General Mills Raising Prices as Costs Rise

MINNEAPOLIS ( TheStreet) -- General Mills ( GIS) said the trend of rising food prices isn't going away, and it will raise prices to offset higher costs and slower volume.

CEO Ken Powell said Wednesday he didn't believe food prices would come down this year as they did last year.


"It would be highly unlikely that we'll see price declines," Powell said in a meeting with investors. "The long-term trends are inflationary, not deflationary. You're going to see pricing in a significant way."

General Mills said it would implement price increases to help offset higher costs for ingredients and food, The Wall Street Journal reported. The company did not say how much it would raise prices.

Shares of General Mills, the maker of food brands Pillsbury, Progresso, Cheerios and Yoplait, among many others, fell 0.5% to $36.87 in early afternoon trading.

The company intends to rely on higher prices paid by consumers -- even though sales volume is expected to decrease -- to help boost top-line revenue into fiscal 2012.


In late June, General Mills forecast revenue growth in the mid-single digits. Despite price increases, General Mills said investors should expect its profit this year -- and particularly in the current quarter -- to be pressured by higher costs.

A roster of companies from Starbucks ( SBUX) and Kraft Foods ( KFT) to Tyson ( TSN) and McDonald's ( MCD) have reported that higher costs were eating into their bottom lines; each has instituted price increases to offset those costs.

In May , Starbucks announced a 17% price hike in bagged coffee, echoing J.M. Smucker's ( SJM) move a day earlier when it raised coffee prices by 11%, its fourth price hike this year.


-- Written by Miriam Marcus Reimer in New York.

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