Why General Mills Is Expecting The Next Year To Be Rocky
In the midst of consistently rising food costs as a result of global inflation, supply chain disruptions, and wheat shortages intensified by the Russian invasion of Ukraine, the world's second largest packaged food company has issued a troubling prediction about the food industry in the coming year (via Straits Research).
General Mills — the parent company of major food brands like Betty Crocker, Cheerios, Annie's, Cinnamon Toast Crunch, and Bisquick — recently disclosed that supply chain issues and rising food costs due to inflation aren't going anywhere anytime soon (via Food Business News).
According to the Bureau of Labor Statistics' Consumer Price Index, last month food prices increased by 0.9% overall, marking the 17th consecutive month of increased food prices in the U.S. Earlier this year, financial experts predicted that the cost of common grocery store items (like eggs, fruit, bacon, and coffee) would continue to rise by double-digit percentages throughout 2022 (via CNN).
However, many major companies have faced scrutiny over soaring profits over the last quarter as the direct result of raising prices to allegedly keep up with the cost of doing business (via The Guardian). General Mills isn't an exception to this trend. Over the last fiscal year, the company reported a record-breaking 5% overall increase in sales, to the tune of $19 billion in total revenue (via Star Tribune).
Despite record profits, General Mills leadership predicts tough days ahead
The company's uptick in profits comes as a result of multiple sweeping price increases implemented by General Mills over the past year, according to the Star Tribune. However, leaders at the company report that despite recent fiscal success, it is still bracing for the year ahead.
In a conference call this week, General Mills' CFO Kofi Bruce shared that operating costs are predicted to rise by 14% over the next fiscal year (up from 8% in the previous year), while food shortages and supply chain disruptions will continue (via Food Business News). "I think we're expecting another year of uncertainty ... similar to the table that was set this year," Bruce said, adding that the company was "expecting only a modest decline in the level of supply chain disruption."
Despite the challenges posed by inflation, CEO Jeff Harmening painted an optimistic future for the company's overall business. "We are planning for rising inflation and reduced consumer spending power to lead to an increase in at-home eating and other value-seeking behaviors," said Harmening on the call.
Unfortunately for consumers, the rising costs of doing business for companies like General Mills will likely result in continued increases in everyday grocery prices, putting a further strain on the budgets of countless Americans in order to maintain a corporate bottom line.