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CHICAGO, June 5 General Mills Inc. (GIS.N) will raise U.S cereal prices as of June 25 to help offset higher costs for items such as grain and energy, a spokesman said on Tuesday.
On average, it will be a small single-digit price increase across the company's portfolio, the spokesman said.
General Mills, the No. 2 breakfast cereal maker with brands such as Cheerios, Chex and Lucky Charms, said that the increase is in line with pricing actions taken by other cereal manufacturers over the past 12 months.
Kellogg Co. (K.N), the world's largest breakfast cereal maker, increased prices on select cereal brands in September 2006, a spokeswoman said. She added that the company does not speculate on future pricing.
Cereal makers, like other food companies, have been pushing through price increases over the past year or so to cope with rising costs on commodities that have run the gamut from oil to cocoa.
Most recently, manufacturers have been faced with higher prices for corn as soaring gasoline prices have increased demand for that crop's use in ethanol, a crop-based alternative fuel. Prices for wheat have also soared due to global weather issues, including a drought in eastern Europe.
"It's unfortunately sort of where we are because of the fact that we have gone through, what, four years now of commodity price increases?" Gregg Warren, analyst at Morningstar, said.
The General Mills spokesman said that rivals have reduced some package sizes over the past decade, and therefore shelf prices for his company's larger packages are often higher than those of competitors.
Some package sizes are being reduced and others are being eliminated. Prices will be reduced on some products, but since the packages will be smaller, the net result will be a small increase.
The moves should help retailers sell General Mills products "at prices we know consumers want," the spokesman said.
Shares of Minneapolis-based General Mills closed down $2.07, or 3.4 percent, at $59.40 after falling as low as $59.11 after Bear Stearns downgraded the shares to "peer perform" from "outperform." Shares of Kellogg, which is based in Battle Creek, Michigan, fell 98 cents, or 1.8 percent, to $53.06.
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