General Mills’ price hikes backfire as consumers say no more

Distress signals went up in Golden Valley on Wednesday morning: People are buying fewer General Mills products. People may continue to buy fewer General Mills products.

CEO Jeff Harmening chalked up the setback to “stronger-than-anticipated value-seeking behaviors” and “a return toward historical price elasticities.”

In other words, consumers are punishing the maker of Chex Mix and Old El Paso for high prices.

“There’s likely no more room to push pricing with continued pushback and increasing pressure from retailers,” analyst John Oh with research firm Third Bridge wrote Wednesday.

Investors are now taking their turn punishing General Mills’ stock price, which was down 2.5% in trading Wednesday morning.

Already General Mills has tried to temper expectations of slower growth ahead as it leaves behind a major pandemic-era boost when people ate almost entirely at home and stocked their pantries full. On Wednesday the company predicted it may not grow sales at all through next summer.

Harmening said they believe heavy advertising and a suite of product innovations — like high-protein Yoplait yogurt and “loaded” cereals — will provide a springboard for better results down the line.

“Our job is to maximize long-term shareholder return, not any particular quarter or, frankly, even any particular year,” he told analysts. “When the consumer is stressed and results are hard to come by, you know, one of the things we’ve seen successful companies like ours do is reinvest for the future.”

In an interview Wednesday, Harmening said that in typical tough times for consumers, they tend to cut back on restaurants and buy more groceries, giving General Mills a boost. That hasn’t happened despite steep menu inflation diners are facing.

“Even though consumers are feeling pinched, they haven’t traded like they normally do,” he said.

…