General Mills Considers Selling its North American Yogurt Division
Overview of Potential Sale
General Mills, the renowned food conglomerate based in Minneapolis, is reportedly exploring the sale of its North American yogurt operations, including the well-known Yoplait brand. This strategic move could potentially rake in over $2 billion (€1.86 billion), as the company engages with JPMorgan Chase to seek out interested buyers from among snack food competitors and private equity firms.
Financial Details and Valuation Expectations
Sources close to the matter, who requested anonymity due to the confidentiality of the discussions, suggest that General Mills is aiming for a valuation close to 10 times the yogurt division’s earnings before interest, taxes, depreciation, and amortization (EBITDA), which currently stands at approximately $250 million (€233.1 million). Both General Mills and JPMorgan have refrained from commenting on the ongoing deliberations.
Historical Context and Business Performance
General Mills has a long history with Yoplait, beginning with a franchise agreement in 1977 that granted the company exclusive rights to market Yoplait in the United States. The partnership deepened in 2011 when General Mills acquired a majority stake in Yoplait for $1.2 billion from PAI Partners and the French dairy cooperative Sodiaal, which still retains a minority stake.
The decision to potentially divest comes after a solid performance in the third quarter, where General Mills reported sales and profits that exceeded market expectations. This success was largely driven by increased pricing across its product lines including breakfast cereals, snack bars, and pet food, helping to mitigate the effects of slowing consumer demand.
Strategic Shifts and Market Position
The sale of the North American yogurt operations is viewed by General Mills as shedding a non-core asset, particularly as the company navigates stiff competition from yogurt market leaders such as Chobani and Danone’s Dannon brand. This move follows a recent pattern by General Mills to streamline its operations, as evidenced by the sale of its European Yoplait operations to Sodiaal in 2021.
During fiscal 2020, the U.S. and Canada yogurt operations of General Mills generated a combined $1.4 billion in net sales, indicating a significant but increasingly non-strategic component of their portfolio.
Industry Trends and Competitive Landscape
The yogurt industry has seen a flurry of deal-making activities recently. For instance, Campbell Soup is currently looking to sell its Noosa Yogurt unit, acquired in a $2.7 billion deal for Sovos Brands last year. Similarly, Danone parted ways with its Wallaby yogurt and Horizon milk brands, selling them to Platinum Equity for an undisclosed amount.
These transactions highlight a broader industry trend where major food companies are reevaluating and restructuring their portfolios to better align with strategic goals and market dynamics.
Implications of the Sale
Should the sale proceed, it would mark a significant realignment for General Mills as it continues to focus on core areas with the greatest potential for growth and profitability. For potential buyers, acquiring General Mills’ yogurt operations could offer an opportunity to scale up their presence in the North American market, leveraging the strong brand recognition of Yoplait.
Conclusion
The potential divestiture of General Mills’ North American yogurt business underscores a strategic pivot towards optimizing its portfolio in response to competitive pressures and market opportunities. As the company seeks to streamline its operations and concentrate on areas with more significant growth potential, the industry watches closely to see how this move will affect the broader landscape of the food sector. The outcome of these discussions could have lasting implications on General Mills’ position and strategy in the dynamic food industry.
Related: General Mills’ Good Measure Redesign
Source: ESN Magazine
