Many companies are starting to take a hit from the rising prices in fuel, driver shortages, and the increasing demand. One company that is coping with this is General Mills. What they thought was going to be a time of very profitable growth, has suddenly become quite the opposite. Higher cost for moving their goods has taken a hit into their profits.
According to General Mills, they began warning the investors last month that there was trouble. This “trouble” however; was bigger than expected and their shares plummeted 9%, becoming the biggest single-day drop in nine years according to the company.
Raising prices are causing companies to suffer. Higher gas prices, driver shortages, and increasing demand has forced General Mills to purchase hauling on a spot basis. This has greatly eaten into their profits considering it is 30% to 60% more expensive. Typically, spot rates account for 5% of their hauling costs, but now it is up to over 20%.
Like many other companies, they are looking for ways to cope. For General Mills, this means looking at other trucking companies to acquire contracts at lower prices on train hauling. Don Mulligan, CFO, says “In the long run, General Mills will reassess the placement of its distribution centers and the entire process for moving ingredients and finished goods. Which is a structural change that we are reacting to.”