General Mills On Thin Ice as Consumers Light a Match on the Company's Product Lineup…

If you’re still holding onto General Mills stock, you might want to grab something stronger than the milk you’re pouring over your Cheerios. Shares of the packaged-food giant dropped 3.5% this week, landing at $63.60, and adding yet another wrinkle in the company’s ongoing struggle to stay relevant in a world where consumers are pinching pennies and weight-loss drugs are killing late-night snack cravings.

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Starting with the numbers, General Mills’ fiscal second quarter wasn’t necessarily… terrible. Net sales came in at $5.2 billion, up 2% from the same period last year, and just barely ahead of analyst expectations of $5.1 billion. Adjusted earnings per share? A solid $1.40, crushing Wall Street’s estimate of $1.22.

(Source: Barrons) 

So why the market freakout then? Simply put, the company slashed its full-year profit forecast, citing an “uncertain macroeconomic backdrop.” Translation: consumers are broke, and that’s not great for business. But here’s where it gets interesting, this isn’t just a General Mills problem. It’s a case study in how legacy brands navigate a consumer landscape that’s fundamentally shifting. And right now General Mills is trying to play both offense and defense to battle it. They’re leaning into promotions, introducing new products, and doubling down on ad spending, all while dealing with rising costs and declining volumes. It’s a balancing act, and not an easy one.

CEO Jeff Harmening had a few wins to highlight during the earnings call. Blue Buffalo, the company’s premium pet food brand, is back in growth mode after a concerted push to promote its “high-quality ingredients.” Apparently, clean eating isn’t just for humans anymore. Meanwhile, U.S. cereal sales have clawed back some market share, thanks to new product launches and marketing campaigns.

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But then there’s Pillsbury and let’s just say the doughboy didn’t rise to the occasion. Disappointing sales in refrigerated baked goods during the critical holiday baking season have General Mills upping its ad budget to lure shoppers back. It’s not exactly the kind of growth story investors want to hear, but it’s the reality of where the company is right now. 

Especially since General Mills is getting squeezed from multiple angles. Net sales in its North America Retail segment were flat year-over-year, and volumes have been declining for four consecutive quarters. Shoppers, faced with higher prices across the board, are trading down to cheaper private-label brands. And then there’s the wildcard—weight-loss drugs like Wegovy and Ozempic. These appetite suppressants are reportedly cutting into demand for indulgent snacks, which isn’t great news for a company that sells Bugles and Pizza Rolls.

(Source: Investing.com) 

Naturally, to counter these headwinds, General Mills is pulling out all the stops. The company has ramped up promotions, offering price cuts across categories like Pillsbury, Totino’s, and fruit snacks. November promotions alone jumped 8% from the previous month. Meaning, they’re betting that short-term profit sacrifices will pay off in the form of long-term customer loyalty.

Then there’s the product pipeline. New high-protein Cheerios are hitting shelves, aimed squarely at health-conscious consumers. A Super Bowl ad for Totino’s is in the works. And on the pet food front, the company recently acquired Tiki Pets, a premium brand that caters to the “spare no expense” crowd of pet owners. If there’s one market that’s recession-proof, it’s cat people.

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On the contrary though, not everyone is convinced General Mills can turn things around. The stock is down 3% YTD and analysts are divided. Bank of America’s Peter Galbo is optimistic, upgrading the stock to “Buy” with an $80 price target, largely on the strength of Blue Buffalo and the potential for Pillsbury to rebound. But even the bulls acknowledge that this is a long game, not a quick fix.

In the end, it’s clear that General Mills is in what you might call its “grind era.” The company is doing everything it can to stay relevant, from slashing prices and ramping up ads to introducing new products and expanding into pet food. The good news about it all though, is if these moves pay off, General Mills could emerge stronger and more resilient. The bad news? Investors will need to stomach some short-term pain before the turnaround story fully takes shape.

(Source: Giphy) 

For now, the cereal aisle remains a battleground, and General Mills is fighting to keep its spot on your breakfast table—and in your portfolio. Whether they succeed or not will depend on how well they execute their strategy in a consumer landscape that’s more challenging than ever.

In the meantime, do what you will with this information and keep tabs on General Mills. Place your bets accordingly and as always, stay safe and stay frosty, friends! Until next time… 

P.S. At the end of the day, we all know what drives the markets right? Greed and fear. That’s it. When big money starts piling into a certain place, stocks go up. When big money starts bleeding out of a certain place, stocks go down. It’s that simple. Which is why, with the Stocks.News insider tool, we are able to see this exact phenomenon play time and time again. So with that said, why not see how your portfolio is holding up with insiders BEFORE the next big move takes place (up or down)? Click here to snag a borderline outrageously cheap membership to Stocks.News premium and start leveraging our proprietary Insider Tool today! 

Stocks.News does not hold positions in companies mentioned in the article.