General Mills Weathers the Storm

General Mills, Inc. [[GIS]] continues to see its products fly off the shelves as consumers eat at home to conserve money, but higher costs for key ingredients and a stronger dollar may end up eating into its performance. Regardless, the cereal-maker announced that it would meet or exceed its goals for fiscal 2009 while many analysts also remain confident in the company’s prospects.

“We believe the company’s strategy to remain focused on new product innovation supported by increased consumer marketing spending is well conceived and should drive consistent earnings growth at General Mills for years to come,” wrote Citi Investment Research analyst David Discoll in a research notes to clients after reiterating his rating on the company.

Other experts aren’t so confident in the future of the U.S. food sector after it lost 27 percent in 2008, according to the Dow Jones U.S. Food Producers Index. The costs of key ingredients like corn and oil rose to record highs over the summer, which hurt margins despite efforts to raise prices to offset the costs. Meanwhile, several large industry players were even forced to declare bankruptcy.

Luckily, General Mills and others with strong brands and pricing power were not so affected by the downturn. These strong brands have seen great sales in recent months as cash-strapped consumers looked to save money this year on food costs by purchasing from grocery stores rather than going out to eat. Meanwhile, some hedges against commodity costs have turned out to be successful.

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