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Takeaway: GIS is staying on our Hedgeye Consumer Staples Best Idea list as a Long, as we look at the great possibilities FY16 will bring.

General Mills has just announced the removal of artificial colors and flavors from its cereal.

“We’re simply listening to consumers and these ingredients are not what people are looking for in their cereal today,” Said Jim Murphy, president of the Cereal division. The change will affect roughly 40% of GIS cereals over the next two to three years. Currently, about 60% of GIS cereals are already free of artificial sources and have been that way for years.

This move comes as consumers are asking for simpler ingredient decks, with less added chemicals such as Yellow 5. In most cereals you will barely be able to see a difference, but others such as Trix and Lucky Charms may have slightly different colors. 

We continue to love the cereal category, and think that GIS is going lead it to greener pastures. This latest innovation by GIS is a big step and they are putting a lot of effort in across the organization to make sure it is done right.  R&D is obviously leading the pack ensuring that quality and taste are not sacrificed in the process of taking out these unwanted ingredients. While marketing will be tasked with delivering the message, educating consumers about the changes and that General Mills has them at top of mind.

GIS | Fundamentally Turning the Ship Around - GIS Artificial color chart 1

GIS | Fundamentally Turning the Ship Around - GIS artificial color chart 2

General Mills is fundamentally turning this ship around as they continue to listen to the consumer. Management continues to impress us with their desire to adapt to the changing taste preferences of consumers. Heading into a very important FY15 Q4 announcement next Wednesday, we are confident in their ability to match consensus or possibly top it by a penny. GIS is staying on our Hedgeye Consumer Staples Best Idea list as a Long, as we look at the great possibilities FY16 will bring.