With plenty of people sticking around the house this summer, General Mills reported another solid quarter. Net sales for the maker of Cheerios, Pillsbury and Progresso climbed 9% to $4.4 billion for the three-month period ending Aug. 30, beating analysts’ expectations, according to S&P Global Market Intelligence.
“We continued to drive exceptional results this quarter, highlighted by broad-based market share gains amid elevated at-home food demand due to the Covid-19 pandemic,” General Mills CEO Jeff Harmening said in a statement.
Several signs, however, suggest the packaged-food industry’s run is winding down.
As strong as General Mills’ latest quarter was, with organic sales increasing 10%, it didn’t match the prior quarter when organic sales—which exclude currency fluctuations, acquisitions and other factors—jumped 16%.
On a wider scale, the CPG industry grew 4% during June through August, a decline from earlier months of the pandemic, according to data from CPG measurement insights firm NCSolutions.
Demand has only slowed down since then.
“In the first weeks of September, total U.S. CPG spending was flat compared to the same period last year—the first time monthly spending did not increase year over year since the pandemic began,” Linda Dupree, CEO of NCSolutions, said.
In specific segments that General Mills competes in, such as breakfast cereal and yogurt, NCSolutions numbers shows that year-over-year industry sales were either flat or down during the summer months. Despite the trend, the Minneapolis-based company posted gains in both U.S. cereal (10%) and U.S. yogurt (5%).
One reason overall CPG sales are sliding is that restaurant visits are rising. Transactions at major U.S. restaurant chains were down 9% in mid-August compared to the same time last year, a major improvement from mid-April when transactions plummeted 44%, according to market research firm the NPD Group. The latest rate marks the first time the industry has been down a single-digit since the outbreak of Covid-19 in March.
Dupree added that since cooking, baking and family meals are central to the upcoming holiday season, CPG brands have an opportunity to maintain momentum and win back straying customers through targeted advertising.
General Mills noted that it has increased marketing investments in digital and ecommerce, places “where consumers are increasingly spending their time,” Harmening said in a statement.
Prior to the pandemic, ecommerce amounted to 4% of sales for General Mills’ North America retail business. Today, that number has doubled to 8%.
At Brandweek last week, General Mills chief brand officer Brad Hiranaga talked about how the company’s marketing reflects these shifts. “Our consumers are always in culture. So we’re trying to make that pivot with that growth learning mindset. And being aware of culture isn’t good enough. It’s about how are we helping create culture and build on culture,” Hiranaga said.
To that end, the company is cranking up the nostalgia factor to promote the release of four popular breakfast cereals that will incorporate their original 1980’s ingredients. During “The Ultimate Saturday Morning Drive-In,” which will be held at the Rose Bowl in Pasadena, Calif. on Oct. 3., fans will be treated to classic Saturday morning cartoons. Saved By the Bell’s Mario Lopez will host the event.
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