General Mills raised cereal and yoghurt prices. It's working



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The company, which also owns Wheaties, Lucky Charms and Annie's, said the actual sales volume of its products fell in North America and Europe during the quarter, although they have risen in Asia.

But thanks to price increases – as well as an increase in purchase of blue buffalo manufacturer Blue Buffalo last year – total sales still rose 8% compared to the previous year.

General Mills needed to raise prices to protect its profit margins, which were threatened by rising dairy inflation, chief financial officer Donal Mulligan told analysts on Wednesday. The company owns Yoplait, the yogurt maker.

It also helps to have some brands to which people are willing to pay higher prices. Although total sales volume has fallen in the United States, General Mills still has several well-known brands that are very popular with consumers.

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CEO Jeffrey Harmening said during the teleconference that there was strong demand for Pillsbury bakery products, El Paso taco kits, Annie fruit snacks and Fiber One bars, for example.

The food industry has been difficult for many companies. Discount Retailers Walmart (WMT) and Target (TGT), along with the king of the warehouse Costco (COST)All pressured food companies to keep prices low.

Meanwhile, consumers are increasingly avoiding processed and packaged foods in favor of fresh and organic produce.

Kraft Heinz (KHC), for example, fell more than 25% this year due to falling demand for its cold cuts Oscar Mayer, Jell-O and Kraft Macaroni & Cheese. The company was so focused on cutting costs that it did not make as much as rivals, including General Mills, to continue producing new and updated brands.
Cereal company shares Kellogg (K) fell about 4% this year as well.

General Mills is not immune to problems. Shares have fallen about 5% since the spring of 2014.

But the company has found ways to put itself in a better place than its competitors. For example, General Mills has taken steps to profit from the organic trend, especially with the acquisition of Annie's in 2014. It also features organic brands Cascadian Farm and Muir Glen, as well as Liberté yogurt.

This growing shift towards organic food has helped keep prices steady despite the emergence of Amazon, (AMZN) which now owns Whole Foods and has its own brand-name grocery service.
Actions of General Mills (SIG) rose 4% Wednesday on solid results. The stock is now 26% this year.

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