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General Mills' (GIS) Venture Capital Unit Invests in Pots & Co

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Zacks Equity Research
·4 min read
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General Mills, Inc.’s GIS venture capital arm — 301 INC — in partnership with other investors unveiled plans of a multistage investment of up to $20 million in London-based food company — Pots & Co. We note that Pots & Co is popular for its assortment of hand-crafted potted desserts, which are available in U.K. supermarkets. Through this investment, Pots & Co expects to accelerate its growth strategy and expand its product range as well as distribution in the United States.

General Mills is on track to increase its retail footprint in the United States, especially in the West Coast and Rocky Mountain areas. For now, Pots & Co will supply its differentiated potted desserts with plans to venture into savory items in the long run. These products are currently produced in Pots & Co’s London-based facility. The deal will enable Pots & Co to explore more options related to production capabilities in the United States, while increasing its investment in marketing and distributing. Notably, Pots & Co generated sales of $19.5 million in 2020, up from $2.8 million reported in 2014.

What Else Should You Know?

General Mills is on track with its three core priorities for fiscal 2021, which include competing efficiently, operating with efficacy to fuel investments in brands and capabilities as well as reducing leverage. The company made solid progress on each of these priorities in the third quarter of fiscal 2021. With regard to the competing efficiently priority, the company’s brand strength helped it hold or increase market share in six out of its eight core markets in the first three quarters of fiscal 2021.

Also, the company witnessed increased share in all its global platforms. As part of boosting efficiency, the company is on track with its Holistic Margin Management (HMM) and Strategic Revenue Management (SRM) initiatives. General Mills also progressed well with reducing its debt leverage in the fiscal third quarter.

Moving on, the company’s Accelerate strategy is outlined to help it make choices of how to win and where to play, with an aim to boost profitability, while enhancing shareholder returns in the long run. Apart from this, General Mills is benefiting from high demand stemming from the pandemic-led elevated at-home consumption. In fact, management expects to continue witnessing elevated at-home food demand compared with pre-pandemic levels for the rest of fiscal 2021. This is likely to be backed by increased cooking and baking at home. The company is focused on capitalizing on these opportunities on the back of its strong brands, innovation and capacity to generate growth.

We note that General Mills is a renowned producer and marketer of branded consumer foods that are sold across retail stores globally. The company boasts well-known brands like Haagen Dazs, Nature Valley and Old El Paso. That said, we believe that investment in Pots & Co is likely to add another leaf to General Mills’ growth story.

Shares of this Zacks Rank #3 (Hold) company have gained 7.9% in the past three months compared with the industry’s growth of 8.4%.

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Sanderson Farms, Inc. SAFM, currently sporting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 43.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The J. M. Smucker Company SJM, currently carrying a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 1.7%.

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