General Mills continues to deal with inflation levels that are higher than what they were once used to, as the food and beverage industry adapts to the post-pandemic consumer environment.
While prices have remained elevated, the CPG giant saw a 1% decrease in net sales in its most recent quarter, with volumes declining two percentage points, according to its earnings report. The company saw its sales in its most recent quarter impacted by “value-seeking behaviors from consumers, affecting both the channels they shop and the size of the basket,” CEO Jeff Harmening said in the post earnings call.
In its quarterly earnings call Wednesday, Harmening said the company’s bottom line continues to be impacted by elevated operating costs. The price of General Mills’ products are increasing at a 4% rate this year, compared to double-digits last year, but before the pandemic the company was used to annual increases of 2 to 3%, he said. The Cheerios maker’s internal costs have increased 32% over the past three years, the CEO said.
“So the cause of prices going up really has been input cost inflation and the prices that we received,” Harmening said on the call.
The cereal category has undergone a change with the introduction of private-label offerings. These offerings hold a 10% market share, which is the same as it was in 2019. However, there has been a slight decrease of 10 basis points since the peak of the pandemic, according to Harmening.
Two areas of growth for the company are Pillsbury refrigerated dough and fruit snack offerings. Both of these categories have witnessed a sales increase of 60% over the past few years. Harmening also mentioned that the company has faced challenges in the yogurt category in recent years. However, the company is happy with the response to Yoplait Protein, which was launched in January.
“We don’t think that our pricing has gotten ahead of inflation,” Harmening said. “In fact, it hasn’t.”
While food inflation has come down from its peak in 2022, it remains above pre-pandemic levels. In February, overall food at-home prices were 1% higher than the same period in 2023, according to the U.S. Bureau of Labor Statistics’ Consumer Price Index. Breakfast cereal was 2% more expensive on a month-over-month basis in February, while the price of eggs increased 5.8% amid rising bird flu cases among commercial flocks.
