The packaged-food maker's finance chief said input costs will stay near 4% through the third quarter before accelerating. Freight, grains, packaging and Canadian tariffs are driving the increase.
General Mills' cost problem is back-loaded. For most of its fiscal year, input-cost inflation is expected to run near where it is now. Then it jumps.
Chief Financial Officer Kofi Bruce told analysts on Wednesday's earnings call that inflation "was about 4% in the first quarter" and should stay close to that level through the third quarter. In the fourth quarter, he said, it is expected to rise to roughly 6%. For the full year, the company now sees input-cost inflation at the high end of its 4% to 6% range.
Bruce pointed to four pressures: freight, grains, packaging and tariffs on Canadian goods.
The timing matters for how the year's numbers come together. General Mills reaffirmed guidance on Wednesday for adjusted operating profit to fall 8% to 13% in constant currency, after a first quarter in which organic sales were flat. If the steepest cost increases arrive in the final quarter, a larger share of the year's margin pressure falls late, which may leave the company less time to offset it.
Management outlined how it plans to respond. The company expects help from lapping last year's investments in lower base prices, and from product mix, premium innovation and price-pack architecture, which changes package sizes and formats to reach different price points. Those are ways to lift revenue per item without broad list-price increases.
The Canadian tariff pressure came up elsewhere on Thursday. Richmond Fed President Tom Barkin said new tariffs on Canada were among the reasons he now expects price pressures to persist, part of his explanation for supporting last week's interest rate increase.
For investors, the CFO's timeline sets up two checkpoints. The second- and third-quarter reports should reveal whether inflation holds near 4% as projected, which would leave the full-year guide intact. Any sign that the 6% rate is arriving earlier, or that freight and packaging costs are climbing faster with oil above $100 a barrel, would put pressure on the profit range before the fourth quarter begins.