General Mills Sees Sales Rise After 33% Media Spending Boost

By Capitalizing on in-Home Eating, Marketer Posts Strong Gains, Closes Gap With Kraft as Top Ad Spender on Food

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CHICAGO ( -- When one thinks of the largest marketing spender in the U.S. food industry, Kraft easily comes to mind. But when it comes to naming No. 2, the answer might come as a surprise: General Mills.

The marketer of Cheerios, Pillsbury, Yoplait and Betty Crocker has become a stalwart of the Great Recession, thanks to increased spending, but also product innovation and its ability to capitalize on the trend toward in-home eating.

For the third fiscal quarter of 2010, General Mills saw sales rise 3% to $3.6 billion, and in the U.S. sales rose 4% in the first nine months of fiscal 2010 to $7.9 billion.

The marketer posted an impressive 33% jump in advertising and media spending. Stifel Nicolaus analyst Chris Growe noted that "General Mills has quickly reached a critical mass in its marketing spending that vaults it up to the second-highest marketer within the food industry" behind only Kraft. And it might even be closing in on the leader: According to an Ad Age estimate, General Mills spent $1.2 billion on advertising alone during 2008, a 23% increase over the year before, just below the $1.3 billion Kraft spent on advertising during 2008, a 16% decrease from 2007.

"We are first and fundamentally about brands," CMO Mark Addicks said in an interview with Ad Age, "and I feel good about the brands and the growth ideas about each [of them]."

The real challenge in this recession, Mr. Addicks said, has been to demonstrate each brand's value and purpose as well as versatility. To wit: The company's new chocolate Cheerios, for instance, are proving popular not only as breakfasts, but as snacks and desserts.

These days, he said, consumers are asking, "What role do you play in my life, and what value do you give me? I'm proud of our business teams and the ways they're answering that question and playing more of a partnership role with our consumers in their lives."

Here's a snapshot of activity with Mills' biggest brands:

Cereal -- Big G Cereal division, which includes the various Cheerios flavors, Fiber One, Cinnamon Toast Crunch and Lucky Charms, saw a 6% sales increase during the last quarter. Honey Nut Cheerios takes the top slot at grocery, according to SymphonyIRI, with sales up 2% in the last year to $339 million. (The data doesn't include Walmart and club stores.) Hispanic families have been a particular growth engine for Honey Nut Cheerios, Mr. Addicks said.

Yoplait -- General Mills said the Yoplait division sales were up 4% for the first nine months of fiscal 2010. It's still the top brand at grocery, with $387 million in sales over the last year, according to IRI, but that's a 5% decrease from the previous year. Yoplait's light version grew sales 1% to $377 million, as did Yoplait GoGurt, with sales up 8% to $122 million.

Meal Kits -- The fledgling category has gained speed as families of four seek fast, easy, affordable dinners for $10. Old El Paso developed meal kits to revive weekly "taco nights." General Mills also makes Macaroni Grill pasta kits for family dinners. U.S. retail sales for the first nine months of fiscal 2010 are up 4%.

Baking -- The once-languishing category rebounded in the recession, but branded players have hit snags this year, following intense price pressure. General Mills' baking segment, which includes Pillsbury and Betty Crocker, posted a 1% sales increase for the first nine months of fiscal 2010.

Soups -- General Mills' Progresso was once the darling of its center-store offerings, reviving the ready-to-serve soup segment with TV ads focused on weight management. But the entire category has suffered recently. According to IRI, Progresso sales are down 9% over the last year to $351 million. Mr. Addicks blamed a bruising series of comparative ads between Progresso and Campbell more than a year ago that "got the category off course."

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