MINNEAPOLIS — As General Mills Inc. hones its value strategy for the fiscal 2025 second half, company executives are focusing on more than just price.

Jeffrey Harmening, chairman and chief executive officer, said General Mills aims to sustain momentum from volume and market share gains during the first half of the year by stepping up its investment “above our original plan in response to a more prolonged and significant value-seeking behavior in the part of consumers.”

“We’re bringing more value to consumers across all aspects of our total product offering, including increased product innovation news, increased brand building and promotional support, and these investments are working.” Harmening told analysts in a Dec. 18 conference call on second-quarter results. “Strong brand campaigns and innovation have helped return our US cereal business to pound share growth, and we accelerated our retail sales performance in some other really important US categories, including food snacks and Mexican foods, soups, snack bars as well as foodservice channels and in many of our international markets.”

Harmening pointed to a US consumer who’s still struggling to adjust to elevated food pricing following the post-pandemic inflation surge — as evidenced by ongoing strong food-at-home purchases.

“You see at-home consumption being about 87% of total consumption, which is quite high,” he said. “That’s because eating away from home is about four times more expensive than eating at-home. So we’ve seen this increased value behavior.”

In the second quarter ended Nov. 24, 7 of General Mills’ top 10 US categories — cereal (Cheerios), grain snacks (Nature Valley), yogurt (Yoplait), fruit snacks (Gushers), soup (Progresso), Mexican foods (Old El Paso) and desserts (Betty Cocker) — strengthened sales sequentially, the company reported. Also during the second quarter, 58% of the company’s top 10 US categories held or grew pound share, compared with 11% in the first quarter, and 23% grew or held dollar share, versus 11% in the previous quarter.

“We look at investment as broader than just price value,” Dana McNabb, group vice president for North America Retail at General Mills, told analysts on the call. “We use a framework called the ‘Remarkable Experience’ to try to assess where we are at relative to the competition across our total product offering, whether that’s product, packaging, communications, price. From a price standpoint, we have had to make a few targeted investments, but it’s not everywhere. It’s on the refrigerated baked goods business, a little bit fruit snacks, a little bit on our Totino’s business. But I want to reiterate that this is, again, more than just investment in price.”

When reporting quarterly results, General Mills spotlighted campaigns for Chex cereal (holiday party mix tin with Peanuts characters), Kelce Mix cereal (with the National Football League’s Kelce brothers), Old El Paso soups, Totino’s pizza rolls, Mott’s apple streusel soft-based snack bars, Betty Crocker’s “Wicked” cupcake kit and Pillsbury’s “The Grinch” holiday cookie refrigerated dough.

Efforts to spur lagging segments such as refrigerated dough, where General Mills is reinvesting in the Pillsbury brand to bring more value to shoppers, are already providing a much-needed lift.

“If we look at other areas in refrigerated baked goods where we’re investing, we’re really seeing them work,” McNabb said. “Look at our cookie line; that’s about a third of our business. It’s up high single digits behind new (production) capacity that we’ve added. Our campaign where we brought back the (Pillsbury) Dough Boy is really resonating with consumers. Our new products are up 10%.

“We’re seeing our cereal campaigns do really well. So, yes, we’re having to invest in price in targeted areas. But we’re also leaning in on areas that are really resonating with the consumer, and we believe this investment will return for us in the back half of the year.”

While General Mills’ category investments have been broad, they’re targeted when it comes to price, Harmening and McNabb noted.

“And in terms of is it enough, I do believe that we put investment into the areas that our analytics show will provide the best return,” McNabb said. “We’ll watch the response, and then we’ll pivot as we learn more.”

General Mills provided some oomph heading into the new year with this month’s launch of Cheerios Protein cereal and the new “Game Day” campaign with Jason Kelce and NFL brothers T.J. and J.J. Watt for Old El Paso, Lucky Charms, Cinnamon Toast Crunch and Pillsbury.

“We are confident in our strategy and the investments we’re making to further improve our momentum in the back half of the year,” Harmening said. “And while stepping up our investment is impacting our profit outlook for the back half of the year, I am very confident that it’s the right choice to position us for stronger growth in fiscal ’26 and beyond.”

Broader food trends raise question marks

In part due to the higher promotional investment, General Mills lowered its guidance for fiscal 2025 adjusted operating profit, now expected to decrease 2% to 4%, and for adjusted earnings per share, now forecast to decline 1% to 3%. 

But TD Cowen analyst Robert Moskow said General Mills expects the higher spending to cause a high-single-digit operating profit decline in the second half of fiscal 2025 as well as to “continue to present a headwind” into the first half of fiscal 2026.

“General Mills’ negative forecast revision to fund incremental investment for promotions reinforces our view that Big Food companies stretched their prices too high during the pandemic,” Moskow said in a Dec. 18 research note. “In addition, we see a rising headwind in our data from consumers shifting their shopping patterns to fresh foods at the expense of center store.”

Most of the major processed food companies have “tamped down profits this year” because of investments to boost the value proposition of their brands, Moskow observed, citing Kraft Heinz Co., The Campbell’s Co., Conagra Brands Inc. and J.M. Smucker Co. But it’s unclear if those investments will be enough in the face of broader industry trends showing a greater predilection for fresh products among grocery shoppers, he said.