Weak snacks demand, international challenges hit General Mills sales

(Reuters) - Cheerios maker General Mills Inc's GIS.N quarterly sales fell short of Wall Street estimates on Wednesday, hit by weak demand for its baking products and snacks in the United States and challenges in key emerging markets such as Brazil and India.

FILE PHOTO: General Mills cereals rest on a shelf inside of a grocery store in New York, U.S., March 20, 2017. REUTERS/Lucas Jackson

The company, which owns dessert pre-mix brand Betty Crocker and Nature Valley granola bars, has been struggling to boost sales of its snacks, cereals and yogurt in the U.S. as consumers move away from processed and sugary foods to healthier and cheaper store-branded options.

In a bid to drive growth, General Mills is making a big push into the pet food market with last year’s purchase of Blue Buffalo Pet Products.

The company also invested in marketing and launching new products such as Blueberry Cheerios, Peanut Butter Chex cereal and Cinnamon Toast Crunch Churros cereal.

Those efforts helped drive a 7% rise in sales in pet foods business and a 1% growth in U.S. cereals division in the first quarter.

However, its snacks as well as meals and baking businesses in the United States recorded a 1% drop in revenue.

Sales from its North America retail unit, General Mills’ biggest business, were flat at $2.38 billion.

“We know we still have room to improve, including some key categories like yogurt and snacks,” General Mills Chief Executive Officer Jeff Harmening said in the post-earnings conference call.

Sales in General Mills’ international markets also declined, partly hurt by a strong dollar and lower-than-expected sales in Brazil, India and China, its key emerging markets.

Harmening, however, said the challenges related to distribution in India and retail inventory reduction in Brazil that the company faced in first quarter were largely over.

Overall, company’s net sales slipped 2.2% to $4 billion, missing the average analyst estimate of $4.08 billion, according to IBES data from Refinitiv.

However, excluding items, the company, which reaffirmed its full-year forecast, earned 79 cents per share, beating analysts expectation of 77 cents.

Shares of the company were up 1% in early trading.

Reporting by Soundarya J in Bengaluru; Editing by Shailesh Kuber