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Our Confidence in Undervalued General Mills Is Growing

We upgraded the firm's economic moat rating to wide from narrow due to the durability of its brand and favorable cost structure.


Sonia Vora: We recently upgraded our economic moat rating for General Mills to wide from narrow to reflect our greater confidence in the durability of its brand-intangible assets and favorable cost structure. 

The firm's portfolio includes several well-known brands, like Cheerios and Yoplait, which have bolstered its relationships with retailers that depend on leading brands to drive store traffic and inventory turnover. While these categories remain competitive, we believe retailers' aversion to out-of-stocks has benefited established manufacturers. We think these relationships have helped General Mills to maintain valuable shelf space for its offerings, even in areas like yogurt, where its share has been challenged. We also think General Mills has shown modest pricing power, as price and mix have averaged more than a 2% contribution to sales over the past decade, driving nearly 60% of organic growth. From our vantage point, this further suggests evidence of a brand-intangible asset.

Sonia Vora does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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