General Mills’ Blue Buffalo Expects to Innovate in Pet Specialty Channel, Pet in General
A year after acquiring Blue Buffalo, General Mills is confident about its ability to innovate in the pet specialty channel, according to CEO Jeff Harmening, who reported overall double-digit sales and profit growth for the company’s only pet brand during a presentation at the 2019 Bernstein Strategic Decisions Conference in May.
Despite Blue Buffalo’s pet specialty business declining by double digits, Harmening said the company plans to continue to revitalize the brand for the channel.
“I think over time we’ll be able to improve our pet specialty business as we’re able to innovate specifically for that channel, whether it’s through new products or through promotions, much in the same way as we’ve done in the organic channel with brands like Annie’s and Lärabar,” he added.
While Blue Buffalo’s pet specialty business declined, Harmening reported overall sales growth for the brand.
“We promised double-digit growth, and we’re pleased to say that we were able to deliver that,” Harmening said.
Fourth quarter sales grew 38 percent, and operating profit, which includes purchase accounting, grew by 82 percent. Net sales for the year are up 11 percent while operating profit is also up 11 percent.
“I’m thrilled with the Blue Buffalo team with, at what we’ve been able to do this year,” Harmening said. “We not only hit our sales targets, but we also hit our distribution goal.”
The company predicted that it would hit about 65 percent distribution, according to Harmening. At the end of April, shortly after Blue Buffalo rolled out in Walmart stores, the company was at about 68 percent, Harmening said. There’s no reason that distribution cannot eventually grow to 80 percent, he added.
“And beyond that, we think we can grow the amount of distribution, the number of SKUs we have in stores, because we’re off to a good start with our Wilderness launch and the food, drug and mass channel,” he said.
With Blue Buffalo as General Mills’ first foray into the pet category, Harmening said the company is more than satisfied with the results of its initial year with the brand.
“One of the things we’re pleased [with] is that when you buy a business in a category that you haven’t participated in before, you think you understand the category when you purchase it,” Harmening said. “But it’s good to feel a year later that when you look back, yes, we actually did know about the business that we are purchasing in. And it’s played out almost exactly as we thought it would.”
The company also plans to expand Blue Buffalo’s distribution in the e-commerce channel. General Mills’ e-commerce business grew at double digits, Harmening reported, adding that pet products are perfect for e-commerce, which includes direct to consumer and click-and-collect models.
“No one wants to lug 30-pound dog food bags around, especially if you have two kids with you,” Harmening said. “I think it really is a channel that is tailor-made for pet food.”
General Mills, which is headquartered in Minneapolis, will report comprehensive fiscal 2019 results in late June.