Case Interview Question #00448: Our client General Mills, Inc. (NYSE: GIS) is an American Fortune 500 corporation headquartered in the Minneapolis suburb of Golden Valley, Minnesota. The company is primarily concerned with food products and consumer packaged goods (CPG). It sells yogurt, frozen pizza, frozen and canned vegetables, cookies, crackers, donuts, and other snacks. The company is well established and has been around for over 100 years. Annual revenues are $15B and the company previously had a profit margin of 20%. Recently, however, that profit margin has fallen by 30% over the last two years.
The CEO of General Mills feels that this is the result of changing market trends. Older consumers that were previously General Mills customers are not buying the same food they used to eat for their children. There are also some spikes in materials costs. In particular, the costs of flour, milk and sugar have risen recently. Previously sugar was purchased from outside the United States, but new tariffs have increased the import price.
What should the company do to reverse the trend of declining profit margin?
Additional Information: (to be given to you when asked)
- Our client General Mills feels that the new trend toward health foods is the major cause and expected to be a long term shift.
- Our client General Mills’ food products are in nation-wide markets.
- Revenues have fallen across all product lines, it does not appear to be a particular product’s problem.
- Our client previously launched a health food product that failed miserably.
- Competitors are facing the same revenue and cost problems as far as we know.