Milling & Baking News - March 8, 2011 - 18

Financial Results 

Strong track record leaves global cereal market poised for more growth
BOCA RATON, FLA. — Building on steady and large gains over the past 20 years, the non-U.S. market for readyto-eat cereal appears poised for solid growth ahead, said Kendall Powell, chairman and chief executive ofﬁcer of General Mills, Inc. Mr. Powell, who said the U.S. market also has potential for modest growth, spoke Feb. 22 at the Consumer Analyst Group of New York annual conference at the Boca Raton Resort and Club in Boca Raton. Looking to distinguish General Mills from other CAGNY presenters, Mr. Powell said “not all branded food companies are created equal,” emphasizing the importance of leading brands, growing categories and a strong presence in growing markets around the world. He said General Mills possesses all three. While brieﬂy mentioning the potential of several General Mills categories, including grain snacks, frozen meals and yogurt, Mr. Powell devoted most of his presentation to a discussion of the R.-T.-E. cereal market generally with particular emphasis to growth prospects in non-U.S. markets. The company’s global cereal sales in ﬁscal 2010 were $3.8 billion, a more than doubling from the $1.8 billion in R.-T.-E. cereal sales in 1990. While the United States remains the world’s largest cereal market, Mr. Powell offered compelling ﬁgures to demonstrate that this dominance is diminishing and will diminish much more in the years to come. Currently at $11 billion annually, including Canada, the North American market for R.-T.-E. cereal has been growing 2% per year over the past 20 years. By contrast, R.-T.-E. sales in non-U.S. markets currently are $14 billion and are growing in mid-single digits. Because of this growth spread, the U.S. market accounts for 40% of R.-T.E. cereal sales worldwide versus a 60% share in 1990. “We expect this trend to widen,” Mr. Powell said. For its part, General Mills is well positioned for the worldwide growth through its Cereal Partners Worldwide joint venture with Nestle. With
18 / March 8, 2011 Milling & Baking News

both its domestic Big G business and C.P.W., General Mills has been gaining share over time, Mr. Powell said. While it has occurred in ﬁts and starts, the company has averaged a market share gain of 20 basis points per year over the past two decades. In the United States, Big G is poised for further growth, Mr. Powell said. Cereal’s health and convenience attributes fuel his optimism. He noted that R.-T.-E. cereals are not a major source of added sugar for children, accounting for about 5% of their total

center in Orbe, Switzerland, jointly with Nestle for C.P.W. Turning back to emerging markets, Mr. Powell identiﬁed several that have generated rapid growth with the potential for more. For example, ﬁscal 2010 sales in Mexico climbed to $1,550 million from only $550 million in 1990, an 11% compound growth rate. C.P.W. has been gaining share in this market, he said. Smaller, but growing more rapidly still, is the cereal market in Russia. C.P.W. sales there in 2010 were only $250 million, but have been growing at a 14% annual rate over the last 10 years. Turkey and Brazil also represent

Per capita consumption, ready-to-eat cereal
in lbs

13.9

9.3

9.0

8.6 6.0 4.0 2.6 0.7 0.4
Brazil

0.2

0.02

United Canada Australia United Mexico France Poland Russia Kingdom States
Source: Euromonitor 2010 Forecast

Turkey Southeast Asia

intake. By contrast, cereal is a driver of milk intake, with 40% of milk intake by children consumed with cereal at breakfast. The ﬁgure is closer to 50% in urban areas, Mr. Powell said. Mr. Powell noted that General Mills is well positioned to help consumers satisfy recent dietary guidelines recommendations to consume 48 grams of whole grains per day, guidance he said more Americans are pursuing. He said 10% of all whole grains intake in the United States currently comes from Big G cereals. Also a positive for U.S. prospects, Mr. Powell noted that seniors consume R.-T.-E. cereal at levels higher than other age groups, per capita. For example, intake among individuals 65 and older is 25% greater than those 55-64. R.-T.-E. cereal also is a popular choice within the growing categories of organic food and gluten-free products. He said the company’s commitment to innovation in the cereal category was demonstrated by the opening this month of a $50 million innovation

countries in which C.P.W. has a strong foothold, that have grown rapidly and look ready to achieve further growth in the years ahead. Fueling this growth in these and other countries has been the expansion of the middle class, the percentage of the population with annual disposable income in excess of $10,000, Mr. Powell said. Between 2010 and 2015, the percentage in this category will grow 98% in Vietnam, 77% in China and India and 75% in Indonesia, he said. Concluding his remarks with comments on broader prospects for cereal, Mr. Powell said the overall category has an advantage in the competition for share of stomach by heavy industry spending on consumer marketing, totaling $3.5 billion in the past ﬁve years alone. “We believe it (marketing investments) will drive per capita consumption in the years ahead,” he said. He predicted $1 billion in global sales growth for R.-T.-E. cereal between 2010 and 2015, to $4.8 billion, equating to compound annual growth of 4% to 5% per year. MBN
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Milling & Baking News - March 8, 2011

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