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General Mills at CAGNY conference       2/22/2011

At the annual late winter meeting with analysts, General Mills leaders this morning highlighted two key components of long-term growth and reaffirmed that the company is on track to meet its fiscal 2011 targets.

“Results through the first half of this year generally tracked in line with strong year-ago performance, as we anticipated,” Ken Powell, chairman and chief executive officer, told attendees at the Consumer Analyst Group of New York (CAGNY) conference in Florida. “For the second half, we expect good sales and earnings growth.

More broadly, Powell told analysts that the company will continue to perform well by staying focused on its five key divers:

• Margin expansion
• Innovation
• International expansion
• Strong customer partnerships
• Brand building

“By successfully executing our plans, we could add over $3 billion in net sales and $1 billion in segment operating profits by the year 2015,” Powell said. “On the bottom line, our goal is to grow earnings per share by roughly 70 percent to well over $3 per share by 2015.”

The potential growth of cereal consumption around the world and the opportunities in China, the world’s most populous country, were highlighted this year at CAGNY. Both “expect to be among the strongest contributors to General Mills’ growth over the next several years,” according to Powell.

In the past 20 years – since the Cereal Partners Worldwide joint venture with Nestlé was launched – the General Mills global cereal business has more than doubled to $3.8 billion today. The growth has come through acquisitions and innovation, but also through geographic expansion.

Cereal sales shifting
Two decades ago, the U.S. and Canada generated more than 60 percent of total global cereal sales. Today, the majority (about 60 percent) of the world’s $24 billion of cereal sales are in markets outside North America.

Cereal consumption has grown as consumers embrace the nutrition, convenience, variety and value of cereal, Powell said, noting that much opportunity remains around the globe, in both developed economies such as France as well as emerging markets such as Russia, Turkey and Brazil.

“We believe our global cereal sales will grow by $1 billion over the next five years, to reach nearly $5 billion by 2015,” Powell said.

China growth
China represents another big opportunity for General Mills. The country’s population, of course, represents opportunity, but it's the emerging wealth of the population that has marketers’ interest. By 2020, the number of middle-class and affluent families across China is expected to double to 200 million households.

Currently, General Mills in China is focused on Häagen-Dazs, Wanchai Ferry frozen convenience meals, and Bugles and Trix snack products. Total sales in China have grown to $350 million, with nearly 8,000 employees and five manufacturing facilities.

Going forward, geographic expansion will play a key role, as well as new formats and new products. “We see tremendous opportunities in China moving forward,” said Don Mulligan, chief financial officer.