General Mills taps into ‘frugality fatigue’ as Americans tuck in to affordable treats

As the economy remains in the doldrums, Americans are showing signs of “frugality fatigue” while food is increasingly “playing an important role in helping consumers cope”, according to trend watchers at General Mills.

Finding ways to tap into “explosive demand” for convenience foods in emerging markets dominated much of the presentations at last week’s investor day at General Mills.

However, mature markets such as the US still held considerable potential as consumers looked to affordable luxuries to eat at home instead of going out for dinner, said bosses.

While sales in the US retail market were "pretty flat" in fiscal year 2011, admitted US retail chief executive Ian Friendly, things were improving and a raft of new products would help to rejuvenate brands such as Fiber One and drive net sales up into the mid-single digits in 2012.

Helping US consumers cope?

In her presentation on consumer trends, vice president, consumer insights, Gayle Fuguitt said US consumers were showing signs of “frugality fatigue” while food was “playing an important role in helping consumers cope”.

She added: “While the vacation may have become a stay-cation and eating in is the norm, affordable food luxuries like Yoplait smoothies or a restaurant quality meal at home like Wanchai Ferry can provide small, meaningful ways to make people’s lives healthier, easier and more enjoyable while still economizing.”

Production innovation to be ‘driver of growth’ in 2012

The firm, which is launching 70 new products in the first half of fiscal year 2012 including new Pillsbury Egg Scrambles, Yoplait Light yogurt with granola and Totino’s Pizza Stuffers (hitting shelves this month), said product innovation would be the “key driver of growth in 2012” for the US business.

While US retail sales of Fiber One dropped by 5 percent in fiscal year 2011, and fell even more sharply over the past three months, new products launching in 2012 including an 80-calorie-per serving variant, would rejuvenate the brand and “bring growth back”, predicted Friendly.

Emerging markets and ‘explosive’ demand

General Mills divides up its customer base into four key groups: Millennials (17-34 year-old, well-travelled, digitally enabled trend setters); Boomers (post-war generation with an interest in disease prevention and management); US multiculturals (particularly Hispanic moms); and Emerging markets (rapidly growing ‘aspirational’ segment in China and India).

The firm, which saw sales in China surge by 19% to $440m in fiscal year 2011, is predicting Chinese sales will top $900m in 2015 as shoppers bought more frozen meals from Wanchai Ferry and indulged with Häagen-Dazs, claimed Chris O’Leary, who heads up the firm’s international business.

There were also huge opportunities to increase ready-to-eat cereal consumption in emerging markets, with the UK, US, Canada and Australia currently accounting for 54 percent of consumption but just 6 percent of the world’s population, he said.

Yogurt was another category identified as one with “tremendous per capita consumption growth opportunities” in emerging markets, which were way behind western markets in the consumption stakes, he added. (French yogurt consumption is a whopping 17.8kg per capita compared with China at 2.3kg and India at just 0.3kg.)

Shifting consumer mindset forged by new middle class

In markets such as China, growing urbanization, more women in the workplace, longer commutes and rising disposal incomes meant demand for convenience foods was “explosive”, claimed Fuguitt.

“Household incomes are rising, and while traditional tastes reign, we see a shifting consumer mindset being forged by the new middle class. We see our products solving three key needs: family time, status and safety. Commute times are getting longer and more women are entering the workforce, putting the need for convenience at an all-time high.

“The new normal emerging market consumer wants to serve up traditional meals without sacrificing family time. To establish their status, the merging middle class sees their ability to afford western products as a sign of class. Brands are badges. And finally on safety, western brands communicate quality and trust.”