General Mills’ $1.2B bet on pet treats falls victim to poor timing

Three years later, the maker of Blue Buffalo is downgrading the value of its True Chews and Top Chews brands over "lower future sales and profitability projections," per a recent filing. The Nudges brand may soon follow.

After a strong run during the pandemic , pet food has not been the same growth machine for Golden Valley-based General Mills this year, and treats are partly to blame. Treat sales are facing a one-two punch of pet parents returning to the office and cutting out discretionary purchases.

"The dollars in the pet category have declined slightly, but that's only because the treats portion of the category has declined because it's more price sensitive and it's more discretionary," Harmening said at an investor conference in September.

The CEO is hoping stocking stuffers for the nation's dogs will turn things around for the company's $2.3 billion pet food business, which saw overall sales drop for the first time last year.

"We're launching more innovation, including incremental seasonal offerings, that should help us build momentum," Harmening told analysts in September. "Treating for pets is a little bit seasonal."

Treating used to be an everyday occasion for pet owners working from home during the pandemic. With more employees back in the office at least a few days a week, there are fewer opportunities to empty the treat bag. Wet pet food, often used as a topper for bowls of kibble, has seen declines for the same reason.

General Mills moved to save money producing pet treats last year in the face of declining sales. The company closed the Iowa pet treat plant it bought from Tyson and found third-party manufacturers to make pet treats instead.

Blue Buffalo, which General Mills bought for $8 billion in 2018, has benefited greatly from the "humanization" of pet food, a willingness to pay more for quality ingredients. As that trend hits the belt-tightening end of a long run of inflation, General Mills is increasingly relying on advertising and retail promotions to keep Blue Buffalo growing, Harmening said.

"The work we really have to do now is to get treats back growing again," Harmening said. "At the end of the year, we're going to say, yes, look, we have bent the curve on growth."

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