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General Mills' Fiscal 2018 Global Strategies to Drive Growth

General Mills Inc. GIS outlined four key global strategies for fiscal 2018 at the company's annual Investor Day meet on Jul 12.

The North American food industry is experiencing changes in consumer preferences as consumers are increasingly gaining faith in organic and healthy food items. This is upsetting the consumer value equation, thus creating challenges for the food industry. This seismic shift in the U.S. food industry is creating hurdles for food behemoths such as Kellogg Company K, Mondelez International, Inc. MDLZ, The Kraft Heinz Company KHC and others, thus making it harder for legacy brands to boost sales.

General Mills’ shares have lost around 13.5% year to date, compared to the 7.5% decline of the Zacks categorized Food-Miscellaneous/Diversified industry. Estimates for this Zacks Rank #4 (Sell) stock have moved down for the current and the next year over the last 30 days.

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

With evolving consumer food preferences, General Mills prioritizes consumer-focused innovation and marketing and also focuses on natural and organic product portfolio to boost sales.

Key Priorities

The company plans to focus more on growing its cereal business, which has been sluggish for quite sometime now. Cereal sales declined 2.1% in fiscal 2017.and 1% in fiscal 2016

In order to counter this, General Mills has made 75% of its cereals free of any artificial flavors and colors. The company is committed toward removing these ingredients from its entire cereals range. Further, General Mills plans to introduce new varieties of its "Toast Crunch" line, Blueberry Chex and Banana Nut Cheerios across U.S. brands.  Also, products like Nesquik and Cheerios all-family granolas will be added to the global product portfolio along with expansion of the Lion Wild brand.

General Mills is restructuring its U.S. yogurt portfolio through fundamental innovation. It is renovating its core Yoplait and Go-Gurt products, expanding its organic presence with Annie's and Liberté, and developing a new yogurt segment. Yogurt sales declined 12.9% in fiscal 2017 while  it dropped 6% in fiscal 2016,  . Such initiatives are expected to help the yogurt business make a turnaround.

The company’s third main strategy focuses on driving differential growth across several global platforms where it has already seen solid revenue (roughly $4 billion) momentum. They are Häagen-Dazs ice cream, snack bars (primarily under Nature Valley), Fiber 1 and Larabar brands, Old El Paso Mexican foods and its natural and organic brands in North America.

Investing in its Foundation businesses (includes refrigerated dough, soup, and baking mixes etc.) is also a key priority for fiscal 2018. The company will be launching a line of organic soups under the Progresso brand and two new varieties of Pillsbury pizza dough.

Apart from these four key priorities, the company is focused on improving its e-commerce channel as CEO Harmening is of the view that “the most significant change that will impact the next five years will be in how consumers get their food, driven by the rapid acceleration of e-commerce.”

E-commerce already represents about 1.5% of the company's total sales in the U.S. in fiscal 2017 and this is expected to grow 5% by fiscal 2020. The company also expects double-digit growth for its global e-commerce business, led by the U.S, going forward.

Consumer-focused innovation, marketing initiatives and robust restructuring savings will likely make up for the sluggish revenue growth at General Mills.

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