Portfolio reshaping to continue at General Mills

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Business



PARIS – Pre-pandemic, General Mills, Inc. was growing at roughly 1%. During the pandemic and as the world moved beyond the worst of the lockdowns and stay-at-home orders the company has been growing at 2% to 3%. Management’s goal is to reach the high end of that growth range and even move higher. To do so the company will continue to reshape its portfolio, said Jeffrey L. Harmening, chairman and chief executive officer.

In late May, General Mills sold its Helper and Suddenly Salad businesses to the private equity firm Kelso & Company, New York, for approximately $610 million. A few weeks earlier General Mills acquired pizza crust maker TNT Crust from the private equity company Peak Rock Capital, Austin, Texas.

“We’re pleased with the results so far,” Mr. Harmening said June 15 during a presentation at the Deutsche Bank dbAccess Global Consumer Conference. “The things we’ve acquired have worked well. We have executed well against the businesses we’ve divested, so far.”

Other portfolio-shaping maneuvers included selling its 51% controlling stake in Yoplait SAS to the French dairy cooperative Sodiaal in exchange for full ownership of Yoplait’s Canadian business, selling its European dough business to the Cerelia Group, and acquiring Tyson Foods, Inc.’s pet food business for $1.2 billion.

“For us to get to that 3%-plus growth rate, we think it will require more acquisitions and potentially divestitures,” Mr. Harmening said. “But we feel good about what we’ve done, and we’re confident that we can do that.

“We need to do both of those things at the same time. And, so, looking for assets to acquire that are growth accretive and tangential things that we’re already doing will be our goal. And then to the extent that we need to shedding assets where somebody else is probably a better owner than we are and they’re dilutive to our current growth.”

When asked about the current economic environment in developed markets around the world, Mr. Harmening did not offer optimism, but he did say the current environment may benefit General Mills.

“I don’t think I’m going to go out on a limb and say the economic outlook for many developed markets is not highly positive,” he said. “We tend to operate well in an environment, though, where the economics get difficult. And the reason for that is that like during the last recession, consumers trade out of away-from-home eating into at-home eating.”

He said the current cost of eating out is approximately 2.5x what it is to eat at home.

“When people talk about trading down a lot of times they start with, okay, what’s private label going to do? That’s actually not the best starting point,” he said. “The starting point is where are people going to eat? And increasingly, they eat at home, and we’re actually starting to see that already even over the last month or two. The percentage of food occasions that are at home have grown by a point or two, even over the last couple of months when people are itching to get out, but they’re concerned about the economic scenarios that face them.” 



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