General Mills' Make-or-Break Moment: Can 'Accelerate' Reverse the Tide?

General Mills (GM) has long been a stalwart of the consumer packaged goods (CPG) sector, but its recent Q4 fiscal 2025 earnings reveal a company at a crossroads. Organic sales declined for the second straight year, margins weakened under inflationary pressures, and the stock has stagnated amid broader market skepticism about the CPG playbook. Yet, management is doubling down on its "Accelerate" strategy, a multi-year initiative to reignite growth through premiumization, innovation, and cost discipline. The question for investors is clear: Can these moves turn the ship around, or will General Mills remain anchored by legacy challenges?

The Sales Slump and a Fragile Turnaround

General Mills' fiscal 2025 results underscore a stark reality. Organic sales fell 2% to $19.5 billion, with the North America Retail segment—home to brands like Yoplait and Haagen-Dazs—declining 10% in Q4 alone. This erosion stems from aggressive private-label competition, shifting consumer preferences, and the lingering aftereffects of pandemic-era pantry loading.

But there's a silver lining. While organic sales remain weak, management highlighted a critical improvement: organic volume was flat in Q4, a marked contrast to the 3-point volume deleverage in fiscal 2024. This suggests that efforts to stabilize core brands—such as smaller package sizes, targeted promotions, and reinvestment in marketing—are starting to gain traction. The "remarkability" framework, which prioritizes product quality, package design, and omnichannel execution, is central to this push.

Margins Under Pressure, But Cost Control Offers Hope

The real challenge lies in margins. Adjusted operating profit fell 7% in fiscal 2025, with gross margin contracting to 34.5% from 34.8% as input costs (e.g., dairy, grains) and volume deleverage took their toll. Even the Holistic Margin Management (HMM) initiative, which delivered 5% of COGS savings in 2025, couldn't fully offset these pressures.

Yet, management has doubled down on cost discipline. A new $100 million global transformation initiative targeting fiscal 2026 aims to further reduce costs, with a focus on automation, supply chain optimization, and overhead reductions. If realized, these savings could provide a critical cushion as the company invests in growth initiatives like Blue Buffalo's fresh pet food line—a segment projected to hit $3 billion in the U.S. by 2026.

Blue Buffalo: The Catalyst for Growth or a Risky Bet?

The North America Pet segment, a key pillar of the "Accelerate" strategy, delivered 12% organic sales growth in Q4, driven by the Blue Buffalo brand and recent acquisitions like Edgard & Cooper. The upcoming launch of Blue Buffalo's “Love Made Fresh” fresh pet food line (set for late 2025) and the U.S. rollout of Edgard & Cooper via PetSmart represent bold moves to capture the premium pet food market.

This segment's performance is critical. Pet food, particularly fresh formats, is one of the few high-growth areas in CPG, with premiumization trends favoring brands that emphasize quality and convenience. If Blue Buffalo can become the largest U.S. pet food brand across all formats, it could single-handedly offset declines in slower-growing legacy categories.

The Road Ahead: Can GM Meet Its FY26 Targets?

Management has set ambitious but cautious FY2026 targets:
- Organic sales growth: -1% to +1% (a slight rebound from 2025's decline).
- Adjusted operating profit: -15% to -10% (due to strategic investments and divestitures).

The path to these goals hinges on three factors:
1. Execution of Blue Buffalo's expansion: The fresh pet food launch and Edgard & Cooper's U.S. rollout must avoid missteps in a crowded, fast-moving market.
2. Cost savings materialization: The $100 million transformation initiative must deliver as promised to offset margin pressures.
3. Brand reinvention success: Core brands like Cheerios and Pillsbury need to regain share through innovation (e.g., plant-based products) and value-driven packaging.

Risks and Rewards: The Investment Thesis

General Mills faces significant headwinds. Input costs remain volatile, North America Retail struggles with secular decline, and the stock trades at a 15.5x forward P/E, which assumes a turnaround. However, the dividend—just raised 2% to $0.61/share—remains a pillar of shareholder returns, with a 54.6% payout ratio leaving room for growth.

For long-term investors, the calculus is this: The "Accelerate" strategy is a high-risk, high-reward bet on pet food dominance and cost discipline. If Blue Buffalo's fresh line and Edgard & Cooper succeed, GM could reclaim growth and justify its valuation. If not, the company risks becoming a slow-growth, dividend-focused relic.

Final Analysis: Hold for Now, but Watch Closely

While GM's stock has underperformed peers in 2025, it's still up 12% over five years, outpacing the S&P 500. The dividend provides a cushion, but the company's success hinges on execution in fiscal 2026. Investors should hold the stock if they believe in the pet food play and cost initiatives, but remain cautious until Blue Buffalo's new lines prove their mettle. A target price of $55–60 (vs. $58.75 as of June 19, 2025) seems reasonable if growth stabilizes.

The next 12 months will be pivotal. General Mills' "Accelerate" strategy is its last chance to prove that it can adapt to a changing CPG landscape—or it may find itself overtaken by nimbler rivals.

Disclosure: This analysis is for informational purposes only and not a recommendation to buy or sell securities.