General Mills flavor bet it’ll save you a little—’mac and cheese will be cheesy’
General Mills’ sales forecast is as bad as a bowl of milk-filled Cheerios, and the packaged goods giant is hoping that the sweet taste of some of its staple products will boost demand for its cereal and snacks.
The company reported a bigger-than-expected decline in net sales for the quarter, down 6% to $4.7 billion, due to lower demand for dog food and snacks. It also forecasts annual earnings below expectations. Shares fell as much as 7.8% on Wednesday following the earnings report. In addition to changing prices and increasing coupons to attract consumers, General Mills plans to invest in promotional activity—including bringing back the Pillsbury Doughboy—and improving the taste of its popular products.
“In tough economic times, consumers can’t afford to waste, so they’re looking for great-tasting products that they know will feed their family,” CEO Jeff Harmening said in an earnings call Wednesday.
“Pillsbury biscuits will be flakier, Annie’s mac and cheese will be cheesier, and Betty Crocker fudge brownies will be fudgier,” he added.
Consumers, increasingly protective of their wallets, have recently turned their backs on packaged goods, and food conglomerates across the board are struggling to maintain and increase sales. WK Kellogg saw a 1.9% dip in net sales year-over-year in its first quarter, and Kraft Heinz posted revenue that missed expectations due to cooling demand on higher prices.
Instead, shoppers turned to independent brands like Walmart’s new Bettergoods line and Costco’s Kirkland Signature for affordability and value. Private label sales rose 6% this year and now account for more than 25% of the market share across food, beverage, home, and beauty, according to consumer behavior platform Circana. This year marked the first time that the Alpha-Diver’s Snack50 Report identified all of its top six snack brands for retail brands.
But there’s an added benefit to switching to private brands that goes beyond price, according to Zak Stambor, senior retail and e-commerce analyst at eMarketer. Those affordable brands still taste good—putting pressure on brand names to raise their standards.
“Consumers, in the last few years because of rising prices, have been more willing to trade up to keep products,” said Stambor. Good luck. “What they’ve found, over and over again, is that most of the time they don’t compromise on quality as much as they trade.”
A recipe for success
But increasing the quality of ingredients and tweaking recipes aren’t foolproof strategies for hurting customers. Pepsi eliminated aspartame, a sweetener linked to cancer risk, from its diet sodas in 2015 to attract health-conscious customers. But Pepsi fans rebelled, as sales of the brand’s soft drinks fell 11% in the first quarter a year after the recipe change. The company returned to its original formula less than a year later.
Even General Mills has faced setbacks in its restructuring efforts, although the company has generally benefited from changes over time. In fact, some General Mills products are redesigned 20 times a year, according to Jon Nudi, the group’s president of North American sales.
After the company got into hot water following the recall of 1.8 million boxes of Cheerios due to gluten contamination—even though the company says it has been producing gluten-free products since 2015—the cereal maker took steps in 2016 to ensure that Cheerios it will contain gluten. – for free. A change in production to filter oats for the product resulted in increased sales. In 2022, the company contended with supply-chain problems caused by Russia’s invasion of Ukraine, forcing it to scramble for oil and starch.
“At the beginning of the year, it was about our distribution centers and constraints,” Nudi said on the earnings call.
Some changes were more visible to consumers. General Mills made a controversial decision in 2016 to remove artificial dyes from its Lucky Charms and Trix cereals in favor of natural dyes made from fruit and vegetable juices, part of a trend in the packaged goods industry to eliminate artificial colors due to health concerns. The new “natural” grains generated exceptional sales—even if their iconic grains lacked their once-signature neon glow.
“We actually have some data, and I’m happy to report that sales are good,” said Erika B. Smith, General Mills’ chief technology officer, in a 2016 conference speech. “They exceeded our expectations. We are happy about that. We have had great feedback from consumers.”
But despite positive sales data, the muted colors failed to impress consumers, who expressed dismay at the change, prompting General Mills to relaunch a dyed version of the cereal alongside a healthier alternative the following year. “I really feel bad for the kids who never got to eat the old Trix cereal,” wrote one customer on Twitter.
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