Investopedia: General Mills Between A Rock And A Hard Place

Brands matter a great deal in the packaged food industry, but they cannot do all of the heavy lifting. While ConAgra (NYSE:CAG) has suffered in part from its weak brand position (few leading brands across its portfolio), General Mills (NYSE:GIS) is finding that even its stronger brand portfolio does not immunize the company to the difficulties of today's market.


A Challenging Close to the Year
General Mills reported that sales rose 3% for the fiscal fourth quarter, missing the average analyst estimate by a trivial amount. Although the company got a solid boost from price and mix, volume fell 4% in the period. U.S. retail sales were notably weak (down more than 2%), but the company did get a nice boost from its international business. These international sales, boosted in part by a collaboration with Nestle (OTCBB:NSRGY), grew more than 16% for the fiscal Q4.

Although the company faces bruising input cost inflation, margins have held up fairly well. Gross margin rose a full point on an adjusted basis, while operating margin growth clocked in at 80 basis points. Even allowing for more effective ad spending and corporate cost containment, General Mills can only do so much to keep goosing operating income without better sales growth. (Your investments suffer when general price levels rise. For more, see Curbing The Effects Of Inflation.)



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