General Mills, Inc. (GIS) has made a significant move, announcing the sale of its North American yogurt business to French dairy giants Lactalis and Sodiaal for a total of $2.1 billion. This strategic move marks a departure from the yogurt market for General Mills, allowing them to focus on other promising sectors.
Under the agreement, Lactalis will acquire the U.S. yogurt business, while Sodiaal will take over the Canadian counterpart. The transactions are anticipated to be finalized by 2025, pending regulatory approvals and other standard closing conditions. General Mills expects these sales to have a slight dilutive impact on adjusted earnings per share in the first year after closing, excluding transaction costs and one-time impacts. The company plans to utilize the net proceeds from the sales for share repurchases, demonstrating its commitment to shareholder value.
The decision to exit the yogurt market is driven by increasing competition from industry giants like Danone (DANOY) and Chobani Inc., coupled with limited market penetration for General Mills. Analysts Jennifer Bartashus and Jibril Lawal from Bloomberg Intelligence noted these factors as key influences in the decision.
General Mills is actively re-evaluating its portfolio, shifting its focus towards growth sectors such as premium pet food and organic snacks. This strategic realignment reflects the company’s commitment to staying ahead of the curve in a dynamic market.
In 2021, General Mills transferred its European Yoplait operations to Sodiaal in exchange for the Canadian business and reduced royalty rates for the Yoplait and Liberte brands in the U.S. and Canada. This move foreshadowed the company’s growing interest in streamlining its operations and concentrating on its core strengths.
General Mills’ U.S. retail yogurt business, dominated by the Yoplait brand, generated $1.4 billion in sales in the 12 months leading up to May 19. The company plans to provide further details about the financial impact of the transactions during its first-quarter results announcement on September 18, 2024.
GIS stock has experienced a strong performance over the past year, gaining over 10%. Investors seeking exposure to this sector can explore ETFs like the Invesco Food & Beverage ETF (PBJ) and the First Trust Nasdaq Food & Beverage ETF (FTXG).
GIS shares closed lower by 0.88% at $72.48 on Thursday.
