Speculation about the future of General Mills (NYSE:GISC) is not new. What’s new is that the ‘whispers’ are getting louder. Potential acquirers include Warren Buffett and 3G Capital to name two. There’s also been talk about interest on the part of Kraft Heinz (NASDAQ:KHCC) (with or without the participation of Buffett and/or 3G).
There's also the activist investor angle. The company is vulnerable ($37 billion market cap with shares off 10% over the past 6 months) and it wouldn’t be a stretch for an activist investor to push for a buyout by a larger snack vendor such as Mondelez International (NASDAQ:MDLZC).
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Adding to General Mills’ woes is the fact that one of its previous strengths – yogurt – is not doing well. Yogurt as a sector isn’t growing and analysts suggest the company hasn’t done much to innovate. General Mills sells yogurt under brands such as Yoplait, GoGurt and Annie’s.
Retailers are taking away shelf space previously occupied by those brands and turning it over to more innovative products like Chobani flips and Dannon’s zero. Simply put, General Mills has concentrated on “light” yogurt while customers have been turning to brands labeled “natural” or “organic.”
Cereal Soggy Too
Another area of loss for General Mills has been cereal. Cereal sales across the board were expected to be down 17% last year from 2009. Worse yet, there was little optimism that sales would go up anytime soon.
Consumers are concerned about lack of nutrition and about lack of convenience. Specifically, consumers want high protein, fiber and natural ingredients in a form that can be carried out of the house and consumed on the way to work or school.
Among the players mentioned most frequently, Mondelez certainly has top billing. Mondelez is known to be on the hunt, especially after it failed to acquire Hershey (NYSE:HSYD) last year despite a $23 billion bid. In addition, several activists own large stakes in the company. They include Bill Ackman, Nelson Pelz and Barry Rosenstein.
There’s also talk about the previously mentioned 3G Capital and Warren Buffett of Berkshire Hathaway Inc. Cl B (NYSE:BRK-BC) along with Kraft Heinz taking over Mondelez. There was also reporting that 3G planned to buy Mondelez alone.
Some analysts who disagree with that scenario see both Mondelez and General Mills creating growth by doing some acquiring of their own in the organic and healthy snack food space.