Yahoo Finance

Shares of General Mills sliding after reporting third quarter earnings here with some of the breakdown. We've got Yahoo Finance and your reporter Brooke DiPalma. All right. What's up with this share price reaction? What is the street not impressed by?

Yeah, certainly negative sentiment here based upon the fact that General Mills said that the consumer is not improving as we make way into the year. Now, keep in mind, this is their fiscal third quarter. They're already three quarters into the year so far, but they said that shoppers are still hyperfocused on value and those essentials. And that's what really led the company to cut their outlook for 2025 more than what the street had expected. The company now expects organic net sales to be coming in at the end of the year down 1 and a half percent to down 2%. And that's compared to the previous expectation of the lower end of the range of between flat and up 1%. And what's really driving that is this snacking slowdown that we're seeing among consumers, particularly here in the US. That led volume growth for North America retail to fall 5% in the quarter. And consumers are pulling back on all the snacking things, snack bars, fruit snacks, and salty snacks. Keep in mind, General Mills owns the brands Nature Valley Value, Annie's, as well as those Gushers. And so consumers aren't going to those discretionary goods. The company did say that they plan to leverage brand partnerships, working with retailers on promotions. They also plan to lean into value pack sizes and addressing key price gaps to get consumers to come back in. Also, keep in mind innovation and newness are a key part of that tactic to get consumers to come back in. Innovation not as high as what we were, or the cadence of innovation not as high as what we were pre-pandemic. Also, away from home sales, industry sales, those also lagged in the quarter, particularly driven down lower by the use of flour. So, food industry, not as many consumers going out to eat perhaps, and that's really coming in in respect of away from home industry sales lagging in the quarter. Now, it's important to note, this is not something new that we've heard from a CPG giant. Conagra Brands, Campbells, Kraft Heinz also reporting this slowdown among consumers that's causing them to to warn of a perhaps impact on their profits in this coming year. And something else that's interesting for the industry is this heat that they're under for those comments from RFK Jr. about creating this healthier America in general. And so a question was asked on the call, and while food dye was not mentioned, that is a key critic of the current administration, this idea of upping protein options was mentioned. They said that their Cheerios protein option is performing well right now.

How much could the focus on red dye number three, obviously used in a lot of the products that you mentioned, likes of Lucky Charms, for example, how much could the administration's focus on cracking down on the use of red dye number three impact a company like General Mills?

Well, think about it. General Mills, not just those Lucky Charms. They also own fruit roll-ups. They also own these Gushers. And so perhaps as they look into this, this fixation on this sort of red dye, it is only a small part when you think about their nearly 100 brands within their portfolio, but certainly something that's weighing on top of mind as they really have to navigate this environment that's different from the previous slowdown that perhaps we've seen back in '08, when there was that recession, where consumers are more fixated on this idea of healthier options and protein options. And so certainly it's weighing on their minds as far as the exact impact this can have. In order to reformulate, perhaps, remains to be seen.

All right, Brooke. Thank you so much for joining us this morning. Break that down. We appreciate it.