General Mills

A tasty company

Do you have time for a delicious breakfast in the morning, or do you have to head straight to work? According to surveys, around 57% of Germans take the time for the most important meal of the day every day, and around 33% at least occasionally. When things need to be quick, most people reach for a delicious muesli or crunchy cornflakes.

This is where General Mills comes into play as one of the world's largest breakfast cereal manufacturers. But the company doesn't just make food for breakfast. Here in Germany, people mainly know the premium ice cream Häagen-Dazs, the bake-at-home rolls from Knack&Back and the granola bars from Nature Valley. If you like making yourself a wrap now and then, you'll probably also recognize Old El Paso from the supermarket shelf. So it sounds like good conditions for a solid investment - but how is General Mills stock doing?

The history and business model of General Mills Inc.

The company history of General Mills began in 1866. Back then, Cadwallader C. Washburn put a grain mill near Minneapolis into operation. The mill stood on the banks of the Mississippi. 11 years later, in 1877, Washburn entered into a partnership with John Crosby, and from then on the company was called the Washburn Crosby Company.

In the beginning, the focus was solely on flour production, but the managers always had a good feel for customer needs. So, as a Christmas present, they launched the breakfast cereal Wheaties on 12/24/1926. The company's own radio station aired the world's first sung advertising jingle at the time - a small sensation.

2 years later, other regional mills joined together and the name General Mills was born. Several more manufacturers followed, and within a very short time the world's largest flour producer was created. In total, there were 27 companies from 16 US states.

Today, General Mills is still one of the really big food manufacturers, number 6 in the world rankings, to be exact. Its product portfolio currently includes over 100 different brands. From ready meals and breakfast cereals to pizza, pasta or yogurt - the company is very broadly positioned. Most recently, General Mills acquired the pet food manufacturer Blue Buffalo for 8 billion US dollars to push further into this area as well.

What does the future hold for General Mills?

The company currently earns 2/3 of its revenue in its home market, the USA. The board has made it its goal to increase sales abroad. The growing middle class in Asia naturally plays into the company's hands here. But sales in Europe have also been rising lately. On the whole, though, the last few years haven't gone well. Revenue and earnings didn't develop as planned.

Why has the stock performed so poorly since 2016?

General Mills has undergone a massive restructuring in recent years. Customers' growing health awareness has, of course, hurt the share price. Sweet cornflakes may be tasty, but they're just not healthy. Fortunately, the company recognized the zeitgeist and reacted in time. Many products are now certified organic - which is more expensive to produce, though. The restructuring should be over soon, since new sales records are expected again for the next few years.

So what about the dividend?

A dividend has been paid every year since 1898 - without a single interruption. However, General Mills lost the title of Dividend Aristocrat in 2000. That's when the dividend was frozen at 55 cents per share for 4 years. So until 2029, the company may count itself among the Dividend Achievers (increases for 10 years). But what you call it now doesn't really matter – fact is, General Mills currently pays 4.6% to its shareholders. On top of that, this payout is increased by around 10% every year. The banks' zero-interest policy can't compete with that ...

Conclusion:
Well, General Mills is a rock-solid, well-running company. Lately it had to struggle with its customers' health trend, but by now it's very well positioned again. Especially now, when the stock is available a bit cheaper for once, you should think about buying in or adding to your position. For investors with a long investment horizon, there are delicious profits to be had here. Enjoy your meal!