General Mills 4Q15 Earnings Call Notes

We’re keenly aware of changing consumer preferences

“as we enter fiscal 2016, General Mills is keenly aware of our consumers’ changing food preferences and the impact those changes are having on our industry. We remain deeply committed to following the consumer adapting to their evolving preferences and driving growth. And where we embraced Consumer First in fiscal 2015, we saw our business respond whether that’s with protein cereals in U.S. retail, Yoplait Yogurt in U.S. retail and foodservice channels or Old El Paso dinner kits around the world.”

Gluten Free Cheerios

“Consumer First renovation is at the heart of our plans to renew cereal growth. At CAGNY, we told you we are embarking on a broad investment plan designed to renovate our Big G portfolio for today’s consumers and that gluten-free Cheerios was the first step in that plan. ”

Removing artificial flavors and coloring

“Last week, we unveiled the second step in our cereal renovation plan. We are removing artificial flavors and colors from artificial sources from all General Mills cereals. Nearly half of U.S. households are making an effort to avoid artificial flavors and colors and we are responding”

Muesli is really hot right now

“Muesli is another cereal form that is benefiting from consumer interest in simple less processed foods. To capitalize on that trend, we have recently launched new Nature Valley Toasted Oat Muesli in Original and Blueberry flavors.”

The rate of decline in cereal is slowing

“I think that the category in the U.S., as we look at that, still declining but the levels, the rate of that decline is moderating. And so we are, David, encouraged by that. And if you just look at last 12, last three, it was a little over 3% decline for the year. For the quarter, it was a little less, 1.5% decline and okay. And I think as you know, the latest month was an easier comp, but there was actually a little bit of growth there. ”

We think we have a good understanding of the new consumer preferences

“The second point is that we think we have a very good understanding for the new preferences that consumers have for breakfast and we have talked about this with you many times for products that are simpler, products that are more filling, products that taste good, products that address very specific issues that consumers have like gluten and artificial colors. And as we address those things and as we bring innovation that address those, we are seeing growth. Our granola business is growing really well.”

We’re going to spend less on media, more on consumer

“Media is down and what I said is our total consumer will be up. And just let me parcel that out. So media is obviously what you see on air, what you see in digital or in print. It will be slightly down…And then total consumer will be up low-single digit. So when I talk about total consumer, that takes into things like in-store events…And then sampling falls into it as well.”

Sampling is a growing part of our marketing mix

“The only think I would just underline on that is, Don’s comment on sampling. Sampling is perhaps the most powerful penetration driver that we have and many of our natural and organic businesses are not really driven in the traditional media. They are in fact driven almost entirely by getting the products into people’s mouths. So that’s a growing part of our marketing mix and one that is not really counted in the media thing. So that’s an important highlight for you.”

Cereal is still very, very large

“let me start my answer by reminding everyone that cereal is $10 billion category in the U.S. So it’s very, very large and as you know, it’s been declining for the last couple of years, but still very, very large and still about a third of all breakfasts include cereals.”

Frozen vegetables has increasingly moved in more a commodity direction

“The observation that I would make, Ken, is that it’s increasingly kind of a value focused category and the segment that is performing a little better tends to be the commodity oriented, just frozen blocks of vegetables. And so that’s the direction that the category has moved in. “