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MINNEAPOLIS -- General Mills Inc. is hoping consumers can stomach higher prices for its Totino's snacks, Green Giant frozen vegetables and other products, in order to boost the company’s profit and revenue after promotions and higher commodity costs hurt its fiscal second-quarter results.
The Wall Street Journal reported that General Mills will raise prices on its refrigerated baked goods, hot snacks and frozen vegetables on Jan. 3 -- after last month doing the same to some of its cereal brands -- in response to higher input costs for commodities.
The company expects the higher costs that are affecting most food manufacturers to help tame the overall promotional environment and bring an end to aggressive deals that have been used to sell everything from cereals to soups. That is likely to help overall sales for the industry.
General Mills said both profit and sales in the second half of its fiscal year are likely to be higher than in comparable prior-year periods, according to the newspaper report.
Other food makers, such as Kellogg Co. and ConAgra Foods Inc., also are banking on higher prices and moderating promotions to help profits in coming months after experiencing setbacks from chopping prices too much recently.
The challenge, however, will be persuading still-cautious consumers to spend more for products they have become accustomed to buying on sale, the Journal report noted.
General Mills Chairman and Chief Executive Ken Powell said shoppers still remain hesitant, using more coupons and sticking to shopping lists. "The consumer does, I think, continue to be careful," Powell said during a recent earnings call with analysts.
In an interview later, Powell said the prices will rise modestly and that General Mills wants to keep its products affordable for consumers. Prices across General Mills cereal brands are up less than 1 percent."These are modest increases that consumers will be able to absorb," he said.
General Mills also plans to offset some of the projected 4-percent to 5-percent increase in input costs by trimming expenses elsewhere. For instance, the company is now buying rice for its Rice Chex cereal from a source closer to the manufacturing plant, lowering transportation costs.