Budget-Conscious Shoppers Splurge on General Mills’ Cat Treats While Skipping Cereal

One part of people’s budgets is untouchable no matter how thin their wallets get, and that’s Fido’s portion. The only segment of General Mills’ sales in North America that rose in the fourth quarter was its pet business, which includes brands like Blue Buffalo and Tiki Cat. The rest of its earnings, reported yesterday, weren’t as rosy.

The company, which owns brands including Cheerios and Betty Crocker, posted a $2 billion loss last quarter, mainly because of non-cash items. Revenue rose 1% as shoppers skimped, opting for smaller package sizes and sale items. 

General Mills said yesterday it’ll try to scrape together $3 billion in cost savings over the next four years, all while innovating in its products. Investors seemed to like the sound of the cereal company’s lean and protein-packed plan, pushing its stock up about 9% yesterday.

Some Aisles Are Sacred

North American sales of pet products rose 4% at General Mills, with its CEO saying, “Cat growth is on fire.” Pet spending has continued to notch gains annually, despite tapering from its pandemic peak. But Crookshanks continuing to get treats isn’t enough for General Mills:

• It cut prices on two-thirds of its products last year to appeal to budget-conscious shoppers — rival PepsiCo announced similar plans. But with shoppers driving a hard bargain, General Mills is now trying to make its products worthy of buying even when they’re not tagged “buy one, get one half off.” 
• The cereal-seller’s biggest upsell seems to be protein, which has swept through the food biz, infiltrating everything from Starbucks lattes to Pop-Tarts. After its protein-packed Cheerios flew off shelves, General Mills said its product innovation plans will focus on protein and fiber this year. 

Still Soggy: The company’s focus on improving its merch doesn’t mean discounts didn’t work. During last year’s fiscal fourth quarter, when consumers felt like they needed a pot of gold to afford a box of Lucky Charms, the retail segment of General Mills (human food, not pet food) saw North American sales slide 10%. At the same time this year, that slide leveled out somewhat to 4%. Getting the balance right between prices and sales will be like pouring the perfect ratio of cereal to milk.

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