NEW YORK--General Mills Inc. (GIS) expects food retail prices to be mostly stable over the next year, and will rely on higher sales volume for the bulk of its sales growth over the next year.
"The cost environment is that we're seeing general price stability across all of our categories," General Mills Chairman and Chief Executive Ken Powell said Tuesday in an interview at the New York Stock Exchange.
Mr. Powell spoke ahead of an annual meeting with shareholders and investors, where the company was highlighting some of the more than 200 new products its plans to launch in the first half of fiscal 2014, ranging from a new version of its Yoplait Greek yogurt to protein-rich varieties of Nature Valley cereal.
The onslaught of new products is more than they launched last year, when products like Fiber One protein bars and a 100-calorie version of Greek Yogurt helped make General Mills's sales in its U.S. retail division, by far its largest division with more than $10 billion in annual sales, grow last year. In that same time frame, new products contributed 5 percentage points to the unit's growth, which was up just 1% overall.
The performance of new products will be key to increasing sales volume, something investors still crave out of food makers who have thus far only shown a slow recovery. General Mills in recent quarters has begun to finally show sales volumes increasing, including a 2% rise in the U.S. retail segment in its fiscal fourth quarter.
General Mills sees low-single digit sales growth for its recently begun fiscal year, and most of that increase will come from selling more product. Costs are expected to rise 3%, a level General Mills executives say is manageable.
New products are also being counted on to help revive two of the company's lagging businesses: cereal and yogurt.
The maker of Cheerios cereal lost some market share over the past year, after what it says was lackluster number of new products and less advertising by all the players in the category. In addition to new products, General Mills is also stepping up advertising behind older brands like Lucky Charms and Cheerios.
Yoplait yogurt, which over the past year lost its leading market-share position to Danone SA's (BN.FR) Dannon brand, meanwhile has revamped its Greek-yogurt product to better compete in the fast-growing segment.
Mr. Powell also said the company doesn't see the need to cut prices of any of its products further this year. Last year, General Mills used "selective" price cuts, lowering prices on items like Yoplait's core yogurt cups.
"Our pricing for all of our core and major brands is in the zone that we want it to be," he said.
General Mills shares were recently up 0.5% at $49.52, and have rallied 22.5% year-to-date. Shares have been boosted by investors looking for stable, dividend-paying stocks, and as valuations for food-makers rose in the wake of H.J. Heinz's $23 billion buyout by Berkshire Hathaway Inc. (BRKA, BRKB) and Brazilian private-equity firm 3G Capital.
Article written by Paul Ziobro for the Wall Street Journial. Original article can be found here. Write to Paul Ziobro at paul.ziobro@dowjones.com
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