General Mills likes to be able to meet customer demand 98% to 99% of the time. In other words, when shoppers go looking for Totino’s or other brands, General Mills wants them to find what they’re looking for—almost without fail.
But in the three months ending February 27, service levels for Refrigerated pizza and dough have fallen to the 70% range, the company noted in a quarterly presentation Wednesday’s financial results.
Chief Financial Officer Kofi Bruce noted a “severe supply shortage” that affected those categories. The situation has begun to improve in the last few weeks of the quarter, according to the company, but supplies are still below normal levels. General Mills expects to achieve service levels in the 80% range in the current quarter.
The food giant has had a hard time meeting demand for many of its products through the pandemic, as supply chain disruptions and labor shortages curtail normal operations.
Meeting customer demand has been a “huge challenge of the year,” John Noddy, president of North American retail at General Mills, said during a phone call on Wednesday.
Nodi said the company was facing bottlenecks within its distribution centers, but that the situation has improved. “We’ve done a great job with the employee distribution centers and are satisfied with our ability to move the product now.”
Lately, the problem has been sourcing ingredients.
When it comes to refrigerated pizza and dough, “The biggest problem we see is really raw material disruptions, ingredients getting into our factories to power our products,” Nody explained. “Things like fats, oils, starches, and packaging.”
One of the ways General Mills can deal with lack of ingredients is by adjusting recipes or sourcing differently from different suppliers. But this may require the company to change the product line or modify its labels, further complicating the process.
Noddy said the company has been able to improve its service levels somewhat, but that “it’s still a little below historical levels. We have a lot of work to do, and we’re still going to be very focused on that.”
“Not only has supply chain disruptions been a challenge, but we are also facing historical levels of input cost inflation,” CEO Jeff Harming said in prepared remarks on Wednesday. “Our market basket… has been at a multi-decade high in recent months.”
However, Harming noted that the company did not have to change its forecast for the year, and still expects its cost inflation to be about 8% or 9%.
He noted that General Mills “is hedged on certain key commodities at competitive prices” for the remainder of the year, leaving the company less vulnerable to extreme volatility.
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