General Mills CEO Says Cereal Sales Won’t Stay Soggy for Long

Second-quarter earnings and revenue fell short of analysts’ expectations

The popularity of gluten-free Cheerios and plans for new product launches with healthier ingredients has CEO Ken Powell optimistic.

Despite less than impressive sales in its most recent quarter, down 6 percent from the prior year and short of Wall Street’s estimates, General Mills remains hopeful as it looks towards the future, according to The Street. Several factors contributed to this drop in sales, including the impact of the stronger dollar, greater competition in the cereal aisle, and less promotion from General Mills’ biggest customer: Walmart. Walmart represents about 30% of General Mills’ sales in the United States and 21% of its net sales overall.

General Mills chairman and CEO Ken Powell tells The Street that the anticipated rebound in cereal sales will likely be fueled by new products that General Mills has been formulating that address growing consumer preferences for healthier ingredients. For January, newly revamped Reese’s Puffs and Trix cereals will hit the market free of artificial ingredients and flavors, and backed by a marketing campaign. Trix fans will notice a change in appearance, as artificial colors have been replaced with naturally-derived colors, however the same taste will remain. General Mills is still working on creating a natural version of Lucky Charms, and as of yet has not found a natural color option that they are satisfied with.

General Mills expects 75 percent of its cereals to be free of artificial flavors and colors by January, reaching 90 percent by the end of 2016. With this initiative, General Mills puts itself ahead of its biggest competition in the cereal aisle, Kellogg’s, which is on track to discontinue use of artificial ingredients by 2018.

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Also promising to future sales increases is consumer interest in gluten-free Cheerios, which made a quick rebound after a recent recall. Powell says, “The response [to gluten-free Cheerios] has been quite good; baseline sales dipped for one week immediately after the recall as some affected product was pulled off the shelves, but then it bounced back very nicely at a good level.”