General Mills Inc. (NYSE:GIS) reported its Q1 Fiscal 2025 earnings, highlighting a gradual improvement in financial performance. The company's North America retail categories experienced a modest 2% growth. Despite a challenging environment with input cost inflation projected at 3-4% for the year, General Mills expects productivity savings to offset these pressures. In aftermarket trading, the company's stock rose by 1.3%, closing at $66.94.
Key Takeaways
- North America retail categories increased by 2%.
- Input cost inflation forecasted at 3-4% for the year.
- Stock price rose by 1.3% in aftermarket trading.
- Company plans to divest its yogurt business.
- Potential bolt-on acquisitions in the $1-2 billion range.
Company Performance
General Mills demonstrated resilience in Q1 Fiscal 2025 with a 2% rise in North America retail categories. The company continues to navigate a competitive market by focusing on improving customer service levels and competitiveness across its segments. The slight improvement in the pet business, particularly the Blue Buffalo Life Protection Formula, indicates stabilization in this segment.
Financial Highlights
- Revenue: Increased in North America retail categories by 2%.
- Input cost inflation: Forecasted at 3-4% for the fiscal year.
- Productivity savings: Expected to offset inflationary pressures.
Market Reaction
Following the earnings call, General Mills' stock experienced a 1.3% increase in aftermarket trading, reaching $66.94. This movement positions the stock closer to its 52-week high of $75.9, reflecting investor optimism about the company's strategic initiatives and financial resilience.
Company Outlook
General Mills anticipates gradual improvement through Q2 and the latter half of the fiscal year. The company is focusing on enhancing brand competitiveness and exploring bolt-on acquisitions in the $1-2 billion range, targeting growth potential in existing categories.
Executive Commentary
CEO Jeff Harmening emphasized, "The key for us is to keep improving our competitiveness," highlighting the company's strategic focus. CFO Kofi Bruce addressed the overhead challenges, stating, "Our expectation is that there is stranded overhead that will take us a period of time."
Q&A
During the earnings call, analysts inquired about General Mills' M&A strategy, the rationale behind the yogurt business divestiture, and international market performance. The company acknowledged challenges in China but noted improvements in Brazil and Europe.
Risks and Challenges
- Input cost inflation remains a concern, potentially affecting margins.
- The divestiture of the yogurt business may lead to transitional challenges.
- International market volatility, particularly in China, could impact growth.
- Competitive pressures in the food industry require continuous innovation.
- Stranded overheads need to be addressed to maintain operational efficiency.
Full transcript - General Mills (GIS) Q1 2025:
Julian, Conference Call Operator: Good morning, and welcome to General Mills' First Quarter Fiscal 2025 Earnings Conference Call. All participants are in a listen only mode. After the speakers' remarks, we will have a question and answer session. As a reminder, this conference call is being recorded. I would now like to turn the call over to Jeff Siemon, Vice President of Investor Relations and Treasurer.
Thank you. Please go ahead.
Jeff Siemon, Vice President of Investor Relations and Treasurer, General Mills: Hi. Thank you, Julian, and good morning to everyone. We appreciate you joining us today for our Q and A session on our Q1 fiscal 2025 results. I hope you had time to review our press release, listen to our prepared remarks and view the presentation materials, which we made available this morning on our Investor Relations website. Please do note that in our Q and A session, we may make forward looking statements that are based on our current views and assumptions.
Please refer to this morning's press release for factors that could impact forward looking statements and for reconciliations of non GAAP information, which may be discussed on today's call. I'm here this morning with Jeff Harmening, our Chairman and CEO and Kofi Bruce, our CFO. So, Julianne, we can go ahead and get to the first question. Will you please open it up? Certainly.
Julian, Conference Call Operator: Our first question comes from Matt Smith from Stifel. Please go ahead. Your line is open.
Matt Smith, Analyst, Stifel: Hi, good morning. I believe when you initially provided fiscal 2025 guidance, you weren't assuming much improvement in your categories with more emphasis on your competitiveness. Does the shift in more at home food consumption give you more confidence in the organic sales outlook? Or are you seeing that benefit muted by continued value seeking behavior?
Jeff Harmening, Chairman and CEO, General Mills: Hey, good morning and thanks for the question. First, I would say the quarter played out from a macro environment, kind of as we had anticipated. And we thought we'd see gradual improvement in our categories throughout the year and we saw improvement in our categories. In fact, if you look at our North America retail categories, they're up a couple of percent, a mix of a little bit of volume and a little bit of pricing in the categories. And so it's played out kind of as we expected.
And for us, as we said in the Q4, the key for us is to keep improving our competitiveness. And we made a step in the right direction in that in the Q1. And we have some more work to do across our portfolio. And so the job for us to do for the rest of the year really is to keep improving. We did see a slight uptick in food consumption at home in the quarter.
We did anticipate that might be the case as we see consumers seeking value. And the fact is that now food at home is 4 times less expensive than food eating out on average. And so eating at home is a great value for consumers and consumers are still economically stressed. So that played out the way we thought. And as we look at the rest of the year, I wouldn't say that our guidance is predicated on our categories, continued improvement.
What it's predicated on is our continued improvement in competitiveness, which we're confident we can do, even going to continuing momentum into the Q2 here because we've got really great news on all of our $1,000,000,000 brands.
Matt Smith, Analyst, Stifel: Thanks, Jeff. And as a follow-up, I appreciate that your investment span both innovation and some couponing and promotional activity. But on the couponing and promotional investments, can you talk about the receptivity from consumers to your investment spending? Are you seeing incremental purchasing behavior from those consumers and is the return on those investments in line with what you had expected?
Jeff Harmening, Chairman and CEO, General Mills: Yes. I think this kind of gets back to this question of value. First, I would tell you that consumers see value in a lot of different ways. And we did couponing, we increased our couponing, we saw good returns on those in line with what we would expect. But consumers also look for brands and products they trust.
I mean, life protection formula continues to grow. It's up mid single digits for Blue Buffalo because we've talked about ingredient superiority and what that brings. We launched advertising on Wilderness and that business has we kind of have the losses on that business in a quarter and see some continued momentum. And in cereal, we launched Fruity Cheerios as the top turning new cereal in the category because consumers trust Cheerios and they want something a little bit different. And so whether it's couponing, whether it's new products or whether it's advertising messaging or pack sizes and getting those in the right places, there are a lot of ways to create value for consumers.
I would say especially, I think probably underappreciated when consumers feel a little bit economically stressed, but the one thing they can't afford to do is throw away food. And so they have to bring something home that their family is going to love and that's where our brands come in and making sure that we have relevant messages in the right package in the right place. But to your point, I feel good so far. What I feel even better about is the majority of the news that we have on our brands actually takes place in the Q2 because it kind of starts in the Q2 because if you think about our portfolio, we have a lot of baking items, a lot of seasonal items, even treating for pets is a little bit seasonal in the Q2. And so you combine that with some improvements we're seeing on Blue Buffalo and some receptivity from our pest specialty channel on Wilderness, we feel like we'll see a step up in the Q2 because we've got more good news coming.
Matt Smith, Analyst, Stifel: Thanks, Jeff. I'll pass it on.
Julian, Conference Call Operator: Our next question comes from Andrew Lazar from Barclays (LON:BARC). Please go ahead. Your line is open.
Andrew Lazar, Analyst, Barclays: Great. Thanks. Good morning.
Jeff Harmening, Chairman and CEO, General Mills: Good morning. Good morning.
Andrew Lazar, Analyst, Barclays: Jeff, you talked a bit about obviously the expectation of continued sort of progress around market share and competitiveness as you go through the year. I guess, would you anticipate being in a position to sort of hold share across your NAR segment for the year? Or maybe just the more gradual start make this sort of outcome perhaps still a bit overly optimistic? And then Kofi, I think last quarter you mentioned an expectation for an equal contribution from volume and price mix for the year. Is that still how you sort of see things playing out at this stage?
Thanks so much.
Jeff Harmening, Chairman and CEO, General Mills: Yes. Thanks, Andrew. I mean, I think the theme
Bryan Spillane, Analyst, Bank of America (NYSE:BAC): of the
Jeff Harmening, Chairman and CEO, General Mills: day is probably progress and continued work to do, which we intend to do to improve our competitiveness throughout the year. But it is certainly true for NAR, it's also true for Blue Buffalo. I would say the Q1 kind of played out as we anticipated for both of those segments. We improved our competitiveness in NAR, but there's still market share gains to get. And we fully expected that, especially as our Q1 sales comp was probably the toughest of the year and Q2 gets quite a bit easier from a sales standpoint.
And we talked a lot about our great news on our biggest brands, but most of that starts to hit in the Q2. So Andrew, I would say I'm not going to predict where we end up at the end of the year. It's a long year. My belief is that we'll keep getting better as the year progresses, starting in Q2 with our competitiveness. And that's what I would expect given the Q1 play that as we thought.
And the news that we have introduced seems to be landing the way we want it to.
Kofi Bruce, CFO, General Mills: And I would second question, we continue to be focused on and expect gradual improvement as we move through the year and total sales. And to the point of our expectations for the full year, there's nothing that tells us we're broadly off market expecting equal contributions from volume and price mix as we work our way through the year towards our guidance.
Michael Lavery, Analyst, Piper Sandler: Thanks so much.
Bryan Spillane, Analyst, Bank of America: You bet.
Julian, Conference Call Operator: Our next question comes from Michael Lavery from Piper Sandler. Please go ahead. Your line is open.
Michael Lavery, Analyst, Piper Sandler: Thank you. Good morning. When you talked about some of the continued market share improvement, you cited one of the drivers has improved customer service levels. Can you call out maybe where that still has been an issue and what the, kind of roadmap is or timing for improvement there?
Kofi Bruce, CFO, General Mills: So we have seen, improved customer service, gradually across most of the portfolio acutely so in our food service business, our pet business, in particular those have been aided by, I would say, bigger changes in the service levels. But in aggregate, service levels are moving close to where they were pre pandemic.
Michael Lavery, Analyst, Piper Sandler: So it's not any one particular category, it's just broad improvement for that?
Kofi Bruce, CFO, General Mills: Say specifically within our food service portfolio and our refrigerated, and obviously across our pet portfolio, both our internal and external supply chain reliability has improved service levels across all the formats.
Michael Lavery, Analyst, Piper Sandler: Okay. That's helpful. And on pet, you said that it's the quarter kind of you're seeing progression. It's as you had expected. Can you give a sense of a little bit more what's ahead?
And maybe specifically on Wilderness, even if the declines are moderating, do you have an idea of when actual growth is expected and how we should be what we should be looking for there?
Andrew Lazar, Analyst, Barclays: Yes, that's a good very fair question.
Jeff Harmening, Chairman and CEO, General Mills: Yes, I was was pleased by our improvement in Q1 on pet, particularly on the sales front. I mean, we were down 1%. I think we lost 0.1% market share, I forget. And our dry pet food business was Wilderness and Life Protection Formula and actually Tasteful and Cat actually gained share. So we kind of gained share around 60%.
So it's a good improvement, but down one is clearly not the goal. And even if Wilderness improved, it did not improve all the way that we want. So I'm really pleased that the direction and the momentum and there's I think there's more to come. Wilderness specifically, we just turned on the advertising at the end of the Q1, this new advertising, which shows the protein relative to our nearest competitor. We've seen the gains we thought, but those take a little while in the feeding cycle of pets.
I would also say starting in the Q2, so we're going to hang up on advertising in the Q2. But in addition, we're doing a couple of other things on Wilderness that will help us. The first is that we're reintroducing some grain free products. So we have some grain free products heading back to the Wilderness portfolio as we had a few years ago. The other is that we're adjusting sizes, making some smaller sizes.
Again, in this current economic environment, smaller bags of dog food tend to do better. So we're reintroducing those. And we have commitments from a couple of our pet specialty customers to improve the way that they feature wilderness in store. And so we're working with our retail customers. All of those things hit in the Q2.
So my expectation is that we continue to see improvement on wilderness and pet into the Q2 and we'll see what that yields. So I'm not going to give a number for how much it's going to improve, but looking for improvement on our Pet business in the Q2 and on Wilderness.
Michael Lavery, Analyst, Piper Sandler: Okay, great. Thanks so much.
Julian, Conference Call Operator: Our next question comes from Max Gunport from BNP Paribas (OTC:BNPQY). Please go ahead. Your line is open.
Max Gunport, Analyst, BNP Paribas: Hey, thanks for the question. Jeff, last quarter you discussed your intent to return excess cash to shareholders in the form of share repurchases, if you couldn't find attractive acquisition candidates. So I think the initial read of the intent to use all the proceeds from the yogurt divestiture suggested there might not be attractive M and A out there. It seems like in today's prepared remarks, you had a bit more pointed commentary about focusing on deals that are more bolt on in nature, specifically in that $1,000,000,000 to $2,000,000,000 transaction size range. So I think that helps to provide more clarity on the reason for why you're returning the proceeds to shareholders.
But I'm curious what you're seeing in the current environment that has made you focus on finding the next Andes or Tyson Pet Treats business rather than the next Blue Buffalo? Thanks.
Jeff Harmening, Chairman and CEO, General Mills: Yes. So thanks for the question. I appreciate that. And first I was kind of back up and say in the last fiscal year, we did exactly what I said, which is we didn't find any acquisition candidates that we really liked. And so we returned money to the shareholders in the form of share repurchases.
So we actually did what we said we're going to do in the last fiscal year. When it comes to this year, our balance sheet is in a great place. And so with this divestiture of our American yogurt businesses, we felt it important to make sure that all of our investors know what we intend to do with those proceeds. And as we look at the environment, you're right, I got a little bit more specific in this release and it really is kind of what we see in the near term as the kinds of things that might be available to us in terms of bolt ons and similar to what we had done in Annie's or similar what we had done in Tyson. I mean, certainly if something bigger came along that we don't see now, we would we could entertain the notion.
But for us, it seems like our focus right now and what we see in the marketplace really is probably more availability of smaller sized assets that we could bolt on that would enhance our growth. So still enhancing our growth, but bolted on to businesses we already own. And importantly, I mean, I know that you know this because you've been following us for a while, but for those who haven't been maybe, we're able to do these bolt on acquisitions and repurchase shares at the same time. We did it with Tyson. We did it with Annie's.
We've done it for a long period of time. And so we got a little bit more specific on the near term only because that's the way it looks to us and looks to be our focus over the coming time. And we have the balance sheet to be able to do both of those things at the same time, add on bolt on acquisitions and do this yogurt divestiture and as well as repurchase shares.
Max Gunport, Analyst, BNP Paribas: Thanks. And then with regard to improving your competitiveness, which is clearly a focus for this year, it is nice to see the progress in the Q1. And I recognize you're far from declaring victory on that front just yet. But I'm wondering if you think investors will be making too much of a big deal out of the last month or so of data, which would suggest you took a step backwards. I realize it's just a quad week and there can be volatility, but it was like in cereal, refrigerated dough, snack bars, sweet snacks.
There was a bit of a step backwards, but it does sound like you have more product news coming later on in 2Q. So just curious how you think you should all be reading that latest Quad Week data? Thanks.
Jeff Harmening, Chairman and CEO, General Mills: Yes. So your questioncommentary on Q1 is right. I mean, we did make progress. There's no victory being declared. But I would say that we're confident in that the Q1 played out the way we thought both in terms of the macro environment and our improved competitiveness and we understand that there's a job left undone, which is to kind of get back all the way to shared growth and absolute growth.
I mean down 1 is not the goal. But we're confident we can get there given what we see coming up on the horizon in terms of our initiatives. Over the last 4 week period, I'm not sure the angst of investors feel over the last 4 week period, but I can tell you it's entirely due to timing of merchandising shift from one period to another. So it's really a big really couple of big merchandising programs that shift in timing. So I am not worried about what you see in the scanner data for the last month.
$3,000,000,000 Thank you very much.
John Baumgartner, Analyst, Mizuho (NYSE:MFG) Securities: It's really in the category. Thanks.
Julian, Conference Call Operator: Our next question comes from Rob Dickerson from Jefferies. Please go ahead. Your line is open.
Andrew Lazar, Analyst, Barclays: Great. Thank you so much. I guess you touched on kind of pricing couponing a little bit earlier, but I am just curious as we think through I guess Q2 and then by also, I guess, back half of the year. Like, is there a scenario that kind of plays out such that North America price mix could actually be positive this year? I mean, clearly, there's a lot of discussion around promotional needs and what we're doing on pricing and the value based consumer etcetera.
But at the same time there's a comment in the prepared remarks that spoke to like selling the right pack size, the right channel at the right price, but then also maybe there is some price mix benefit on some of those shifts. So just trying to get a sense of kind of the price mix outlook for the year.
Jeff Harmening, Chairman and CEO, General Mills: Yes. I was the let's look at kind of what's happened this year in our categories where you see kind of an equal contribution from rate and from mix or from rate and volume in our categories. And that's kind of what we see playing out for the year kind of an equal contribution. And it's more or less what we saw in the Q1. And then if you look at our business, you look at our price mix was down 1%, it was entirely mix, in fact, more than entirely and more than entirely mix.
And mix is a hard thing to really predict. As we look ahead, I mean, we don't comment on pricing or promotion plans as we look ahead. But I mean, I think it's important to note that our categories are remain very rational, and that what we see as input costs inflation has certainly moderated, but it's still our forecast for us for the year is 3% to 4%. And so as we look ahead, we see rational categories and we see a little bit of inflation. And what I'm pleased with is that we have the productivity savings that can really offset that.
And so now our job is to drive growth. And so as we look at the coming quarters, we'll see what happens with price mix, but it's played out exactly so far this year kind of as we thought it would.
Kofi Bruce, CFO, General Mills: Yes. And we could see some modest improvement in mix as we work our way forward. But to Jeff's point, it is hard to predict.
Andrew Lazar, Analyst, Barclays: Fair enough. And then just on the M and A side, again, prepared remarks spoke to kind of bolt on attraction, dollars 1,000,000,000 or $2,000,000,000 transaction size on average. Simple question, kind of where you would like to go, right? Is this kind of build up a little bit more international scale, maybe lean into pets? Just any color you could provide would be fabulous.
Thank you.
Jeff Harmening, Chairman and CEO, General Mills: I'll provide a little bit of color, but maybe not as colorful as your head. It's going to be things that kind of bolt on to our existing categories. I would say specifically, the category where you have a right to win, which in a large degree are our global businesses. And so you look at pet or you look at what we've done in acquisition in pet or snacking or what we've done in food service. I would expect more of those both on the priority business, so we have a right to win and where we see growth.
And it could be international, it could be domestic. So I'm not going to get that level of detail. But really where we have a competitive advantage, where we see growth, maybe get a little synergies along the way, those are the places where we'll continue to look.
Andrew Lazar, Analyst, Barclays: All right. Super. Thanks, guys.
Max Gunport, Analyst, BNP Paribas: Thanks.
Julian, Conference Call Operator: Our next question comes from Bryan Spillane from Bank of America. Please go ahead. Your line is open.
Bryan Spillane, Analyst, Bank of America: Hey, thanks operator. Good morning everyone. Good morning. So 2 for me. 1, just I think we've talked a little bit about kind of progress and trends.
So maybe Kofi, could you just tie together, I think at the start of the year, we were kind of looking at more of a back half loaded plan to begin with. So just as we're looking at the Q2, will it look somewhat similar to 1Q? I know we've got the comps are kind of wonky in Pet, but any color you can give us in terms of phasing, I think will help will be helpful. And then I got a follow-up.
Kofi Bruce, CFO, General Mills: Sure. So we would expect to see continued improvement off of this trend as we step into Q2. I think it would be fair to characterize the year is expecting gradual improvement in the top line as we work our way Q2 into the back half of the year and then obviously profit a little bit more phased in the back half.
Max Gunport, Analyst, BNP Paribas: Okay. Thank you.
Bryan Spillane, Analyst, Bank of America: And then the follow-up, Kofi, just on the divestiture and the dilution. Is there stranded overhead incorporated in that? I guess underneath my question is just, is it dilutive initially, but then you work through the overheads and over time it actually isn't as dilutive?
Kofi Bruce, CFO, General Mills: Yes. Our expectation you're exactly right. Our expectation is that there is stranded overhead that will take us a period of time. We would expect that period to be about 2 years or less for us to get that stranded overhead addressed and out of the cost structure. So that is part of the drag in the dilution math.
Bryan Spillane, Analyst, Bank of America: Okay. Are there any TSAs also we should be aware of?
Kofi Bruce, CFO, General Mills: Yes, there will be TSAs as part of the terms of both of the sale agreements with Sotia and Lytellus.
Bryan Spillane, Analyst, Bank of America: Okay. But not very material?
Kofi Bruce, CFO, General Mills: Yes, I would not consider them material to the dilution and accretion. All
Max Gunport, Analyst, BNP Paribas: right. Thank you. You bet.
Julian, Conference Call Operator: Our next question comes from Leah Jordan from Goldman Sachs (NYSE:GS). Please go ahead. Your line is open.
Jeff Siemon, Vice President of Investor Relations and Treasurer, General Mills0: Good morning. Thank you for taking my question. I just wanted to follow-up to the discussion on the more food at home trends supporting the volume lift. Is that a widespread lift versus your expected baseline across categories or any notable surprises to call out there? And has that demand shift impacted your view on how you're promoting or messaging in this current environment, including any update on how you're thinking about the timing of the spin throughout the year?
Max Gunport, Analyst, BNP Paribas: Yes. The
Jeff Harmening, Chairman and CEO, General Mills: as we look at a little bit of a shift from away from home to at home, first, it's a little bit of a shift. I mean, it's from like 86% of food at home to 87%. So that just to make sure we highlight that and don't overplay it. The second I would say within the trend, it is broad based and what we see is that the traffic at restaurants is down a little bit and the traffic at what we call non commercial outlets. So places like K-twelve schools or colleges and university or healthcare, places like that, we actually see growth, which is where we over index.
And importantly, we see growth versus the prior year, but neither are actually at pre pandemic level. So it's growth off a base that was much lower than it was before, but growth in this non commercial space, which we over index, which is why we have confidence in the growth of our foodservice business. In terms of the impact on our retail business, it's actually been quite broad based across food and beverage. So it hasn't really impacted one category or the other significantly because again, it's a one point change versus what we saw a year ago.
Bryan Spillane, Analyst, Bank of America: And when you talk
Jeff Siemon, Vice President of Investor Relations and Treasurer, General Mills: about time and spend, I mean, we have had, I think, pretty consistent plans for to increase our investment behind media and brands this year. We saw that in Q1 that will actually be up even more in Q2. Jeff talked about some of the big seasonal initiatives that we have, whether it's on Pillsbury or Soup or others. And so making sure we're supporting our brands through that period of time is important. So you'll see even a bit more of an increase in brand support here in the second quarter and that will continue in the back half.
Jeff Siemon, Vice President of Investor Relations and Treasurer, General Mills0: Okay, great. Thank you. And then for my follow-up, I don't think we've touched on international yet. Just see if you could provide more color on trends in that segment. I mean, it sounds like Brazil has improved from last quarter.
What are the key drivers in that region? And then, Tina, if you could comment on China as well. I mean, that seems to still be challenged. How are things trending sequentially? And any updated views on that region as we go throughout the year?
Jeff Harmening, Chairman and CEO, General Mills: Sure. On our international business, I was really pleased. First of all, I was really pleased with our European results. You didn't mention that, but I'll tee up the question and answer it myself. We did see some growth in our European Australian business, which is good because it's a business that is a strong profit contributor.
And so I like the way we're competing in Europe. In Brazil, you're right, we grew in the Q1 in Brazil on the top line and much improved from the year before. We it's one place and when we've talked about this before, it was one place where we saw a lot quite a bit of inflation over the last few years and probably didn't fully utilize our strategic revenue management tools in the right way. And so we've adjusted pricing in Brazil. It's one of the places where we needed to adjust.
We've made the adjustments. We're seeing the benefits of that. So pleased with how we performed in Brazil. The challenge for us really is China. And within China, we have 2 businesses, Wan Chai Ferry Dumplings and Haagen Dazs kind of equally split.
Wan Chai Ferry Dumpling is doing fine. And even Haagen Dazs at retail stores and through e commerce also doing pretty well. It's the Haagen Dazs shops, the shop traffic is down. And, even much like you've seen and probably heard others in the market talk about the consumers pulling back and when they do, shop traffic is down. And so as we look at the rest of the year, while we would like that trend to improve, we're not banking on that trend improving for us to hit our guidance for the year.
And so as we look at international, I'm actually pretty pleased with most of it. And the one area that's challenging is China. And it's not really an execution challenge on our part. It really is a more of a macroeconomic challenge with the shops. The margins on shops are low, but the fixed costs are high.
So it has an impact on profitability. So that's what we're seeing a little bit in China. We're not counting on the economics to get better in the near term. So it's something we'll continue to have to work with throughout the year.
Max Gunport, Analyst, BNP Paribas: Thank you.
Julian, Conference Call Operator: Our next question comes from Robert Moskow from T. B. Cowen. Please go ahead. Your line is
Jeff Siemon, Vice President of Investor Relations and Treasurer, General Mills: open. Sorry, we can't hear you. We heard just a tiny little sound.
Max Gunport, Analyst, BNP Paribas: How is this? I'm sorry.
Michael Lavery, Analyst, Piper Sandler: That's good. Perfect.
Max Gunport, Analyst, BNP Paribas: Okay. To what extent does Morning Foods currently operate with an integrated cross category strategy across cereal and yogurt? And does the divestiture of yogurt require you to alter your approach to the retailer or your consumer insights? And are there any implications regarding scale in that regard? Or is it just like there's different buyers, there's a cereal buyer, there's a refrigerated buyer and it's very separate?
Jeff Harmening, Chairman and CEO, General Mills: The answer Rob is much more the latter. There's not a category strategy when it comes to yogurt and cereal. I mean, they both participate in a lot of the morning occasion. So that's one of the things they have in common as well as kind of a combination of taste good and good for you. So they have that in common as well.
But there's not really a there's not broader implication with our retailers. There's not a broader implication on insights. We have insights embedded in that particular operating unit, but also we have insights in North America retail that kind of span. So there it's a business from that standpoint and frankly from a manufacturing standpoint that's relatively easily separable and I wouldn't see an impact on cereal from that divestiture.
Max Gunport, Analyst, BNP Paribas: Right. Okay. Thanks. And a follow-up, you said 6 of your 10 categories are flat or getting better. Can you comment on the other 4, like is it snacks and dough?
And what's the plan for accelerating the growth in those other 4?
Jeff Harmening, Chairman and CEO, General Mills: Yes, I would say that rather than taking a tour around the world of all 4, I would say that the biggest one is dough and snacks. And so those are kind of the 2 biggest by far. And with refrigerated dough, I think we have some phenomenal advertising coming up in the Q2 using the Doughboy. We have lots of product news in that category, launching some new products. And so I would anticipate our dough business to get better in the Q2.
We'll see about share. Our market share in dough is already about 75% or so. So the key to dough is really just to get to grow it. And so I have a high degree of confidence in our plans as we look forward. We'll see what they yield, but our dough business, I feel good about.
And then fruit snacks, reminder, you may not remember this, but we're bringing on additional capacity starting in the second quarter for our particularly for our Gusher business, which has been capacity constrained. We have some really good new products, especially in Gusher is also coming in the Q2. So that's a business where I would expect to see some improvement as we move throughout the year. I mean, it will happen in the Q2, but as we move through the year, I would expect us to see improvement in our Fruits Next (LON:NXT) business. So those are the 2 biggest ones, Rob, of the one where we feel like, okay, we made a good progress on a lot of them, but those are 2 we need to continue to make progress.
Max Gunport, Analyst, BNP Paribas: Got it. Thank you.
Julian, Conference Call Operator: Our last question today will come from John Baumgartner from Mizuho Securities. Please go ahead. Your line is open.
John Baumgartner, Analyst, Mizuho Securities: Good morning. Thanks for the question.
Max Gunport, Analyst, BNP Paribas: Good morning. Good morning. Good morning. Jeff, I wanted to
John Baumgartner, Analyst, Mizuho Securities: come back to North America and the comments on competitiveness and the larger eating at home environment. Looking at recent innovation, it seems to appeal maybe a bit differently to the frequency of consumption, the Patino's breakfast, the taco dessert shelves, the low sugar Betty Crocker. How do you assess your portfolio at this point in the frequency of consumption relative to its potential? Are there certain brands or categories where that gap is still significant? And in closing those gaps, what's the relative importance between even more innovation relative to making pack size changes or marketing differently against the business in its current state?
Jeff Harmening, Chairman and CEO, General Mills: Yes. When we think about innovation, we kind of think about it broadly and it can happen in all the way as you identify, which is new product innovation. It can happen with through our marketing messaging. It can happen through pack sizes. It can happen through all those things.
A lot of times people focus on just the new product innovation. And by the way, I think our new product innovation is good, but it's like 5 it will be 5% of our business this year and the rest of that 95% is really what drives profitability and growth and household penetration. And so I will so the key for us is to make sure we have innovation that's relevant category by category and sometimes that's messaging, sometimes that's news, sometimes that's having the right pack sizes in place and other times it's new product innovation. Fortunately, I've said it before, so I'm maybe at the risk of just repeating myself. But as we look broadly landing in the Q2, I feel good that we have good new product innovation on our $1,000,000,000 brands.
We also have stepped up levels of advertising. You'll see some, I think, some exciting advertising on Totino's coming here starting in the Q2, as well as new products from Old El Paso and New Old El Paso soups that we've launched in the marketplace, as well as news on our core like flakier biscuits. So it really is and I go category by category, but everything I just mentioned is innovation on a $1,000,000,000 brand. And I think that's the key. When you have good ideas on big brands, you tend to do better.
And I think we have differentially good ideas on big brands, which by the way includes Blue Buffalo, not just North America retail.
Max Gunport, Analyst, BNP Paribas: Thank you.
Jeff Siemon, Vice President of Investor Relations and Treasurer, General Mills: Okay. I think that's all the time we have this morning. Appreciate everyone's engagement and we look forward to catching up over the course of the coming months. Please reach out with any questions through today and we look forward to speaking with you again next month. Take care.
Thanks, Julianne, over to you.
Julian, Conference Call Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
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