General Mills Grapples with Ingredient Shortfalls

American food manufacturer General Mills is reworking some of its product formulations as shortages of certain ingredients bear down on the company, executives said during a call with analysts this week.

“The biggest issue we’re seeing is really around materials selection,” Jon Nudi, group president, North American Retail for General Mills, said in the firm's Q3 2022 call. “So, ingredients coming into our plants to run our products.”

General Mills’ pizza, refrigerated baked goods, and hot snacks businesses faced shortfalls in supplies of fats, oils, starch, and other inputs during the last quarter. While the firm has worked to overcome these issues and recently made some improvements in product availability, Nudi remarked, “our service levels are still quite a bit below historic levels” for the platforms.

Company senior executives are now meeting once a week to focus on the company’s ingredient needs and communicate with suppliers. General Mills is also starting to alter some of its product formulations.

“In some of our products, we’ve reformulated over 20 times year to date,” said Nudi. “Every time you make an ingredient change, you have to change the formulation, which is obviously a lot of work by our two teams.”

Food manufacturers are also encountering dramatically higher prices for ingredients. Prices of cooking oils and shortening rose by 44% between February 2021 and February 2022, according to the CPG industry trade group Consumer Brands Association (CBA). The cost of wheat grew by 37.7% during the year.  

“We’re seeing broad-based inflation across our ingredients,” Kellogg Co. CFO Amit Banati detailed in the firm’s Q4 2021 earnings call in February, singling out oil, wheat, and corn in particular. The company said it deployed productivity and growth management initiatives, as well as shifted the price and mix of its products, to counteract input inflation.