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Greek yogurt sales surge at General Mills as new capacity comes online

By Elaine Watson , 22-Sep-2011

General Mills expects to see a sharp acceleration in Greek yogurt sales this year after bringing on new manufacturing capacity and ratcheting up advertising spend.

In a conference call with analysts yesterday, US retail boss Ian Friendly said sales of General Mills’ Yoplait Greek-style yogurts had jumped by 50% in the first quarter of fiscal 2012, and were set to accelerate further following the introduction of new manufacturing capacity last month.

This meant General Mills was finally in a position to cash in on rising demand, he said. “At the end of the last fiscal year we were not able to meet consumer demand for our Greek yogurts, but with additional capacity now online we expect our growth to accelerate as we move forward. We’ve also turned on national advertising support for the product for the first time.”

Initial feedback was very encouraging, he added. “Since the August 1 launch of our ad campaign, baseline unit turns have increased over 30%, and our Yoplait Greek yogurt sales were up 50% for the quarter.

“But our media plan goes beyond television. For example, this month we launched a digital marketing initiative in San Francisco and Chicago that incorporates social media. We've also got in-store sampling and couponing planned to bring new users.”

Greek yogurts now account for a quarter of category sales

Category growth continued to be driven by the burgeoning Greek segment, said Friendly. ”In fact, sales of Greek-style yogurt have doubled over the last 12 months and today make up roughly one quarter of category sales.”

According to Nielsen data, he added, sales of most other yogurts were flat or in decline over the same period with the exception of kids’ yogurts, which showed modest growth.

But Greek was not the only iron in General Mills’ fire when it came to yogurt, he stressed. “We have a great line up of new product launchesthere is further innovation to be done beyond the Greek segment. Our overall yogurt sales were down over quarter but should get better over the year.

“I am enthused about the yogurt category, but we have some work to do. We think we’ve got a solid plan to get our yogurt business growing again in 2012.”

‘Terrific’ sales for gluten-free Chex cereals, Lärabar bars and Fiber One 90-cal brownies

There were also significant growth opportunities in gluten-free cereals, grain snacks and the $250m Small Planet Retail natural and organic foods division, he said.

“The gluten-free benefits of our Chex line of cereals continue to resonate with consumers. Dollar sales of this franchise were terrific, up 29% [in the first quarter].

New 90-calorie Fiber One brownies – launched in June 2011 - were also off to a “terrific start”, and several new snack products were lined up for the second half, he revealed.

“With retail sales up 16% in measured channels alone, we are very pleased with our grain snacks performance in the first quarter and with increased levels of marketing supported planned throughout the year and with a strong line up of innovation scheduled for the second half, we are expecting another year of good growth.”

Meanwhile, sales of Lärabar snack bars – acquired in 2009 – had risen 65% in two years and were up 35% in the first quarter, he said.

Consumer trends: ‘A tale of two worlds?’

Operating profit for the US retail segment was down 5% to $585m, while net sales were up 3% to $2.51bn driven by strong growth in snacks and the Small Planet Foods division. International net sales were up 20% on a constant currency basis.

Chief executive Ken Powell said: "Consumer trends are a tale of two worlds. An increasing number of consumers in emerging markets are buying branded packaged goods as their income expands. But high unemployment, a soft housing market and concerns about the economy are pressuring consumer confidence and spending in developed markets.”

The firm, which blamed a 3% drop in group operating profit to $727m on “significantly higher input costs”, posted a 9% rise in net sales to $3.85bn in the 13 weeks to August 28.

Post Foods and anti-trust issues

Asked whether General Mills would be interested in purchasing branded cereals business Post Foods after it was spun off from Ralcorp, Powell said his firm would face the same anti-trust issues recently cited by Kellogg .

“We would have similar anti-trust competition issues if we tried to look at Post Foods. As to how they might do on a standalone basis, we think there is good brand power there, so if the standalone business does a good job of bringing people that really understand how to build cereal brands then those brands ought to be responsive.”

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