As more and more Americans opt for healthier, fresher options at the grocery store, can big packaged food companies -- like 150-year-old General Mills -- survive the shift?
According to recent Nielsen data, fresh and perishable foods like produce and deli-prepared items are booming, with the category seeing growth of $400 million year-over-year.
Not to mention, the growing organic packaged goods sector has almost doubled from around $10 billion in 2013 to $17 billion in 2017, according to Nielsen’s data. Meanwhile, old-school Cheerio’s and Lucky Charms parent General Mills has reported eight straight quarters of sales declines and even lost its coveted No. 1 spot in yogurt market share once held by Yoplait to Chobani’s Greek yogurt. In an effort to turn those losses around, the company has cut thousands of jobs and brought on new CEO Jeffrey Harmening, a 23-year-veteran of the company.
“We’ve been around 150 years and there’s a reason for that and the reason is that we’ve been able to adapt to change over time. I mean, we used to make nerf balls and we don’t do that anymore,” Harmening tells FOX Business.
But he says as the company pivots to keep pace with the consumer shift, it won’t turn its back on iconic brands like Lucky Charms, Cinnamon Toast Crunch and Haagen Dazs ice cream.
“What has happened is that people have taken out ingredients that consumers didn’t want and I’ve been asked, so what’s going to happen next?” Harmening tells FOX Business. “Well, what’s going to happen next is that people are going to get back to things that they always wanted—how good does something taste, how convenient is it, and value. So, things that taste good with simple ingredients.”
Harmening, who took over in June, says when the company added more cinnamon to Cinnamon Toast Crunch—sales of the cereal grew. In fact, over the past three years, the 80’s classic has delivered 6% growth.
"Lucky Charms, when we were talking about no artificial colors and flavors, you know customers didn't really care that much but when we started talking about marshmallows again, the business started to grow,” he added.
Retail sales for the 60’s classic grew 3% this past year and the company expects it to grow even more in fiscal ’18—all because of the marshmallows, the company says. (The brand did shift to whole grains in 2004.)
Additionally, the popularity of the 90’s cereal, Reese’s Puffs has also seen an uptick recently, with a 7% retail sales growth in the U.S. this year, pushing the company to invest in more advertisements for the chocolate, peanut buttery cereal for 2018.
Internationally, he says, the company is betting big on growing its iconic 60’s ice cream brand Haagen Dazs.
“I think people would be surprised to know that we have a billion dollar Haagen Dazs business outside the U.S., and we’re growing that business in the UK and we’re growing it in France, China and Korea,” he says.
But along with the old, the company is also betting on some new brands that appeal to the time-strapped health conscious consumer.
"So consumers look for a lot of different things and we’re confident that we can grow our iconic brands as well as some of our new iconic brands on things like Annie’s,” he says.
Harmening spearheaded the acquisition of the healthy, natural food brand for $820 million in 2014.
“There is a lot of change going on in food, but that spells opportunity. The only question is, are you going to be the ones to capitalize on that opportunity? Or are you going to let someone else do it?” he says.
The biggest industry change Harmening expects in the next five years won’t actually be in how the food is made, but rather how it’s delivered, especially since Amazon announced plans to acquire Whole Foods market back in June.
“Certainly the rise of ecommerce and food is going to be the biggest thing that we will see. And we already see if in Korea, we already seeing it in China and as we look at the U.K. and France. You know … a high single digit part of our business is done online, and that is going to come to [the] U.S. and the reason that we know it’s going to come to the U.S. [is] because customers shop online for many other things and they are going to shop for food online as well,” he said.