General Mills: Navigating Challenges and Positioning for Growth in Consumer Goods

The consumer goods sector has long been a battleground for companies balancing legacy brands with evolving consumer preferences. General Mills (GIS), a century-old giant with iconic products like Cheerios, Yoplait, and Blue Buffalo, is now at a pivotal crossroads. Recent financial results, strategic shifts, and leadership decisions underscore its efforts to adapt—yet questions linger about whether these moves will sustain long-term value creation.

Recent Performance: A Mixed Bag of Growth and Headwinds

General Mills' fiscal 2025 first-quarter results revealed a challenging start, with net sales down 1% to $4.8 billion, driven by pricing pressures and sluggish volume trends in snacks and yogurt. Operating profit fell 11% to $832 million, reflecting higher costs and reinvestment in brand marketing. However, the company rebounded in Q2, posting a 2% sales rise to $5.2 billion, fueled by strong performance in pet food and foodservice segments.

The key takeaway: General Mills is not growing its top line organically, with flat-to-1% guidance for fiscal 2025. Yet the company is aggressively restructuring to offset this stagnation. Its “Accelerate” strategy—focused on brand revitalization, cost discipline, and portfolio optimization—aims to improve margins and redirect capital toward high-growth areas.

Leadership and Strategic Focus: Continuity Amid Restructuring

While there have been no reported changes to the C-suite (CEO Jeff Harmening and CFO Kofi Bruce remain in place), the company has undergone significant operational restructuring. Notably, the elimination of the international COO role and a $70 million restructuring charge in Q4 highlight efforts to simplify decision-making and reduce overhead.

This leadership continuity is critical. Harmening, who has championed the “Accelerate” strategy since 2021, has demonstrated a willingness to make tough choices, such as divesting non-core assets. The recent sale of its North American yogurt business to Lactalis and Sodiaal for $2.1 billion exemplifies this focus—sacrificing short-term EPS for long-term agility.

The Yogurt Divestiture: A Necessary Trade-Off for Growth

The yogurt sale, finalized in late June 2025, marks a pivotal shift. While yogurt contributed ~$1.5 billion to 2024 sales, it faced declining demand, competition, and complex supply chains. The divestiture removes a margin drag, freeing capital to reinvest in higher-margin segments:

1. Pet Food Growth: The $1.45 billion acquisition of Whitebridge Pet Brands has turbocharged its pet segment, now accounting for ~20% of sales with 30%+ EBIT margins.
2. Premium Brands: Häagen-Dazs (ice cream) and Blue Buffalo (pet) are expanding globally, with Asia-Pacific sales up 8% in 2024.
3. Cost Savings: Holistic Margin Management (HMM) initiatives target $600 million in gross productivity savings by 2026, offsetting inflation and boosting reinvestment in marketing and innovation.

The trade-off? A 3% EPS dilution in the first year post-sale. However, the long-term upside—redirecting capital to faster-growing, higher-margin areas—could lift operating margins back to 15% by 2026, from 12% in 2023.

Shareholder Value: Risks and Opportunities Ahead

Investors must weigh two competing narratives:
- Bear Case: Weak organic sales growth, margin pressures in snacks/retail, and execution risks from restructuring could prolong underperformance.
- Bull Case: The “Accelerate” strategy could deliver margin expansion, premiumization wins (e.g., pet, e-commerce), and shareholder-friendly actions like buybacks (the company spent $600 million in H1 2025).

At a P/E of ~18x 2025 estimates—slightly below its five-year average but above peers like Campbell Soup (CPB) and Kellogg (K)—GIS offers a reasonable entry point. The $2.1 billion yogurt proceeds, combined with a strong balance sheet (net debt/EBITDA of 0.4x), provide flexibility for strategic moves.

Investment Thesis: Hold for the Long Game

General Mills is not a high-growth story today, but its structural shifts position it to outperform in the mid-term. Key catalysts include:
- Margin Expansion: HMM savings and premium brand growth could lift operating margins toward 15%.
- Share Buybacks: The company has ~$3 billion in net cash; reinvesting proceeds into shares could boost EPS over time.
- Global Expansion: Blue Buffalo's European launch and Häagen-Dazs' Asia-Pacific growth signal untapped opportunities.

Risk Factors:
- Continued weakness in North America Retail (down 2% in Q2).
- Execution risks from leadership reshuffles and supply chain disruptions.

Final Take

General Mills is undergoing a necessary transformation—trading short-term EPS for long-term resilience. While near-term results will remain choppy, the strategic clarity under Harmening's leadership, paired with the yogurt sale's capital-light future, makes GIS a compelling hold for patient investors. Those seeking aggressive growth might look elsewhere, but GIS's dividend yield (~3.5%) and balance sheet strength offer a steady foundation for value creation.

Stay tuned for updates on FY2025 earnings and the execution of its global expansion plans—they could tip the scales toward a full buy rating.