Industry Trend Analysis - General Mills Must Address Revenue Decline - SEPT 2017
BMI View: General Mills' third consecutive year of revenue decline is a serious concern, as it has failed to keep up with changing consumer preferences. In 2015, we argued that the company's margin expansion strategy would really only provide a short-term boost, as it does not address poor industry fundamentals. These industry fundamentals have only gotten worse since then and General Mills must invest in innovation and areas such as yoghurt and organic food to spark a turnaround.
General Mills saw its FY2016/2017 net sales for the year ending May 28 2017 decline by 6% down to USD15.62bn, marking the third consecutive year that its revenues have fallen. Net sales also declined in organic terms by 4%, as volumes declined in its North America and Europe & Australia units, by 11 points and 7 points respectively.
The fact that consumers are eating fewer General Mills products is of major concern for the company, and is due to wider trends in the packaged food industry which are negatively impacting legacy food manufacturers such as General Mills, as well as rivals the Campbell Soup Company and Kellogg's, among others. Demographic shifts have seen consumer preferences evolve, with the health conscious millennial generation placing greater emphasis on consuming healthy foods, resulting in higher demand for fresh produce and nutritious and natural foodstuffs. Greater interest in organic and fresh food is coming at the expense of General Mills' traditional strengths - its ready-to-eat meals and breakfast cereals - as they tend to have higher sugar and/or salt content.
|Revenue Decline The Major Concern|
|Source: General Mills, BMI|