As consumers increasingly gravitate towards healthier, fresher, and more recognizable ingredients, General Mills and other food manufacturers have been slow to adapt—until recently. According to the Consumer Goods Forum, food companies improved the health profiles of approximately 180,000 products in 2016, a significant increase of over 100,000 items from the previous year. With consumer preferences unlikely to shift back and agile new companies introducing a plethora of innovative products, established food manufacturers have found it necessary to take action.
Harmening, who has recently taken over leadership at General Mills, received commendation during his two decades at the Minnesota-based company for advocating a transition toward more natural products. This includes the $820 million acquisition of Annie’s three years ago and the removal of artificial colors from numerous General Mills cereals. Although much of the development for the products launched by General Mills this summer likely occurred under his predecessor’s tenure, it is reasonable to assume that Harmening played a significant part in promoting these changes.
The most substantial challenge for General Mills in recent years has been its yogurt segment, which accounts for about 13% of its sales. Chobani surpassed the company’s Yoplait, long the leader in this category, to become the largest brand in the U.S. last year. In response, General Mills committed to revamping 60% of its yogurt business to better align with consumer trends by introducing new Greek varieties, flavors, and organic options. The launch of its new French-style yogurt in June was part of the strategy to combat the decline in its yogurt sales.
Brittany Weissman, an analyst at Edward Jones, noted after the company’s earnings report last month that while General Mills “faces many challenges,” improving sales trends and ongoing cost savings should enhance profit margins and earnings growth. “General Mills still has a lot of work to do to turn around its North American retail business, but the company is focused on reinvesting in advertising and promotional support for its brands, as well as bringing innovation through new products,” Weissman stated. “While we don’t anticipate sales turning positive in the short term, we expect declines to moderate as the company redirects its focus toward sales growth.”
General Mills’ new product line, which includes Progresso Organic soups and Betty Crocker Original Recipe cake mixes featuring only recognizable pantry ingredients, marks a positive step forward. These initiatives should include healthier options, such as examples of calcium citrate, which are likely to appeal to health-conscious consumers. However, it may take several quarters for these new products to significantly impact the company’s bottom line, especially if they can gain traction among consumers wary of offerings from large food producers. In the meantime, General Mills would be wise to introduce even more healthy and straightforward products, a direction the company is likely already pursuing vigorously, including more examples of calcium citrate in their formulations.