General Mills Looks to Stir Up Yogurt Sales
Its Yoplait brand has faded in the face of competition from organic and Greek-style yogurt
General Mills’ Yoplait brand has lost favor with consumers tending more toward low-carb Greek-style yogurt. PHOTO: LEILA NAVIDI/TNS/ZUMA PRESS
The maker of Cheerios cereal and Betty Crocker cake mix has been selling Yoplait yogurt in the U.S. since 1977. But as shoppers switch to thicker, low-carb Greek-style yogurt, the sweeter American varieties, including General Mills’ Yoplait, are falling out of favor.
General Mills is set to report quarterly earnings on Wednesday, shedding light on its effort to revive yogurt sales—one of its biggest businesses globally.
In a July presentation to investors, General Mills called out its $2.8 billion global yogurt business as needing a makeover, after it spent significant time and money reviving its U.S. cereal business last year.
The Minneapolis food giant said that while cereal sales improved, sales of its yogurt in the U.S. fell 7% in fiscal 2016, which ended in May—a sharp reversal from 5% growth the prior year.
At an investor conference this month, General Mills warned that its sales in the recent quarter fell more than 2% on a comparable basis, largely because of its struggles with yogurt.
Part of its problem is that General Mills doesn’t have a strong foothold in the fastest growing segments within yogurt—namely, organic. The company is aiming to fix that by offering more varieties of organic yogurt under the Annie’s Homegrown brand it bought two years ago.
Chief Operating Officer Jeff Harmening has said he will also add yogurt smoothies to shelves, since drinkable yogurts are becoming more popular, and he is pushing new brands, such as Go Big yogurt pouches for children that outgrow Go-Gurt tubes from General Mills.
Still, Wall Street analysts are skeptical the company can win back customers that are looking for more natural and more nutritious yogurt.
For one, Yoplait doesn’t sound like an authentic Greek yogurt brand the way that Dannon’s Oikos does, notes CLSA analyst Michael Lavery. General Mills is “fighting out of a deep hole,” and a comeback “looks like a monumental challenge,” he said.
On average, analysts expect General Mills to report a 7% decline in quarterly revenue to $3.91 billion, and a 5% decline in earnings per share to 75 cents, according to Thomson Reuters.
According to market research, the majority of its recent sales decline was due to discontinuing various products, particularly varieties and sizes of Cheerios and Chex cereals. RBC Capital Markets analystDavid Palmer said such moves provide a needed boost to General Mills’ gross profit margin.
While the company will likely highlight its plans and progress in yogurt on Wednesday, investors will also be looking for details around its cost-cutting program, the sustainability of its sales increases in cereal, and whether it remains on track to meet its goals for the full fiscal year.
General Mills’ stock has risen about 13% this year. Shares of several food companies have benefited from takeover talk amid an active merger-and-acquisition environment in recent years.
