Analyst Note| Rebecca Scheuneman, CFA |
General Mills’ fiscal third-quarter organic sales grew 7%, fueled by American’s continued turn homeward as a result of the pandemic, and as pet food sales (10% of revenue) grew 14% on the launch of Tastefuls wet cat food, along with ongoing strength in dog food. Per Nielsen, the firm grew market share in all five of its global platforms during the quarter (60 basis points in cereal, 30 in bars, 40 in pet, 30 in ice cream, and 110 in Mexican). But we think it will be difficult for the firm to maintain these gains once the market normalizes after the pandemic, even as we acknowledge that the firm maintains a portfolio of strong, market leading brands (that underpin its narrow-moat rating). During the health crisis, across packaged food categories, the largest brands generally gained share as manufacturers and retailers simplified offerings to maximize efficiency, in order to meet heightened demand. Once the spike in at-home food consumption eases, smaller brands should be reintroduced on shelves, challenging General Mills’ recent gains.