General Mills chief: Cost rise will slow in 2010

General Mills Inc. Chief Executive Officer Ken Powell said the increase in costs for ingredients, supplies and energy will slow next fiscal year.

Those expenses will rise by a "low single-digit" percentage, compared with a forecast 9 percent jump in the year ending May, Powell told Bloomberg Television today at the World Economic Forum in Davos, Switzerland.

The maker of Cheerios will raise its prices to retailers by 4 percent to 5 percent this year to recoup part of the expenses, which have risen to "the highest we've seen in a generation," Powell said. In the long term, costs will gain as much as 5 percent annually, driven by greater demand for ingredients and fuel from China and India, the CEO said.

"I expect very consistent, very resilient performance from General Mills," Powell said. "We've done a great job of offsetting the costs through productivity."

General Mills, the second-largest U.S. cereal maker, is reducing the amount of packaging used for cereals to cut transportation costs, Powell said. Kellogg Co., the world's largest cereal maker, announced a test of smaller boxes Jan. 26.

Minneapolis-based General Mills plans to sell $1.15 billion of 10-year notes in a benchmark offering, according to a person familiar with the transaction.

The company will use proceeds from the sale, which may occur as soon as today, to repay commercial paper, said the person, who declined to be identified because terms aren't set.