Gen'l Mills 100: new food blitz

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General Mills is unleashing its most aggressive new-product barrage in memory-estimated by one sales executive at 100 products-as it strives to meet lofty growth expectations despite setbacks integrating its Pillsbury acquisition.

The new-product tally for General Mills' fiscal year beginning in May far exceeds what the company has previously introduced in a single year, according to the sales executive. The push will include line extensions, such as a Banana Nut flavor of Chex Morning Mix and a line of Bisquick Complete Pouches that will ship at the end of May, as well as truly new products including Sunkist Fruit Snacks and a cereal that will make its debut in August. The effort will span the breadth of General Mills categories such as meals and yogurt, as well as ones recently added with the Pillsbury acquisition, including refrigerated dough, frozen snacks and ready-to-serve soup.

The move throws open wider the floodgates for new packaged-food products-and resultant marketing spending. The total measured media spending for General Mills and Pillsbury brands reached $635 million last year, according to Taylor Nelson Sofres' CMR. That number is expected to grow as General Mills ramps up marketing for Pillsbury products.

General Mills would not comment, saying it does not discuss new products until they are in the marketplace. A spokeswoman, however, said product innovation is one of the company's "key growth drivers."


General Mills isn't alone in pushing more products onto shelves. According to Mintel's Global New Products Database, new food products are on the rise: Items introduced from January through March of this year totaled 2,238, up from 1,440 during the same period last year.

"New products have become increasingly important to differentiate brand franchises and avoid private-label competition," said Prudential Securities analyst John McMillin, citing Kraft Foods' continued aggressiveness and stepped up efforts from such rivals as Sara Lee Corp. and ConAgra Foods. "General Mills clearly needs to jumpstart the Pillsbury business, and there's no better way than with new products."

Pillsbury brands overall showed consistent declines over the last year and the most recent four-week period. For example, volume for once-strong Progresso was down 13% in the four-week period ended Feb. 24, according to Information Resources data provided by Banc of America Securities analyst Bill Leach.

"Pillsbury was in limbo for 15 months while waiting for Federal Trade Commission approval [of the General Mills acquisition], and even prior to that, Pillsbury hadn't been exploited as a unit of a British liquor company [Diageo]," Mr. Leach said.

In a statement in February revising earnings estimates for its third quarter, General Mills Chairman-CEO Steve Sanger maintained expectations of double-digit earnings growth for 2003 despite unexpected volume declines following the close of the long-awaited Pillsbury acquisition in November. Product innovation, long a priority for the company, has become even more important to drive the volume growth deemed crucial to meet those ambitious goals.

General Mills' recent new product lineup has been successful. It's Milk `n Cereal bars have performed beyond company expectations, and early sales indicate its Yoplait Whips yogurt will also be a hit.

strong track record

"General Mills has the best track record [in the food industry] with new products, as is exemplified by its volume growth of 5-6% over the last four or five years," said Credit Suisse First Boston analyst Dave Nelson. And while volumes collapsed in December, Mr. Nelson said, they rebounded to gains of 3% in February, still low by General Mills' standards but a figure "most companies in the industry would give their left arm to deliver," he said.

While retailers eagerly await the new items, which one Midwest retail executive said "always stir excitement, attention and sales," the heavy load is expected to tax General Mills' sales force-many newly hired and now carrying the burden of additional items and/or categories.

"My [sales representative] sounded exasperated," said the retail executive, "and she said she didn't know how she was going to handle it."

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