While plenty of companies struggled with raw costs, and missed their quarterly earnings estimates as a result, General Mills outperformed.
Chairman, CEO and President Kendall Powell told Cramer Tuesday that his team saw the signs of coming commodity inflation as many as four years ago as demand overseas started to grow. That’s when they took a new approach to rising prices they call “holistic margin management.”
The strategy is a “total focus on eliminating waste at General Mills,” Powell said, by finding ways to cut costs, use less fuel, run plants more efficiently and distribute products better. “And it’s held us in great stead.”
General Mills was so focused on productivity that the company even studied NASCAR mid-race tire changes. Powell said GIS has changeovers to make in its factories and plants that are crucial to the business.
“We’ve got to keep those assets moving,” Powell said. “So we actually did send a team out and looked at a NASCAR pit crew and said, ‘Hey look, if they can do it that fast, so can we.’”
The resultant momentum from this productivity has carried the company, even past energy costs that were $500 million more than expected. Powell is expecting the next three years to be even better than the past three, he said.
General Mills have grown consistently overseas as well, a good development since the points for international business were always given to Kellogg. Where only 5% of General Mills’ sales came from outside the U.S. 10 years ago, that number will increase to just under 25% this year, Powell said, thanks to a growing middle class in China.
New products are driving revenues at GIS, too. Fiber One, a popular cereal is now also sold as a snack bar. It brought in $100 million in its first year.
Investors can expected “many more upside surprises for GIS,” Cramer said.
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