General Mills Hikes Prices on Some Cereals, Baking Brands

October 25, 2010
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Big G is boosting the prices of some of its cereals and baking products, the clearest signal yet that food makers will pass some price pressure from higher commodity costs on to retailers and consumers.

General Mills, Inc., Minneapolis, says that it’s implementing what is described as “low single-digit” percentage price increases on select cereal brands and slightly higher increases on some baking products, such as flour and baking mixes, according to a spokesperson.

The price increase, which the company says will go into effect Nov. 15, will involve about one quarter of its cereal business in the United States. The company didn't disclose the names of the brands that will be affected. General Mills also is increasing the prices on some baking products, including flour and baking mixes. Those changes will on average amount to a mid-single-digit price hike on certain products in the baking category. Higher input costs necessitated the changes, the company says. It has been using productivity improvements and cost cuts to offset raw material pressures and will continue doing so, the spokesperson points out.

The move could pave the way for a wave of price increases. Such increases in 2008 drove profits and stocks higher for some industry players. Food companies have been trying to entice recession-weary shoppers with major promotional campaigns, but the more recent increases in commodity prices are pushing many of these companies to weigh raising prices.

The new price hikes would come at a time of widespread caution among consumers, who are still jittery about the pace of the economic recovery and are still trying to save rather than spend. And higher prices could put some retailers in a bind. Major supermarket operators, also cautious about the consumer recovery, will have to decide whether to boost shelf prices or sacrifice profits.

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