GIS General Mills Inc

By Annie Gasparro 

General Mills Inc.'s sales fell 7% to $3.9 billion in the latest quarter as its yogurt business plunged in the U.S., where shoppers are trading Yoplait for Greek-style brands.

Minneapolis-based General Mills has struggled to keep up with its customers rapidly changing eating habits, hurting brands such as Cheerios cereal and Betty Crocker cake mix.

Chief Executive Ken Powell has prioritized revamping the U.S. cereal business recently, eliminating artificial colors or gluten and adding protein to draw buyers back. But now the dairy aisle has become an equal challenge. Yoplait Light sales are down almost 30%, according to Edward Jones analysts.

"In general, consumers are migrating away from low-calorie kinds of light products," Mr. Powell said in an interview. "We need to broaden and balance our portfolio."

Still, the company expects sales trends will improve over the remainder of the year, and General Mills' profit for the quarter came in better than analysts expected.

Edward Jones analyst Brittany Weissman said switching to simpler and trendier ingredients was wise, but reviving cereal and yogurt brands will take time in those highly competitive niches. Investors might not have the patience to wait and see if General Mills succeeds.

"They have been able to keep profits up by cutting cost, but at some point sales have to matter," she said.

U.S. shoppers are buying more Greek-style yogurt, which has more protein and less sugar, and organic varieties that don't use artificial sweeteners. General Mills doesn't have a strong brand recognition for such products. Instead, its Yoplait Light brand is built on fans of low-calorie diets and 100-calorie snacks that have gone out of style.

"The Yoplait brand isn't damaged any more than the Cheerios brand was damaged before we made them gluten free," Chief Operating Officer Jeff Harmening said. "Consumers still love the Yoplait brand, we just have to give them what they want."

General Mills is adding more varieties of organic yogurt under the Annie's Homegrown brand it bought two years ago and plotting new products such as yogurt drinks and snacks that come in different containers than the traditional yogurt cup.

General Mills' cereal overhaul appears to be working, with retail sales of cereals without artificial colors and flavors up 3% in the U.S. in the recent quarter.

"Consumers have changed relatively quickly," Mr. Harmening said in an interview. "Certain fads come and go, but satiety, the focus on protein -- we know these things aren't fads. They are trends that are here to stay."

Excluding the sale of its Green Giant vegetable brand and other items that affect comparability, sales fell 4% globally for the three months that ended in August. General Mills' U.S. retail sales fell 8% to $2.33 billion, including a 5% drop in comparable sales.

The company has also been hurt recently by a strong U.S. dollar that has cut into the value of international sales, which fell 6% to $1.13 billion in the latest quarter.

General Mills reported a profit of $409 million, or 67 cents a share, down from $426.6 million, or 69 cents a share, a year earlier. Adjusted for certain restructuring costs and other one-time items, per-share earnings fell to 78 cents from 79 cents. Analysts expected 75 cents a share, according to Thomson Reuters.

Joshua Jamerson contributed to this article.

Write to Annie Gasparro at annie.gasparro@wsj.com

(END) Dow Jones Newswires

September 21, 2016 13:49 ET (17:49 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.