Green Giant Strides Into Snack Aisle as General Mills Sets 100-Product Push

Among New Lines Planned Are Veggie Chips and New Cereal and Yogurt Flavors

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The Jolly Green Giant is about to make a grocery-turf grab. The General Mills-owned brand, synonymous with frozen and canned vegetables for more than 100 years, will in January enter the snack aisle for the first time with the launch of Green Giant veggie chips. The snacks will come in two flavors: sweet potato multigrain chips with sea salt and roasted veggie tortilla chips with a "zesty cheddar flavor."

The snacks are among more than 100 new products that General Mills is rolling out in the U.S. in its fiscal year 2013, which ends in May, including some offerings that have already made their debut. Hitting stores soon is Honey Nut Cheerios Medley Crunch, which includes clusters and wheat flakes. The launch represents the first time that top-selling cereal brand Honey Nut Cheerios -- a line extension of Cheerios -- has rolled out its own line extension. (The base Cheerios brand has plenty of flavors.) Other new cereal line extensions include Peanut Butter Toast Crunch and Fiber One 80 Calories Chocolate. General Mills will also continue to seek to revitalize its yogurt business with new flavors and a high-protein kids brand called Yoplait Pro-Force.

The marketer, like other big food companies, is facing new pressure to continuously innovate with flavors and new forms of old brands as consumers -- especially millennials -- demand more variety than ever before.

General Mills' long-term goal is to get between 4% to 5% of its sales from new products "and we think we will be very much in that range," CEO Ken Powell told Wall Street analysts during a second-quarter earnings call on Wednesday. "We want to make sure that we are launching products that are bringing new consumers into their [brand] franchise, and we have steadily improved that number," he said.

The company beat earnings expectations in the quarter ending Nov. 25, reporting net earnings of $541.6 million, up from $448.8 million in the year-earlier quarter. Net sales grew 6% to $4.88 billion.

Advertising and media spending fell 3% in the quarter, as the company shifted more attention to in-store promotional support for new and established products. In the U.S., "we now expect our media expense to be down for the year in total," said U.S. Retail and Exec VP Ian Friendly. "This is due in part to this year's tactical shift on merchandising. It also reflects ongoing cost discipline, which helps us lower media expense while maintaining very competitive media pressure against the consumer."

Morningstar analyst Erin Lash questioned the marketing strategy in a note to investors. "While we understand that this [in-store] spending is essential as [General Mills] brings a rash of new products to market, we were hoping that this trend would reverse during the quarter," she stated. "From our perspective, promotional spending is not a sustainable or profitable long-term strategy, and we'd prefer to see General Mills invest behind the advertising support of its brands."

Green Giant's move to the snack aisle uses an established brand to capitalize America's growing obsession with snacking. Snacks now account for a third of the calories consumed daily by adults, according to a recent Rabobank Group report. At General Mills snacks are accounting for an increased percentage of overall sales -- rising to 9% last fiscal year. In the second quarter the company reported 15% sales growth in snacks, which include Nature Valley and Fiber One bars. Frozen food sales, on the other hand, were flat.

The Green Giant expansion also comes as the company gives a facelift to the Jolly Green Giant, who appears prominently at the top of the snack bags. The character, who debuted in 1928, is taking a more prominent role in TV ads, where in recent years he had been relegated to low-profile appearances, appearing only as a shadow in some spots. General Mills is still finalizing marketing plans for Green Giant snacks, but the products are not expected to get immediate traditional media support.

The Honey Nut Cheerios Medley Crunch launch is meant to bring a "textural variety to the Cheerios franchise," a company spokeswoman said in an email, noting that General Mills has found that "76% of cereal consumers are eating cereals with multiple textures some or all of the time."

In the second quarter, net sales for the company's Big G cereal division fell 2%. "Other players in the category had more merchandising activity in the first half of the year," Mr. Friendly said. "We've got more merchandising planned for the second half, including introductory support for our new items."

The company is also planning new yogurt varieties as it continues to face stiff competition from upstarts such as Chobani. The new Yoplait Greek 100 Calorie brand will debut new tropical fruit and lemon flavors. The company is seeking to boost its kids yogurt lineup with "GoGurt Twisted," a two-color version of the tubed yogurt. The tween market will be targeted with new "Yoplait Pro-Force" billed as having "two times the protein of the leading kids yogurt."

Sales for the Yoplait division fell 5% in the second quarter, which marked an improvement over recent trends. Still, Bernstein Research stated in note to investors that "it now looks as though the company will fall well short of the 'mid-single-digit' sales growth that it was looking for in U.S. yogurt in [fiscal year 2013]" that General Mills called for during an investor day in June.

Other new offerings scheduled soon include Totino's Pizzeria Rolls, Chex Mix Muddy Buddies Snickerdoodle and Cascadian Farm branded organic crunchy granola bars in oats & honey, peanut butter and oats and cocoa flavors.

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