General Mills’ Struggle with Yogurt and Baking Brand Sales Costs the Company 625 Jobs

By next spring, cereal brand General Mills plans to cut about 625 jobs. This is in an effort to reduce costs in its production of yogurt and baking products while improving their market performance. Many of these positions were already cut in the latest financial period. The cut might seem drastic, but profits fell 13 percent to $354.4 million from $408.9 million in the fourth quarter of 2017.

This might be due to the fact that yogurt sales in the US fell five percent. Even sales of baked products fell two percent. Since most consumers are now leaning towards healthier products, General Mills is left in a struggle to compete. Cereal is where the company normally focused and that segment’s net sales rose by two percent along with the company’s snacking unit. This was possible because of the company’s investment in cereal products like Lucky Charms, Frosted Flakes, Cinnamon Toast Crunch, Shredded Wheat and Dippin’ Dots cereal.

With the trend among consumers towards eating healthier yogurt products, companies struggle to keep consumer attention. A survey conducted last year showed a trend towards plant-based dairy products rather than conventional dairy. Thirty-six percent of the consumers surveyed reported health benefits as their primary reason for consuming dairy alternatives – something that could be a valuable consideration for manufacturers as well.

However, the company did attempt to revamp its yogurt selection by releasing a French-style Yoplait yogurt named “Oui.” The company also released YQ by Yoplait which is a low-sugar and protein-rich yogurt for consumers who are more health-conscious.

In a shift in focus, General Mills has recently invested in the pet food space which is said to be growing. In April, the company purchased Blue Buffalo in a deal worth $8 billion.

“We are committed to competing effectively across all our brands and geographies, increasing investments to accelerate our differential growth platforms, and maximizing the growth opportunities for Blue Buffalo… We are also keenly focused on maintain our efficiency in this more inflationary cost environment, and we have initiatives underway to help protect our profitability.” CEO Jeff Harmening said in the company press release.

This allowed General Mills to join the competition with Nestle’s Purina Petcare, Mars’s purchase of the VCA, Inc. and Cargill’s Animal Nutrition segment. These diversification efforts may help the cereal titan gain more profit.

“While we were pleased to see continued progress in sales and believe the recent Blue Buffalo acquisition has the potential to further boost sales growth, General Mills faces a challenging operating environment from a dynamic retail environment, increased competition and higher input costs.” Brittany Weissman, Edward Jones analyst had written in a note.

General Mills isn’t alone in cutting jobs. Kellogg has also been cutting its employees through the Project K initiative, with the aim of generating $425 million to $475 million in cost savings. Similarly, the job cuts from General Mills are part of its global cost savings initiative. However, it’s unclear whether this initiative will help General Mills recover from lost sales.