General Mills Inc. is benefiting from its acquisition of Yoplait International, even as it struggles to expand its yogurt business at home.
The Minneapolis-based maker of Cheerios, Betty Crocker and Hamburger Helper said Wednesday that its fiscal first-quarter profit rose 35 percent as its purchase of Yoplait International lifted sales overseas. General Mills has licensed the brand in the U.S. since 1977 and last summer purchased a controlling stake in the company as part of its plan to focus on healthy foods and expand to other parts of the world.
In the U.S., however, the company’s push to boost its stake in the rapidly growing yogurt market has yet to unfold. In the first quarter, General Mills said U.S. yogurt sales declined 10 percent. That’s despite the introduction of nearly three dozen new yogurt items, including its 100-calorie Yoplait Greek yogurts.
CEO Ken Powell noted that most of the items started shipping toward the end of the quarter in August, and that sales should improve with the company planning to “turn on the advertising” in the months ahead.
Powell also noted that the Greek yogurt is a “good business model” because consumers are willing to pay more for it. While many other yogurts sell for as little as 50 cents, he said Greek yogurts typically sell for $1 or more.
Still, General Mills faces intensifying competition in the category, which is dominated by Chobani and Fage. Earlier this year, PepsiCo Inc. also announced plans to start selling Greek and traditional yogurt in partnership with a German dairy company.
Yoplait makes up about 14 percent of the company’s U.S. revenue.
For the three months ended Aug. 26, General Mills said it earned $549 million, or 82 cents per share. That compares with $405.6 million, or 61 cents per share, a year ago.
Not including one-time items, the company said it earned 66 cents per share. Analysts expected a profit of 62 cents per share, according to FactSet.
Revenue climbed 5 percent to $4.05 billion, which was shy of the $4.08 billion Wall Street expected.
The results in the latest quarter were boosted by the purchase of Yoplait International in July of last year; international sales rose 27 percent to $1.09 billion.
Going forward, the company expects its recent acquisition of Brazilian food company Yoki Alimentos SA to further add to sales.
In its far bigger U.S. market, however, the company said net sales declined 1 percent to $2.49 billion as price hikes failed to offset lower volumes. Although the snack food division saw revenue gains, revenue declined for its Big G cereals, frozen foods and yogurt.
General Mills noted that it expects volumes to improve as the year progress on the strength of its product lineup. In the first quarter, the company introduced more than 100 new products, including extensions of its Chex, Nature Valley and Fiber One brands. The company said it plans to put its “full advertising support” behind those new items in coming months.
Jon Nudi, who heads the company’s snack food division, said General Mills will also keep rolling out new products that feed the growing appetite for “better-for-you” snacks, such as those that have protein or fiber. That will build on the company’s purchase of Food Should Taste Good, a natural snack foods company, earlier this year.
For its fiscal 2013, General Mills expects costs for ingredients to rise by 2 percent to 3 percent. That’s far lower than the 10 percent increase last year.
With its costs inflation easing, the company said sales volumes should recover. The company stood by its 2013 adjusted earnings outlook of $2.65 per share.
Shares of General Mills rose 50 cents to $39.81 in morning trading.