General Mills Earnings Soar Amidst Price Increase And Shift To Organic Products

General Mills
General Mills Kids Breakfast Cereals Pallet Display (Photo: Flickr.com CC BY 2.0)

Despite having lower sales volumes for its various products, General Mills has reported relatively good 2018 earnings that surpassed previous earnings forecasts. The company, which owns popular supermarket brands such as Haagen-Dazs ice cream, Pillsbury, Cheerios, and Lucky Charms, revealed that the increased earnings can partly be attributed to the recent price increase of its various consumer items.

According to the company's report, sales volume across North America and Europe drastically fell last year. However, the company did see a rise in sales volume in Asia. Fortunately, thanks to the company's decision to increase prices across all of its products, General Mills was able to increase its total sales numbers by about 8 percent last year. The boost in sales is also apparently thanks to the company's recent acquisition of pet food maker, Blue Buffalo.

General Mills CFO Donal Mulligan told analysts that the decision to increase its prices was instigated by the need to protect the company's profit margins amidst the continuing dairy inflation. The company currently owns yogurt maker, Yoplait, as well as other products that heavily rely on dairy suppliers.

The move was a big gamble for the company seeing as that most of its competitors have chosen to decrease their prices to increase sales. Fortunately for General Mills, it currently owns a number of well-known brands that are popular with consumers worldwide. Consumers were apparently willing to pay a little extra for these products instead of going with other cheaper brands.

Last year was particularly hard on the global food industry, with major retailers such as Target and Walmart continually pressuring food manufacturers to keep their prices low. Some companies that weren't able to adapt to the change in consumer preference fell hard last year. Kraft Heinz fell by as much as 25 percent just recently due to a decreased demand for their products. General Mills was able to quickly adapt to consumers shunning processed and packaged foods with the introduction of several organic products. The company's CEO, Jeffrey Harmening, mentioned in General Mills' latest conference call that they had experienced strong demand for their more healthy products such as Annie's fruit snacks, Fiber One bars, and their Pillsbury baked goods.

General Mills is reportedly planning to further shift some of its products to align with the latest organic trend. The company started this strategy back in 2014 when it acquired Annie's Homegrown; a company that manufactured organic and natural meals, snacks, and pasta. This was immediately followed by the acquisition of other organic brands such as Muir Glen and Cascadian Farm. Since the start of the year, General Mills stock prices have risen by more than 26 percent.

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