General Mills (GIS - Analyst Report) has reportedly confirmed the expansion of cereal production in its Buffalo plant by including brands like Corn Chex, Honey Nut Chex and others. Notably, the facility already produces brands like Kix, Total, Lucky Charms, Wheaties, Cheerios, and Gold Medal flour.
Notably, the expansion project involves an investment of $25 million with public sector support coming from New York State of $1 million grant. The funds are in addition to the supply of low-cost hydropower and electricity from the Power Authority.
The project also involves the purchase of new packaging equipment and upgraded ingredient systems. The upgradation is expected to be completed in May 2017. Meanwhile, management reported that 417 of the current workers at the plant will be retained. At the same time, no new jobs will be created.
General Mills have been cutting costs lately to improve its bottom-line performance. Earlier this year, General Mills announced its plans to dismiss 1400 workers worldwide and close several plants owing to low demand for some of its products.
Notably, the U.S. cereal category of the company has been declining in the recent years. Revenues at this segment declined 8% year over year to $2.33 billion in first-quarter fiscal 2017. Although the cereals business showed some improvement in fiscal 2016, overall Cereal sales declined around 1% in the year.
Lower demand for cereals due to competitive pressure from alternatives including yogurt, eggs, bread and peanut butter is hurting category growth. Moreover, changing consumer views on health and wellness have hurt cereal retail sales.
However, we believe that the Buffalo plant expansion initiative should somewhat aid General Mills to reinvigorate this priority business.
General Mills currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-ranked stocks in this industry include Post Holdings, Inc. (POST - Snapshot Report) , Tate & Lyle plc (TATYY - Snapshot Report) and ConAgra Foods, Inc. (CAG - Analyst Report) .
Post Holdings – a Zacks Rank #1 (Strong Buy) stock – is expected to witness a 295.81% rise in fiscal 2016 earnings.
Tate & Lyle is expected to witness a 6.25% rise in fiscal 2017 earnings. The company carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
ConAgra Foods carries a Zanks Rank #2 (Buy). Full-year fiscal 2017 earnings growth is projected at 18.20% for the company.
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