In September of 2007, Matt Mckiney reported for the Star Tribune in Minneapolis Minnesota on the rise in price for cereal costs and the earnings of the company.
When the cost of corn went up, General Mills wasn’t sure how to prevent cost increases so they ended up making the boxes smaller. It was not something they were excited about doing, but with record prices on all of the commodities going up there wasn’t much else they could do without making each box more expensive.
“Earnings for the quarter ended Aug. 26 were up 8 percent to $289 million, with earnings per share of 81 cents, one penny more than consensus analyst estimates. The company reaffirmed its earnings per share guidance of $3.39 to $3.43 per share for the year.”
These numbers show that although they did have to shrink their product in size to accommodate for price, it was most likely the right thing to do since their stocks continued to rise after this all took place.
Although the cereal prices were the ones to take the biggest hit, General Mills also saw small increases in some on their other products such as their yogurts and a few bakeries.
“The yogurt results were "a little bit disappointing," compared with the generally positive numbers elsewhere in the earnings report, said William Frels, who manages mutual funds with 1.6 million General Mills shares at Mairs & Power Inc. in St. Paul.”
These results most likely come from the fact that the yogurts suffered from an actual price increase as opposed to small product reductions and it is clear which is more effective.
This article has helped my research by showing what General Mills in a crisis such as this and it seems that they handled it well. That is encouraging to me since I wasn’t as impressed with the way they handled their last crisis with the Eggo Brand.
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