By Anuja Bharat Mistry
(Reuters) -General Mills cut its annual profit forecast on Wednesday as the Cheerios maker increased its spending on promotions to attract cost-conscious consumers, sending shares down about 4% in early trading. to marketing. The company revived volumes by lowering prices across its entire range of products, from snacks to pet food. However, it warned that higher-than-expected promotional spending would affect its annual profits. general mills (NYSE:) now expects adjusted annual profit to fall between 1% and 3%, compared to the previous range of between 1% and a 1% increase. The company said it was significantly increasing media spending in the third quarter for its Pillsbury brand to attract customers in the key baking season, which would lead to higher selling, general and administrative expenses.
“Its (General Mills') investments in brand marketing are necessary to sustain the long-term growth of its brands, but this will also have a negative impact on margins in the short term,” said Blake Droesch, an analyst at eMarketer.
Customers have rejected more expensive brand-name products in favor of cheaper private brands, prompting packaged food companies to step up promotions to win back value-conscious shoppers. Strong eating-at-home trends have boosted demand for food and pantry staples, helping companies like General Mills and WK Kellogg (NYSE:). Corn chip snack maker Bugles beat second-quarter results as pricing strategies boosted demand. It posted sales of $5.24 billion for the quarter ended Nov. 24, beating analyst estimates of $5.14 billion, according to data compiled by LSEG. Adjusted earnings were $1.40 per share, above estimates of $1.22 per share. The Minnesota-based company's quarterly volumes increased 3 percentage points, reversing a 4 percentage point decline from a year earlier. Prices decreased 1 percentage point in the quarter, compared with an increase of 3 percentage points a year earlier.
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