General Mills plans to raise $2 billion by selling yogurt division
General Mills Inc, one of the world's largest food giants, is in advanced talks to sell its yogurt business in North America for more than $2 billion. The move would include the sale of operations in the U.S. and Canada that include the well-known Yoplait brand, and reportedly the buyers could be French dairy companies Groupe Lactalis and Sodiaal.
This potential sale is a significant strategic move by General Mills $GIS-0.5% and reflects current trends and challenges in the dairy industry.
Decision to exit the yogurt market in North America
The reasons for exiting this market in North America are varied, but the key factor is increasing competition. In the US market, General Mills faces competitors such as Danone and Chobani, which have significant market share and are creating an environment where it is increasingly difficult to maintain dominance. Analysts at Bloomberg Intelligence, Jennifer Bartashus and Jibril Lawal, said in a May report that limited expansion opportunities in that market have led the company to consider a possible exit.
General Mills is also choosing to focus its portfolio on growing segments such as premium pet food and organic snacks, reflecting a trend of food companies upgrading their portfolios toward healthier and more sustainable products.
History and current situation of the Yoplait brand
Founded in France in 1965, the Yoplait brand has gradually become a globally recognised and popular yoghurt brand. However, despite its strong market position, the company has decided to sell Yoplait's European operations as early as 2021 to Sodiaal in exchange for the Canadian business and reduced royalties for the Yoplait and Liberté brands in the US and Canada.
According to the aforementioned analysts, Yoplait accounted for as much as 87% of General Mills' US yogurt sales, with the US yogurt business alone generating $1.4 billion in revenue for the 12 months ending May 2023. Despite this solid performance, it appears that the future of the yogurt market is not as attractive to General Mills as it once was.
General Mills' future growth strategy
General Mills has reevaluated its priorities and growth strategy over the past few years. The company has increasingly focused on more promising markets and products such as premium pet food and organic food. This shift is a result of changing consumer preferences, with more people seeking healthier and more sustainable food alternatives, and companies are looking to adapt to this demand.
While yogurt products still represent a significant portion of General Mills' portfolio, particularly in North America, the company no longer wants to invest as much resources and energy in this segment as it once did. Its focus is shifting to higher value-added products with promising growth potential.
Conclusion
Negotiations on the sale of the North American yogurt business to General Mills are still ongoing and a final decision has not yet been made. However, the move represents a significant change in corporate strategy that reflects broader trends in the food industry. With the shift to premium products and portfolio diversification, General Mills is showing a clear direction toward long-term sustainability and growth, even if it means leaving traditional segments such as yogurt.
For French dairy giants such as Lactalis and Sodiaal, the deal could represent an attractive opportunity to strengthen their position in the North American market and expand their influence in a key food industry market.
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