General Mills Raises Cereal Prices

GOLDEN VALLEY, Minn. - General Mills Inc. has raised the price it charges wholesalers for its cold cereals by 2 percent, The Associated Press reports. Rival Kellogg Co. recently introduced a similar price increase.

Chief executive Steve Sanger said Monday that the price increase for Cheerios, Wheaties, Chex and other Big G cereals was based on the rising cost of wheat, cocoa and energy.

Sanger also told analysts at the annual Consumer Analyst Group of New York conference in Scottsdale, Ariz., that General Mills expects sales to increase 6 percent this year, accompanied by strong earnings growth.

Some of that growth will come through continued product innovation.

"We've had good innovation on existing lines and have much more on the drawing board," Sanger said. The Golden Valley-based food company has introduced about 100 new items in the first half of its fiscal year.

General Mills has spent the past 16 months integrating former rival Pillsbury and has completed most of the work involved with the $10.4 billion acquisition, said Randy Darcy, senior vice president of supply chain at General Mills.

The remaining effort -- a plant restructuring -- will continue through 2004. Four plants have been closed, with five more to follow. The number of vendors that the company works with has been pared from 900 to 600.

General Mills has increased its estimate of productivity savings over 10 years related to the Pillsbury purchase to close to $1 billion, up from the previous estimate of $700 million.

Sanger said sales growth potential of the company's Progresso soup and cold cereal lines is tied to the aging of America.

Consumers over the age of 55 represent a group that will grow 25 percent over the next decade, Sanger noted. Motivated by dietary concerns and a hunger for convenience, those people eat a lot of cereal and soup, he said. "Our
Progresso soup has an adult orientation. Consumption is highest among people over 55."

So far this year, soup sales are up 6 percent and cereal sales are up 2 percent.
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