General Mills manufactures and distributes well known consumer brands (Cheerios, Nature Valley, Old El Paso, Häagen-Dazs outside the US under license) and has become a heavyweight in pet food with Blue Buffalo. Its exposure remains predominantly North American.
Over the past two years, the combination of rising prices and declining volumes has reached its limits: revenues and margins have declined in each of the last three fiscal years. As a result, EPS fell from $4.42 to $4.10 over the period.
Faced with rising prices, consumers are turning away from premium brands in favor of private labels, which are gaining market share. In animal nutrition, Blue Buffalo, which previously acted as a buffer, is now suffering the same fate. The company is being forced to step up its promotional efforts in a context further complicated by the issue of customs duties.
Regarding costs, some raw materials such as cocoa, sugar and dairy products are getting back to normal, although others remain high and volatile. This is the case for energy, transportation and wages, which is weighing on margins.
The situation appears all the more delicate when compared to certain competitors such as Mondelez International, which benefits from a continued strong demand driven by its iconic brands (Oreo, LU, BelVita, Cadbury, Milka, Toblerone) and a more international geographical presence, limiting its dependence on an already saturated US market.
For General Mills, one of the main challenges for the future will be to revitalize its mature, niche categories (breakfast cereals, yogurts, ready meals, and pet food), where volumes are stagnating or declining. The company has adjusted its offering to the current economic climate: developing family-size and economy formats, simplifying recipes, and refocusing innovation on concrete benefits for consumers (protein, fiber, clean label).
The latest trends point to a slightly less chaotic environment: supply chains are becoming more fluid, logistics costs are better controlled, and some campaigns are beginning to yield encouraging results. Nevertheless, demand remains unstable and promotions (although they erode margins) remain the main lever to support volumes, which is not really good news.
All of these factors are logically weighing on the stock's valuation, which is now trading at less than 10x expected earnings for this year and around 22x free cash flow. For FY 2025, the consensus forecasts a further decline in revenue, coupled with margin erosion. In the absence of a clear catalyst (improved results, market recovery, or sector consolidation), the stock's potential remains limited.
