MINNEAPOLIS — With consumers “increasingly looking for options that provide real nutritional benefits,” it’s “no wonder” that better-for-you snacks is the fastest growing segment in the snacks category, said Jon Nudi, president of the U.S. Snacks division at General Mills, Inc.
In comments to analysts as part of General Mills’ release of its first-quarter fiscal 2013 earnings on Sept. 19, Mr. Nudi described a marketplace where consumers are snacking more than ever. It is also a market where General Mills, with an extensive portfolio of grain, fruit and savory snacks, is positioned for growth, he said.
Mr. Nudi said grain snack bars are the company’s largest and fastest growing business.
“We created this category back in 1975 with the launch of Nature Valley granola bars,” he said. “Today, the category generates $3 billion in retail sales and it’s growing at a 5% annual rate. Our sales are well outpacing the category, driving solid market share gains for us.”
He noted General Mills’ share of the category has increased 10 percentage points over the past five years, and through the first quarter of fiscal 2013 had gained another full point of share.
“We’re growing our sales and the category by innovating,” he said. “We kept the original Nature Valley crunchy bars growing and we’ve added new flavors and formats. In 2006, we launched the very successful Fiber One snack bar line and that unlocked a whole new level of market growth. In fiscal 2012 we further expanded the Fiber One line with the introduction of 90-calorie brownies. In one year, just two brownie flavors generated more than $100 million in retail sales. To put that into context, one industry benchmark sets a standard of $50 million for a successful new product introduction.”
He said the company continues to innovate with the launch of a 90-calorie chocolate chip cookie and the recent introduction of Fiber One Chewy Bars in the child-friendly flavors of chocolate and peanut butter and jelly.
In grain snacks, Nature Valley remains the company’s flagship brand.
“Our newest variety is Nature Valley Protein Bars, which contain 10 grams of protein in each bar,” Mr. Nudi said. “They contributed double-digit retail sales growth for the brand in fiscal 2012. They’re on track to be as big as Fiber One brownies in year one retail sales. We have new flavors and formats of Nature Valley bars coming throughout the year, and we expect the brand to continue to lead our snacks portfolio.”
The company’s savory snacks business — which operates in a category with more than $2 billion in sales and a growth rate of 9% over the past year — also shows great promise, Mr. Nudi said.
“We just launched several new flavors of our very popular Chex Mix,” he said. “We introduced a new product line, Pillsbury Baguette Chips. These are made from baked bread. They’re great by themselves or with your favorite dip.”
Category sales are growing at a 3% rate in the $900 million fruit snacks category, of which General Mills is the market leader. But heightened competition from value players in the segment has resulted in a share decline for General Mills, a trend Mr. Nudi believes the company is poised to reverse.
“We expect to post renewed sales and share growth this year with a solid lineup of new products, including Mott’s Fruit Snacks that appeal to kids and adults alike,” he said. “Our Mott’s Medleys are made with real fruit and vegetable juice and provide 100% of the daily value of vitamin C with just 80 calories per serving. We just launched this line and it’s off to a great start.”
The Snacks division is part of General Mills’ U.S. Retail unit, which posted operating profit of $575.1 million in the first quarter of fiscal 2013 ended Aug. 26, down 2% from $585.2 million in the same period a year ago. Net sales in the U.S. Retail unit were $2,493.9 million, down 1% from $2,510.3 million.
Overall, General Mills’ net income in the first quarter was $548.9 million, equal to 84c per share on the common stock, up 35% from $405.6 million, or 63c per share, in the same period a year ago. Net sales were $4,051 million, up 5% from $3,847.6 million.