General Mills, Inc. - Shareholder/Analyst Call

| About: General Mills, (GIS)

General Mills, Inc. (NYSE:GIS)

September 26, 2011 12:00 pm ET


Unknown Speaker -

Ian R. Friendly - Executive Vice President and Chief Operating officer of Us Retail

Roderick A. Palmore - Chief Compliance & Risk Management officer, Executive Vice President, General Counsel and Secretary

Unknown Executive -

Peter C. Erickson - Senior Vice President of Innovation, Technology & Quality

Kendall J. Powell - Chairman and Chief Executive Officer

Kendall J. Powell

Ladies and gentlemen, good morning to one and all, and welcome to the 83rd Annual Meeting of General Mills shareholders. I'm Ken Powell, the Chairman and Chief Executive Officer of the company. It is exactly 11:00. We have a quorum. All official papers are on file, and the inspectors of election have been appointed, so I will call this meeting to order.

I'll begin today with an overview of our company's recent performance and our plants for future growth. Then, Peter Erickson, who is our Senior Vice President for Innovation, Technology and Quality, will provide an update on our product innovation efforts and a key philanthropic initiative that leverages the talent of the people in his organization. And then I'll introduce this year's Champions Award winners. These are employees who've made particularly notable contributions to our performance during the past year, and after that, we'll cover today's business agenda and, of course, take your questions.

Let me quickly remind you that our comments on the future are based on our current views and assumption. This slide points out that there are many factors that could cause our future results to be different than our estimates.

General Mills posted good performance in fiscal 2011. Sales grew to $14.9 billion. Segment operating profit grew faster than sales, up 4% to exceed $2.9 billion, and our earnings per share grew 8% to $2.48, adjusted for certain items affecting comparability of our result year-over-year. We were pleased with our results in 2011 because it was a challenging environment for food manufacturers. Input costs increased throughout the year and consumers around the world remain cautious in a very uncertain economy.

Performance in our U.S. Retail segment reflected these challenges. Sales totaled $10.2 billion, essentially matching the previous year's results. However, we saw good sales increases on a number of key businesses, including Nature Valley and Fiber One snack bars, Progresso soup, Old El Paso dinner kits and LÄRABAR and Cascadian Farm natural and organic foods. Performance by our Bakeries and Foodservice segment outpaced the U.S. foodservice industry. Our net sales grew 6% and operating profit rose 16% to exceed $300 million for the first time in company history. Our International segment results also were strong with sales increasing 7% to nearly $2.9 billion. Segment operating profit grew at a double-digit rate. And finally, our Cereal Partners Worldwide and Häagen-Dazs Japan joint ventures contributed $96 million in after-tax earnings last year.

Our good financial performance was reflected in price appreciation for General Mills stock during 2011. Combined with dividends, our total return to shareholders was 14%. This did lag the very strong returns posted by our peer group and the broader market for this 12-month period. However, our results followed an exceptionally strong 43% return to GIS shareholders in fiscal 2010.

General Mills has a long track record of creating superior returns to shareholders. Whether you look at the past decade or the past 20, 30 or even 50 years, General Mills has consistently outperformed the broader market. Now over these years, our company has gone through many transformations. 30 years ago, we were a premier consumer products company with a portfolio ranging from restaurants to toys and fashion. In the '90s, we refocused on consumer foods, and this fall, we'll celebrate the 10th anniversary of our acquisition of Pillsbury, which transformed General Mills into a food company with international capabilities. International expansion will be a significant growth engine for us in the years ahead.

Today, we're leveraging our portfolio around the world to appeal to 4 key consumer groups that will drive our growth. The Baby Boom generation includes 1.2 billion people worldwide who are over the age of 50. These consumers have a particular interest in foods with health and wellness benefits. The Millennials are ages 17 to 34 and are the largest consumer segment. They like to experiment with food and they look for options that are natural, simple and local. And Multicultural consumers in the U.S., along with the rising Middle Class in Emerging Markets, represent the fastest growing consumer groups for us.

We see 5 key drivers of our future growth. The first of these is product innovation. Consumers everywhere are looking for foods that provide health benefits, convenience and great taste, and we work continuously to improve our established brands and create great new food products, and Peter's going to tell you more about these initiatives in a few moments.

Our second growth driver is protecting and expanding margins. Holistic margin management is our discipline of using productivity, mix and pricing to offset input cost inflation, and we've been able to protect the gross margin in recent years despite inflation that has averaged between 4% and 5% across this period. Strong gross margins give us the ability to fund continued high levels of investment in advertising and other brand-building programs. Our company-wide media spending totaled more than $840 million last year. And we're accelerating our investment in new media. For example, our spending on digital media, such as websites and other Internet outlets, has been growing by double digits over the past several years. Multicultural consumers are another focus of increased media spending. For example, General Mills is the top Hispanic advertiser among food companies and Qué Rica Vida is our successful Hispanic marketing platform.

We're also driving growth by partnering effectively with our retail and Foodservice customers. Traditional grocery stores are the largest customer group and our sales in these outlets have been increasing at a low single-digit rate. Our sales in supercenters and club stores are growing at high single-digit rates, and our sales in retail formats such as drug, dollar and discount stores are posting the fastest growth, up by double digits. We'll continue to bring our industry-leading sales capabilities to all of our customers.

Our fifth growth driver is international expansion. As I mentioned earlier, this is a significant opportunity for General Mills in the years ahead. We now have 5 global platforms to build on. Ready-to-eat cereal is our largest platform, generating $3.8 billion in sales company-wide. This includes our 50% share of sales for Cereal Partners Worldwide, our joint venture with Nestlé. Häagen-Dazs sets the standard for super premium ice cream. Net sales for our Häagen-Dazs business in international markets, plus our 50% share of revenues from our joint venture in Japan, total approximately $750 million. Convenient meals generate around $1.9 billion in annual sales for General Mills. Our international brands include Old El Paso Mexican foods and Wanchai Ferry Frozen Dim Sum and noodles.

Our fourth global platform is wholesome snack bars. This is a growing business in markets worldwide and generates $1.1 billion in sales for General Mills. Our fifth and newest global platform is refrigerated yogurt. We've marketed the Yoplait brand in the United States since 1977, and as of July, we now market Yoplait yogurt internationally in a partnership with Sodiaal, a dairy cooperative in France, and we're very excited about the opportunities in this great category.

Worldwide, the yogurt category generates $65 billion in retail sales and Yoplait is the second largest brand. This acquisition will add roughly $1.2 billion to our company's reported net sales in 2012, and we intend to work with Sodiaal to build the Yoplait brand in existing markets and expand into new markets.

So looking across all of our operations, we see excellent long-term growth prospects for our business. We believe General Mills should deliver low single-digit sales growth year in and year out. We expect operating profit to grow faster than sales over time, increasing at a mid-single-digit rate. And we believe our earnings per share should grow at a high single-digit compound rate. We'd expect that high single digit EPS growth to translate to high single-digit stock price appreciation over time. And combine that with a dividend yield of 2% to 3%, and we should deliver double-digit total returns to our shareholders over the long term.

We've met or exceeded these long term goals over recent years despite a tough operating climate. Since 2007, net sales have grown at a 5% compound rate. Segment operating profit has increased at a 7% rate, and adjusted diluted EPS has grown at a 12% compound rate. This good growth has allowed us to increase shareholder dividends. Since 2007, our annual dividend has grown more than 50%. In June, we announced a further 9% increase to a new annualized rate of $1.22 per share, and I'm pleased to report that earlier this morning, the board approved a quarterly dividend at the prevailing rate, payable November 1 to shareholders of record on October 10. General Mills has now paid dividends without interruption or reduction for 113 years. Our goal is to increase dividends with earnings growth over time.

Our business results have translated into good stock price performance in a very turbulent equity market. Over the last 4 years, shares of GIS have appreciated 25%, ahead of our peer group, and well ahead of the S&P 500. I'm also pleased to report that our business is off to a good start in fiscal 2012. We reported first quarter results last week. Net sales grew 9%, including one month of business from the Yoplait acquisition. Operating was -- profit was down 3%, as expected, reflecting higher input costs and increased advertising investment, and adjusted earnings per share of $0.64 matched prior year results. This puts us on track to achieve our full year sales and earnings targets for 2012.

As we look to our next phase of growth, we've established fiscal year 2015 targets for net sales, the segment operating profit and earnings per share, targets that are consistent with our long-term growth model. And these 2015 targets don't include any contribution from the recent Yoplait acquisition, which we expect to enhance our future growth.

Achieving our financial goals is our responsibility to shareholders. But we work to serve the needs of all of our stakeholders in the communities where we live and work. For example, in fiscal 2011, we contributed more than $2 million to disaster relief efforts around the world, from aid for the earthquake and tsunami Japan, to helping tornado victims in Joplin, Missouri, to humanitarian relief for the famine in Somalia. We're also fighting hunger here at home. We recently pledged $1 million as the founding partner of Hunger-Free Minnesota. This partnership of local food banks, the United Way and several corporations has a goal to provide 100 million meals every year for adults and children in Minnesota. And our initiatives reach beyond our state.

Let me now introduce Peter Erickson, who will tell you more about how our product development work and our people are nourishing lives around the world. Peter?

Peter C. Erickson

Thanks, Ken, and good morning, everyone. I'm honored to be here today representing the 1,200 members of our global R&D organization. As many of you know, General Mills has had a long history of product innovation. It started back in 1866 when Cadwallader Washburn built his first innovative flour mill on the Mississippi River here in Minneapolis. In the early '20s, we introduced our first ready-to-eat cereal, Wheaties. And in the '50s, we created a new convenience category, a refrigerated dough. And more recently, we've led a number of category innovations including the line of great tasting light, ready-to-serve soups.

Behind our innovation today is a global R&D organization with resources located in over 20 locations. In addition to our outstanding R&D facilities here in Minneapolis, we now have a product development services organization in Mumbai, India; a CPW innovation center in Orbe, Switzerland; a dairy products R&D facility in Vienne, France, thanks to our recent Yoplait international acquisition. And next year, we plan to break ground on our R&D center in Shanghai, China.

Our innovation approach is working. We're expanding our brands and entering new categories, increasing the diversity of our product portfolio and technologies. We're delivering first-to-market innovation that gives us lasting marketplace advantage, and we're always looking for new sources of innovation. Our connected approach helps us tap into innovators around the globe, across multiple industries. In addition, we're finding better ways to leverage our internally generated brands, insights and technologies across the company.

Successful innovation isn't just about quantity. It's about quality. And we worked hard to develop more differentiated products that bring new users into a category, like our gluten-free baking mixes, or products that create new usage occasions, like our food service Mini Pancakes and products that expand our brands globally, like our Nature Valley grain snacks business.

Consumers around the world want food products that provide health, taste and convenience. At General Mills, we've got great innovation focused on each of these attributes. Let me highlight a few examples. To deliver meaningful food innovation around health, you need the trifecta of great taste and meaningful health benefits at an affordable price. One of our best success stories is our Fiber One brand. There are lots of high-fiber products available in the marketplace, but through our proprietary formulation technology, we've been able to create a wide variety of high-fiber foods that really taste terrific. Global sales for Fiber One franchise has exceeded $400 million in 2011. As you all know, taste rules when it comes to dessert, and consumers around the globe love the taste of Häagen-Dazs. Through technical innovation we've recently introduced 2 new ways to enjoy this great brand. Secret Sensations was introduced in Europe this summer. It's ice cream on the outside with a delicious caramel or chocolate sauce located in the center. And Crepe Glacé, sold in Japan, offers hand-held luxury. It's super premium ice cream wrapped in a bakery crêpe, both of these products are off to great starts this year.

And here's an example of innovation around convenience. Our Brands on the Go team was looking to provide convenient ways for Foodservice operators to serve hot breakfast in schools. We developed a line of great-tasting breakfast products, including mini pancakes, mini french toast and mini cinnamon rolls. These products heat right in the package, and they provide at least 16 grams of whole grain per serving.

We plan to keep the innovation coming, with a terrific lineup of new products in the current fiscal year. More than 100 new items have been launched around the globe already, including Fiber One 90-calorie Brownies and Pillsbury Frozen Breakfast sandwiches and Egg Scrambles here in the U.S. In our international markets, we're introducing new varieties of Wanchai Ferry frozen dim sum in China, and chewy varieties of Nature Valley grain snacks in Australia.

But innovation isn't just about new products. We worked just as hard to improve our established products. A lot of this work is focused on improving the health profile of our brands. And we've improved more than 600 items globally since 2005. In the last year alone, General Mills provided over 1 billion servings of vegetables, over 2 billion servings of low-fat or non-fat dairy and over 62 billion grams of fiber.

We continue to invest in product improvements today. Let me give you just a few quick examples. We've made a significant commitment to reducing sodium level in our products. In 2010, we announced that we would trim sodium by 20% across our biggest categories by 2015. I'm pleased to report that we've made considerable strides today, including double-digit percentage declines in sodium levels for nearly 200 products. And we've developed an extensive platform of gluten-free foods. We began by renovating several brands -- several of our Chex cereals brands to make them gluten-free. We then transferred those learnings to Betty Crocker, and became the first national branded player to offer an affordable, high-quality line of gluten-free baked goods. Today, our gluten-free website offers over 400 gluten-free products from General Mills and other manufacturers, along with education and resources.

Calcium is another example of our health improvement efforts. 60% of American women aren't getting enough calcium in their diet, and almost all women don't get enough vitamin D. In 2010, we reformulated our Yoplait Original Style yogurt to provide 50% of the recommended adult daily value of calcium and vitamin D in each serving. And our cereal products today are better for you than ever. Several years ago, we converted all of our cereal products to whole grain. The entire Big G portfolio contains at least 8 grams of whole grain per serving. General Mills cereals are the largest single source of whole grain at breakfast in the United States, providing over 12 billion servings in 2010, but we're not finished. We continue to add whole grain to our U.S. cereals, and in our international markets, our CPW cereals are made with whole grain as well. We're also focused on reducing sugar in cereal. Since 2007, we've lowered sugar levels in our kids cereals by more than 14% on average.

I think it's an exciting time to be at General Mills. We're delivering tremendous innovation across our new and established products, and we continue to invest, to develop our new capabilities. We remain focused on constantly delivering great-tasting differentiated products that address consumers' needs. And most importantly, we are fulfilling our mission of nourishing lives.

At General Mills, we're fortunate to have some of the most talented employees in the world, with a true passion for improving the lives of others through food and nutrition. A few years ago, we realized we had the opportunity to harness our expertise to do something truly transformational. Through the efforts of employee volunteers, General Mills founded Partners in Food Solutions, a pioneering corporate skill-based volunteer movement that brings together food expertise, knowledge and resources to nourish lives in Africa. Our model is quite simple: We connect with small African food processors who source their raw materials from local farmers. We provide business, engineering and food science expertise to help these processors create safe, high quality, nutritious foods at affordable prices. Our knowledge helps these small processors become more competitive, and that in turn stimulates increased marketplace demand. This growing market demand in turn expands their need for even greater quantities of locally produced crops, creating new outlets and sources of income for small-holder farmers in the area, and this virtuous cycle continues.

Let me stop now and show you a quick video so that you can hear from some of our program participants.


I'm happy to report that we've made tremendous progress over the last 3 years. Our more than 300 employee volunteers are currently helping 25 food processors located in Tanzania, Zambia, Kenya and Malawi, who are in turn sourcing from 90,000 small-holder farmers and positively impacting the lives of over 450,000 family members. Our 5-year goal is to further scale up our approach by partnering with other global food companies who are also willing to share their expertise, and ultimately nourish the lives of millions in Africa and beyond. If you have additional questions or would like to support this effort, I encourage you to visit our website at Thank you for the opportunity to share some of our initiatives focused on nursing lives.

And with that, I turn it back over to Ken.

Kendall J. Powell

Thanks for that update, Peter, and you should all know that Peter's personal commitment and leadership in setting up Partners in Food Solutions. Now our success in achieving our mission and our overall performance as a company reflects the talent and the skills of General Mills' people. Now as we usually do at this meeting, I'd like to recognize the outstanding achievements of a selected group of employees this morning. They are our Champion Award winners for 2011, and I'm going to ask that they stand when I read their names.

This first team of champions worked on our Progresso ready-to-serve soup business. At the start of fiscal 2011, soup category sales were declining. This team went to work to determine what was behind the decline and how we could improve Progresso's performance. They launched a comprehensive plan to help retailers improve variety at the shelf and emphasize the great taste of Progresso. This included TV advertising, sampling, the development of new varieties, such as our World Recipes line, and the results have been terrific. Nearly 4 million more households bought Progresso soup in fiscal 2011, in comparison to fiscal 2010, and our share of ready-to-serve soup category sales grew to more than 36%. For these great results, I'd like to recognize Efrain Cardenas, Bobby McConnell and Molly Sjostrom from our Sales division; Michelle DeLamielleure from Consumer Insights and Chad Johnson from Marketing. Congratulations to all of you.

Our second group of champions generated great growth for LÄRABAR, a line of fruit and nut-based energy bars. The team developed new flavors, including a very successful chocolate variety, and they put together an innovative and cost-efficient social media campaign. By developing one-on-one relationships with consumers using outlets such as Facebook, this team drove a 77% increase in retail sales, making LÄRABAR the fastest-growing brand in our portfolio in 2011. Congratulations go out to Jennifer Jorgensen and Sarah McDowell from Marketing, Jillian Johnson from Consumer Insights, Nicole McGinty from the Continuous Improvement group; Ashley Schneider from Sales; and Alec Hopkins from Research and Development.

The next winning team took a 50-year-old business and repositioned it for today's consumer. The Pillsbury Crescent's team got consumers to think differently about crescent rolls, emphasizing their versatility beyond a side bread. They developed multiple TV spots, digital ads and videos to show moms how to use crescent-rolled dough for everything from appetizers to easy meal solutions and they got online bloggers to comment on these new recipe ideas. As a result, retail sales for Pillsbury crescent rolls increased 8% in fiscal 2011, leading growth for the Pillsbury division. For their innovative thinking, I'd like to recognize Danielle Gutzmer from Consumer Insights and Brad Hiranaga and Julia Wing-Larson from Marketing.

I said earlier that leading growth with our customers is key for General Mills, and our Convenience Store and Vending team has been doing just that. Fiscal 2011 marked the fourth consecutive year that this team achieved strong volume, profit and share growth in these channels. They've developed tools to help C-store operators understand category dynamics, the most effective shelf sets for their stores and the best product selection for vending. They also leveraged many new snack products to drive growth, such as Wheaties Fuel bars and Betty Crocker Sweet Rewards bars. Congratulations to Denise Holtz for Marketing, Linda Baggio from R&D and John Dalton, Kelly Fulford and Rick Anastasi from Bakeries and Foodservice sales.

Holistic Margin Management is a company-wide focus. In just 2 years, our employees in Australia developed and executed a growth-driving, value-added HMM program that's now considered a benchmark for our other international regions. With strong leadership and engagement by all employees, the team has generated savings in areas ranging from procurement to packaging. In fiscal 2011, they delivered more than $10 million in cost savings. Here representing the entire team from Australia is Caitlin Patterson in Business Improvement and Strategy, and her fellow award winners from Australia include Jason Karavias in R&D; Dina Kinkaid in Operations; Travis Mutch in Sourcing and Angela Turrell in Consumer Insights. Congratulations to all for some great work.

Our final champions led a team, I should say champion, led a team in our mill here in Fridley, Minnesota. We mill oat flower at Fridley, and as a byproduct of that process, we generate a lot of oat hulls. By replacing our natural gas boilers with biomass burners, we are now using those oat hulls as an energy source. This initiative reduced our natural gas usage at the mill by 90%, and decreased our greenhouse gas emissions by more than 20%. In addition, we've reduced the number of trucks on the road that hauled away the oat halls and the ash byproduct generated by the biomass burners is being used as a fertilizer. Here representing the team at Fridley mill is John Hellweg from our supply chain. Thanks, John, for your innovative thinking and leadership.

I learned last night that John retired just a few weeks ago and he said what a great initiative to go out on, and you're right. Congratulations. Let's have one more round of applause for all of our Champion award winners.

All right. So ladies and gentlemen, now we will turn to the agenda items for today's meeting. I'd like to ask Don Mulligan, our Chief Financial Officer; and Rick Palmore, our General Counsel and Secretary to join me on stage. Rick, do you have all of the attendance figures for our meeting this morning?

Roderick A. Palmore

Yes, Ken, I do. We have represented in person or by proxy 547,440,920 shares of the company's common stock. This is 84.7% of the total outstanding on the record date, which constitutes a quorum necessary to transact business at this meeting.

Kendall J. Powell

Okay, thank you. Thanks, Rick. So as we begin the business meeting, let me remind you that if you wish to ask a question or offer a comment, please step to one of the floor microphones so that everyone can hear you clearly. After you've been recognized, identify yourself by your name, your city of residence and any organization that you represent. If you're representing a stockholder, please name that stockholder. Now a reminder that we will also have a question-and-answer period following the completion of the business agenda. To give as many people as possible the chance to participate, we will limit questions or comments to one per stockholder unless time permits more. I also ask that you keep your questions brief so that we can cover all the subjects that stockholders are interested in today. Please limit your comments and questions to a few minutes.

Now our first order of business is the election of directors. We have 13 nominees standing for election. And they are: Bradbury H. Anderson, retired Chief Executive Officer and Vice Chairman, Best Buy Corporation; R. Kerry Clark, retired Chairman and Chief Executive Officer, Cardinal Health; Paul Danos, Dean of the Tuck School of Business at Dartmouth College; William T. Esrey, Chairman of the Board, Spectra Energy Corporation and Chairman Emeritus, Sprint Nextel Corporation; Raymond V. Gilmartin, adjunct professor at Harvard Business School and retired Chairman, President and Chief Executive Officer, Merck & Co.; Judith Richards Hope, Distinguished Visitor from Practice and Professor of Law at Georgetown University Law Center; Heidi G. Miller, President, JPMorgan International, a division of JPMorgan Chase & Co.; Hilda Ochoa-Brillembourg, Founder, President and Chief Executive Officer, Strategic Investment Group; Steve Odland, adjunct professor at the College of Business at Florida Atlantic University and former Chairman and Chief Executive Officer, Office Depot; Michael D. Rose, Chairman of the Board, First Horizon National Corporation; Robert L. Ryan, retired Senior Vice President and Chief Financial Officer of Medtronic; Dorothy A. Terrell, Managing Director, FirstCap Advisors; and I am also standing for reelection. Would all of our nominees stand so that we could recognize you? Now the election of directors is by ballot, and nominations are now in order.

Unknown Speaker

Mr. Chairman, I'm Cindy Muller from St. Paul, Minnesota and I move the nomination of the 13 director candidates set forth in the proxy statement.

Kendall J. Powell

Thank you, Ms. Muller. Is there any discussion related to the election of directors? Okay. I now declare the polls open. If you have not voted or would like to change your vote and need a ballot, please raise your hand and one will be brought to you. Now there are 6 items requiring a vote today. You can mark your ballot after each item of business. The ballots will be collected following the final item. Our inspector of elections for today's meeting is Broadridge Financial Solutions.

Now our second order of business today is to vote on the adoption of the 2011 stock compensation plan. The board of directors recommends a vote for this plan. It's described in your proxy statement starting on Page 20. The purpose of this plan is to provide a compensation program that rewards superior individual and company performance, attracts and retains management talent and aligns the interest of company managers with the interests of our stockholders by linking a portion of managers' compensation directly to increases in shareholder value. This plan would replace the 2009 stock compensation plan, which terminates at the end of this calendar year. The terms of the new plan are substantially similar to the current plan. Is there a motion to approve this plan?

Unknown Speaker

Ken Knight [ph] from Plymouth, Minnesota. Mr. Chairman, I move the approval of the 2011 stock compensation plan.

Kendall J. Powell

Thank you, Mr. Knight [ph]. Is there any discussion regarding this compensation plan? Okay. Please mark your ballots.

The third order of business today is to approve the 2011 compensation plan for non-employee directors. The Board of directors recommends a vote for this plan. It's described in your proxy statement, starting on Page 26. The purpose of this plan is to provide a compensation program that attracts and retains qualified individuals to serve on the company's board of directors and that aligns the interests of non-employee directors with the interests of our stockholders. This plan would replace the 2006 compensation plan for non-employee directors, which terminates at the end of this month. The terms of the new plan are substantially similar to the current plan. Is there a motion to approve this plan?

Unknown Speaker

Ken Knight [ph], Plymouth, Minnesota. Mr. Chairman, I move the approval of the 2011 compensation plan for non-employee directors.

Kendall J. Powell

Thank you, Mr. Knight [ph]. Any discussion regarding this compensation plan? Please mark your ballots.

Our next order of business is to provide an advisory vote on executive compensation as disclosed in the proxy statement. The board of directors recommends a vote in support of our compensation practices, which are based on several core principles. First, we believe compensation should be tightly linked to company performance. Second, we believe broad and deep stock ownership best aligns the interests of management with those of stockholders. And third, compensation must be competitive in order to attract and retain superior leaders. We believe the company's long-standing executive compensation programs have been effective in incenting the achievement of superior results for stockholders. Is there a motion to approve this resolution?

Unknown Speaker

Mr. Chairman, Malcolm Macdonald [ph], Norfolk, Minnesota. I move of approval, on an advisory basis, of the compensation paid to the company's named executive officers as disclosed in the proxy statement.

Kendall J. Powell

Thank you, Mr. Macdonald [ph]. Is there any discussion on this item? Okay. Then, please mark your ballots.

Our fifth order is business is to vote on the frequency of the advisory vote on executive compensation, the frequency. The board of directors recommends that future advisory votes on executive compensation occur every year. The board believes this is the appropriate frequency, and as in keeping with our commitment to regular and ongoing engagement with our stockholders. Is there a motion to approve this resolution?

Unknown Speaker

Mr. Chairman, Malcolm Macdonald [ph], Norfolk, Minnesota, I move the approval, on an advisory basis, of an annual advisory vote on executive compensation.

Kendall J. Powell

Thank you, Mr. Macdonald [ph]. Is there any discussion on this item? All right. Then, please mark those ballots.

The final order of business today is to approve the appointment of our independent auditors for fiscal 2012. The Audit Committee of the Board of Directors has appointed KPMG LLP as General Mills' independent registered public accounting firm for fiscal 2012. The Audit Committee for the past year consisted of 5 non-employee directors, and they are Judy Hope, Chairperson; R. Kerry Clark; Paul Danos; Bill Esrey; and Bob Ryan. The committee's report for 2011 was published in the proxy statement on Page 66. I would like to introduce Jackie Daylor, Mike Roos and Mark Goodburn [ph] who are here representing KPMG. Jackie, Mike and Mark, will you please stand so that stockholders can recognize you, and they are available to answer questions on auditing procedures and other related matters. The Audit Committee's appointment of KPMG LLP to serve as our auditor for fiscal year 2012 is subject to stockholder ratification today, and I would appreciate a motion to approve that action.

Unknown Speaker

Gil Dillman [ph], Plymouth, Minnesota. Mr. Chairman, I move the ratification of the appointment of KPMG LLP as General Mills' independent auditor for fiscal 2012.

Kendall J. Powell

Thank you, Mr. Dillman [ph]. Is there any discussion on the appointment of our independent auditors? Okay. Please mark your ballots.

Now at this time, I'll ask those of you who have filled out a ballot today to pass it to an usher in the aisles. We will now move into the question-and-answer session. Rick, when we have the preliminary vote totals, please let me know. We'll interrupt the question-and-answer session so that you can report that them. And once again, let me remind you to step up to one of the microphones, wait to ask your question until you're recognized by me, then identify yourself, your city of residence, any organization you represent. If you're representing a stockholder, please identify that stockholder. As I mentioned previously, I will recognize one question at a time from any individual. So if I can have the first question.

Question-and-Answer Session

Unknown Speaker

My name is Josh Welcome [ph] here representing the Humane Society of the United States. We're the nation's largest animal protection organization in the country with more than 12 million supporters. I'm here today to thank General Mills for your great work on animal welfare. This past year, General Mills announced that it switched 1 million of its eggs in the United States to cage-free. And in Europe, previously you switched millions more, and these are initiatives have had very tangible results for animals. Because of your work, thousands of egg-laying hens won't be confined in barren cages so small, they can't spread their wings. I'd like to thank a couple of your staff members, if you don't mind. I know this is a team effort, of course, but a couple of them really stand out to me. Namwa [ph] in Communications is a star at General Mills, and she championed this issue within the company, and John, along with his team at Procurement helped find a way to make cage-free eggs work within your supply chain. It really says a lot about your company tackling an issue so important to American consumers as animal welfare and preventing cruelty to animals. Thank you so much for the great work of you and your team. I'm looking forward to work with General Mills for more years to come, and your company deserves a big round of applause.

Kendall J. Powell

We, Mr. Buck, we really appreciate that comment and I just want to say, like our consumers, we are very concerned about animal welfare, and we acknowledge also the comments you made about egg production. As you note, General Mills is buying 1 million cage-free eggs for its U.S. portfolio in 2012, and in Europe, where eggs from cage-free and free-range hens are now becoming more available, Häagen-Dazs has begun transitioning to free-range eggs. Currently more than 50% of the eggs we source for Häagen-Dazs facility in Arras, France come from free-range hens, and we will move that to 100% in 2013. So we appreciate our ongoing dialogue with you, and thank you for the comment.

Unknown Speaker

Dwayne Washey [ph] from Golden Valley, Minnesota. I am personally interested in the acquisition of the Yoplait brand internationally. When GMI started Yoplait, we received technical support from France in the areas of production and product development. We quickly outgrew this technical need, but I anticipate that now General Mills Sodiaal will have to be in a position to have to provide this type of technical support to all of the international licensees around the world. If this is so, how and where will this technical support be provided and come from?

Kendall J. Powell

Dwayne, thank you for the question, and I think that it's a very good question, and Mr. Washey [ph] is referring to the fact that while a significant portion of the Yoplait business that we now own is -- it will come from wholly-owned subsidiaries, in for instance, the France and the U.K. Many other smaller parts of the business will be coming from licensees around the world, and as part of our relationship with them, we will be providing technical support. And Peter Erickson, I know -- if you would make maybe a brief comment on how you see the power of this new, combined R&D effort unfolding.

Peter C. Erickson

Sure. I had a chance to visit the Yoplait international R&D center just 2 weeks ago, and I was very impressed with their capabilities and their technologies. And I think in answering your question, Dwayne, it's really going to be the opportunity to bring the scale of all of our R&D activities around Yoplait together to be able to find the best ways to support those licensees around the world in the most efficient and effective manner that we can. But I think between the 2 great R&D organizations that we now have in one, we'll have sufficient technologies and capabilities to be able to meet those needs to grow the Yoplait business all around the world.

Roderick A. Palmore

Ken, we have the preliminary vote totals.

Kendall J. Powell

Yes. Let's hear those, Rick. Why don't you announce them?

Roderick A. Palmore

For the election of directors, all nominees received at least a majority of the votes cast and all were elected to the board. The 2011 stock compensation plan was approved by 72.4% of the votes cast. The 2011 compensation plan for non-employee directors was approved by 82.8% of the votes cast. Shareholders supported the company's executive compensation program with 94.5% of the votes cast for the program. The proposal to hold an annual advisory vote on executive compensation was approved by 89.1% of the votes cast. And the appointment of KPMG LLP was ratified by 98.9% of the votes cast.

Kendall J. Powell

Thank you, Rick. Are there any other questions this morning? Okay, yes, sir. Please move to the microphone so that everyone can hear.

Unknown Speaker

This is my first time here. My name is Eric Hall [ph], and I'm from Delaware, Ohio. My question is, Mr. Powell, is I'm having a hard time trying to find the Golden Grahams 40-count box of the Treats. I could not find them in the big warehouse-type stores like Costco and I was wondering if they are still marketable.

Kendall J. Powell

Thank you very much for the question. Ian, that's going straight to you and I'm wondering who you're going to pass it to.

Ian R. Friendly

I'm going to very quickly pass that to one of our award winners who is responsible for this business.

Unknown Executive

Yes, sir, in the community store business, we do have distribution throughout our distributors in Ohio. So we'll gladly get your information and we'll get that to you. But we have about 68% ACV on that item. So it's still building, so we'll find out where it is.

Kendall J. Powell

So maybe if, maybe if you 2 guys, you can connect and make sure he gets that information. All right. Do we have any other questions this morning?

Unknown Speaker

Lola Jason [ph], Elk River, Minnesota, shareholder. And I want to know why you took the dried fruit out of the cereals. You used to have bananas, dried bananas, dried strawberries, I think, in the Cheerios. I bought the banana and this banana flavor and it's not the same. I have to go to another company to get my fruits.

Kendall J. Powell

Gosh. That's terrible. I'm a...Ian?

Ian R. Friendly

I'd like to find out which particular -- we do have cereals with fruit in them, and we certainly would not to like to drive you to buy from others who shall not be named. But why don't we get information on which -- I'm not sure which brand you're referring to. We have a wide variety of cereals with fruit mixed in. It sounds like we don't have the same one that you've previously enjoyed. So let me hear about that and we'll see what we can do.

Unknown Speaker

Dennis Berquist [ph], Minneapolis. In the Minneapolis Tribune last summer, there was a rather lengthy article about Nestlé buying out General Mills or merging with General Mills. Is there any truth to that article, rumor or whatever it was?

Kendall J. Powell

Well, we've had a joint venture with Nestlé. For a week in fact, we celebrated our 20th anniversary just a few months ago, and those rumors have been around since we've had that joint venture. They are rumors and speculation, and as is our standing practice, Mr. Berquist [ph], we never comment on those.

Unknown Speaker

Mr. Powell, I'm Judge James D. Rogers [ph]. I've served 32 years as a judge of the District Court here in Hennepin County, I'm now retired. I'm a shareholder living in Minnetonka. I'm making a few comments, and of course, it's always the problem with judges they talk too darn long, but that's all right. I think the shareholders should know what the corporation and their company has done. You and others, particularly Don Mulligan, who's up here; Mike Davis of Human Resources and Ellen Luger in the support of men and women in the Guard and Reserve. And these people, members should know that Secretary Gates has awarded a award to this company for going above and beyond what it has done to support not only its employees, but the over 20,000 members of the Guard and Reserve in the state of the Minnesota, members of the Guard and Reserve and those who have been deployed. We have a high number of employee Guard and Reserve members in the state of Minnesota and what this corporation has done to support them not only employees, the company has been fantastic. And your statement of support and also statement of support, I would comment, of Director Anderson from his corporation, Best Buy, and this support that has been seen is deeply appreciated by the members of the Guard and Reserve throughout this country and the shareholders should be deeply proud of what their corporation, you and the other individuals, have done to support them. At least in my efforts in retirement working with the people who have been deployed, and appreciate what this company has done or my company has done, and thank you.

Kendall J. Powell

Judge Rogers [ph], thank you very, very much for your comment. We have over 750 veterans working for the company here in the United States. I believe we have 20 deployed overseas right now, and as you know, we, of course, protect their job while they're gone. And in fact, we make up for the difference between what they're earning while they're in the Guard and their salary here at General Mills, which we're not required to do, but we do, do because we believe so strongly in their service. So thank you very, very much for that comment. Are there any other questions? Okay. Well, if that is the case, let me remind you, please stop in the lower lobby as you leave today to pick up a gift bag, which we will be very, very happy to give you. I want to thank all of you for participating in your Annual Meeting. The polls are now closed, and the meeting is adjourned. Thank you.

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