General Mills Buys A Growth Opportunity

Wide-moat

The deal strikes us as strategically sound, as it stands to improve General Mills’ growth trajectory without compromising its ongoing efforts to enhance its bottom line. We expected the firm to look for inorganic growth opportunities, particularly in the natural and organic aisle, to prop up sales as top-line growth across the packaged foods landscape has remained elusive. While General Mills enjoys leading share in several domestic food categories, we’ve viewed its exposure to center store (which has faced declining traffic over the past several years as consumers opt for fresher alternatives in the perimeter) as a persistent headwind. As evidence, its cereal sales have averaged 3% declines the past three years, in line with the low- to mid-single-digit declines of the category, despite the company's 30% market share, with three of the top five brands in the U.S.

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