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Yoghurt no longer satiates General Mills’ hunger for growth. The Minneapolis-based packaged foods giant — whose brands include Cheerios and Wheaties — is reportedly looking to sell its North American yoghurt business in a deal that could be worth more than $2bn.
Talks of a sale should come as no surprise. Under boss Jeff Harmening, General Mills has been looking to filter out underperforming assets. But hoisting the “for sale” sign may be the easy part. Finding a prospective buyer for a business with falling sales would be harder. A number of food and beverage companies — including Starbucks, Kraft Heinz and McDonald’s — are fighting to hang on to customers. The latter, fed up with high prices, are reining in spending and ditching big brands.
The outlook for yoghurt looks particularly sour. Americans’ love affair with the creamy, fermented dairy product is over. Yoghurt sales in the US topped $11bn last year, almost a third more than a decade ago, according to Euromonitor International. But that is mainly due to price increases. Consumption peaked in 2015 at 1.84mn tonnes as Greek yoghurt exploded in popularity. That figure fell to about 1.75mn tonnes last year.
Yoghurt fatigue is one problem. The market has too many choices. They run from Icelandic style to non-dairy versions made from coconuts or almonds — all in an array of flavours.
At General Mills, US yoghurt sales shrank by a third to $919mn between 2015 and 2020. Its Yoplait brand once led the market. General Mills was slow to respond to Chobani, which almost single-handedly set off the craze for Greek-style yoghurt. Chobani pulled plans for an initial public offering in September 2022.
Having lost the yoghurt war to Chobani and France’s Danone, General Mills should sell and let someone else try to stir up more sales. Analysts at Citi, citing NielsenIQ data, say that General Mills’ share of the yoghurt market dropped from 16 per cent to about 13 per cent over the past five years. Sale proceeds can help lower its net debt from 2.5 times forward ebitda from 2.9 times.
Another option: jump on the demerger bandwagon and spin off US yoghurt as a separate publicly listed company. KW Kellogg, the cereal business spun out of Kellogg (now called Kellanova), has gained 50 per cent since the demerger in October, outperforming its former parent company’s 12 per cent rise. In this culture war, General Mills needs a new strategy for its yoghurt business.
