120 million at an 11% CAGR.

Third-quarter growth for both wet food and treats was approximately 25%, shared Kofi A. Bruce, chief financial officer of General Mills. The company plans to focus on these two categories, specifically wet cat food, as well as condition-based diets to drive continued growth.

“Wet cat food is an attractive, growing segment with roughly $5 billion in retail sales,” said Bethany Quam, global president of General Mills’ pet segment.

The company’s new BLUE Tastefuls launch, which will replace its existing Healthy Gourmet cat food portfolio, specifically speaks to this category with an emphasis on natural formulations.

“Since we acquired Blue Buffalo, the US pet food category has grown about 4% a year, and recent trends point to continued mid-single-digit growth for the category going forward,” Quam said. “Natural pet food, which represents around 30% of total pet food sales today, has led the category with 9% growth in calendar 2020. Because we know pet parents want natural, high-quality ingredients for their pets, we expect the natural segment to continue to drive category growth in the years ahead.”

General Mills has also increased Blue Buffalo’s retail and household penetration, growing primarily in the Food, Drug and Mass (FDM) channel. Blue Buffalo has grown from 22% ACV [all-commodity volume] in the FDM channel in 2017 to 86% ACV in 2020.

Additionally, household penetration is up 6% from 2017, and market share has also grown. The company is also focusing on the pet specialty and e-commerce channels to drive growth through its brand awareness strategy deemed “Out with the Old, In with the Blue.”

“In BLUE’s early days with General Mills, we invested significantly to continue to build the brand and accelerate BLUE’s expansion in the Food, Drug and Mass channel… where about 40% of pet food is sold,” Quam said. “As a result, since the acquisition, we’ve increased our distribution in FDM… we’ve nearly doubled our household penetration, and we’ve increased our all-channel market share to about 7.7% in this fast-growing category.”

The company continues to grow internationally, with its pet segment up 40 basis points and other product segments up between 30 and 110 basis points. The company’s key international markets include Canada, France, the United Kingdom, Brazil and New Zealand.

Overall, the company posted strong financial numbers for the third quarter. Yet, the Minneapolis-based company could face challenges in upcoming financial quarters.

General Mills in the fourth quarter will begin overlapping the period when the COVID-19 pandemic hit and changed consumer eating patterns. Inflation is becoming a headwind, too.

“As we look ahead to Q4 and fiscal 2022 where we'll be comparing against pandemic-driven results that included unprecedented global at-home food demand, we plan to introduce a two-year compound growth metric into our quarterly communications,” Bruce explained. “This will enable investors to compare our results against pre-pandemic periods and give you better visibility into the underlying momentum in our business. In other words, you'll be able to better see how much demand is sticking.”

Net earnings attributable to General Mills in the third quarter were $595.7 million, or $0.97 per share on the common stock, which was up 31% from $454.1 million, or $0.75 per share, in the previous year’s third quarter. Net sales rose 8% to $4.52 billion from $4.18 billion in the previous year’s third quarter, reflecting market-share gains amid elevated demand for food at home.

Organic net sales were up 7% in the third quarter. General Mills expects full-year organic net sales to increase about 3.5%.

Companywide over the first nine months of the fiscal year, net earnings attributable to General Mills were $1.92 billion, or $3.13 per share on the common stock, which was up 24% from $1.56 billion, or $2.56 per share, over the same time of the previous year. Nine-month net sales rose 8% to $13.6 billion from $12.6 billion.

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