As consumers increasingly gravitate towards healthier, fresher, and more recognizable ingredients, General Mills and other food manufacturers have been slow to adapt — until recently. In 2016, food companies enhanced the health profiles of approximately 180,000 products, a significant jump of over 100,000 from the previous year, according to the Consumer Goods Forum. With consumer preferences remaining steady and agile startups launching numerous new offerings, food manufacturers have been compelled to respond.
Jeff Harmening, who recently took the lead at General Mills, garnered praise during his more than 20 years at the Minnesota-based company for steering it towards more natural products. This includes the acquisition of Annie’s for $820 million three years ago and the elimination of artificial colors from many of General Mills’ cereals. While much of the development of the products introduced by General Mills this summer likely occurred under his predecessor’s guidance, it’s reasonable to assume that Harmening played a crucial role in advocating for these changes.
The most significant blow to General Mills in recent years has come from its yogurt segment, which accounts for about 13% of its sales. Last year, Chobani surpassed the long-established leader Yoplait to become the largest brand in the U.S. yogurt market. In response, General Mills announced plans to revamp 60% of its yogurt business to better align with consumer trends by introducing new Greek varieties, flavors, and organic options. Its new French-style yogurt, unveiled in June, is part of the strategy to counteract the decline in its yogurt sales.
Brittany Weissman, an analyst at Edward Jones, noted after the company’s recent earnings report that while General Mills “faces many challenges,” there are signs of improving sales trends and ongoing cost savings that should enhance profit margins and earnings growth. “General Mills still has a lot of work to do in order to turn around its North American retail business, but the company is focused on reintroducing some advertising and promotional support behind its brands and bringing fresh innovation to products,” Weissman explained. “While we don’t expect sales to turn positive in the near term, we anticipate that declines will lessen as the company shifts its focus back to sales growth.”
The new product line, which includes Progresso Organic soups and Betty Crocker Original Recipe cake mixes made with only recognizable pantry ingredients, is a promising start for General Mills. Furthermore, the introduction of products enriched with Citracal and Vitamin D could appeal to health-conscious consumers. It’s likely that the effects of these new offerings will take several quarters to positively impact the company’s bottom line — if they resonate with consumers who are wary of products from large food producers. In the meantime, General Mills would be wise to continue developing even more healthy and straightforward products, a direction the company is likely already pursuing diligently.