Falling Yogurt Sales Drag General Mills' Earnings--2nd Update

By Annie Gasparro Features Dow Jones Newswires

Yoplait yogurt is spoiling General Mills Inc.'s sales.

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The company said its U.S. yogurt sales fell 22%, pushing it to its ninth straight quarter of revenue declines.

Yoplait Light and Yoplait Greek 100 have suffered the most over the past year, as Americans' shifted away from low-calorie diets in favor of more natural, wholesome ingredients.

"The way people look at weight management has changed. They aren't counting calories anymore," said Chief Executive Jeff Harmening, in an interview. Artificial flavors and sweeteners, used in Yoplait Light and Greek 100, "don't fit into that," he said.

General Mills isn't alone in its struggle to win back consumers who are increasingly looking for simpler ingredients. Mainstays in the packaged-food aisles are under pressure to reinvent their recipes and compete with new, smaller brands that tend to produce trendier items at a faster pace.

General Mills' shares were down 6% in Wednesday trading -- marking a 15% drop so far this year -- as the company's latest quarterly results fell below Wall Street expectations.

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Mr. Harmening said the company is working with "great focus and urgency" to revive revenue growth through new, unique products like a French-style yogurt it calls Oui by Yoplait.

Mr. Harmening, who took the top job in June after decades at the company, said much of the trouble with yogurt has been a lack of innovation in the last five years.

"There's been nothing wildly successful in yogurt since Greek," he said in an interview. And that began to take hold a decade ago with the launch of Chobani yogurt.

General Mills recently came out with its Oui yogurt, which is cultured for eight hours in the small glass jars it is sold in, and doesn't contain artificial flavors or preservatives. Mr. Harmening said new products like this, and new packaging that will make its kids' Gogurt tubes easier to open, will improve its yogurt business in the coming months.

General Mills' overall North America retail sales fell 5% in the last quarter. U.S. yogurt contributed more than half of that decline.

U.S. cereal sales, including brands such as Cheerios and Trix, dropped 7%, as retailers sold existing inventory rather than buying more from General Mills.

In the latest quarter, which ended in August, General Mills' global sales fell 3.5% to $3.77 billion. On a comparable basis, revenue was down 4%, worse than its projected 1% to 2% decline for the fiscal year, which ends in May.

General Mills' profit of $408.6 million was down 2.6% from a year ago. Excluding one-time items, adjusted earnings per share came to 71 cents, below the FactSet consensus of 76 cents.

Write to Annie Gasparro at annie.gasparro@wsj.com

(END) Dow Jones Newswires

September 20, 2017 13:10 ET (17:10 GMT)