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CerealPrices 2ndLd-Writethru 06-05

General Mills raises cereal prices

MINNEAPOLIS — General Mills Inc. said on Tuesday it would raise cereal prices to match increases by competitors, but investors sent its shares down more than 3 percent, and one analyst downgraded the stock.

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

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

"Input costs are definitely a factor" in the price increase, Forsythe said. "Grain and energy costs have increased."

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