General Mills Embraces Natural and Organic

MINNEAPOLIS -- Though brands such as Yoplait, Progresso, Fiber One and Pillsbury took a bit of a hit in General Mills' third-quarter earnings, the company's operating profit in convenience stores was up. In the convenience stores and foodservice unit, profits increased 3% to $93.6 million from $90.6 million, but sales fell 1.1% to $448.5 million from $453.7 million.

Sales have been falling in general over the last seven quarters for the food giant. Third-quarter results ended as the company expected, down 1.1% from $361.7 million, from the same period a year ago. Net sales fell 5% to $3.8 billion from $4.0 billion.

The company plans to invest in marketing and promotions to reignite growth in its yogurt brands, which saw sales drop 20% in the third quarter. The company attributes these losses to high prices relative to its competitors and has, as a result, focused on cutting costs to boost profit margins.

"As we've previously discussed, we have work to do to reposition our U.S. yogurt portfolio into faster growing, more premium yogurt segments," said Jeff Harmening, CEO of General Mills, during a March 21 earnings call. "We'll do that through core renovation on our existing lines and innovating on the emerging segments in the yogurt category."

But it's not just yogurt under the microscope at General Mills. Other brands are being tweaked, too. Here's a look at some of the brands that will likely benefit from those tweaks, as well as a few of General Mills' bright spots ...

The company will increase marketing support behind recipe reformulations for Lucky Charms and Cocoa Puffs that have improved taste. It will also tout its gluten-free messaging on Cheerios and whole grain messaging on a variety of other cereal brands.

"We won't get back to growth on Fiber One, certainly in the fourth quarter," Harmening said, adding that the company is addressing weakness in this and other snack brands.

While there are challenges in other areas of the business, the company's natural and organic portfolio is driving double-digit sales growth, led by Annie's. General Mills is expecting to generate more than $1 billion on that brand in the fiscal year.

"Annie's is our largest brand, and retail sales are increasing nearly 40% so far this year in U.S. Nielsen-measured outlets," Harmening said. "We continue to gain distribution on Annie's established businesses, including macaroni and cheese, fruit snacks and cracker lines that were in the market when we acquired the brand. Year to date, retail sales for those categories combined are up 18%."

Larabar has achieved year-to-date sales growth of 44% on the heels of expanded distribution in conventional channels. 

"In fact, household penetration for Larabar has grown 30% in the past year, as we've found new ways to reach consumers, including targeted TV advertising," Harmening said. 

"We're also seeing good growth on Epic natural meat snacks, with retail sales more than doubling so far this year on good innovation and strong distribution gains, and we see considerable opportunity to expand household penetration on this growing brand," Harmening said.