General Mills has revealed that it may be prepared to say goodbye to its Betty Crocker and Green Giant brands.
The $32 billion packaged-food company this week reported its sixth straight quarterly sales drop - the worst such slump in 20 years. That’s even after it acquired fast-growing organic food producer Annie’s Inc. in October.
The Annie’s purchase will help Minneapolis-based General Mills respond to consumers’ growing appetite for healthier fare. Still, the $810 million deal was just a drop in the bucket. A bigger brand shakeup may be needed.
Divesting underperforming, slower-growing products such as Green Giant canned and frozen vegetables, Betty Crocker baking mixes and Hamburger Helper quick meals could be a logical next step, said Ken Shea of Bloomberg Intelligence.
“It’s those kinds of businesses that helped it establish a footprint in most grocery stores when it needed to because everybody has to have vegetables and bread and cake mixes,” Shea said. “Today’s food company needs to be a little savvier and a little more concentrated.”
Brand Relevance
Cutting ties with brands such as Green Giant vegetables - already the subject of speculation after Reuters reported it was for sale - could help improve margins and returns. General Mills could simultaneously make more acquisitions in healthier parts of the grocery store.
“If, over time, General Mills can prune some slow growth or declining non-core brands and replace them with faster-growing brands in the right categories, that’s ultimately going to be a good thing for investors,” said Kevin Dreyer, a money manager at Gabelli Funds, a unit of Gamco Investors Inc. “It certainly makes sense at the right price to look at other organic and natural brands and make sure that they keep their portfolio relevant going forward.”
News by Bloomberg, edited by ESM
