General Mills Earnings Conference Call Nuggets: Yoplait and Pricing

General Mills, Inc. (NYSE:GIS) reported its second quarter earnings and discussed the following topics in it conference call.

Yoplait and China

Alexia Howard – Sanford Bernstein asked: I wanted to ask about your plan for taking Yoplait into China. I think I have seen reports over the last weeks that Danone has decided to close one of its China plants on the yogurt side and most of the reports cite intense local competition as one of the reasons for that.

I know you’ve talked about wanting to take Yoplait into China. How does that news affect the way that you think about entering the yogurt market in China? Are you using cash as widely as possible if you do so?

Christopher D. O’Leary – EVP and COO, International responded: The first thing I would say is yogurt is a big category in China, about $4.5 billion growing double digit; we clearly see that not stopping. So that’s the first thing.

I think to succeed in China, you need a combination of the right product and the right local team to execute it against those plans. As you know, we have a very strong team in China–some 4,000 plus employees mainly local Chinese–who have done a great job on brands like Haagen-Dazs and Wanchai Fairy.

With regards to the success of our (likely), we haven’t announced plans to go into China but we are looking at it.

We have to be mindful of all the considerations to make it a successful launch. So, do we have the right product, do we have the right dairy sourcing, do we have the right cold chain distribution system and relationships with the retailers?

That’s obviously all factored in.

I won’t specifically give comment on either Danone’s success or failure there, although I will say we have had tremendous success thus far in China in our other categories.

If we do launch yogurt, it would be a very mindful, very well-planned launch.

Kendall J. Powell – Chairman and CEO added: I think one of the secrets to our strong success in China is that we’ve really proven our business models in small geography before we’ve expanded.

So, anything that we do there has been to learn about the consumer reaction and dynamics and then expand.

That’s been a conservative model, but it’s worked very, very well for us.

Pricing

Ken Zaslow – BMO Capital Markets asked: Have you taken all of the pricing that you require to take to offset the higher commodity prices?  Is the implication that once February comes around that there will be greater than your long-term growth in terms of the margin expansion opportunity, given that commodities have seemingly stabilized? Can you just talk to that a little bit?

Donal L. Mulligan – EVP and CFO responded: As you know, we don’t talk prospectively about our pricing, but as we’ve been clear, we began taking pricing last really end of the third quarter, more in our fourth quarter of fiscal 2011 in anticipation of the inflation that we saw coming in 2012.

Since that pricing impact has built, as this year has unfolded, one of the reasons that we point to better profit growth in the second half, one of the factors will be that we will have that pricing fully in place.

By the way, we’re not going to talk prospectively about any pricing actions that we may or may not take.