Dec. 17 (Bloomberg) -- General Mills Inc., the maker of Yoplait yogurt and Progresso soup, reported second-quarter profit that topped some analysts’ estimates and raised its full-year earnings forecast as consumers choose to eat in more.

A 21 percent increase in ad spending spurred demand for soup, yogurt and Betty Crocker baking mixes. Revenue climbed 8.3 percent to $4.01 billion, exceeding the average estimate of $3.99 billion in a Bloomberg survey of analysts. Net income declined 3.1 percent to $378.2 million, or $1.09 a share, because of commodity-hedging costs, the Minneapolis-based company said today in a statement.

General Mills, the second-largest U.S. cereal maker, introduced new flavors of reduced-calorie Yoplait Light and stepped up Progresso’s marketing to counter advertising by rival Campbell Soup Co. Chief Executive Officer Ken Powell intensified efforts to sell more Hamburger Helper dinner kits, Pillsbury cookie dough and cake mixes to consumers forced by rising unemployment and shrinking credit to eat out less.

“They’ve done a good job selling new products, particularly outside of cereal,” Janna Sampson, who helps manage $1.1 billion at Oakbrook Investments, said yesterday in a telephone interview. Lisle, Illinois-based Oakbrook owned 79,185 General Mills shares as of September.

General Mills is the only stock in the 12-member Standard & Poor’s 500 Packaged Foods Index to rise in 2008. The shares, advanced 10 cents to $61.35 at 4:15 p.m. on the New York Stock Exchange and have climbed 7.6 percent this year. The index has declined 15 percent.

Hedging Costs

General Mills incurred expenses to hedge commodities after locking into contracts when food costs were rising. As a result, it has been unable to take full advantage of falling prices of wheat, corn and gasoline as the global economic slump curbs demand for raw materials.

The company said it earned $1.36 a share excluding the hedging costs of 49 cents and a $129 million gain from the sale of the Pop Secret microwavable-popcorn unit. Analysts anticipated $1.23 a share, the average of 14 estimates in the Bloomberg survey.

Full-year earnings will rise to $3.83 to $3.87 a share even after a 9 percent increase in costs, General Mills forecast today. The company had earlier projected a profit of $3.85 at most. For the year, 15 analysts projected profit of $3.89.

Supermarkets, Campbell’s

The stock has sunk 12 percent in the past three months because shoppers may be turning to cheaper supermarket brands. A Campbell’s ad campaign comparing its Select Harvest line to Progresso may also be denting soup sales, according to Eric Katzman, an analyst at Deutsche Bank Securities Inc. in New York.

Investors are “overly concerned” with competition from Campbell, the world’s largest soupmaker, and focusing too little on growing soup sales during the U.S. recession, Katzman said. He recommends buying the shares.

Progresso’s share of U.S. consumers rose 1.1 percentage points in November, giving it market share of 34.6 percent as of Nov. 22, General Mills said today.

To contact the reporter on this story: Chris Burritt in Greensboro at cburritt@bloomberg.net.

Last Updated: December 17, 2008 18:09 EST