The cereal major reported a slump in net profit of 16% for the first quarter (Q1) of fiscal 2014, down to $4.37bn from $548.9m the previous year. Despite the profit slump, overall sales were up 8% including sales across its US retail sector that includes cereals.
Speaking in the firm's earnings call with analysts, James Murphy, senior vice president and president of Big G Cereals at General Mills, said: "I have unwavering faith that cereal is an adaptable category and we’ll meet the changing needs of consumers at breakfast.”
General Mills has pulled levers on some brands that it had not supported as much in the recent past, he told analysts. "We see a lot of upside for supporting brands like Wheaties and Total and the like and we’re doing it with different marketing vehicles. So it’s not the standard TV plan. You’re going to see a lot more in this social space as an example.”
A new era of marketing to unleash old, smaller brands
General Mills recently boosted its defunct Monster cereal line with a re-launch. The five-strong cereal line saw the relaunch of Yummy Mummy and Frute Brute which haven’t been on shelf in over 20 years.
Murphy said there is a new era of marketing where very little money and experimentation can work effectively, citing Monsters as an example. “We’re unlocking growth on some of these brands we haven’t marketed for a while.”
“I think that the whole digital and social space opens up some opportunities to innovate – that maybe we didn’t have five years ago. We can really micro target and with the Monsters thing in a way (…) capitalize on pop culture,” he said.
Initial shipments of the monster range are well ahead of last year’s pace, he added, illustrating the power of cereal in pop culture.
Natural: Small but trendy
The cereals president also said the natural segment was brimming with opportunities, despite being an emerging, relatively small and less productive than mainstream.
“Nonetheless, we think we have two terrific brands to capitalize on that trend – Cascadian Farms on the organic side and now Nature Valley, which I think is going to be a really strong brand in the cereal category operating in that type of space of natural ingredients you can see,” he said.
General Mills launched its Nature Valley Protein Granola three months ago in two varieties – oats and honey and oats and dark chocolate. “These products taste terrific. After only three months in the market, it’s already among the top-turning granola items,” Murphy said.
Overcoming category failings...
Murphy said General Mills remains “very bullish on the US cereal category”.
He said problems and the decline in the overall category has been a result of a lack of innovation from branded players, not enough product news behind established brands and too little consumer-directed advertising to support the sector.