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By Erin Lash, CFA | 11-10-2011 03:00 PM

General Mills' Aisle-Opening Strategies

General Mills CFO Don Mulligan outlines the consumer giant's strategies in light of aggressive competition, input cost inflation, customer trade-downs, and emerging-market opportunities.

Erin Lash: Hi, my name is Erin Lash, and I am a consumer products Analyst here at Morningstar.

Today we're welcoming Don Mulligan, executive vice president and chief financial officer at General Mills to talk about the competitive landscape in the consumer products industry, both domestically and abroad.

Thank you for joining us, Don.

Don Mulligan: It's my pleasure, Erin. Happy to be back.

Lash: The news is ripe with headlines about the divergence in spending among high-end consumers, which seem to be spending abundantly, and low- to middle-income consumers, whose budgets appear to be stretched.

What are you seeing with regards to your business, and in addition how have your strategies maybe changed over the past two years given that we haven’t really seen a real rebound in spending?

Mulligan: Well, it's a great question. It's very top of mind for us. Obviously, it focuses mostly here in the U.S. or the developed markets. We can talk about the emerging markets later. We see the environment remains very challenging. Consumers are cautious. They are being very planful in terms of how they spend their money.

But that does two things; I think it actually helps our business. First of all, [consumers are] looking for value, and the best food value you are going to find is in the store.

And the second is, you have to eat, and so food is a very resilient category, and as we see those two factors, if you will, coming together, we actually think it's great time to be in the food industry.

We've actually seen our categories grow over the last quarter. We're up actually 4% in aggregate, and 11 of our 12 largest U.S. categories grew year-on-year in our first quarter. And that's because I think we're bringing to bear what the consumers are looking for; obviously, great taste, convenience, health, and then value.

If you look at our core products, a bowl of cereal is going to be a $0.25, a cup of yogurt is $0.70, a granola bar is $0.55. So, we constantly are making sure that the food tastes great, that it is bringing the right benefits--and health is one of those--but also that it's at the right value. The combination of those things has allowed our business and our categories to grow.

Lash: Building on that, one of the things that we've been impressed by is General Mills' commitment to investing in product innovation and marketing that resonates with consumers.

However, your competitors seem to be re-energized in their efforts as well to generate new sales from new products.

How do you ensure that your products continue to end up in consumer shopping carts?

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