General Mills Still Facing Input Costs and Labor Shortage | 2021-09-23
MINNEAPOLIS – Executives at General Mills, Inc. expect rising input costs, a labor shortage and supply chain problems to last for some time.
The company will tackle input costs by continuing to take pricing measures. Jonathon J. Nudi, president of North America Retail, described supply chain problems as almost “punched”.
Amid challenges, net income attributable to General Mills for the first quarter ended Aug. 29 was $ 627 million, or $ 1.03 per share on common stock, down 2% from $ 639 million , or $ 1.04 per share, in the first fiscal year of the previous year. quarter, mainly reflecting lower operating income. Net sales rose 4% to $ 4.54 billion from $ 4.36 billion in the first quarter of the previous year. Gross margin declined 120 basis points to 35.2% of net sales, mainly due to higher input costs.
General Mills at the start of the year expected inflation to be 7%, CEO Jeffrey L. Harmening said on a September 22 conference call.
“It’s clearly going to be between 7% and 8% now over the course of the year,” he said.
General Mills started raising prices in the quarter, and more prices will come in the second quarter, he said.
Retailers and General Mills have worked well together through the pricing actions, Mr. Nudi said.
“We got the majority of our prices accepted and more importantly reflected in the market,” he said. “So that’s also a tip. So we work very well with retailers, and we will continue to factor in inflation and manage it as we move forward throughout the year.
“He’s almost a mole right now. So we have literally hundreds of disruptions in our supply chains, and that really changes daily and weekly. – Jonathon J. Nudi, General Mills
The challenges of the job could continue, Harmening said.
“So there is a shortage of truck drivers here in the United States, and it’s not going to ease for some time,” he said. “There is a shortage of sea containers as we look at global transportation. You can see them in photos in the LA Harbor. So it’s not going to go away for a while. “
A cut in government spending, especially on stimulus checks to the unemployed, has loosened labor markets somewhat, but that won’t solve the whole problem, he said.
“So I suggest that the challenges we have with the workforce and workforce inflation will persist for some time,” Harmening said. “We haven’t really seen them decrease significantly at this point.”
Raw material suppliers, in-house manufacturing, co-packer manufacturing and its own distribution network all impact General Mills’ service levels, Mr. Nudi said.
“It’s almost a punch right now,” he said. “So we have literally hundreds of disruptions in our supply chains, and that really changes daily and weekly.”
Senior level meetings are held daily or weekly to resolve issues, he said.
General Mills reaffirmed its outlook for the year with organic net sales expected to be in the upper end of the original forecast range, down 1% to 3%.
In North America Retail, first quarter net sales fell 3% to $ 2.64 billion. Sales fell 7% in US Meals and Baking and 6% in US Cereals. Net sales increased 3% in Snacks in the United States. Net sales of yogurt in the United States are at year-ago levels. Organic net sales also fell 3% in the first quarter for retail in North America, but compared to the pre-pandemic first quarter of 2020, organic net sales were up 5%.
First quarter convenience store and foodservice net sales increased 23% to $ 482 million. Sequential recovery has occurred in the out-of-home power circuits of schools, restaurants, accommodation and convenience stores. On a two-year compound growth basis, first quarter organic net sales were up 4% from the first quarter of 2020.
In the companion animal segment, first quarter sales jumped 25% to $ 488 million, driven by strong volume growth and favorable net fulfillment and price mix. The acquisition of the pet treats business of Tyson Foods, which closed on July 6, contributed five points to net sales growth.