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General Mills Inc. SWOT & PESTLE Analysis

Last Updated : 15 May, 2017

OVERVIEW

Name of the Company: General Mills, Inc.

Business Sector: FMCG, Food Processing

Operating Geography: North America, United States, Global

About the Company: General Mills, Inc. founded in 1928, is an American Multinational manufacturer and marketer of branded consumer foods, sold through retail stores. It also serves the foodservice and commercial baking industries with the supply of branded and unbranded products. The company is headquartered in Minneapolis, Minnesota, United States and has over 42,000 employees globally.

Revenue: $16,563 million – FY ending May 2016

SWOT & PESTLE Analysis

The SWOT analysis for General Mills is presented below:
Strengths
Weaknesses
1. Increasing the value of dividends per share
2. Brands have maintained consumer loyalty and trust
3. Provides safe working environment and encourage a healthy work/life balance
4. Committed to maintaining highest standards for responsible advertising and marketing
5. Contribution of resources, time, and talent to communities
1. No revenue gains since 2012 reflecting stagnant growth
2. High debt due to continuous and increased dividend pay-out
3. Unaware of the lawsuits filed against the company
Opportunities
Threats
1. Rising demand for consumer products
2. Increasing awareness of food products
1. Intense competition from various sectors within the industry
2. Increased bargaining power of both buyers and suppliers
3. Increased tariff rate on main components like agricultural land
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Strengths

1) Increasing the value of dividends per share: From the consolidated statement of earnings report, it can be observed that despite of reporting reduction in sales from $17,630 million in 2015 to $16,563.1 million in 2016, it has continued to increase the value of dividends per share from $1.67 in 2015 to $1.78 in 2016.

2) Brands have maintained consumer loyalty and trust: General Mills has more than 100 brands serving in more than 100 countries, with some prominent brands such as Pillsbury, Betty Crocker, Totino’s and Yoplait to name the few. The brands have maintained consumer loyalty and trust for General mills. Also, through mergers and acquisitions, General Mills has added many prominent American companies in its portfolio.

3) Provides safe working environment and encourage a healthy work/life balance: General Mills provide all employees with a safe and secure workplace and considers preventing violence at workplace as its priority by implementing policies which prohibits behaviours that undermines employee safety, including acts or threats of violence or other forms of intimidation.

4) Committed to maintaining highest standards for responsible advertising and marketing: General Mills is committed to maintain the highest standards for responsible advertising and marketing, especially in advertising those which reaches children.

5) Contribution of resources, time, and talent to communities: General Mills Foundation and volunteers around the world contribute resources, time, and talent to the communities where they work and live. One of its brand Yoplait is a steadfast supporter of women’s health and wellness as a National Presenting sponsor of the Susan G. Komen, the only organization that addresses breast cancer on multiple fronts of research, community health, global outreach, and public policy initiatives to make the biggest impact against this disease.

Weaknesses

1) No revenue gains since 2012 reflecting stagnant growth: General Mills had a debt to equity ratio of 3:1 in 2016. From the consolidated statement of earnings report, it can be observed that there have been no revenue gains since 2012. Despite this fact, they have continued increasing dividend pay-outs resulting in high debt to equity ratio.

2) High debt due to continuous and increased dividend pay-out: The main reason for General Mills high debt is the money spent by General Mills in acquiring new companies. At present scenario, there are some companies like Yoplait whose performance has been declining, resulting in overcoming its losses through the profits earned by other companies or through debt.

3) Unaware of the lawsuits filed against the company: It usually used to happen that General Mills was unaware of the lawsuits filed against it, due to which it had to change its legal terms by introducing an arbitration clause which states that all disputes with General Mills must be resolved in small claims court or arbitration and not on behalf of a group.

Opportunities

1) Rising demand for consumer products: The market share of General Mills in cereal products has been around 32% for past couple of years, indicating the potential for consumer products in U.S. market. General Mills has been trying to identify opportunities in other countries but, it should realize that there persists an opportunity for them in U.S. market. There has been rising demand for cereals across the world.

2) Increasing awareness of food products: With the increase in awareness of food products, consumers are becoming more conscious about their health therefore, General Mills can try to come up with new products under this consideration with existing products like dough, pastries, pizza, snacks, etc. especially for older population in the age group of 55 years and above, which constitutes approximately 25% of the total U.S. population.

Threats

1) Intense competition from various sectors within the industry: General Mills is facing intense competition from cereal and convenience food producing company- Kellogg, dairy products, early life nutrition and medical nutrition producing company- Danone, canned, frozen, and bottled food producer- Seneca Foods to name a few. Also, there is a continuous threat of new entrant.

2) Increased bargaining power of both buyers and suppliers: General Mills has also witnessed increase in the bargaining power of both the buyers and the suppliers resulting in high cost of sales and low profit margins, respectively.

3) Increased tariff rate on main components like agricultural land: WTO has increased the tariff rate for agricultural land, leading to increase in cost for acquiring raw materials which can largely impact General Mills.

General Mills SWOT analysis has been conducted by Yelve Abhishek Aniruddha and reviewed by senior analysts from Barakaat Consulting.

References

1. General Mills Annual Report 2016: http://investors.generalmills.com/quarterly-earnings

2. General Mills fiscal 2016 financial highlights: file:///C:/Users/welcome/Downloads/GM+2016A+Annal+Report+Complete.pdf

3. General Mills code of conduct: file:///C:/Users/welcome/Downloads/COC_English.pdf

4. General Mills reports first quarter fiscal 2017 results: http://www.blog.generalmills.com/2016/09/general-mills-reports-first-quarter-fiscal-2017-results/?_ga=1.231498583.918342436.1488966107

5. WTO Tariffs: https://www.wto.org/english/tratop_e/tariffs_e/tariffs_e.htm

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The PESTLE analysis for General Mills is presented below:
Political
Economical
1. Changing political situations and uncertainty in the European markets may increase the cost of doing business for General Mills1. General Mills is dependent on its supply chain for raw materials, packaging, and energy and any disruptions in the same or major increase in prices of any commodity will impact the company.
2. General Mills faces tough competition in emerging markets like India and China with conditions favoring local companies
Social
Technological
1. Restructuring exercise conducted by the company leading to multiple loss of jobs and affecting employment
2. Changing consumer lifestyle, health consciousness are driving consumers towards organic food, driving growth for General Mills which is one of the largest natural organic food producers globally.
1. ‘Customer Engagement’ through digital transformation is the key for FMCG companies like General Mills to keep customers updated about products and services
2. Investments in technologies and analytics for agriculture will help framers strengthening the company’s supply chain
Legal
Environmental
1. General Mills is facing litigations over misleading labelling claims which can attract penalties and affects the brand image.
2. The company is facing lawsuit for age discrimination in layoffs conducted in 2016.
1. General Mills has organization wide focus on environment and sustainability with more than 85% of its solid waste recycled in North America
2. The company has a set target to sustainably source 100 percent of its ten priority ingredients by 2020.
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General Mills PESTLE analysis has been conducted by senior analysts from Barakaat Consulting.

References

1. General Mills Annual Report 2016: http://investors.generalmills.com/quarterly-earnings

2. General Mills fiscal 2016 financial highlights: file:///C:/Users/welcome/Downloads/GM+2016A+Annal+Report+Complete.pdf

3. General Mills code of conduct: file:///C:/Users/welcome/Downloads/COC_English.pdf

4. General Mills reports first quarter fiscal 2017 results: http://www.blog.generalmills.com/2016/09/general-mills-reports-first-quarter-fiscal-2017-results/?_ga=1.231498583.918342436.1488966107

5. WTO Tariffs: https://www.wto.org/english/tratop_e/tariffs_e/tariffs_e.htm

Download Analysis Report




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