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New General Mills CEO Plans Turnaround After 2017 Sales Slump
Jeff Harmening, the CEO of General Mills

New General Mills CEO Plans Turnaround After 2017 Sales Slump

Cost cuts helped the company improve its profit outcome year-over-year, while its sales continued to fall for the eighth quarter in a row.

Sales at three out of General Mills’ four core U.S. food businesses slipped in the fourth quarter and ate away at its total revenue, which fell 3 percent during the March-to-May period, according to results released Wednesday.
 
With another quarterly sales drop, the Golden Valley-based food conglomerate has now gone two years without improving its overall sales. As a result, the company’s annual sales have fallen $2 billion, dropping from $17.6 billion in its fiscal 2015 to $15.6 billion now.
 
“Fiscal 2017 was a year of significant change for General Mills,” Jeff Harmening, the company’s new chief executive as of June 1, told analysts on a conference call Wednesday. “It’s clear some actions did not go according to plan. We have pulled back too far our investment in some key categories and our overall execution was not up to our normal standards. Our sales and profit suffered as a result.”
 
While its profits did rise by about 8 percent to $409 million in its fourth quarter, General Mills’ overall profits for the fiscal year slid from a year ago by roughly 2.5 percent, totaling $1.66 billion.
 
The company’s yogurt brands, in particular, are still struggling to land in American shopping carts. Sales in the division fell the sharpest—18 percent—among General Mills’ food divisions. Convenient meals and baking supplies sales also dove by 10 percent year-over-year in the U.S., while cereal dropped by 3 percent. Snacks remained flat.
 
At the heart of Harmening’s agenda, he said, is a five-point plan: to improve pricing and promotions of General Mills’ products; up its advertising spending; increase new product innovation; grow its e-commerce capabilities; and focus on global growth areas, such as cereal overseas.
 
“We have to have our pricing in the zone, because a lot of media spending—if your pricing isn’t in the right place—it doesn’t really work,” he told analysts. “That’s why innovation is going to grow, that’s why we are building capability in e-commerce and strategic revenue management.”
 
One of Harmening’s benchmarks was touched on earlier this week when it introduced Oui, a new French-style yogurt brand. General Mills executive David Clark claimed the new product could “[introduce] an entirely new category of yogurt” to the U.S. and shake up the market.
 
Other improvements won’t be apparent immediately, General Mills said, as it predicted sales would fall 1 to 2 percent in its fiscal 2018. Yet its adjusted operating profit margin is bound to rise further, the company said, after having reached its target rate of 18.1 percent in its just-finished fiscal year.
 
Investors responded favorably to the outlook. General Mills’ stock rose by 1.6 percent over the course of Wednesday, finishing at $56.42 a share.