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General Mills’ Pet Segment Remains Strong Despite COVID-19 Pandemic


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While General Mills’ overall third quarter results have been impacted by the coronavirus (COVID-19) pandemic, its pet segment reports favorable figures.

Net sales for the company’s pet segment saw an increase of 11 percent to $384 million for the third quarter ended Feb. 23. The uptick was driven by strong growth in food, drug and mass channels and positive price mix, Kofi Bruce, chief financial officer of General Mills, said in a mid-March earnings conference call. Net sales performance was led by double-digit growth on Blue Buffalo’s two largest product lines: Life Protection Formula and Wilderness.

Year-to-date, net sales in the pet segment increased 11 percent to $1.14 billion. All-channel retail sales were up double digits in the first nine months of the year, officials said.

“From a channel standpoint, year-to-date retail sales were up significantly in food, drug and mass as we benefited from our expansion into new customers and the launch of Wilderness in food, drug and mass in last year’s fourth quarter,” said Jeff Harmening, chairman and CEO of General Mills. “Importantly, retail sales for food, drug and mass customers who have carried Blue more than 18 months were up 31 percent in Q3.”

Year-to-date, retail sales in pet specialty were down versus last year, but the company expected this, Harmening said.

“We continue to support the channel through unique programs and innovation,” Harmening said. “And as we shared at CAGNY [Consumer Analyst Group of New York] last month for launching two new lines into select pet specialty retailers in the second half, including Baby Blue, which brings solutions to new and younger pet parents at a time when they are most engaged and True Solutions, a line of pet food formulated to treat common pet elements. And Blue Buffalo continues to drive strong year-to-date retail sales growth in the rapidly evolving e-commerce channel.”

Two factors will have a material impact in the pet segment come Q4, according to Harmening.

“First, we’ll lap last year’s distribution expansion and Wilderness launch into food, drug and mass, which drove significant pro forma growth and positive price mix in last year’s fourth quarter,” Harmening said. “Second, as Kofi mentioned, we report an extra month of results in our pet segment in this year’s Q4 as we align the segment to General Mills’ May year end.”

During the conference call’s Q&A portion, it was asked if the company had any concerns that the lower economic activity due to the coronavirus pandemic will negatively impact premium pet sales.

Harmening replied, “During the last recession we didn’t see a pullback on pet food. And as we look at Blue Buffalo, when we bought it, one of the things we like about it was the demand for pet food seems to be pretty inelastic. And what we have seen so far in the fourth quarter is not to the same degree is where we have seen North America retail, but people love their pets and they want to make sure they take care of their pets. And, so, we feel like our retail takeaway for pet in the fourth quarter is going to be robust.”

Overall, the Minneapolis-based company reported net sales of $4.2 billion for its third quarter, flat compared to the year-ago period. Net earnings came in at $454 million, up 2 percent from a year ago.

“We began fiscal 2020 with three key priorities: accelerate our organic sales growth, maintain our strong margins and reduce our leverage,” Harmening said. “Our focus and execution in a dynamic environment this year have kept us on track to achieve those goals. Our third-quarter results were broadly in line with our expectations, except for the negative impact in Asia of the COVID-19 virus outbreak.”

Through this pandemic, Harmening said the company’s No. 1 objective continues to be the health and safety of its consumers, employees and other stakeholders.

“Looking forward, we’ll remain agile to adapt to changing demand patterns around the world as circumstances with COVID-19 continue to develop,” he said.

Harmening added that the company has asked all employees to partake in social distancing practices, and have required those who can to work from home through at least April 1. In addition, the company has also restricted business travel and visitors to their facilities.

 

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