General Mills Inc., maker of Cherrios and Yoplait yogurt, will close two U.S. plants by the end of next year as the company faces flagging domestic demand for its breakfast cereal business. The Minneapolis company has embarked on a $100 million cost-reduction plan as it faces a steep decline in profits.
North America's second-largest cereal maker said Thursday it will close by the end of next year its 67-year-old cereal factory in Lodi, California, that employs about 430 workers, and a yogurt plant in Methuen, Massachusetts, with 144 employees. The company saw U.S. demand for its cereal brands drop 9 percent in its fiscal first quarter, which ended Aug. 24
“Our results were driven by sales and profit declines in the U.S., where industry trends were weak in the quarter,” Chairman and CEO Ken Powell said in the company’s earnings report. “We know we must always be working to reduce costs, streamline operations and improve efficiency across our worldwide business.”
General Mills' operating profit fell 15 percent in the quarter to $690 million and per-share earnings fell 21 percent to 55 cents. Competitors Kellogg, maker of Frosted Flakes and Rice Krispies, and Post Holdings, which sells Raisin Bran and Honey Bunches of Oats, also reported in their latest earnings statements significant declines in demand for cereals in the U.S. as consumers morning meals, like yogurt and breakfast sandwiches.
General Mills yogurt sales were up in the last quarter by 2 percent in a division that also sells organic foods and grain-based snacks. The closing of the 21-year-old Massachusetts yogurt plant is part of the company’s cost-cutting efforts. Three other yogurt manufacturing facilities will be consolidated, indicating possible jobs cuts.
General Mills’ net sales in the first quarter were $4.27 billion, lower than what had been expected. The price of the company’s shares (NYSE:GIS) has dropped nearly 3.7 percent to $51.22 since the earnings were announced Wednesday morning. So far this year the share price has climbed about 2.6 percent. The company increased its quarterly dividend earlier this year by nearly 8 percent, to 41 cents per share.