By Danielle Wiener-Bronner, CNN Business
If you’ve been struggling to find Pillsbury dough or Totino pizza rolls lately, it’s not you. It’s General Mills.
The company is struggling to meet demand for its chilled pizza and pasta in the United States.
Generally, General Mills likes to be able to meet customer demand 98-99% 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 ended Feb. 27, service levels for refrigerated pizza and dough fell 70%, the company noted in a presentation for its quarterly report financial results on Wednesday.
Chief Financial Officer Kofi Bruce cited “acute supply shortages” affecting these categories. The situation began to improve in the last 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 grocery giant has struggled to meet demand for many of its products during the pandemic as supply chain disruptions and labor shortages curtailed normal operations.
Meeting customer demand has “been a big challenge for this year,” said Jon Nudi, president of North America retail at General Mills, on a call with analysts Wednesday.
The company was facing bottlenecks in its distribution centers, but that situation has improved, Nudi said. “We’ve done a good job staffing distribution centers and are happy with our ability to move product now.”
More recently, the problem has been the supply of ingredients.
When it comes to chilled pizza and dough, “The biggest issue we’re seeing is really raw material disruptions, the ingredients coming into our factories to make our products work,” Nudi explained. “Things like fats and oils, starch and wrappers.”
One of the ways General Mills can deal with ingredient shortages is by tweaking recipes or sourcing from different suppliers. But it could force the company to change a production line or modify its labels, adding complexity to the process.
The company was able to improve its service levels somewhat, Nudi said, but they “are still a bit below historic levels. We still have a lot of work to do and we will remain very focused on that.
General Mills also noted that the cost of its basic products was increasing. Wheat prices have soared this year and high inflation has affected commodities across all sectors.
“Not only have supply chain disruptions been a challenge, but we’re also facing historic levels of input cost inflation,” CEO Jeff Harmening said Wednesday in prepared remarks. “Our consumer basket…has reached its highest level in several decades in recent months.”
Harmening, however, noted that the company has not had to change its outlook for the year and still expects its costs to be inflated by around 8% or 9%.
He noted that General Mills is “hedged on certain key commodities at competitive prices” for the rest of the year, making the company less prone to extreme volatility.
General Mills raised prices to help offset inflation, passing those costs on to consumers.
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