In a year that saw the return and rapid acceleration of cost inflation for various food ingredients and energy, Kendall Powell, chairman and chief executive officer of General Mills, happily reported to investors that the company was still able to grind out a 4% profit.
“We're generally pleased with our 2011 sales and profit results, which met the key targets we set for the year and represent performance consistent with our long-term growth model,” he said.
General Mills' fiscal 2010 results reflect a company that is forging ahead despite cost challenges. Net sales grew 2% to reach $14.9 billion. Its stable of retail brands — from Green Giant to Pillsbury — contributed $10.2 billion to the bottom line. The best-performing retail division was Small Planet Foods. Sales in the organic and natural food division rose 13%, with double-digit growth by the Larabar snack bar brand. Better-for-you eating also helped boost sales of the snack division, where sales increased 5%, led by sales of the Nature Valley and Fiber One brands.
Powell credits HMM — Holistic Margin Management — as an effective tool in controlling costs. The program, introduced under Powell's predecessor in 2005 but fully implemented in the ensuing years, focuses on cutting costs and reinvesting those dollars into new product development. It's an initiative that “has proven to be a very powerful program for us,” Powell said.
General Mills is also deepening its commitment to the yogurt category. In late June, the company closed a $1.2 billion deal that gives it a majority stake in Yoplait, the popular yogurt brand it has licensed in the U.S. since 1977. At the same time, the company gained a 50% interest in a related entity that holds the rights to market Yoplait worldwide.
“Yoplait is a fantastic global brand with tremendous potential,” said Powell. “General Mills and [its partners] are well-positioned to advance and grow the Yoplait brand around the world. It is an exciting combination.”
Among the biggest ongoing commitments the company has undertaken belongs to health and wellness, and this past year the largest one-year gain in product health improvements in company history. As outlined in the General Mills' most recent Corporate Social Responsibility report, issued in March, General Mills has successfully reduced sugar in cereals advertised to children by an average of 8% in 2010, bringing total reductions to roughly 14% since 2007.
Improvements were also made to other products the company makes by adding whole grains, fiber and calcium, and reducing calories, sugar, sodium and trans fats. These improved foods comprised 25% of U.S. retail sales in fiscal 2010.
The company's CSR also covered the company's progress on packaging reduction. This past year, General Mills established its first-ever packaging metric. The goal is to improve 40% of the company's packaging by 2015. A recent success came with shrinking the width of Nature Valley granola bar cartons by half an inch and the depth by a quarter inch — while maintaining the size of the granola bars. The change saved an estimated 6.2 million pounds of paperboard per year.
At a recent press conference previewing 70 new products, Powell told analysts that the “very robust” innovation lineup for the coming year should help offset the threat of continued inflation.
“We expect fiscal 2012 to be another year of good sales,” he said.