General Mills Inc. (GIS), a global consumer food company, recently discussed its outlook and growth strategies for fiscal 2014 at the New York Stock Exchange.
Growth in fiscal 2014 is expected to be in line with its long-term targets and driven by new products, increased brand support and cost savings from the Holistic Margin Management (:HMM) program. The company maintained its prior guidance for fiscal 2014. Earnings per share are expected to grow at a high single-digit rate in a range of $2.87 to $2.90.
The company continues to expect net sales to grow at a low single-digit rate and exceed $18 billion in fiscal 2014 on the back of new product innovation and contribution from new businesses such as Yoplait Canada and Yoki. The U.S. retail business is expected to benefit from new product launches and increased innovation, while the international business will gain largely from the newly-acquired businesses.
Segment operating profit is expected to grow in mid-single digits. The company expects margin to expand in fiscal 2014 on the back of cost savings from the HMM program. Capital spending is expected to be around $700 million.
Moreover, the company plans to increase dividends and share buybacks in the year, thus offering greater shareholder value. The increased buybacks are expected to lower the average number of shares outstanding by 2% in fiscal 2014. The company also plans to increase its dividend by 15% effective from the quarterly payment due on Aug, 01.
The company intends to launch more than 200 new products in the first half of fiscal 2014. More products are expected to be introduced later in the year.
In 2014 and beyond, in order to drive sales growth, General Mills will focus on five global categories. These categories include ready-to-eat cereals, super-premium ice creams, convenient meals, wholesome snack bars and yogurt. These categories are highly responsive to innovation and are capable of meeting evolving consumer needs. General Mills’ retail sales in the five global categories are growing at attractive rates and all of these have promising long-term growth potential.
Focus on Cereals
General Mills operates a $4 billion cereal segment. The company intends to offer new cereal options and brand building in the U.S cereal market in 2014. Some of the new products are Hershey’s cookies & Creme cereal and two varieties of Nature valley granola cereal. The company intends to expand the distribution of BFast, a breakfast shake.
Focus on Yogurt Business
General Mills generates $3 billion of sales from yogurt segment. The company intends to launch a new line of Yoplait Greek strained yogurt. The company also plans to increase its advertising expenditure and focus on product innovation, in order to drive sales.
The U.S. yogurt business has been challenging as increased sales prices in response to dairy cost inflation is reducing the competitiveness of its products. With the latest brand building and product innovation, the company expects its U.S. yogurt business to return to growth in fiscal 2014. The company has several products planned for its yogurt business in Europe and U.K.
Focus on Snacks
General Mills’ snacks segment is a $3 billion business. The company plans to introduce products like Nature Valley soft baked oatmeal squares, Fiber One, Ckex snack chips and Betty Crocker caramel Brownies in the U.S. It has products lined up for Europe and Brazil as well.
Focus on Meals
The company has planned several innovations for the meal segment also, which includes brands like Old el Paso and Helpers. The company will also launch several new products in China and Brazil.
The company has initiated a global advertising campaign on Haagen- Dazs. The company intends to open more than 70 new Haagen- Dazs cafes in 13 cities in China in fiscal 2014.
Focus on International market
General Mills also discussed its plans to shift the geographic mix of its business towards the international markets with particular focus on the emerging markets. Currently more than 1/3rd of its sales are generated from the international markets including about $2 billion in sales from the emerging markets.
General Mills carries a Zacks Rank #3 (Hold).
Other food companies that have been doing well consistently are Flower Foods Inc. (FLO) and B&G Foods Inc. (BGS) both carrying a Zacks Rank #1 (Strong Buy) and Campbell Soup Company (CPB) carrying a Zacks Rank #2 (Buy).
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