General Mills is one of those companies that benefited a lot from the big swings in consumer purchasing behavior caused by the pandemic. Yet it's lately been cutting jobs.
The message in this news for all those businesses that prospered during the pandemic seems clear: Going back to normal isn't going to be that much fun.
There's almost always more than one thing going on in any business story, and that's true here. The product categories served by General Mills haven't all been booming, for one thing. And its huge growth during the pandemic stood out in part because it's in an industry that for many years had a tough time lifting sales.
The best-positioned businesses last spring as the pandemic erupted were those that sold substitutes to in-person services. Think of Peloton Interactive selling fitness bikes and online classes to people who couldn't go into the gym. Or Disney and Netflix providing streaming subscriptions to movie buffs with no place to go.
Anybody who sold tools to enable productive work from home obviously did very well, too.
In looking at the quarterly results for Zoom Video Communications, it's actually a little bit surprising that revenue in the quarter that ended in January 2021 was only up 369% from revenue it booked in the last full quarter preceded the pandemic.
In the retail industry, any list of the beneficiaries has to include Target Corp. of Minneapolis, which saw sales growth last year that exceeded the previous 11 full years combined. Sales were up nearly 20% for the fiscal year. What the company calls drive-up, meaning customers just pulling into the parking lot to get their purchases walked out to the car, shot up more than 600%.
Only a relative handful of the largest retailers offered shoppers curbside delivery before the pandemic. By the summer of 2020, nearly half of them did, and retail sales did not roll off the table.
Whether Americans ate more during the pandemic is not easy to say, but where they consumed food certainly changed. A lot of meals had been eaten in schools and offices that were closed down. Of course, in-person dining at restaurants was also disrupted.
Consultants at McKinsey & Co. knew that consumer packaged goods (CPG) saw more growth last year than in the previous four years combined, but sales growth really varied between CPG categories and providers.
In its research note, McKinsey tried to distinguish between products that were being consumed a lot more in the home from products that consumers chose to stock up, in the rush of buying they called "pantry loading."
Sales for some products actually slipped earlier last year, such as cosmetics and fragrances, what with parties canceled and more office work from home. Snacks did not do well, either, maybe because hungry, Zoom-schooled kids could simply walk to go to the refrigerator and polish off whatever was left over from dinner.
But the chart-topper product category in McKinsey's work, with both a spike in at-home consumption and a lot of loading up in the pantry, was a category called packaged meals. In the March to October period of last year, the first six months of the COVID-19 pandemic, sales in this category increased more than 225%.
General Mills sells a lot of different stuff, from baking mixes to yogurt, and is a major player now in the premium pet food business. In the financial filings of General Mills, what stands out is a category that consists of things like meal kits, boxed meals, soup and frozen pizza. The company calls this "convenient meals."
Offering ever-greater convenience was once the winning strategy in the packaged food industry, for General Mills as well as others. Hours worked and average commuting times had both been inching up since the 1970s, leaving a lot less time for, among other things, making dinner.
Greater convenience has been yesterday's growth strategy now for years, as consumers increasingly turned instead to buying fresh and organic foods — up until workplaces and schools shut down. Then consumer convenience once again mattered a lot.
Sales for products on a line called "U.S. meals and baking" in the General Mills regulatory filings increased 31% in the quarter ended last August. This is quite a turnaround from the nine months ending in February 2020, the last accounting period before the pandemic, when sales in this category declined 1%, just like they'd done the previous full fiscal year.
It's worth noting the enormous amount of hustle and problem-solving it took within General Mills just to step up production that much, from keeping workers safe from the spread of COVID-19 to lining up additional suppliers.
The sales growth rate in U.S. meals and baking slowed to 18% in the second quarter and slipped again to 15% in the last reported quarter. The company will report its fourth quarter in a couple of weeks.
That hasn't been the only thing happening at the company, though, which has lately been talking about a new "accelerate" strategy. Only recently did it become clear that the new direction meant maybe one in five of the roughly 3,000 jobs at its Golden Valley headquarters could be gone.
There's not much evidence in the financial statements that General Mills staffed up during the pandemic, which would signify that it might now need to scale back. And executives have said they're not cutting jobs to maintain the recent gains in operating profit margin.
Instead, they say they want to free up more budget to do the things that should lead to more growth, such as e-commerce and other technology-oriented initiatives.
What was striking in the investment conference presentation that laid out some of the principles of the accelerate strategy was the modesty of the targeted sales organic growth rate: 2% to 3%.
At well-managed companies like General Mills, leaders knew all along that back to normal meant that the normal old challenges would be back, too.