General Mills Struggles With Slowing Snack Business

American cereal giant General Mills might have made a smart move with an early investment in the meat alternative company Beyond Meat.  The company was one of the first outside investors to stake a claim in the daring company, all the way back in 2013.  That was quite an early bid in a concept that definitely took a few years to take up root.  

But such an investment in this upstart has not been enough to help the company recover from a changing trend in American eating habits. For example, new data shows that Americans are more willing, these days, to splurge on pet food than for human snacks. 

Essentially, General Mills has seen revenue far lower than expected coming out of weak results from the North American retail unit. There was a 2 percent drop in sales from this division, which includes everything from Cheerios and Lucky Charms to Yoplait yogurt, to Chex, Fruit Snacks, and Annie’s branded cheddar bunnies. 

However, even though sales are up 7 percent—to $4.2 billion—these numbers are slightly lower than what analysts had forecast. And net North American sales—a metric that accounts for more than 50 percent of revenue—fell 2 percent from that decline in US snack sales. 

This dragged shares down, in the middle of this week, by about 7 percent.  More importantly, this earned the company the distinction of worst-performing stock in the Standard & Poors 500 Index, on Wednesday. 

According to General Mills Chief Financial Officer, Donal Mulligan, “We need to get snacks back on track,” noting that the R&D will ramp up spending to get new products onto store shelves.  He continues, “You’ll see us invest behind some really good ideas on bars and snacks.”

But while the company is working on shoring up their snacks business, their pet products division is doing quite well.  Blue Buffalo products, for example, are booming, up about 38 percent on the year.  On top of this, operating profits are soaring more than 80 percent.  

All in all, General Mills’ struggles are easy to understand when you look closer at the numbers.  The 7 percent drop in share value comes after the Minneapolis-based food maker posted a net earnings statement of %570 million. This equates to roughly 83 cents per adjusted share.  It is definitely better than the $354 million (79 cents per adjusted share) from the same period one year ago (and better than the 77 cents analysts had expected).