General Mills FY 4Q17 Earnings Call Notes

Jeff Siemon


“And before we get to our usual earnings commentary, I would like to turn the call over to Ken Powell, who last month wrapped up 10 years leading General Mills as CEO and he was continuing on as the Chairman of the Board for an interim period. We don’t have time this morning to cover all of Ken’s accomplishments over the past 10 years nor what he want us to.”

Jeff Harmening

Not going to be just one winner in e-commerce

No, thanks for that question, Chris, I mean, obviously, it’s one that’s on the minds of lot of people these days and has been for us for long time. I think with regard to e-commerce, I think there is couple of key things on a high level to keep in mind. The first is that where we have engaged in e-commerce, whether it’s here in the U.S. Our sales online have broadly outperformed our sales in the store. And so we feel good about our ability to win in e-commerce environment. The second is that if e-commerce is going to be broad across many customers, there is not just going to be one customer, even though that lot of talk about the Amazon and Whole Foods deal, I mean, all of our major customers have e-commerce components. As we have experienced around the world, there are variety of customers who participate in e-commerce and so it’s not going to be just one winner. The third is that we have got great relationship specifically with Amazon and we have got great relationships with Whole Foods. In fact, some people will probably be surprised to know that we are actually vendor of the year for 2 years in a row with Whole Foods and we have our e-commerce growth has been – we have been really pleased with it.

China and Korea highest prevalence of e-commerce

“Well, I think that Chris, I think that the growth in e-commerce, especially here in the U.S., but is going to accelerate. And so to the extent that accelerates, then we will accelerate our investment broadly in e-commerce, but really with the growth of the e-commerce business. But we see growth in e-commerce here in the U.S. as really prevalent in China and Korea. I mean, that’s where we see the highest penetration of e-commerce and food and growth. So, we expect that channel to continue to grow.”

General Mills FY 3Q17 Earnings Call Notes

Ken Powell – Chairman & CEO

Thoughts on weakness of Nielsen data

“So as we — you know, we’re obviously seeing the same trends for the industry. If you look at kind of where the food and beverage industry is now versus a year ago, there is about a four point difference from where it was than to where it is now; so sales were up about 1.5 this quarter a year ago and now it’s down to — about half of that is due to pricing; and so we’ve seen deflationary pricing across food and beverage over the past quarter and so as we think about that 4 point gap, half of that is pricing and so the unit volume really is about 2 points and there is really not one factor that impacts it. Although there are — certainly there is movement for the perimeter over the store and there is even more deflation in categories like meat and dairy; but also you see significant growth and increasing growth in channels that aren’t measured by Nielsen and e-commerce is certainly one of those which is growing at between 35% and 50% this year and is probably upto 1.5% of total food and beverage sales. And so without doubt there is increased growth and channels as not measured by Nielsen.”

Don Mulligan

Expect a more modest inflation outlook

“we have every expectation of seeing significant margin expansion, particularly given the fact that we see a bit more modest inflation outlook versus what we saw a year ago in the fourth quarter and last year’s fourth quarter we saw some significant margin contraction.”

General Mills 1Q17 Earnings Call Notes

General Mills’ (GIS) CEO, Ken Powell on Q1 2017 Results

Sales performance did not meet expectations

“our net sales performance did not meet our expectations due to the challenging macro environment, a difficult year-over-year comparison, and a slower start to the year on certain businesses.’

Total food and beverage retail sales have slowed because price appreciation has decelerated

“We have seen total U.S. food and beverage retail sales slow over the last few quarters. Units have held stable, but net price appreciation has decelerated from adding two points of growth a year ago to adding less than 50 basis points of growth in our first quarter.

12% growth in natural and organic food portfolio

“Now let’s turn to our natural and organic portfolio, where we’ve seen our top line results accelerate recently behind excellent ideas and great execution. For the most recent three-month period, our nine natural and organic brands posted 12% retail sales growth across natural and traditional channels. Annie’s and Larabar have been leading our growth so far this year. Retail sales for the Annie’s categories that existed at the time of acquisition, like mac ‘n cheese, crackers, and fruit snacks, were up 20% in the first quarter driven by continued distribution expansion and progress we’ve made moving Annie’s SKUs into the main aisle.”

Don Mulligan

Sales results did not meet expectations

“our organic net sales results did not meet our expectations. We expect our sales growth to improve in the balance of the year as we see continued growth in certain businesses as we execute a number of consumer first actions across our portfolio. We’ll also lap easier net sales comps in the remainder of the year.”

Tough comparisons

“Over the course of our remarks this morning, we’ll note the businesses that saw particularly challenging comparisons this quarter. ”

Sales down 7%

“Net sales totaled $3.9 billion, down 7% as reported. Organic net sales declined 4%. Total segment operating profit totaled $787 million, down 4% on a constant currency basis.”

Net sales down 8%, 5% excluding green giant divestiture

“U.S. retail net sales declined 8%. The snacks operating unit posted 2% net sales growth driven by excellent performance on Annie’s and Larabar. This was offset by declines in the other operating units. Organic net sales were down 5% from year-ago levels that were up 1%. The difference between reported and organic net sales results in U.S. retail primarily reflects the divestiture of Green Giant in fiscal ’16.”

Jeff Harmening

Focused on things we can control

Well David, this is Jeff. I think as we–as Ken started out his comments, the macro environment is tough. It’s tough globally, but our focus really is on what we control. One of the things that we’ve seen time and again is that when we focus on the things that we can control, we can have a lot of success. Gluten-free is a great example of that in the cereal category.

EGg prices account for a lot of deflation

“Big picture, we see in Nielsen data and certainly I have heard from a lot of our retailers over the last month in my direct conversation with them, is that we see prices deflationary, or the inflation reducing in the store over the course of the last quarter or so. As we look, and Ken shared with you earlier, as we look at the items in grocery that contain the UPC code, we have about half a percent growth – I think it’s 0.4%. A big portion of that is really reduction in egg pricing from a year ago, so if you strip out the pricing on eggs, it’s about 1% inflation, which is pretty consistent with the last couple of quarters. So we had the flu last year and the price of eggs was really high, and it’s a lot lower now, so that accounts for a lot”

Seeing appreciation in our categories though

“I’ve also heard from a lot of retailers about deflation in other parts non-UPC, so the perimeter of the store in things like dairy and meat, but what we’re seeing in our categories really is about 2.5% price appreciation in the first quarter, and that’s what we’re seeing in our Nielsen in our categories as well. “

JS Earnings Call & Investor Presentation Notes 9.22.2015 – AZO, JPM, GIS

Autozone (AZO) William Rhodes said the company continues to focus on the “do-it-yourself” auto retail segment while also growing it’s commercial garage business

DIY remains our number one priority. Our DIY business continues to grow, remains the largest portion of our sales, and continues to generate tremendous returns.  We also see significant opportunities for new store growth and improved productivity in our existing stores. As our commercial business continues to grow and is intertwined with our retail business, we’ve continued to identify opportunities to optimize our inventory placement and distribution strategy in order to respond to the ever increasing challenge of parts proliferation in the industry.”

Despite robust sales and profitability growth over the last decade, he said the company can still improve and often missing out on sales opportunities due to inventory being out of stock

To this day, it surprises me how often we’ve to say sorry, we don’t have that available. Even with our new part additions too many customers leave our stores without their needs being met. In this spirit to help the customer we continue to make significant systems enhancements and to capture data about our customer shopping patterns across all of our platforms.”

And the company continues to benefit from the tailwind of increased mileage by drivers

As new vehicle sales are reaching all-time highs and gas prices on average are down year-over-year, vehicle miles driven continue to increase.  This trend is encouraging.  We continue to believe that lower gas prices have a real impact on our customers’ ability to maintain their vehicles, and cost reductions help all Americans, we hope to continue to benefit from this increase in disposable income.”

And the company’s management team restated their “return on capital” mindset as opposed to “grow sales at all costs” mindset

We should also highlight another strong performance in return on invested capital, as we were able to finish fiscal 2015 at 31.2%. We are very pleased with this metric and is one of the best in all of hardline retail.  Our primary focus has been and continues to be that we ensured every incremental dollar of capital that we deployed in this business provides an acceptable return, well in excess of our cost of capital. It is important to reinforce that we will always maintain our diligence regarding capital stewardship as the capital we invest is our investor’s capital.”





JP Morgan (JPM) CEO Jamie Dimon is taking the long view on his economic outlook for China

“Our view of China is in 20 years it will be a large developed nation probably housing 20% to 25% of the global Fortune 2000 or something and that’s where we are keeping our eye on. We know that between here and then, they are going to have some serious bumps in the roads in a couple of ditches and maybe even a rough like we had in 2008 or 2009. And I think they are very bright, the reason for that though is, they have a lot of lot of issues they got to deal with and they are very open about these issues.”

JP Morgan (JPM) CEO Jamie Dimon said it doesn’t matter when the Fed raises interest rates

“It’s a lot of chatter about nothing. I don’t want to add to that chatter. Let the Fed decide when they want to raise rates and wherever I go I ask businesses, consumers, small business, large business, will it affect you if rates go 25 basis points? I haven’t found anyone who says, Oh my god. By the way, if someone says oh my god, I’m in trouble.”

He went on to say the bank’s returns have come down but they expect them to go up in the long run 

I mean, when you look at a business, if you add just one checking account and in the old days the NPV of that was 25% or so, the IRR is 25% and you do it today and the IRR is 12% or 8%. Would you not open that account? Of course, we open the account because that will change over time and as spreads go up. So we’re looking at – we’re keeping our eye on the long haul here and not the short one.”

JP Morgan (JPM) CEO Jamie Dimon said the bank has no acquisition plans 

We are not the acquisition business right now unless it was kind of a small fit in something. And obviously we can’t do a bank here and I don’t think we are going to try a bank overseas right now. There is no reason for JPMorgan in getting a fight with regulators around the world what we’re trying to do and distract us from our mission at hand. I believe we’ll grow organically for a long time.  We are legally not permitted to buy banks in the United States.”

And he explained to what degree the bank will become more profitable in a higher interest rate environment

So we make a disclosure in our 10-K that if rates go up 100 basis points, we will make little over $2 billion more. More of that’s in the short and long end, but obviously how they go up really matters and how fast they grow up really matters, but in general rates going up, all things being equal will do better. “   





General Mills (GIS) CFO Donal Mulligan said the company has implemented many cost savings initiatives in hopes of reducing expenses

“In addition we are making good progress on our incremental cost savings initiatives, including Project Catalyst, Project Century, Project Compass and the changes to our administrative policies and practices. Taken together these initiatives remain on track to deliver between $285 million and $310 million in annual savings this fiscal year and more than $400 million in fiscal ‘17.”

General Mills (GIS) CFO Donal Mulligan stated that the company is using the Proctor & Gamble focus strategy of prioritizing its most profitable and popular brands

We are prioritizing what we call our Power 450 SKUs. These are our 450 best turning national items. In fact they turn at a rate that is nearly four times faster than the other items in our portfolio. These products represent three-quarters of our U.S. Retail volume, but less than 20% of our SKUs. More importantly we have on average less than 350 of these 450 items on the shelf. That’s almost a 25% distribution gap and a significant growth opportunity for our largest and most profitable brands.”

General Mills (GIS) Senior VP Shawn O’Grady said E-commerce is one of the fastest growing sales channels for the company’s products

On the e-commerce front, in the 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. Obviously Amazon is leading some of the thought there, is investing a great deal to make sure that they and utilizing their stores to make sure they are competitive. And that really is causing all the players in the marketplace to one of the actives in the e-commerce space.  We have only to look at other markets where we do business like the UK and France where, for some of our categories our online sales are approaching 10%. So it’s pretty clear that we’re going to move in that direction very rapidly in the U.S. and this is an area that we’re investing in at General Mills to develop our capability.”

General Mills FY 1Q16 Earnings Call Notes

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, 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.”

Andrew Sohn Notes: GIS, SBLK, NKE, ISCA

Andrew Sohn, a junior at Columbia University, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Andrew has read this week.



GIS shifting and focusing on the core of the business-Ken Powell CEO

We have four clear priorities for U.S. retail in 2016. They are, first and foremost to grow our cereal business, second to accelerate our performance in better-for-you snacking, which includes both our yogurt and snacks operating units within U.S. retail, third to drive double-digit growth on our natural and organic portfolio by leveraging the combination of Annie’s and our heritage natural and organic brands and finally to deliver Consumer First value on select brands in a way that generates positive returns for our business.

GIS cautious about growth and penetration into Chinese markets-Ken Powell CEO

The products are on the shelf in retail stores in Shanghai. We are offering a couple of traditional spoonable varieties. These are very, very high quality building on the French heritage of Yoplait. We are also offering a drinkable product. So there will be basically three platforms. They are on the shelf. They look great. We are really excited by it. We are going to do what we have always done in China, which is to really learn about the business model in Shanghai and then as we success we fully intend to expand that business into other major cities in China.

GIS’s growth predicated on sustained expansion in markets with plenty of runway left for growth-Ken Powell CEO

As you know, our convenience and foodservice business is very, very targeted to the channels that we think have longer term growth potential and so we are highly focused in schools and universities and healthcare and all of those channels are growing anywhere from 2% to 4%. So a part of it is that we are just seeing there is a little bit of a tail wind there and I would say the second part is that our innovation has just worked terrifically well in those channels.

GIS intends to ramp down media based advertising and focusing more on a marketing tactic predicated on sampling-Don Mulligan CFO

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, essentially I think about it as flat on a 52 to 52 week basis. So we lose a week obviously this year. Importantly it’s going to be up on key growth platforms where we have clear ideas. Ken just talked about cereal in U.S. and internationally, our snacks business in the U.S., yogurt in the U.S., natural and organic in the U.S. Internationally, we see it in Old El Paso in addition to the cereal businesses and in emerging markets. So we will have media up on platforms where we have strong growth ideas.

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. We have many of those in the emerging markets. We are doing Häagen-Dazs in-store displays in Southeast Asia markets. Obviously Yoplait displays in China, Yoki in Brazil. So a lot of opportunity to get more exposure in the store itself. And then sampling falls into it as well. Again think about Yoplait in China as we are launching that brand. We are going to see a lot of our natural and organic businesses getting supported by increased sampling this year in the U.S. So there is a number of vehicles that don’t hit media nor a consumer vehicles that don’t hit media that we will be increasing or invested on this year.

GIS going hard for sampling driven marketing-Ken Powell CEO

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.


Its been rough for dry bulk shipping-Petros Pappas CEO

The first quarter has been the worst dry bulk market on record, with the all-time low Baltic Dry Index, set on February 18th. Our financial results have therefore been disappointing, but we’re continuing to pursue a number of actions that will increase our liquidity while also reducing our breakeven levels.

Cost cutting via exploitation of economies of scale has proven to be valuable in a tough environment-Petros Pappas CEO

We have been able to reduce our cost. OpEx for Q1 was $4,439 per day down 7% from a figure for calendar 2014. Our net cash G&A expense for the quarter was cut by 22% to $1,130 per day per vessel. This makes us one of the lowest cost operators in the dry bulk space. We are seeing a direct effect of our economies of scale and strong relationships with key suppliers on our bottom line.

STRBLK using adjustments to ship manufacturing schedule to time capacity for an upswing in the market-Petros Pappas CEO

These agreements increased the liquidity of the Company in the near term and enable us to take delivery of our vessels at the time when we expect trades will have improved. The vessels that have been moved into 2016 will also have a high resale value as they will be one year younger. We raised proceeds of $405 million from equity offerings in January and May 2015. These funds should allow us to outlast this market downturn and benefit from an eventual recovery.

Recent macroeconomic headwinds have caused reshuffling in assets in shipping industry-Petros Pappas CEO

The low straight environment during Q1 is the result of an unprecedented negative demand growth during a period that the market had already been dealing with over supplier. Vessel demand became even more challenging as the continuing fall of commodity prices affected by activity and lead destocking of all major dry bulk commodities with a significant negative effect on seaborne traded volumes. This recent market shock could prove to be a blessing in disguise for the dry bulk market as it has forced owners to take action.
During the first months of 2015 we have experienced record high levels of demolition and significant delays in scheduled deliveries. Furthermore orders have been running at record low level since October ‘14. In fact also after we adjust for conversions and cancellations we can say with confidence that we have practically experienced negative contracting of vessels. The above adjustments have put a ceiling for medium term fit growth and as a consequence the fundamental requirements for a sustainable recovery are slowly being built.

Commodity demand, specifically in steel has been a major cause of the headwinds in the industry-Petros Pappas CEO

Dry bulk trade growth during the first half of 2015 experienced a sharp slowdown mainly as a result of the ongoing commodity price correction that began in the second half of 2014. The steel industry is the most important sector for dry bulk trade. The recent steel consumption slowdown affected demand for raw materials related to the production of steel products, consequently it has also led to a slowdown in energy consumption and impacted thermal coal requirements.

Consumption in China has also caused problems too-Petros Pappas CEO

Furthermore dry bulk trade received additional negative pressure from higher consumption of stocks. For example, China iron ore stocks at ports are currently down 30% year-over-year while thermal coal stocks at major power plants have decreased 4% during the last seven months. As a result during the first five months of 2015 Chinese imports of iron ore and coal decreased by 1% and 38% respectively. On the other hand the Chinese mining industry has been negatively affected from the correction of raw material prices. Between January and May 2015 China domestic production of iron ore and coal have decreased by 10% and 8.5% respectively. We believe that China’s depletion of stocks and domestic production cutbacks will inevitably lead to higher import requirements in the near future and we view 2015 to be a transition year for trade growth.

Scraping has become a key tool to surviving the drought-Petros Pappas CEO

Absence of ordering and increased demolition has slowly put a cap for fleet growth for the next couple of years. Scraping is the single most effective commercial defensive weapon ship owners have in their arsenal apart from laying up. If we stop scraping the market will commensurately delay improving.


Even with headwinds, 2015 has been great for Nike-Mark Parker CEO

Fiscal ’15 was a great year for We delivered 51% revenue growth in Q4 with 55% growth for the full year. We saw increases in both traffic and conversion, fueled by our investments in critical infrastructure to improve the consumer experience on both desktop and mobile. And as I mentioned last quarter, our traffic on mobile has exceeded traffic on desktop, making it a very sharp point for consumer engagement going forward. I’m proud to say our e-commerce business surpassed $1 billion in revenue this past year, a fantastic achievement from all of our teams. But really we’re just scratching the surface of our potential in this area. Global consumer spending through e-commerce exceeds $1 trillion, a significant portion of which is done on mobile devices, tremendous opportunity ahead for us in e-commerce.

While other struggle, Nike has done well in internationally-Trevor Edwards CEO

Now let’s turn to Western Europe where we’ve seen broad-based demand with growth of 17% in the quarter and 21% for the year. Growth in the quarter and throughout the year was fueled by our continued efforts to transform the marketplace in line with the category offense. We saw strong growth across most key categories led by sportswear, running, women’s training and basketball and in the territories, particularly in AGS, that’s Austria, Germany and Switzerland as well as in the U.K. and Ireland.
And finally in China, our Q4 revenue grew 20% and we posted a full year growth of 19%. Our strong growth in the quarter was driven primarily by running, basketball and sportswear. For our wholesale partners, those that have been retrofired continue to outperform the rest of the fleet and in DTC, we saw a growth of 52% with continued strong growth in our stores as well as online.

In China, the NIKE Brand is incredibly strong, which provided the foundation to reset the market in line with the Category Offense. Our strong results throughout fiscal year ’15 demonstrate that our strategy has paid off. We’ve returned to strong revenue growth, we’ve improved profitability and productivity for ourselves and our wholesale partners and inventory in the marketplace is healthy. Going forward, we will leverage the momentum from fiscal year ‘15 and continue to execute this consumer-led strategy to drive sustainable profitable growth in this key geography


ISCA has done well, price and volume have both increased-John Saunders ISCA

We’re pleased to report our second quarter results, again exceeding our expectations. The attendance upturn that started with Talladega in the Contender round of last year’s Championship Chase continues to build, and this is the third consecutive quarter we have seen an increase in average ticket price for comparable events, demonstrating a solid trend in the resurgence of our core business.

The average ticket price for comparable events, held during the quarter, was approximately $55.22, an increase of 2.6% as compared to the same period in 2014. For fiscal 2015, the average ticket price for all events held year-to-date is approximately $69.67, an increase of 2%.

NASCAR has been doing well-John Saunders ISCA
NASCAR Sprint Cup has been the number one or number two sport of the weekend for 10 of 15 events in 2015 and the sport is continuing to experience positive trends in social and digital metrics to-date. On the corporate sales front, again a year-over-year increase helped drive results for the quarter. We continue to see favorable trends including robust ad sales for MRN. We have sold all but one of our NASCAR Sprint Cup entitlements and our sales team is well into discussions for a strong partner for this remaining fall cup race at Talladega. We have secured 97% of our total 2015 corporate sales target compared to 94% at this time in 2014.

Casinos at racetracks has proven to be quite profitable-John Saunders ISCA

Our Hollywood casino at Kansas Speedway joint venture is once again a strong contributor to earnings and cash flow during the quarter. Our share of equity earnings increased over 60% compared to last year’s second quarter, driven mainly by continued growth of market share. Our cash distributions from the casino totaled $19.5 million since December 1, 2014 through the end of June and we expect that total of $30 million to $31 million for fiscal 2015. This compares to $22 million received in fiscal 2014. Approximately $4.5 million of the increase is non-recurring and a result of transitioning from quarterly to monthly distributions in 2015, the balance resulting from improvement in operating results

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. “

General Mills 3Q15 Earnings Call Notes

Sales down 1% but up 3% ex currency

“Net sales totaled $4.4 billion, down 1% due to foreign currency effects. On a constant-currency basis, we posted 3% growth in net sales.”

Constant currency adjusted diluted EPS

“Excluding these items affecting comparability, adjusted diluted EPS was $0.70, up 13% from $0.62 a year ago. Constant currency adjusted diluted EPS increased 15%.”

Returned more than 100% of our free cash flow

“Slide 15 shows that we returned almost $10 billion to shareholders in the last 5 years, which represents more than 100% of our free cash flow during that time.”

Americans are eating away from home more again

“In recent years, as unemployment has moderated and consumer confidence has slowly improved, food-away-from-home has captured an increasing share of food spending. ‘”

Losing share in frozen veggies, but gaining share in priority categories

“dessert mixes and frozen vegetables are 2 categories where we’re seeing more significant share declines this year, and we have work to do to fix these businesses. But we are gaining share in our priority categories of Snacks, Yogurt and Cereal, and our year-to-date share is up in categories representing over 2/3 of our measured sales.”

Annies is benefitting from GIS’ manufacturing capabilities

“one of the many benefits of the combination that we’re seeing as we move to the integration is to see how General Mills’ innovation and formulation and manufacturing capability complements so well the desires of the Annie’s team to extend the brand into new areas.’

We have learned a lot from the small entrepreneurs that we compete with about being close the the consumer

“over the last half dozen years, we have been looking very closely at the entrepreneurs that we compete with, the smaller companies that we compete with, and we have studied in detail how those kinds of small companies develop and bring their products to markets. And we’ve learned a lot from doing that. And I would say a couple of the key lessons that we’ve learned is that the entrepreneurs who develop those products are very, very, very close to the ultimate consumer who will buy the product. Sometimes, the consumer is themselves or family members. And so that learning has really underscored our desire to put our marketeers and our consumer research specialists in the homes of the people who will be buying our products. This is so-called consumer empathy. We think it’s really, really important. And in many ways, it’s replacing big and broad-scale tests that we used to do, which, in a way, moves our marketeers out of the process and distances the consumer from them. So we’ve got a very high premium on getting our folks right next to the consumers who were going to buy these new products. The other area where we’ve really focused is rapid prototyping of the idea so that we can get a tangible representation of a new product in front of consumers very early in the process and learn directly from the consumer very rapidly. And these are lessons that we’re learning from these small companies. And when you do them the right way, the result is you go fast, you make decisions rapidly. You’re very connected to the consumer, and so you’re more on target more often. So I could go on for another 20 minutes. I won’t, but we have changed quite a bit the approach that we take to new product development, very much learning from small companies and entrepreneurs.”

General Mills FY 2Q15 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Minimally processed foods driving granola sales

“Consumers today are showing interest in products they perceive as minimally processed. This is driving strong growth for the granola segment where sales are increasing at a 10% compound rate in the past four years. We are the segment leader and retail sales for our granola cereals, including Nature Valley and Cascadian Farm, America’s favorite granola have grown at a 27% compound rate over the same timeframe.’

More protein too

“Consumers are also looking for more protein options at breakfast. So over the past 18 months, we have introduced a variety of higher protein cereal options.”

Improving share in greek yogurt

“Our share of the Greek yogurt segment continues to rise, reaching 12% in the second quarter thanks to continued distribution gains and strong advertising highlighting the great taste of Yoplait Greek and Greek 100. We have also been able to drive two successive quarters of double-digit retail sales great growth on original Yoplait through product renovation and compelling snack focused advertising”

Annies helps give more scale in organic

“The addition of Annie’s this October puts our overall natural and organic portfolio at over $600 million in net sales. That is meaningful scale for both our suppliers and our customers. We are operating Annie’s separately with John Foraker running the business out of Berkeley headquarters and reporting directly to me. ”

Pursuing the organic customer has led to synergies in other parts of the business

“far from getting lost, what we have found is that not only have we been able to grow those businesses but also the understanding of the natural and organic consumer and what they are looking for has actually rubbed off on the rest of the people in the business. And so we think that there is an opportunity, not only to accelerate our growth for our natural and organic brands within these operating units, but also that the consumer understanding we generate there will have benefits for our other brands as well.”

We feel like we get the consumer, we just have to innovate to meet them

“we have a good understanding of where the consumer is and we feel like we have a really good understanding of where they are going. Whether it’s in better-for-you snacking or whether it’s in wellness or what they expect of the economic value for their products. And so, because we feel like we have a good idea, when we innovate well and we spend behind it, we like the results.”

General Mills FY 1Q15 Earnings Call Notes

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Foreign exchange lowered sales by 1% point

“net sales declined 2% due to lower pound volume, mix and net price realization added 1 point of sales growth. That was offset by foreign exchange which reduced sales growth by 1 percentage point.”

Merchandising programs are less effective

“We are experiencing less effectiveness for merchandising programs. This is an issue we and others in the industry have noted previously. And we had a difficult comparison.”

International growing, US retail just not doing well

“The total operating profit decline was driven by U.S. retails results. International profit was 16% above year ago levels and up 17% on a constant currency basis. In Convenience Stores and Foodservice, profit increased a robust 18%.”

tough operating environment

“the operating environment in several of our markets has grown more challenging…U.S. Retail industry trends are a bit weaker. ..International developed markets were a bit softer too…In emerging markets, we’re still seeing sales growth for our businesses, but the pace of growth in China did slow a bit this quarter.”

Consumers trust Annies

“Consumers know and trust Annie’s purpose-driven culture and authentic brand. We believe that combining the Annie’s product portfolio and go-to-market capabilities with General Mills supply chain, sales and marketing resources will accelerate the growth of our organic and natural food business.”

Attractive position within organic space

“I’d love to, obviously, we think it’s a terrific equity. It’s a very, it’s a unique equity in that organic space sort of it’s an all family equity. Its mom’s buying organic products for herself and for her family and the kids, which is a very attractive positioning within the organic space.”

Supply chain possibilities

“There are numerous margin expansion opportunities for — with Annie’s, everything, can from the sourcing and how ingredients are brought in to the logistics and how we reach customers, all of the other internal supply chain, HMM things. We think there are many opportunities here and we have actually jointly discussed these opportunities with Annie’s management and they are quite excited by those opportunities. ”

Do our best to leave them alone

“we learned a tremendous amount from these various natural and organic companies that we’ve acquired over the years. We’ve been very good. I think about leaving them alone. Let them do that thing. We will retain Annie’s headquarters in Berkeley. These are very talented people. They build a — built a really good brand. And key is just to figure out where we have capabilities that can really help them and bring them those capabilities which they are actually eager to — eager to have to accelerate the growth of this thing.”