NEW YORK — While upbeat directionally about General Mills Inc.’s business, the company’s top executive said reaching its long-term sales growth target in the just-started fiscal year may be a stretch.
Jeffrey L. Harmening, chairman and chief executive officer, offered an update on many aspects of the company’s business in a May 29 discussion with Alexia J.B. Howard, senior analyst with Sanford C. Bernstein & Co. The discussion was part of the Sanford C. Bernstein Strategic Decisions Conference.
Declining to offer specific financial guidance for fiscal year 2025, Harmening said it may be tough for General Mills to hit sales growth of 2% to 3%, the company’s long-term target.
“Our goal will be to be competitive within our categories, and I think we can achieve that in this coming year,” he said. “As we have, by the way, the last four years. We’ve grown in 50% of our categories our market shares.”
While unit volume trends remain weak, Harmening said there is good cause for optimism.
He noted that volumes in the company’s categories were down 3% in the first quarter of 2023 and only 1% in 2022. Decreases at General Mills specifically were steeper but have been improving, too.
Key to trends going positive will be consumers adjusting to cost inflation totaling more than 30% over the past three years, Harmening said.
“Consumers are stretched financially right now,” he said.
When they “feel more economically sound” and acclimate to the higher pricing, market conditions in the food and other industries will improve, Harmening said.
“It’s probably a 12- to 18-month process before consumers really land on, okay, what is the true price of this good going to be?” he said. “And I think it’s particularly difficult for consumers.”
Even as discussions about health and wellness and concerns about ultra-processed foods may have intensified, the most important driver of consumer demand remains taste, Harmening said.
“It’s not to say that consumers don’t care about nutrition as well, but I don’t want to get lost in the conversation,” he said. “News flash — people like food that tastes really good. One of the things that General Mills does really well is make food that tastes good and is good for you. And to the extent that consumers are looking at ingredients more closely, I think that’s a benefit for us, and I think that’s going to be an opportunity for us.”
Regenerative agriculture is important to General Mills “because the climate is changing,” Harmening said.
“We depend on the climate, and particularly certain crops like wheat, for example, for flour, or oats, which we make Cheerios and Nature Valley,” he said. “And so regenerative agriculture is a really important step for us because it improves soil health, takes carbon out of the atmosphere, sequesters carbon better, keeps nutrients better, just makes the whole cycle more resilient.
“And so we have a goal of getting to 1 million acres of regenerative agriculture by 2030. We’re more than halfway there, and we set this goal only a few years ago. So we’ve made great progress. There’s more progress yet to make.”
For context, Harmening said 1 million acres equates to a fourth of the land mass required for the company’s ingredient needs.
“It’s not an inconsequential level of space,” he said.
Capping off the presentation was a discussion of why investors should find ownership of General Mills’ shares appealing. Harmening said General Mills has distinguished itself by an ability to “pivot faster than many of our peers” during challenging times.
“If you think the environment ahead of us is going to be really stable, maybe that doesn’t matter,” he said. “If you think that the environment ahead of us is rocky, either because of climate change or geopolitics or say the consumer is influx or that inflation we may or may not know what’s coming, if you think that there’s an air of volatility ahead of us, I think you should bet on us.”