General Mills Sees Growth in Global Cereal Business

The U.S. is still the single largest cereal market. Including Canada, sales for cereal in North America approach $11 billion. This market has been growing at a 2 percent compound rate during the last 20 years.

2/24/2011 --- Addressing analysts at the annual Consumer Analyst Group of New York (CAGNY) conference, General Mills Chief Executive Officer Ken Powell said General Mills’ global cereal business will be among the strongest contributors to the company’s growth during the next several years . The company expects to add $1 billion to its global cereal sales, reaching $4.8 billion by 2015.

General Mills operates wholly-owned cereal businesses in the U.S. and Canada, with popular brands such as Cheerios, Wheaties and Fiber One. Through Cereal Partners Worldwide (CPW), a joint venture with Nestlé, the company operates in an additional 130 countries, marketing global brands that include Fitness, Chocopic and Cheerios.

The U.S. is still the single largest cereal market. Including Canada, sales for cereal in North America approach $11 billion. This market has been growing at a 2 percent compound rate during the last 20 years. Powell said, “low single-digit growth in a market of this size translates into plenty of sales opportunity.” 

Consumers around the world are interested in foods that offer health and wellness benefits.  Today Big G cereals are the No. 1 source of whole grain at breakfast in the U.S.  General Mills is aggressively promoting its whole grain message with TV advertising, packaging, and in-store displays.  Powell said the company sees growth opportunities in foodservice, too, from school breakfast programs to senior living facilities. Big G’s whole grain message differentiates the company in these growth areas.

In Canada, Honey Nut Cheerios, with its cholesterol-lowering benefits, is the best-selling cereal brand, just as it is in the U.S.  Weight management messaging on MultiGrain Cheerios, and the combination of high fiber and great taste in Fiber One cereal, are contributing to retail sales growth for the company’s cereal line in Canada so far this year. 

Two decades ago, the U.S and Canada generated more than 60 percent of global cereal sales. Today, the majority of cereal sales are in markets outside of North America. Powell said General Mills expects this split to widen, as international markets continue to grow at a faster pace. Today, one third of General Mills’ global cereal sales are generated outside of the U.S., with most of these international sales coming from CPW. CPW has been leading category growth in markets across the globe, he noted. 

“We think the cereal category is poised for continued growth, as people around the world embrace the benefits of cereal,” said Powell. “Cereal offers nutrition, convenience, variety and value – important food attributes to consumers everywhere.”

Despite these benefits, cereal consumption today is very concentrated. The U.S., United Kingdom, Canada and Australia combined represent 54 percent of total cereal consumption.  Yet those four regions comprise just 6 percent of the world’s population. Powell said emerging markets represent the growth for ready-to-eat cereal.  As the number of middle-class consumers increases in many countries, the demand for healthy and convenient branded foods will rise.

CPW is the share leader in these emerging markets, including in Russia and Turkey.  Powell said CPW has been in many of these markets for more than a decade, so “we’ve got a great base to build from.” 

In Russia, cereal category sales have more than tripled spanning the past decade to reach $250 million, and CPW leads the market with a roughly 50 percent share. CPW’s advertising in Russia is a mix of brand-focused spots, along with ads that compare its cereals to a traditional, porridge-based Russian breakfast. Today, Russia is CPW’s biggest market for Nesquik cereal.  The company sees great growth ahead in this emerging market.

Turkey is another market showing growth in cereal consumption. The cereal category there is now four times the size it was 10 years ago. CPW has a strong share position there, too, with 60 percent of category sales. As in Russia, CPW’s advertising in Turkey showcases the benefits of cereal relative to traditional breakfast options. 

This month, CPW opened a $50 million Innovation Centre in Orbe, Switzerland. This state-of-the-art technical facility will be a global research and development hub for cereal, leveraging scientific knowledge from both General Mills and Nestlé.    
 
Powell said, “We see strong category growth ahead, fueled by consumer interest in health and wellness, rising disposable income in many markets, and strong brand-building investment by cereal manufacturers.  We believe General Mills is well-positioned to lead continuing growth in this terrific category in the years ahead.”