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General Mills to raise prices

June 06, 2007|From the Associated Press

MINNEAPOLIS — General Mills Inc. said Tuesday that it would raise cereal prices to match increases by competitors, but investors sent its shares down 3.4%, and one analyst downgraded the stock.

General Mills spokesman Tom Forsythe said customers should actually see lower prices per box, but the boxes would be smaller, so the effect was a price increase of a few percent. The new prices go into effect June 25.

The maker of Wheaties and Lucky Charms has been looking for a way to boost profit on its cereals. It sold as much cereal during its most recent quarter as it did in the same period a year earlier, but at lower prices because of promotions. Profit has been squeezed by higher prices for fuel and ingredients such as oats.

Bear Stearns analyst Terry Bivens wrote in a note Tuesday that General Mills was gambling by making the change across all its cereals at once. He downgraded the stock to "neutral."

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