General Mills, a leading consumer goods manufacturer, is increasing its ad investment by double digits in the last quarter of the year. The company that owns Cheerios, Haagen-Daz, and Old El Paso expects its ad expense to grow in the midst of competition by private labels.
Earlier this year, the business sent out information indicating it was increasing its marketing investment to build brands and stay relevant.
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Increasing its Marketing Budget
According to General Mills CEO Jeff Harmening, General Mills has increased its online marketing budget by 35% in the past few years compared to the pre-pandemic levels. He says that this will benefit the business in the coming years since consumers in that environment are searching for new ideas and new ways to grow.
The company has also increased its investment in media by 17% in the last year. “ We are happy with our previous year’s spend and are confident of the year ahead,” he said.
Harmening’s confidence comes from the ability of the business to remain agile in the last few years. “It’s not by accident that our market shares in most categories have grown in the last five years,” he added.
General Mill 1st Quarter Results
In its first quarter of 2024 results, the company saw its sales for global operations increase by 4% to $4.9 billion. One of the biggest growth was in the European market, where sales grew by 10%. However, the company saw a drop in operating profits to $930m during the quarter. The company attributed this to an increase in selling and administrative costs.
To continue succeeding in an evolving business landscape, General Mills wants to focus on competing effectively, improving efficiency in its operations, and maintaining a disciplined approach to its capital allocation.
General Mills expects these steps to improve its financial performance to meet and exceed its long-term goals. The company increased its August dividend by 9% as a sign of its commitment to drive strong returns.
General Mills remains committed to building brands as it seeks to return to profitability. In a call to investors, Koffi Bruce, the Chief Finance Officer(CFO), says. “We believe there is a need to put brand support behind some quality ideas. This is especially so when the environment is stabilizing,”.
According to Harmening, the “environment” here refers to reduced inflation, stabilizing supply chains, and a resilient consumer who is also cautious.
The Challenge of Private Labels
Many FMCG companies have been struggling with the supply chain problem in the last 18 months. This has been attributed to the impact of the Ukrainian war and staffing problems.
General Mills president for North America, John Nudi, says the company has improved availability to consumers this year compared to last year. He added that the most remarkable difference this year is in their competitors and particular private labels. He cited the increase year after year of their products on the shelves.
The firm’s pet division did not record any growth in sales in the first quarter. However, it recorded an increase in profitability by 10% from $111.2m to $123.1m
“So while that was a tailwind for us when we were on the shelf, and the private labels weren’t, it’s a headwind this year.”.The company is keen on growing its pet division by investing in smart, hard-hitting advertising,” Harmening said.
The company is also reviewing its packaging and pricing. For instance, it’s introducing medium-sized dry pet food packages instead of sticking with many big sizes.
General Mills Ecommerce Strategy
General Mills plans to focus more on its long-term plans to increase profit. The plans require an accelerated strategy to show value to investors and the ability to adapt to an increased change in the consumer landscape. This is important if you will have consumers buy from you.
According to Harmening, the company also plans to use connected commerce powered by data and digital strategies, assessment, and execution to improve customer relationships and drive brand growth. The company collects data to optimize its personalized marketing efforts and improve its promotion. Connected commerce will help us build our brands going forward,” Harmening said.
An example he pointed out is the Box Tops digitization for the US education schemes, now a mobile app that can collect first-party data. In this initiative, the brand donates money to schools for each redeemed product label.
According to the company vice president of investor relation, Jeff Simeons, while connected commerce sounds like another buzzword, General Mills view it as the next big thing in marketing. He added that brands need to combine physical retail stores and ecommerce as the latter has become very important in the recent past.
Importance of Retail Customers
According to him, 85% of the company’s e-commerce sales now happen through its retail partners. Therefore, there is a need for e-commerce stores to perfect their e-commerce game while maintaining a physical brick-and-mortar store.
According to Simeons, key relations have helped provide quality data, which helps them with better marketing and innovations. “ With data improving for our retailers, it will also keep improving for us. This will play an important role even though you can only trust the data of the people you actually trust”. He adds.
This underscores the importance of their retail relationships because they go to the market and discuss what is happening there. He adds that they try to ensure they have good relationships.
Regarding marketing strategies, Siemon adds that the company plans to maintain strong support for priority brands despite the company getting strong pressure on costs.
