General Mills: From Cereal to Pet Food, Built to Last

General Mills is a global packaged food company with a wide-ranging portfolio that includes household names like Cheerios, Häagen-Dazs, Pillsbury, and Blue Buffalo. From breakfast cereals and snacks to pet food and ice cream, the company spans categories that benefit from recurring consumer demand and strong brand loyalty. With a focus on innovation, value, and healthier offerings, General Mills is adapting to shifting preferences while investing in long-term growth areas like fresh pet food. The question is: Does this consumer staples giant still offer enough upside to merit a place in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in General Mills at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of General Mills, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

General Mills is an American multinational food company with a history that dates back to 1856, when it began as the Minneapolis Milling Company. Headquartered in Minneapolis, Minnesota, the company has evolved into a global manufacturer and marketer of branded consumer foods, operating in more than 100 countries across six continents. It manages its business through four segments: North America Retail, North America Foodservice, North America Pet, and International. The company’s product portfolio is wide-ranging and includes ready-to-eat cereals such as Cheerios and Lucky Charms, snacks like Nature Valley and Fruit Roll-Ups, baking products including Betty Crocker and Pillsbury, refrigerated and frozen dough, convenient meals like Totino’s and Old El Paso, and super-premium ice cream under the Häagen-Dazs brand. In the pet food category, General Mills owns Blue Buffalo, a well-known brand of natural pet food. While it previously owned yogurt brands such as Yoplait and Liberté in North America, the company has divested its yogurt operations in the U.S. and Canada as part of a strategic shift toward higher-growth categories. General Mills also holds 50% ownership in two strategic joint ventures. One is Cereal Partners Worldwide with Nestlé, which sells ready-to-eat cereals outside of North America, and the other is Häagen-Dazs Japan, which markets ice cream in Japan. The company’s competitive moat is lies in the strength of its brand portfolio, which includes over 100 brands that are widely recognized and trusted by consumers. Many of these brands have held leading positions in their categories for decades. This brand equity translates into customer loyalty, pricing power, and strong shelf positioning in retail stores. The company’s competitive moat lies in the strength of its brand portfolio, which includes over 100 brands that are widely recognized and trusted by consumers. Many of these brands have held leading positions in their categories for decades. This brand equity translates into customer loyalty, pricing power, and strong shelf positioning in retail stores. General Mills benefits from significant scale advantages in manufacturing, distribution, and marketing, which allow it to compete effectively across the packaged food industry. Its presence in a broad range of segments makes it less dependent on any single product or trend, adding resilience to its business model.

Management

Jeffrey L. Harmening serves as the CEO of General Mills, a role he assumed in 2017 after more than two decades with the company. He joined General Mills in 1994 and has held a variety of leadership roles across its North America and international businesses, including Executive Vice President and Chief Operating Officer. His deep familiarity with the company's operations and brands uniquely positioned him to lead General Mills through a period of transformation and strategic portfolio reshaping. Under his leadership, General Mills has sharpened its focus on high-growth segments such as natural and organic foods, pet food, and global snacking. Today, the company is the third-largest producer of natural and organic food in the United States, a testament to Jeffrey Harmening’s commitment to evolving consumer preferences and sustainable growth. He has also overseen major acquisitions and divestitures, including the purchase of Blue Buffalo and the recent sale of the company’s North American yogurt operations, aligning the business with long-term strategic priorities. In addition to his role as CEO, Jeffrey Harmening serves on the General Mills Board of Directors. He is also Chairman of the Board of the Consumer Brands Association and a member of the board of The Toro Company. He holds a bachelor's degree from DePauw University and an MBA from Harvard Business School. Jeffrey Harmening is known for his leadership philosophy rooted in authenticity, clarity, and teamwork, principles he believes are essential to building trust and driving performance. These values resonate with employees as well; he has received an employee rating of 80 on Comparably, placing him in the top 5% of CEOs at similarly sized companies. With his extensive industry experience, strategic acumen, and people-first leadership style, Jeffrey Harmening is well-positioned to guide General Mills as it adapts to shifting consumer trends and pursues sustainable long-term growth.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. General Mills has consistently delivered a high ROIC, historically above 10%, thanks to a combination of strong brand power, operational efficiency, and disciplined capital management. Its well-known brands, such as Cheerios, Nature Valley, and Blue Buffalo, give the company pricing power and help maintain healthy profit margins, even in competitive markets. As one of the largest players in the packaged food industry, General Mills benefits from economies of scale in manufacturing, distribution, marketing, and research. Initiatives like its Holistic Margin Management program have also contributed to improved cost control and margin performance. On top of that, the company generates steady free cash flow, which gives it the flexibility to reinvest in growth and pay down debt. Together, these strengths have enabled General Mills to achieve consistently attractive returns on the capital it invests in its business. General Mills saw a small decline in its return on invested capital in fiscal 2025, mainly due to lower profits and some short-term pressures on the business. Slower sales and tighter margins made it harder to generate strong returns. At the same time, the company spent more on acquisitions and improvements, which added to its cost base. It also faced some one-off expenses during the year, including restructuring efforts and the sale of its yogurt business. Even with the dip, the company’s returns remained healthy, and the decline appears to be a temporary result of recent changes and investments.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. From 2018 to 2022, General Mills steadily increased its equity thanks to strong business results and consistent profit growth. But since 2023, equity has declined each year. This change is mostly due to the company buying back a large number of its own shares, which reduces equity over time. In addition, profits have come under pressure from slower sales, rising costs, and one-time expenses like restructuring and selling parts of the business. As a result, the company has had less profit left over to strengthen its financial position. While the recent decline in equity reflects a period of transition, it doesn’t suggest any major financial concerns.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. It is not surprising that General Mills has delivered positive free cash flow every year over the past decade. The company has consistently shown its ability to turn profits into cash, even in more challenging environments. Although free cash flow declined in fiscal 2025 compared to the year before, it remained higher than in 2023, reflecting continued solid cash generation. The drop was mainly due to slightly lower profits and ongoing investments to support future growth, though lower capital spending compared to the prior year helped soften the impact. Free cash flow margins have remained fairly stable, indicating that General Mills continues to manage costs effectively while investing with discipline. Management expects free cash flow to stay strong and grow over time. Turning profits into cash remains a top priority, and their track record supports that commitment. Even as the company faces cost pressures and invests in new areas, management believes it can continue generating healthy cash flow thanks to efficiency programs and ongoing savings efforts. While earnings may fluctuate in the short term, the company still expects to convert a large share of its profits into cash. General Mills uses this cash to return value to shareholders through dividends and share buybacks. In recent years, most of its free cash flow has gone toward these two goals, showing that rewarding shareholders is central to its strategy. As cash generation has improved, the company has gradually increased its dividend while continuing to buy back shares, helping support the share price and provide consistent returns to investors. Looking ahead, as long as free cash flow remains strong, shareholders can likely expect both ongoing buybacks and regular dividend increases. The current free cash flow yield also suggests that the shares are trading at an attractive valuation. However, we will revisit valuation later in the analysis.

Debt

Another important aspect to consider is the level of debt, and it is crucial to determine whether a business has manageable debt that can be repaid within a period of three years. This can be assessed by dividing the total long-term debt by earnings. For General Mills, this calculation reveals that the company has 5,6 years of earnings in debt, which is above the typical three-year threshold I consider comfortable. However, this higher figure is not alarming for several reasons. General Mills generates strong and consistent free cash flow, giving it the flexibility to manage its debt without putting pressure on day-to-day operations. The company also operates in the relatively stable packaged food industry, which helps support predictable earnings and provides lenders with confidence in its financial position. In addition, a portion of the debt was used to fund strategic acquisitions that have added long-term value to the business. Management has also demonstrated a commitment to gradually reducing debt over time.

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Risks

Competition is a risk for General Mills. The human and pet food categories in which the company operates are highly competitive, both in the United States and globally. General Mills faces pressure not only from other large, well-funded food manufacturers but also from retailers that produce their own private label brands, which are often sold at lower prices. These competitors operate across both traditional retail and e-commerce channels and often have significant marketing, distribution, and innovation capabilities. In most of its categories, General Mills competes on factors such as price, product quality, brand recognition, consumer loyalty, marketing effectiveness, and the ability to respond to changing consumer preferences. Maintaining a competitive edge requires ongoing investment in innovation, advertising, and supply chain efficiency. If General Mills fails to keep up with consumer trends or if competitors gain traction with new product launches, the company risks losing market share and pricing power. Private label products, in particular, represent a growing threat. These lower-cost alternatives have gained popularity among price-sensitive consumers, especially during periods of economic uncertainty. If General Mills cannot maintain brand loyalty or justify premium pricing with clearly superior product quality, it may be forced to reduce prices or increase promotional activity, which could hurt margins and profitability. In addition, large global competitors could use their scale to aggressively price or promote products in ways that General Mills might find difficult to match without sacrificing profitability. The competitive pressure is further intensified in international markets, where General Mills also competes with local brands that may be more familiar or better suited to regional tastes.

Losing favorable brand perception is a significant risk for General Mills. The company’s success depends heavily on the strength of its brands, many of which are iconic and have been trusted by consumers for generations. When people buy products like Cheerios, Pillsbury, or Blue Buffalo, they are not just choosing based on price or convenience, they are also responding to what those brands represent in terms of quality, safety, trust, and consistency. If consumers begin to view any of General Mills’ brands less favorably, it can directly impact demand, reduce sales, and erode market share. This can happen for a variety of reasons, including product recalls, concerns about food safety or nutrition, inconsistent product quality, or negative publicity around corporate behavior. Even a single negative incident can cause lasting damage if it undermines consumer trust. In today’s digital environment, this risk is amplified. Social media and online platforms can rapidly spread negative information or opinions, whether accurate or not, which can quickly influence public perception. A viral post or video, critical news story, or activist campaign can put pressure on the brand and force the company into costly damage control. Brand perception can also suffer if General Mills reduces its advertising or promotional support, or if competitors are more successful in connecting with changing consumer preferences. For example, if the company is slow to respond to growing demand for cleaner ingredients, sustainability, or more transparent sourcing, it could appear out of touch with modern values and lose relevance with key customer groups. Ultimately, General Mills’ ability to maintain premium pricing and customer loyalty depends on continued positive brand perception. If that perception fades, the company may be forced to increase promotional spending to win back customers, reduce prices, or accept lower volumes, all of which would weigh on profitability

Customer concentration is a risk for General Mills. In fiscal 2025, Walmart accounted for 22% of the company’s total net sales and nearly a third of sales in the North America Retail segment. This heavy reliance on a single customer creates a structural vulnerability. If Walmart were to reduce its orders, change its purchasing terms, or stop stocking certain General Mills products, it could have a significant negative impact on the company’s revenue and profitability. Walmart’s size and influence also give it considerable bargaining power. As one of the world’s largest retailers, it can pressure suppliers like General Mills to offer lower prices, extend payment terms, or provide additional promotional support. Meeting these demands could compress General Mills’ margins, while resisting them could result in reduced shelf space or even delisting of products. Either outcome would hurt the company’s financial performance. The risk is not only about pricing and shelf space. General Mills is also exposed to strategic decisions made by Walmart, over which it has little control. For example, if Walmart decides to prioritize its own private label brands or shift its focus toward economy products, this could reduce consumer exposure to General Mills’ branded offerings and lead to a decline in sales. Any significant change in Walmart’s business model, competitive positioning, or customer mix could ripple through General Mills’ results. In addition, the broader retail environment is consolidating. As large retailers grow larger and smaller ones struggle to compete, the power of a few major customers increases. This shift makes it harder for suppliers like General Mills to diversify their customer base and reduces their leverage in negotiations. Losing even one large customer would be difficult to offset through other channels, especially in a competitive and price-sensitive industry.

Reasons to invest

Investing in consumer value is a reason to invest in General Mills. In response to changing consumer preferences and rising price sensitivity, the company has made a deliberate shift to offer more value across key product categories such as cereal, soup, refrigerated dough, and snacks. This strategy began in the second half of fiscal 2025, when General Mills focused on brands like Pillsbury and Totino’s by adjusting shelf pricing and launching more value-oriented marketing campaigns. The early results were clear: sales volumes increased, market share improved in terms of units sold, and household penetration stabilized after years of decline. Encouraged by this success, the company expanded these efforts to other parts of its portfolio, including fruit snacks and cereal, with similarly positive outcomes. Rather than relying on discounting alone, General Mills has taken a more strategic approach by aligning value with strong brand messaging, innovation, and packaging. For example, its “10 pizza rolls for about a dollar” campaign for Totino’s became the most shared Super Bowl ad, and Pillsbury’s “Bakes up Bigger” message helped lift sales in refrigerated dough. As fiscal 2026 begins, roughly 80% of the company’s North America Retail business is already gaining unit share, a sign that the value strategy is resonating with consumers. General Mills plans to build on this momentum by investing in value across two-thirds of its retail portfolio, introducing new pack sizes and formats to better meet shoppers at different price points and in more channels. The company also expects its volume growth to outpace revenue growth in the short term, as consumers respond to improved affordability, with dollar share catching up as pricing stabilizes and new products gain traction. Management has made it clear that achieving the right balance between volume and pricing is essential for long-term growth. During the inflationary period of the past few years, growth came almost entirely from pricing. Now, with consumer sentiment more cautious, the company is leaning more on volume to drive results, with the expectation that pricing and mix will play a larger role again over time. Altogether, this disciplined and consumer-focused approach is helping General Mills protect its market share, strengthen its brand relevance, and set the stage for more sustainable long-term growth.

Introducing healthier products is a reason to invest in General Mills. As consumer preferences continue to shift toward better-for-you options, particularly among younger and health-conscious shoppers, General Mills is actively evolving its portfolio to meet this growing demand. One of the most notable trends in food today is the increasing focus on protein. General Mills has responded by developing new offerings across its leading brands that make protein more accessible, affordable, and appealing to a wide audience. The company is expanding its lineup of high-protein cereals and snacks with products like Cheerios Protein, Nature Valley Protein Granola, and Annie’s SuperMac. These offerings not only align with health trends but also fit seamlessly into the brand identities that consumers already know and trust. The early success of Cheerios Protein, which exceeded expectations just six months after launch, reflects strong consumer interest and validates General Mills’ strategy. Management is confident this momentum will continue, pointing to nearly $100 million worth of new protein-focused innovations planned for fiscal 2026. Beyond protein, General Mills is also focused on what it calls “core renovation news”, updating existing products to better meet today’s nutritional and taste expectations. The company sees this as the most compelling pipeline of health-oriented innovation it has developed in years, with new product news and reformulations being used not only to attract attention but to support long-term brand relevance. With brands like Nature Valley, Cheerios, and Annie’s already associated with better-for-you choices, General Mills is in a strong position to lead the next wave of health-focused eating. As more consumers prioritize nutrition, label transparency, and functional benefits in their food choices, companies that can deliver on taste, health, and value will be best positioned for long-term success. General Mills’ commitment to innovation in this area, combined with its existing brand strength and scale, makes it a compelling investment opportunity as demand for healthier food continues to grow.

Pet food is a strong reason to invest in General Mills. The company’s Blue Buffalo brand has established a solid presence in the premium pet food market, and management is now focused on accelerating growth through innovation, marketing, and category expansion. After stabilizing the Pet segment in fiscal 2025, with improved performance in both dog and cat feeding, General Mills is now preparing for a national launch into the fast-growing U.S. fresh pet food market with a new line called “Love Made Fresh.” Early testing showed strong consumer interest, high repeat rates, and positive reception from retailers. With this launch, Blue Buffalo will become the only major U.S. brand offering solutions across dry, wet, treats, and fresh pet food, positioning it uniquely to meet the growing trend of “whole bowl” feeding, where pet owners combine formats. The fresh segment alone is expected to more than triple in size over the next decade, and General Mills believes it has the scale, brand equity, and refrigerated supply chain expertise to win in this space. Beyond fresh food, the company is also strengthening its core offerings with new product news and targeted media investment across its dog and cat brands, including Wilderness, Life Protection Formula, Tastefuls, and Tiki Cat. Additionally, the upcoming U.S. launch of Edgard & Cooper, a fast-growing European pet food brand acquired in 2023, adds another premium label to the portfolio. As more consumers treat pets like family, especially younger generations, the trend toward high-quality, natural, and fresh pet food continues to grow.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 4,10, which is from the fiscal year 2025. I have selected a projected future EPS growth rate of 7%. Finbox expects EPS to grow by 6,6% in the next five years. Additionally, I have selected a projected future P/E ratio of 14, which is double the growth rate. This decision is based on General Mills' historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be $27,91. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy General Mills at a price of $13,96 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 2.918, and capital expenditures were 625. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 438 in our calculations. The tax provision was 574. We have 547,6 outstanding shares. Hence, the calculation will be as follows: (2.918 – 438 + 574) / 547,6 x 10 = $55,77 in Ten Cap price.

The final calculation is referred to as the Payback Time price. It is a calculation based on the free cash flow per share. With General Mills' free cash flow per share at $4,19 and a growth rate of 7%, if you want to recoup your investment in 8 years, the Payback Time price is $46,00.

Conclusion

I believe that General Mills is an intriguing company with capable management. The company has built a competitive moat through its brand portfolio, which includes over 100 widely recognized and trusted names. It has consistently delivered a high return on invested capital above 10% for the past decade and maintains solid free cash flow supported by a steady levered free cash flow margin. Competition is a risk because General Mills operates in crowded categories where it faces pressure from both global brands and lower-priced private label products. To protect its market share and pricing power, the company must keep investing in innovation, marketing, and quality, as falling behind could lead to lost sales and eroded brand strength. Brand perception is also critical, as General Mills relies heavily on consumer trust. Any lapse in product quality, negative publicity, or failure to meet evolving consumer values could damage its reputation, reducing pricing power and forcing costly recovery efforts. Customer concentration presents another risk, with a large share of sales tied to Walmart. This gives the retailer significant leverage over pricing, terms, and shelf space, and any reduction in purchases or shift in strategy could meaningfully impact revenue. On the positive side, investing in consumer value is a reason to like General Mills, as the company has adjusted to shopper price sensitivity by offering more affordable products without diluting its brand equity. This has already driven stronger sales volumes and market share, and management sees it as a formula for sustainable growth. Introducing healthier products is another reason to consider the stock, with successful protein-rich offerings like Cheerios Protein and a growing pipeline of health-focused innovations positioning the company well for shifting consumer preferences. Pet food adds further appeal, with the Blue Buffalo brand well entrenched in the premium space and new launches like Love Made Fresh opening opportunities in the fast-growing fresh segment. Combined with innovations like Edgard & Cooper and a full range across dry, wet, treats, and fresh formats, General Mills is well placed to benefit from the long-term trend of pet humanization. While there is a lot to like, I believe there are currently more attractive opportunities elsewhere, so I will not be investing in General Mills at this time.

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