Stock Research and Analysis
by Erin Swanson, CFAA weak economy and commodity prices that remain above long-term averages have weighed on the performance of firms across the packaged food industry. Although General Mills is not immune to these head winds, we believe its portfolio of market-leading Read more 
Bulls Say
General Mills is the second-largest producer of ready-to-eat cereals in the U.S. (behind Kellogg) and has partnered with Nestle to distribute cereal products in more than 130 countries.
The firm possesses the number-one ready-to-eat cereal franchise, Cheerios, which maintains about 12% of the market. In addition, its Pillsbury brand dominates its segment with nearly 70% share.
With leading positions in ready-to-eat cereal, yogurt, and canned soup, General Mills generates 40% of its annual sales from products offering convenient meal solutions to health-conscious consumers.
General Mills' ability to generate enormous amounts of free cash flow, even in such a difficult operating environment, is a huge plus. In fiscal 2009, the firm produced nearly $1.3 billion of free cash flow, which amounts to almost 10% of sales (about the level generated in the year-ago period).
General Mills' portfolio of value offerings (like baking items, snack foods, vegetables, soups, ice cream, and yogurt) should appeal to consumers who are eating more meals at home, driving sales growth. Read more
Bears Say
Higher commodity, packaging, and distribution costs, along with increased marketing and promotional spending, could limit profit expansion at General Mills.
The quality of private-label products has improved dramatically as supermarket chains invest heavily in their brands, many of which rival branded products.
In January 2009, General Mills voluntarily recalled some of its products containing peanut butter because of a salmonella scare. We expect that similar recalls will occur from time to time.
Adopting mark-to-market accounting for its commodity hedges has added volatility to the firm's quarterly earnings results, and this accounting treatment is unique among packaged food firms. Read more
Strategy
General Mills is focused on driving sales of its new and established brands through investments in product innovation and higher marketing spending, both domestically and internationally. Further, the Read more
Management
Ken Powell, 55, assumed the roles of CEO and chairman in 2007 and 2008, respectively. In our view, the industry experience Powell has garnered in his 30 years at General Mills is invaluable for the firm and, ultimately, its shareholders. However, we Read more
Profile
With operations that began more than 150 years ago, General Mills is now a leading global manufacturer and marketer of branded consumer foods, such as ready-to-eat breakfast Read more
Key Signs of a Dividend Increase
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