General Mills’ sales forecast is already as sluggish as a bowl of Cheerios, and the packaged food giant hopes a burst of flavor from some mainstream brands will boost demand for its cereals and snacks.
The company reported quarterly net sales fell 6% to $4.7 billion, a larger-than-expected decline due to lower demand for dog food and treats. It also forecast lower-than-expected annual profits. Shares fell 7.8% on Wednesday after the earnings report was released. In addition to adjusting prices and adding coupons to lure consumers back, General Mills plans to invest in promotions, including relaunching Pillsbury Doughboy foods and improving the taste of its popular brands.
“In these tough economic times, consumers can’t afford to waste, so they are looking for great-tasting products they know their families will eat,” Chief Executive Jeff Harmening said during an earnings call Wednesday.
“The Pillsbury cookies will be crispier, Annie’s mac and cheese will be cheesier, and Betty Crocker Fudge Brownies will be fudgier,” he added.
Consumers are increasingly protective of their wallets and have recently stopped buying packaged foods, while all food groups are struggling to maintain and grow sales. WK Kellogg’s first-quarter net sales fell 1.9% on the year, and Kraft Heinz reported revenue that fell short of expectations as high prices cooled demand.
Instead, shoppers are turning to private labels, such as Walmart’s new Bettergoods line and Costco’s Kirkland Signature, for affordability and value. According to data from consumer behavior platform Circana, private label sales have surged 6% this year and now account for more than 25% of the market share in the food, beverage, home and beauty sectors. This year, for the first time, Alpha-Diver Consulting’s Snack50 report sees its top six snack brands all being store-brand products.
Zak Stambor, senior analyst for retail and e-commerce at eMarketer, said there are additional benefits to moving to private label beyond price. These more affordable brands still taste good – which puts pressure on brands to raise their standards.
“As prices have increased over the past few years, consumers have become more willing to buy store brand products,” Stambol said. wealth. “What they find time and time again is that they often don’t sacrifice quality when they buy at a reduced price.”
Tips for success
But improving ingredient quality and tweaking recipes aren’t foolproof strategies for attracting disgruntled customers. In 2015, PepsiCo removed aspartame, a sweetener linked to cancer risks, from its diet sodas in an effort to appeal to health-conscious consumers. But PepsiCo fans were unhappy, with sales of the brand’s diet drink plunging 11% in the first quarter of the following year after the recipe change. Less than a year later, the company returned to the original formula.
Even General Mills has had its share of bumps in the road with its own recipe tweaks, although the company has generally benefited from the changes in the long run. In fact, some General Mills products are reformulated 20 times a year, said Jon Nudi, president of the North American Retail Group.
The cereal maker made significant progress in 2016 after it struggled to recall 1.8 million boxes of cereal due to possible gluten contamination, despite claiming to make gluten-free products since 2015. Make sure the cereal is gluten-free. Changes in production to screen the product oats led to an increase in sales. In 2022, the company faced supply chain issues caused by Russia’s invasion of Ukraine, forcing it to get creative in sourcing oils and starches.
“At the beginning of the year, it was really an issue of bottlenecks in our distribution centers and logistics,” Nudy said on the earnings call.
Other changes are more obvious to consumers. General Mills made the 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, which are packaged goods Part of a trend in the industry to eliminate artificial colors due to health concerns. New “natural” cereals are generating astonishing sales—even if their signature cereals lack the neon glow that was once iconic.
“We actually have some data, and I’m happy to report that sales are going very well,” General Mills technical director Erika B. Smith said in a 2016 conference speech. “They exceeded our expectations. We’re very excited about it. We’re getting some great feedback from consumers.
Despite positive sales figures, the muted colors failed to please consumers, who expressed anger at the change, prompting General Mills to reintroduce artificially dyed cereals next year along with healthier alternatives. “I feel really bad for the kids who never got to experience the old Trix cereal,” one customer wrote on Twitter.
