Food giant General Mills, Inc.’s (GIS Quick QuoteGIS - Free Report) investment partner and venture unit - 301 Inc. - has teamed up with Chicago-based 2x Consumer Products Growth Partners for an investment in D's Naturals, a maker of plant-based, low-sugar No Cow brand protein bars and nut butter snacks. However, terms of the investment have been kept under wraps.

Started in 2015 in Cincinnati, D’s Naturals’ products are gluten and soy-free, containing no dairy and offering plant-based sourced proteins along with low sugar. These products are sold in about 10,000 stores nationwide that includes Vitamin Shoppe Inc., GNC Holdings Inc. and CVS. The company, now based in Denver, has generated almost $10 million in revenues, as per a release from 2X Partners.

General Mills has an impressive portfolio of growth products and brands, especially its healthy and convenience packages. Currently, a major portion of its cereals range is devoid of any artificial flavors and colors. Also, the company keeps pouring money into startups like D's Naturals to boost profits by diversifying into the innovative food space.

301 Inc., formed in 2015, holds interests in six brands, including innovative startups like plant-based food maker Beyond Meat, vegan cheese and yogurt brand Kite Hill and kale products company Rhythm Superfoods.

We note that General Mills’ sales and profits at the U.S. Retail segment, contributing 60% to its sales, have been soft due to lower demand amid changing consumer food preferences. Shift in consumer preference toward products with less artificial ingredients and changes in consumer dynamics, such as increased need for portable and on-the-go products, is affecting growth prospects.

Organically, year-over-year sales growth is anticipated to drop approximately 4% in fiscal 2017, at the low end of the previous range of 3% to 4% decline.

Now, considering this, the company’s latest move is undoubtedly appreciable. The investment marked a new move for 301 Inc., which earlier created and seed-launched its companies before boarding on a new strategy of capturing minority stakes in emerging companies.

General Mills is expected to report third-quarter fiscal 2017 results on Mar 21, 2017.

General Mills’ shares gained around 1.7% in the last one year, compared with 6.1% growth of the Zacks categorized Food-Miscellaneous Preparation/Diversified industry. Estimates have also decreased by 2 cents for the current year and by 4 cents for the next year over the last 60 days. The company’s weak sales growth trajectory may impact the stock’s performance in the upcoming quarters as well.

Meanwhile, the company is on track to update its products in accordance with changing needs, however, we believe drastic improvement in the demand situation will take time.

Zacks Rank & Key Picks

General Mills currently has a Zacks Rank #4 (Sell).

Better-ranked stocks in the consumer staples sector include Lamb Weston Holdings, Inc. (LW Quick QuoteLW - Free Report) , Ingredion Incorporated (INGR Quick QuoteINGR - Free Report) , J&J Snack Foods Corp. (JJSF Quick QuoteJJSF - Free Report) .

For the current year, Lamb Weston’s revenues are expected to grow 5.1%. Lamb Weston sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ingredion also has a decent earnings surprise history, beating the Zacks Consensus Estimate in all of the last four quarters, the average positive earnings surprise being 10.36%.

J&J’s current year EPS is expected to improve 8%.

Both Ingredion and J&J hold a Zacks Rank #2 (Buy).

The Best Place to Start Your Stock Search

Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>