MINNEAPOLIS โ General Mills, Inc. will only make acquisitions โat pricing that makes sense for our investors,โ said Jeffrey L. Harmening, chairman and chief executive officer.
Mr. Harmening made the comment Sept. 16 in response to a question from an investment analyst noting General Mills had been cited as interested in acquiring a major snacking company, a clear but unstated reference to Hostess Brands, Inc. With J.M. Smucker Co. the winning suitor for Hostess (at a price of 3.3 times sales and 17 times EBITDA), the analyst asked whether snacking was a โkey areaโ in which General Mills wanted to expand.
Declining to comment on โa rumor or what has or hasnโt transpired in the marketplace,โ Mr. Harmening said General Millsโ merger and acquisitions objectives โreally havenโt changed.โ
โI will also remind you that weโve also said weโve been disciplined, and we are disciplined,โ he said. โAnd so, to the extent we see something that we like on acquisitions, weโll certainly do that, but only at pricing that makes sense for our investors. And so I want you to know that no matter whatโs transpired over the last little while in M&A, our position hasnโt really changed. Iโve also read commentary, are food companies looking at M&A now because their volumes are down. The answer is no. I mean we donโt play the short-term game. We go get brands we like, we hold them for a long time. We grow, and weโve been doing that for 165 years, and weโll continue to do that. And so what isnโt going to be the case is that we see volumes going in a certain direction, therefore, we have to make up a gap. Thatโs really not part of our plan.โ
Also during the call, the General Mills executives indirectly commented on another pending industry transaction โ the separation of the Kellogg Co. breakfast cereal business from the snacking and other businesses into two companies. They were responding to a question of whether General Mills would be able to โcontinue to gain shareโ in the future in a category that is not generating much growth.
Mr. Harmening noted breakfast cereal is still the top choice for breakfast in the morning, accounting for about a fifth of breakfast sittings. Additionally, he said the company has gained share five years in a row, growing 20% over that period.
โWe have almost 50% of the categoryโs new product volume, and I think itโs 47%,โ he said. โAnd four of the last five big items are from General Mills. So weโre innovating well. Weโre developing our equities well, we continue to grow. And so my expectation for our cereal business is that we grow a little bit every year and hopefully take a little bit of share every year.โ
Regarding othersโ views of the category, โYou’ll have to ask the rest of the competitors,โ Mr. Harmening said.
โBut we like cereal,โ he said. โWe like our brands. I love how weโve been competing.โ
Jonathon J. Nudi, president of North American Retail, called cereal a โgreat categoryโ and promised General Mills will โkeep investing.โ
He continued, โThe other question we get a lot is, what happens if one of our major competitors gets more focused? And what we would tell you is thatโs actually a good thing. If you go back through history when the two major competitors in the category are supporting the category with marketing as well as innovation, the category does better. So we hope that everyone comes to play, and we can continue to grow those categories as we move forward.โ
