As “value-seeking” behaviour lingers longer than anticipated, General Mills is investing behind marketing and innovation to return sales to growth.
By its own admission, the third-quarter sales performance fell short of “expectations” – down 5% in organic terms – and almost four weeks into the final three months of the 2025 fiscal year, General Mills is looking ahead to a reinvestment savings programme.
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Chairman and CEO Jeff Harmening followed on from yesterday’s sales downgrade for the current year, to minus 1.5% to 2%, with a pledge to reinvest $100m from targeted savings in the 2026 financial year.
“We’re reviewing new cost-efficiency initiatives that are anticipated to generate at least $100 million in additional savings in fiscal ’26, with further savings expected in fiscal ’27 and beyond,” Harmening explained in his prepared remarks yesterday (19 March).
“Our number one priority is to accelerate our organic sales growth by delivering remarkable consumer experiences across our leading food brands, resulting in stronger volume and improved market share performance.”
The Pillsbury brand owner is on target to generate 5% in cost-of-goods sold savings in the current year through the company’s Holistic Margin Management (HMM) programme and expects to repeat that in fiscal 2026, equating to more than $600m in “gross productivity savings”, Harmening said.
However, as General Mills reported “softness” in the US snacking category in its recent quarter – across bars, fruit snacks, and salty snacks – and “greater-than-expected retailer inventory headwinds” elsewhere, the CEO gave an inkling of the challenge ahead revolving around the consumer.
“Coming into this year, we thought the consumer environment would improve as the year got on, and that hasn’t really been the case,” Harmening told analysts during yesterday’s Q&A session.
“And consumers are still seeking value as much or more than they had when our fiscal year began. And if you look at the most recent confidence indices, it would indicate that consumer confidence is actually below where it was three months ago and about where it was in 2008.”
Spending will be stepped up behind innovation to deliver “remarkable” consumer brand experiences, along with increased marketing investment, all geared toward improving organic growth.
Harmening admitted that General Mills’ new product innovation as a percentage of sales stills lags behind where it was before the Covid-19 pandemic. The “theme” for fiscal 2026 is likely to be “fewer but bigger”.
General Mills also needs to find a balance for pricing across its categories as consumer budgets continue to feel the economic pressures.
“We just have to get into a zone in which our pricing is going to work,” he explained.
“And then we have to consider all the elements of our marketing mix, and we use the remarkable experience framework to do that – category by category.
“I’m confident as we head into the fourth quarter and then into fiscal ’26, we have a much better handle, category by category, what jobs need to be done. And in some cases, that’s value, in some cases that’s marketing on the core, and in some cases, that’s innovation.”
Robert Moskow, an analyst at TD Cowen, summed up his thoughts in a research note: “We view GIS’ investments as acknowledgement that they and other big-food companies raised prices too high during the pandemic and need to reset the value equations (and their margins) in a large swath of categories,” he said.
“Waiting for consumers to acclimate to cumulative inflation is not likely to work out well at a time when consumer confidence is declining, GLP usage is expanding, and the government is poised for another cut to SNAP benefits.
“We expect several other Big-Food peers to follow their lead in the coming quarters.”
