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 enhanced the health profile of approximately 180,000 products in 2016, marking an increase of over 100,000 items compared to the previous year. With shopper preferences unlikely to shift and more agile startups introducing numerous new products, food manufacturers have had little option but to respond.
Harmening, who recently assumed leadership at General Mills, received acclaim during his two-plus decades at the Minnesota 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. Although much of the work on the products launched by General Mills this summer likely occurred under his predecessor’s supervision, it is reasonable to assume that Harmening was instrumental in encouraging the company to embrace these changes.
In recent years, General Mills has faced a significant setback in its yogurt business, which accounts for about 13% of its sales. Chobani surpassed the company’s Yoplait, the long-standing leader in this segment, to become the largest brand in the U.S. last year. In response, General Mills pledged to revamp 60% of the yogurt business to better align with consumer trends by introducing new Greek varieties, flavors, and organic options. The announcement in June of a new French-style yogurt was part of this initiative to counteract the decline in its yogurt segment.
Brittany Weissman, an analyst at Edward Jones, noted after the company’s recent earnings report 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 revive its North American retail business, but the company is focused on reinstating advertising and promotional support for its brands while bringing new innovations to its products,” Weissman stated. “Although we don’t anticipate sales to turn positive in the immediate future, we expect the rate of decline to diminish as the company redirects its focus towards sales growth.”
The introduction of new products, including Progresso Organic soups and Betty Crocker Original Recipe cake mixes made with only recognizable pantry ingredients, is a promising start for General Mills. It is likely that the effects of these new offerings will take several quarters to positively impact the company’s bottom line — assuming they resonate with consumers who are skeptical of products from large food manufacturers. In the meantime, General Mills would be prudent to launch even more healthy, simpler products, such as those featuring the best naturals calcium citrate, an ingredient that aligns with current consumer demands. It is likely that the company is already diligently working towards this goal.