In this segment from MarketFoolery, host Chris Hill and analysts Ron Gross and Emily Flippen discuss packaged food giant General Mills (NYSE:GIS), which has been experiencing rocky results for a while now. Last quarter was no different -- the U.S. is its big market, but virtually all of its sales growth is coming from overseas. The trio talk about its troubles, its recent acquisitions, its longer-term strategy, and its financials.

A full transcript follows the video.

This video was recorded on Sept. 18, 2018.

Chris Hill: Alright, let's move on to General Mills. Shares of General Mills down more than 7% this morning after first quarter sales came in lower than expected. Emily, General Mills operates in a lot of markets, but the biggest market is North America. It seems weird to say this, but the bright spot in North America for General Mills was actually cereal.

Emily Flippen: Yeah, it's actually really interesting to see. You'll notice that one of the highlights from their earnings -- which was a pretty mixed bag -- was sales growth of almost 9%. But, when you look at North American sales growth, it was negative 2%. Virtually all of their growth now is coming outside of North America. Within the North American market, it's interesting to see the plays that's been going on, in terms of their existing brands and their potential expansion into new brands. North America is their target market. They need to perform well in the core areas like cereal in order to continue to be a good investment for people who are invested. If you are invested, I hope you also had a big cup of coffee today, because it was probably a hard morning to swallow.

It's also interesting to see how their acquisition strategy is playing out. They bought the healthcare pet food brand, which was an interesting play, Blue Buffalo. That's one that's been proven to be not too well received by the market, but potentially expanding outside of slowing growth areas. There's a general consensus that they might have overpaid for this pet food brand. In my opinion, I think future General Mills growth is going to be driven by strategic acquisitions.

Hill: Yeah, we had some analysts on the team who were big fans of Blue Buffalo, and they were kind of bummed when they got bought out.

Ron Gross: They really are going after this pet food business as their growth driver. Obviously, they're doing it through acquisitions, as Emily said. I haven't looked at the balance sheet recently, but I think it's whacking around the balance sheet a bit. Interest expense is higher, if I'm not mistaken, and they've got to be careful to make sure that balance sheet is stable, especially if there's weakness in their North America business.

Hill: Emily, in terms of the international growth, how heavily can they lean on that? As you said, you look at what they did in North America. Cereal was the bright spot. Snacks were down in North America. Yogurt was down in North America. Is international still small enough that any meaningful growth they get internationally is going to be good, but it's not really going to move the needle? Or is it genuinely getting to be a bigger piece of the pie?

Flippen: I think it's genuinely getting to be a bigger piece of the pie. While they still are sticking with North America as their target market, and you can see that with a lot of these smaller niche brands they're really pushing here, I think they're realizing that, in terms of their life cycle in America, cereals, yogurts, these sort of products, have changed for the American tastes. They're looking at, how can they play off of their core competencies in new markets like Asia and Europe. It'll be interesting to see about their ability to expand more into these areas moving forward. To me, that's going to be the most key aspect of their ability to continue to grow in the future.

Hill: They also own Haagen Daz.

Flippen: Haagen Daz is international production, too, which is a really big part of that.

Hill: That's rock solid.

Gross: It's tasty, too!

Hill: That's what I meant. I wasn't talking so much about the business. That's just a good product.

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