General Mills FY 1Q16 Earnings Call Notes

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Sold Green Giant to B&G

“We’re selling the Green Giant and Le Sueur brands of frozen and shelf stable vegetables to B&G Foods for $765 million in cash, subject to an inventory adjustment closing. ”

Structure of sales organization

“we employ around 1,700 sales professionals across the U.S. Our organization includes cross functional teams that call on customer headquarters, a retail organization that make sure our products are merchandised in stores and stocked on shelves and a centralized support group that provides advantaged capabilities to our sales teams. We have expertise in 25 categories, that span all three temperature states and we manage an average of 690 General Mills items in distribution.”

We’re the third largest natural and organic foods manufacturer in the US

“Natural and organic retailers have also experienced strong growth as consumer preferences change. We’ve been selling to these retailers for more than 15 years but the acquisition of Annie’s has opened up new growth avenues and increased our capabilities. We’re now the third largest natural and organic food manufacturer in the United States and this enhanced scale combined with our dedicated stewardship of our brands has made us a significant and credible supplier to natural and organic consumers.”

e-commerce is the fastest growing food channel

“E-commerce is the fastest growing food channel and our customers are testing a wide range of business and distribution models. We’ve established an e-commerce Center of Excellence to provide leadership for the virtual shelf by serving as food captain and we engage in annual collaborative business planning with our key retailers like Amazon, Wal-Mart.com and other pure play e-commerce retailers.”

Challenging economic conditions impacting emerging markets

“Challenging economic conditions are having an impact on our categories and our businesses in emerging markets. First quarter net sales increased 3% on a constant currency basis for the Asia-Pacific region, but it was a mixed bag across our portfolio. In China, constant currency net sales were down 1%, driven by a decline on Wanchai Ferry dumplings. ”

Revising currency headwind higher

“it’s about $0.05, I think it is. I think we had $0.04 in July, it’s $0.09 now. So about $0.05 swing. And obviously the U.S. dollar strengthens, the Canadian dollars, the A dollars, the Euro, the Brazilian Real. So yeah we see more of a headwind on our reported results from currency.”

People ask us why we don’t do divestitures and the reason is that we have nice cash flowing brands

“we’re often asked why don’t we do — why aren’t we more active from a divestiture standpoint and one of the things we always come to is we have very profitable cash generative brands. And so Green Giant has a little under $600 million in sales last fiscal. Its margins were in the upper teens and that’s going to be lost income this year.”

5-6% of US food sales could go online

“U.S. food sales that are going through online are between 1% and 2%. Now that’s changing pretty quickly, meaning moving from 1% to 2%. If you said what does it look like out four or five years ahead, all the projections I’ve seen are in the 5% to 6% range. So it’s going to be a high growth area.”