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General Mills Thrives on Increased Marketing Spending

Boosting TV Ads Hiked Cereal Sales, But Digital ROI Even Higher

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BOCA RATON, Fla. (AdAge.com) -- General Mills, one of the package-food industry's top performers, laid out a number of recent marketing successes at the Consumer Analysts Group of New York conference this morning, and offered a preview of the rest of its fiscal year.

The company has staunchly supported consumer-marketing spending increases -- 19% in the first half of fiscal 2009, which began in June -- while competitors, including Kellogg and Kraft, have begun to scale back on the heady marketing outlays of 2008, instead preaching bundling and greater return on investment. General Mills estimates that its consumer-marketing spending will be up by "double digits" for the full fiscal year.

CEO Ken Powell has repeatedly said that it's particularly important to support well-known brands during the current economy.

"We're meeting here in Florida at a time of great economic uncertainty around the world," Mr. Powell said. "General Mills has weathered the storm due in large part to the strength of our product categories and the strength of our brands." He underscored that the company has a number of well-known 50-year-old brands, such as Cheerios and Pillsbury, as well as 30-year-old brands such as Yoplait and Nature Valley, that consumers trust.

Positive response
General Mills' sales have responded well to increased marketing support as consumers are eating more at home. Sales grew 11% in the first half of fiscal 2009, to $7.5 billion. The company has raised guidance with each of the first two quarters. General Mills is doing so well that analysts had been expecting the company to raise its earnings guidance again this morning.

For the balance of 2009, the company said it is planning a broadcast blitz for its cereal brands. Ian Friendly, chief operating officer of U.S. retail operations, said he expects the ad program to generate the biggest bump in sales. The company's Cheerios, Honey Nut Cheerios, Multigrain Cheerios and Lucky Charms have been faring particularly well. General Mills is launching Banana Nut Cheerios, Cinnamon Chex, and Fiber One Frosted Shredded Wheat cereals in the coming months.

Some of these products are likely to be advertised to baby boomers, who Mr. Friendly noted will make up about half of the U.S. population by 2010. "When I started here in 1983, we didn't do much advertising to baby boomers," he said, adding that boomers are eating more cereal as they age. "We're targeting them directly now."

The company is also working harder to target Hispanics, with Progresso products such as Menudo being tested in Texas. Mr. Friendly said the company credits Hispanic-targeted advertising for Honey Nut Cheerios with a 35% increase in year-to-date sales with those consumers. Bromley Communications is General Mills' Hispanic agency.

Online growth
But while the bulk of the company's spend remains on TV, Mr. Friendly said in a conference with reporters that it has begun to see significantly higher return on digital investment. General Mills has been diverting funds online, driving traffic to recipe sites such as BettyCrocker.com. The company's cooking sites had about 8 million visitors last month. General Mills also recently launched a free Betty Crocker iPhone application, which offers meal suggestions based on what's in a consumer's pantry.

"We are seeing very high returns from digital than broadcast," Mr. Friendly said, declining to give the percentage of spending that's moved online. "It's not that our TV ads don't work, but when you're watching TV you're doing it for a different reason. When you go to a website you have a very specific purpose."

General Mills' agencies include Saatchi & Saatchi and Cassanova.

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