General Mills completes Canadian yogurt business sale amid strategic portfolio reshaping

General Mills, Inc. (NYSE: GIS) has finalized the sale of its Canadian yogurt business to French dairy cooperative Sodiaal. The divestiture forms part of a larger $2.1 billion agreement, announced in September 2024, to sell both its Canadian and U.S. yogurt operations. While Sodiaal assumes control of the Canadian segment, the U.S. operations are set to be acquired by Lactalis in 2025, subject to regulatory clearance.

This move underscores General Mills’ commitment to reshaping its portfolio in line with its Accelerate strategy, which aims to streamline operations and focus on high-growth, high-margin brands. Jeff Harmening, Chairman and CEO of General Mills, highlighted the significance of these transactions, stating, “With nearly 30% of our net sales base reshaped since fiscal 2018, we are positioning ourselves for stronger long-term growth and profitability.”

What does the divestiture entail?

The sale to Sodiaal includes Canadian operations of leading yogurt brands such as Yoplait and Liberté, as well as a manufacturing facility located in Saint-Hyacinthe, Québec. These brands, well-known among Canadian consumers, have been a cornerstone of General Mills’ North American yogurt business. In fiscal 2024, this segment contributed approximately $1.5 billion to the company’s net sales.

The broader deal also includes U.S.-based operations, with brands like Go-Gurt, Oui, and Mountain High set to transfer to Lactalis. This will involve terminating the current licensing agreements with General Mills for the Yoplait and Liberté brands in the U.S. and creating new arrangements with Lactalis. Sodiaal, however, retains exclusive global ownership of these brands.

How does the sale impact General Mills’ financial outlook?

General Mills has updated its fiscal 2025 outlook to reflect the financial impact of the Canadian yogurt business sale and its recent acquisition of North American Whitebridge Pet Brands. The company now anticipates adjusted diluted earnings per share (EPS) to decline between 4% and 2% in constant currency, a slight revision from the earlier projection of down 3% to down 1%. The adjustment accounts for increased interest expenses tied to the debt issued for the Whitebridge acquisition.

Despite the EPS impact, General Mills reaffirmed its forecasts for organic net sales growth, operating profit growth, and free cash flow conversion. The company plans to use proceeds from the yogurt business sales for share repurchases, a move consistent with its strategy of delivering top-tier shareholder returns.

How does this divestiture benefit Sodiaal and Lactalis?

Sodiaal’s acquisition of the Canadian yogurt business aligns with its “Grandir Ensemble” (Growing Together) strategy, which emphasizes international expansion and brand value enhancement. Jean-Michel Javelle, President of Sodiaal, called the deal a key step in reinforcing the cooperative’s position as a leading global dairy player. “This acquisition strengthens Yoplait’s legacy and our cooperative’s commitment to quality and innovation,” he stated.

The deal includes the Saint-Hyacinthe manufacturing facility, which will support Sodiaal’s operational growth in Canada. The Canadian yogurt market, valued for its dynamic consumer base, presents significant opportunities for Sodiaal to expand its product offerings and cater to evolving consumer preferences. The company anticipates the Canadian operations to generate an estimated CAD 500 million in annual revenue by May 2024.

Meanwhile, Lactalis’ acquisition of the U.S. yogurt business is expected to bolster its presence in the competitive American market. The company’s new licensing agreements will allow it to leverage the strength of Yoplait and Liberté in the region, further diversifying its product portfolio and market reach.

What is the broader impact on the North American dairy industry?

The sale of General Mills’ North American yogurt operations to Sodiaal and Lactalis marks a significant shift in the competitive landscape of the dairy industry. By exiting this segment, General Mills aims to redirect its resources toward high-growth platforms and focus on delivering value through its Accelerate strategy.

For Sodiaal and Lactalis, these acquisitions represent strategic opportunities to expand their North American market share. Analysts expect increased competition in the yogurt segment, with potential implications for pricing, distribution, and product innovation.

What does this mean for General Mills’ future?

General Mills’ divestiture of its yogurt business reflects a decisive shift in strategy, emphasizing global platforms and high-margin brands with robust growth potential. The company’s focus on reshaping its portfolio positions it for long-term success, even as it navigates near-term financial impacts.

By realigning its priorities, General Mills is leveraging its Accelerate strategy to address changing consumer demands and strengthen its competitive position in key markets. As the company moves forward, its commitment to shareholder value and operational efficiency will likely remain central to its growth trajectory.