Annual reports, investor presentations, and conference calls
are equally important events. And that's because they offer us a
rare opportunity to plug into some pretty smart management teams.
With conference calls, four times a year, we get tremendous color
on the business of our favorite stocks.
The June 25
Q4 conference call did not disappoint. While the results of the
company were about average (the stock barely moved after
earnings), CEO Ken Powell and CFO Don Mulligan had some very
interesting things to say during the conference call.
No. 1: Fiscal 2014 was a good year
From CFO Bob Mulligan:
Fiscal 2014 was a good year for General Mills' shareholders.
A combination of share price appreciation and dividends
resulted in a 13% total return for the year. That (matches)
some of the very tough returns generated by our peer group, and
it's consistent with our goal of delivering double-digit
We have a strong track record of returning cash to
shareholders. In recent years, our dividends per share have
increased at a 13% compound rate, and our average shares
outstanding have declined 1% per year, that's despite pausing
briefly on share repurchases to fund the strategic acquisitions
of Yoplait and Yoki.
For the full year, sales were up 1% to $17.9 billion, while
operating profit fell 2%. But with brands like Cheerios, Yoplait,
Pillsbury, Progresso, and Green Giant, General Mills
generates plenty of loot. Cash flow from operations was $2.5
billion last year. The company spent $1.7 billion repurchasing
shares of common stock in 2014, reducing average diluted shares
outstanding by 3%. It also paid $983 million in dividends to
shareholders. General Mills is a brand acquirer and that massive
amount of cash flow also allows it to add more brands to its
No. 2: Priority platforms are doing well
Net sales for our convenience stores and food service
segment grew 1% overall in the quarter, with pound volume
essentially matching year-ago levels. However, looking at just
our six priority platforms, which are snacks, cereal, yogurt,
mixes, biscuits and frozen breakfast, combined net sales grew
An early image of Betty Crocker. Source:
The performance of these six platforms is very important to
this business. While flat pound volume is nothing to write home
about, a 5% pop in products like cereal and snacks is solid.
Product innovation continues to power these categories. New
products added more than 5% to General Mills' U.S retail shipment
volume. As consumers become more comfortable with these
offerings, they will replace some of the older (more tired)
products in a customer's basket.
No. 3: Cereal is a big deal
CEO Ken Powell had this to say:
I know many of you are anxious to see renewed cereal
category growth and frankly we are too. We are confident it
will happen. This is a category consumers love. In fact, U.S.
consumers rank cereal as a top 10 food and beverage choice in
the same list as sandwiches, fruit, coffee, and juice. We are
very focused on doing our part for the cereal category and
growing sales for our cereal brands in 2015.
I bet some of you weren't aware of the power of cereal, but
clearly, it's a big-time category. Fortunately, it's right in
General Mills' wheelhouse. With new product spinoffs of the
Cheerios, Chex, and Big G brands (with whole grains), management
seems to have it figured out.
No. 4: China is key
From Powell again:
So let's shift to emerging markets, where our focus on the
growing middle-class consumer is driving strong growth for our
businesses. Fiscal 2014 was another year of double-digit growth
for us in China and we intend to keep our foot on the gas in
2015. We're expanding the Haagen-Dazs retail line with new
flavors like blueberries and cream. We'll reinforce the super
premium equity with increased media investment in existing
geographies and we'll continue to expand the brand with new
shops and retail outlets in new cities across the country.
With a developed American market, most food companies are
turning their sights to emerging markets and particularly China.
Excluding currency effects, General Mills' international business
was up 8% last year. That includes a 38% pop in Latin America and
a 9% increase in the Asia-Pacific region. Foreign revenue is a
$5.5 billion chunk, which is around 30% of General Mills' top
No. 5: General Mills is targeting these consumer
Powell also stated:
As we move into fiscal 2015, our No. 1 priority is to
accelerate top-line growth. We'll do that by sharpening our
"consumer first" mind-set with particular focus on four growing
consumer groups: the growing middle class in emerging markets,
U.S. multicultural families, millennials, and consumers over
age 55. With these growing consumer groups and our broad
portfolio there are plenty of growth opportunities and our plan
is to go out and get them.
This statement is key, as it's the blueprint for all consumer
food companies, not just General Mills. Here Powell tells us who
his key customers are and how they will help the business achieve
its goals. By focusing its marketing spend and product innovation
on these groups, General Mills is setting itself up for
The conference call is a powerful tool that will give you color
on not just one business, but an entire industry. General Mills
does a nice job breaking it all down by product category,
consumer group, and geographic region. Investors should be
excited about its targeted marketing spend and its new-product
innovations. The 5% increase in its six priority platforms is a
good sign and should power the business going forward.
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5 Things General Mills' Management Wants You to
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