The Price of Price Resistance for General Mills


General Mills’ earnings for its current fiscal year won’t be as good as the company expected.

The maker of foods such as Progresso soup, Hamburger Helper and Yoplait yogurt, is reducing its full-year earnings forecast by about two percent.

Edward Jones analyst Jack Russo said consumers are resisting the attempts of General Mills and other food companies to pass long rising commodity costs. And that’s hurting sales and profits.

“A lot of companies have raised prices on their products to offset higher commodity costs,” he said. “And it appears that consumers are voting with their feet and have just said, ‘Look, we can’t afford some of these higher prices’ and have cut back on purchases, perhaps looking at [grocery stores’] private label [offerings] a little bit. Or perhaps just cutting back period on what they’re spending.”

Bloomberg Research consumer products analyst Ken Shea said it’s hard to fight consumers’ frugality.

“Consumer spending is tight,” he said. “And consumers are looking for bargains. So, it’s just a tough environment for food manufacturers in general to generate sales and profitable growth.”

The federal government said grocery store prices rose by nearly five percent last year and may rise by about three percent this year.

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