Release Date: September 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- General Mills Inc (GIS, Financial) saw an improvement in North America retail categories, which were up 2%, driven by a mix of volume and pricing.
- The company experienced a slight uptick in food consumption at home, which aligns with their expectations and supports their value proposition.
- General Mills Inc (GIS) reported good returns on increased couponing efforts, indicating effective promotional strategies.
- The company has strong news and initiatives planned for its billion-dollar brands, expected to drive growth in the second quarter.
- Improved customer service levels were noted across most of the portfolio, particularly in the food service and pet business segments.
Negative Points
- Despite improvements, General Mills Inc (GIS) acknowledges that there is still significant work to be done to enhance competitiveness and market share.
- The pet segment, particularly the Wilderness brand, showed only moderate improvement and remains below growth targets.
- The company faces challenges in the Chinese market, particularly with Häagen-Dazs shops, due to reduced consumer traffic and macroeconomic factors.
- There are concerns about the impact of stranded overhead costs from the yogurt divestiture, which may take up to two years to address.
- Recent scanner data indicated a step backward in market share for categories like cereal, refrigerated dough, snack bars, and sweet snacks, attributed to timing shifts in merchandising.
Q & A Highlights
Q: Does the shift in more at-home food consumption give you more confidence in the organic sales outlook or are you seeing that benefit muted by continued value-seeking behavior?
A: The quarter played out as anticipated with gradual improvement in categories. North America retail categories are up 2%, driven by a mix of volume and pricing. We saw a slight uptick in food consumption at home, which we anticipated due to consumers seeking value. Our guidance is predicated on continued improvement in competitiveness, not just category improvement.
Q: Can you talk about the receptivity from consumers to your couponing and promotional investments? Are you seeing incremental purchasing behavior from those consumers?
A: Consumers see value in various ways, including couponing, trusted brands, and new products. Our couponing efforts saw good returns. We also launched successful new products like Fruity Cheerios and advertising for Blue Buffalo's Wilderness, which helped improve sales.
Q: Would you anticipate being in a position to hold share across your North America Retail (NAR) segment for the year?
A: We expect to improve competitiveness throughout the year, especially as Q2 sales comps get easier. We have great news on our biggest brands starting in Q2, which should help us improve our market share.
Q: Can you call out where customer service levels have been an issue and the roadmap for improvement?
A: We have seen gradual improvement in customer service across most of the portfolio, particularly in food service and pet businesses. Our service levels are moving close to pre-pandemic levels.
Q: What are you seeing in the current environment that has made you focus on finding bolt-on deals rather than larger acquisitions?
A: We see more availability of smaller size assets that we could bolt on to enhance our growth. Our balance sheet allows us to do both bolt-on acquisitions and share repurchases simultaneously.
Q: How should we read the latest quad week of data, which suggests a step backward in categories like cereal and refrigerated dough?
A: The recent data is due to a timing shift in merchandising programs. We are not worried about the scanner data for the last month.
Q: Is there a scenario where North America price mix could be positive this year?
A: We see an equal contribution from rate and volume in our categories. Our categories remain rational, and we expect modest improvement in mix as we move forward.
Q: Can you provide more color on trends in your international segment, particularly in Brazil and China?
A: We saw growth in Europe and Brazil. In China, Wanchai Ferry dumplings are doing fine, but Häagen-Dazs shops are struggling due to lower traffic. We are not counting on economic improvement in China for our guidance.
Q: Does the divestiture of yogurt require you to alter your approach to the retailer or your consumer insights?
A: There is no broader implication with our retailers or insights. The divestiture is relatively easily separable and won't impact our cereal business.
Q: How do you assess your portfolio's frequency of consumption relative to its potential?
A: Innovation can happen through new products, marketing messaging, and pack sizes. We have good new product innovation on our billion-dollar brands and stepped-up levels of advertising, which should drive growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
