General Mills predicts home consumption to rebound on price cuts

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General Mills said demand for its products increased after the Cheerios maker cut prices on some items earlier this year.

CEO Jeff Harmening said Wednesday during the company’s quarterly earnings conference call that the company is focused on maintaining a competitive edge despite the volatile environment. Food and beverage companies are struggling with lower volumes and lower demand as cash-strapped customers are buying few products Down save money.

Harmening said the breakfast cereal and snack maker is benefiting from the increase in consumers eating their meals at home.

“We anticipated that this would happen because we see that consumers are looking for value,” Harmening said. “And the fact is that eating at home is now on average four times cheaper than eating out.”

General Mills’ product mix and pricing fell 1 percentage point in the latest quarter, according to its earnings report. The company’s net sales for the quarter were $4.85 billion, down 1% year over year.

TD Cowen analyst Robert Moskow wrote in a note to investors that the company’s results were in line with expectations, but warned that sales would fall even further if the company continued to cut prices.

One aspect of the company’s current strategy is to shed some assets that aren’t driving growth. Earlier this month, the company announced the sale of its North American yogurt business, Lactalis and Sodiaal, for $2.1 billion. It previously acquired a controlling stake in Yoplait more than a decade ago. The Minnesota-based company will use the proceeds to buy back shares, it said.

Hardening said the yogurt sales do not mean General Mills is moving away from breakfast products, as the company treats breakfast cereals as a separate category.

“From that standpoint, and frankly from a manufacturing standpoint, it’s a business that’s relatively easy to separate, and I don’t think this sale will have any impact on the cereal market,” Harmening said.

Harmening said the Nature Valley bar maker considers a number of issues when it comes to product innovation, including package sizes and marketing. He added that the company is also considering increasing its mergers and acquisitions activity, particularly with smaller assets.

“The focus right now seems to be on what we see in the market, which is more availability of smaller assets that we could add that would increase our growth,” Harmening said.