By Annie Gasparro
Years after the Greek-yogurt boom knocked the feet out from
under General Mills Inc.'s Yoplait, it's pointing to signs of a
comeback--which might be the only bright spot in the company's
earnings report this week.
A look in General Mills's pantry reveals a number of decades-old
brands, like Cheerios, Betty Crocker and Hamburger Helper, many of
which are losing favor with Americans. On Wednesday, the
Minneapolis company will report its fiscal second-quarter earnings.
While cereal and simple meals will likely continue to struggle,
yogurt and its smaller natural and organic brands could provide
some relief, analysts say.
Yoplait sales inched up 1% in the previous quarter--the first
rise in years--but the brand still has a long way to go.
Yoplait now has about 24% of the U.S. yogurt market, according
to market research firm Nielsen, down more than 10 percentage
points from 2008, thanks to Chobani Co. shaking up the yogurt aisle
with Greek style, a trend Yoplait waited too long to jump into.
Overall, analysts predict General Mills will report a 2% decline
in revenue for the second quarter and a 7% drop in earnings per
share, according to Thomson Reuters. The company warned last month
that its annual sales should grow at a low-single-digit rate this
fiscal year, down from its earlier mid-single-digit forecast. It
also said operating profit at its U.S. retail segment, which
includes yogurt, cereal, frozen pizza and more, will probably
decline.
Yoplait accounts for more than 12% of U.S. retail sales for
General Mills, or $1.31 billion in fiscal 2014, which ended in
May.
From fiscal 2011 through 2014, Yoplait sales fell 12.5%, a
steeper decline than cereal and frozen food--two categories known
for their dismal sales industrywide.
After missing the mark with its first attempt at Greek yogurt,
Yoplait fared better with its 100-calorie version in 2012, but it
wasn't enough. Chobani and Dannon's Oikos brand had already gained
consumer loyalty.
Yoplait has since made other significant changes, like creating
a new Greek yogurt recipe last year, which removed what critics
called thickeners.
Yoplait says the recent rebound in its Greek yogurt has
encouraged grocery stores to give it more shelf space, and that the
extra yogurt has continued to sell through to consumers.
General Mills also removed high-fructose corn syrup from its
Yoplait original yogurts and aspartame from its light products, and
about six months ago, it named a new head of the division, David
Clark.
He's working on launching new Greek-style products, like Greek
yogurt Whips, which will come out next month. Ironically, the Greek
Whips are meant to be a "yogurt mousse" that appeals to people who
don't like the taste or texture of traditional Greek yogurt. "Greek
just means higher protein to most people," Mr. Clark said.
Mr. Clark says 81% of households in the U.S. buy yogurt, but
only 6% buy it every month, indicating there is room to grow.
Yoplait has gone from 14 flavors in 1977--shortly after
launching in the U.S.--to more than 85 flavors now.
While Mr. Clark is trying to spruce up his yogurt, General Mills
overall is cutting back on production and laying off factory
workers and corporate staff in light of the lack of demand for its
food. In June, it announced a multiyear cost-cutting plan, and a
few months later, it said it would close two plants, including a
Yoplait factory in Methuen, Mass., which General Mills purchased in
1993 and employs 144 people.
General Mills has been investing in expansion in emerging
markets as well as putting its money on natural and organic brands
in the U.S., hoping to capture some meaningful growth. To that end,
it recently acquired snack maker Annie's Inc.
But emerging-markets growth is slowing, giving analysts pause on
its potential. Several Wall Street firms downgraded their ratings
of the stock after General Mills lowered its earnings outlook for
the year. Still, shares are slightly up about 5% this year.
The Week Ahead looks at coming corporate events.
Write to Annie Gasparro at annie.gasparro@wsj.com
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