At the end of the last decade, General Mills and its competitors were fighting for every penny as many consumers abandoned legacy packaged food brands.
Between 2016 and 2019, General Mills' annual revenue rose a total of 2%, while profit climbed just 3%. And even that modest growth required sweat and sacrifice: The Golden Valley-based food maker repeatedly cut costs and tightened up finances to stay in the black.
But at the end of its 2022 fiscal year in May, General Mills' revenue was up 13% over 2019. And its profit? Up 54%.
That's what executives mean when they talk about the "tailwinds" at the company's back. But General Mills, like every other business and person, is now settling into a new post-pandemic era that economists hope will be a bit less supercharged.
General Mills Chief Executive Officer Jeff Harmening talked with the Star Tribune earlier this month about how the company intends to maintain momentum, and what challenges it will face in the coming years. The conversation has been edited for length and clarity.
Q: The pandemic gave General Mills a big boost as more people ate at home. How is General Mills positioned to perform in a post-pandemic world?
A: There are two trends that have helped us in the past few years. People are eating more at home than they were pre-pandemic. And people bought a lot of pets during the pandemic — and those pets are still around.
Looking at our business momentum, it is more about how we've navigated change. The world I see ahead is probably as volatile as what we've seen so far.
We've changed through portfolio shaping, both acquisitions and divestitures, and we've done it well. Almost 20% of our company is different than it was going into the pandemic. We've shed some slower growing businesses and ones we weren't prioritizing while adding assets like pet treats. We're going to emerge a different company.
We've continued to grow market share in a majority of our categories, and we've made investments to spur our growth. We've spent on consumer marketing. We've stepped up our digital capabilities, especially in data and analytics.
Q: Analysts have praised the company's Accelerate strategy. Can you talk about how that strategy has in some ways remade the company, and what comes next for Accelerate?
A: About 15 months ago, we really restructured the way the company works. It wasn't caused by the pandemic. Any business textbook will tell you the best time to make a change is when you're doing well.
Restructuring North America or setting up a growth division or changing how we work outside the U.S. have caused us success in the short term, but they are also things that live on beyond the pandemic and will continue to help us be successful.
Strategy is a fancy business school term for prioritization, and strategies are only as good as the people behind them. We have a very talented organization. People understand the reasons we're doing it, and we have 30,000 people rowing roughly in the same direction now. When I ask people in the halls what they're working on, it's Accelerate.
There are a lot more investments we can make in data and technology, as well as innovation. We'll continue to shape our portfolio, and keep a balance on sales growth and profit growth. We need to do both, it's not enough to do one or the other.
Q: When you look at consumer behavior, what are some key changes you're seeing compared with the days before the pandemic — and how are you responding?
A: One of the biggest changes we're seeing is more meal occasions, eating at home. And that's particularly true for millennial consumers, many of whom [used to] eat out a lot. One of the biggest things people do during a recessionary period is eat more at home, because it just costs less.
The other thing we've seen is the embrace of big and popular brands again. We now have nine brands with $1 billion or more in sales [Totino's recently became the ninth].
We've seen consumers navigating to things they know and trust. We also see it in consumers looking at our websites, looking for recipes from Pillsbury and Betty Crocker.
The key is that brands need to stand for something — Lucky Charms are magically delicious. Cinnamon Toast Crunch, you're going to crave those crazy squares. So the key is to make sure you keep true to what the brands stand for, in a way that's modern and contemporary and where people receive it well.
Q: Looking at your global responsibility report, 41% of global sales volume met "Nutrition Forward" criteria in fiscal 2021. Are you looking to increase that percentage in response to growing demand for health and wellness, or does that figure represent the right mix?
A: For right now it's the right mix, but we're always looking for ways to increase the nutritional content of our food.
Health attributes only work if people actually eat it. What gets lost in all the health and wellness is consumers want food that tastes good. It needs to be convenient, and they want great value, too. We try to make things as nutritious as possible — but when you go for Häagen-Dazs, you want really good, indulgent ice cream.
Q: Let's talk about inflation — General Mills has experienced quite a bit of it, like other food companies. Can you talk about how you've justified price increases, and what you might say to consumers worried about price gouging?
A: This inflationary period is hitting all of us as food makers, and hitting all consumers, and we're really cognizant of that. These are inflation rates we haven't seen in 40 years. Prices of commodities are up, and labor rates are up everywhere. As we look at the landscape, the costs we absorb are higher than ever.
When supply chains are tough, they make our operations more inefficient. If we're waiting for an ingredient, that means we're seeing costs above and beyond inflation. Our first line of defense is to become more efficient, we call it holistic margin management.
Are we pricing too much? We just issued our guidance for the year, and we expect our [operating] profit to rise zero to 3%. I understand the angst consumers feel, whether it's gas prices or the price of food. We get the angst, and so our job is to be as efficient as possible and try to deliver on the promise of having great food at a great value.
Q: How have you been able to keep shelves stocked?
A: Back in February of 2020 we would have delivered everything retailers wanted 98% or 99% of the time. It's 85% of the time now — better than 75% a few years ago.
Our supply chains are better but not back to normal, and I don't think they're going to get back to normal for a while. But I'm proud of what we've been able to do, and it's better than most of our competition. For most of our retail customers the biggest issue is not inflation, it's about supply.
Q: How about that looming recession — if we are headed to a recession in the next year, what happens to General Mills?
A: I've been at General Mills for 28 years and change, and the first thing I'd say is it's our goal to be successful in any environment, for our employees, community, consumers, shareholders, everyone.
Whether it's a recession or not, people are feeling the pinch. Inflation is up and wages aren't keeping track. During the last recession more than a decade ago, people ate at home more. To the extent we can service our business well — which we are — we tend to do well during a recessionary period. There's no more important time for us to be on our game.
Q: Finally, let's talk about legacy. What do you envision as the defining characteristics of the Harmening era so far?
A: I'm proud we've lived our purpose as a company, and we deliver food the world needs.
We recently started going through a list of the last five years [since Harmening became CEO], and there's been a lot thrown at us. The people of General Mills have adapted and adjusted. We would say many times we're a great company but not agile, and now we're agile. In that way we've really benefited consumers. We've done a lot of good things for our environment through regenerative agriculture and made great strides in inclusivity.
It helps when you build on a legacy that's 155 years old, and a string of successful CEOs before me. I feel as if I'm in the process of building on their legacy.
