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General Mills sees gluten-free products as major drivers of sales

General Mills has successfully entered the tricky gluten-free food market.

It can be difficult for a major existing corporation to successfully enter the gluten-free food market. Such companies may find it difficult to adhere to strict regulations that gluten-free foods must adhere to, as most have produced, and will continue to produce, gluten-containing foods in their manufacturing facilities. What’s more, developing gluten-free foods is expensive and time-consuming. Companies must often undergo trial-and-error to retain a food’s flavor, texture, and consistency without including gluten, which is often used to give structure and elasticity to foods.

One company that has managed to enter the gluten-free market successfully is multinational food corporation, General Mills.

General Mills has expanded its gluten-free offerings to 600 since its first gluten-free launch in 2008. The company experienced slow sales in the first half of 2015 in its US retail business and identified three areas of products it would focus on in the future to improve sales, two of which include gluten-free products.

General Mills launched its first gluten-free product in July 2008: Rice Chex cereal. Since then, the company’s gluten-free products have grown to reach over 600 and their global reach has expanded. For example, General Mills’ gluten-free Corn Flakes are available in 17 countries around the world.

Source: CHEX

A range of General Mills’ Chex Gluten-free cereals                                                                                              Source: CHEX

 

General Mills has outlined that it sees gluten-free as a priority to improve its US retail business in the second of financial year 2015. The company’s first half-year results were poor: US retail sales were down by 3.5%, which executive vice-president and chief operating officer of the US retail segment, Jeff Harmening, put down to “the slowdown in overall US food and beverage industry sales.”

Harmening outlined three priorities to improve US retail growth, including yogurt products as well as boosting cereal and healthy snacks sales, the latter two of which contain gluten-free products. All product priorities are to improve products in a way that would appeal to a more health conscious consumer.

The company’s cereal sales were down by 3% in the first half of 2015 compared to the same period in 2014, but Harmening thinks this could be turned around by focusing on consumer trends, such as gluten-free. He used the example of Chex, which has seen strong growth, to indicate the success these products can expect.

He said, “The past few years have seen a sharp rise in consumer interest in gluten-free foods. We have leveraged that consumer insight to drive an incredible turnaround on our Chex cereal business. Chex was on a steady downward trend for most of the 2000s. Retail sales declined 50% between 2002 and 2009. Since fiscal 2010 when we began marketing the brand as a gluten-free cereal, Chex has grown at a 10% compounded rate. We expect Chex to grow again in fiscal 2015, including contributions from our new Chex gluten-free oatmeal.”

Harmening outlined the launch of a number of new gluten-free cereals, including two Cascadian Farm granolas. Additionally, from July 2015, five Cheerios products will become gluten-free, with gluten-free Cheerios packs reaching shelves in around August or September.

As Chex witnessed a boost in sales after it was marketed as gluten-free, so Cheerios may see a jump in sales. If this pattern emerges, it’s likely the company will provide further gluten-free options and may spur other companies to do the same.

The grain snacks segment performed well in H1 2015, delivering 5% growth compared to the same period in 2014, while fruit snacks grew by 4%, and natural and organic snacks grew by 18%.

This explains General Mills’ eagerness to concentrate on snacks that appeal to a health-conscious consumer. The company’s gluten-free product launches in 2015 include snack bars and dips from the Food Should Taste Good brand. This should help cement this segment as a consistent producer of sales growth.

For more on the rising gluten-free market, check out our case study by clicking here.

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