(Reuters) - General Mills posted a smaller-than-expected drop in quarterly sales on Wednesday, benefiting from improved demand as the Cheerios maker cut prices for some of its products.

General Mills and other packaged food peers have been grappling with lower volumes for the past few years as price-conscious customers balk at companies raising prices to tackle higher input costs.

As a result, General Mills has been trying to pare back prices in the past two quarters to boost volumes. Volumes were flat in the reported quarter, compared to a 2 percentage point decline in the prior one.

Prices were down 1 percentage point in the first quarter, compared with a 6-percentage-point rise a year ago.

Consumers choosing home-cooked meals to economize contributed to a 1 percent pound volume growth in U.S. retail categories in the quarter, CEO Jeff Harmening said.

The company expects volume trends to improve gradually in fiscal 2025, although full-year category dollar growth is expected to be below its long-term growth projections.

However, General Mills' gross margins fell 130 basis points to 34.8% partly due to higher input costs and double-digit media investments.

Last week, General Mills said it would sell its North American yogurt business to French dairy firms Groupe Lactalis and Sodiaal in a $2.1-billion deal to focus on its core brands in a bid to lure value-seeking consumers.

Its quarterly sales fell 1% to $4.85 billion from a year ago. Analysts, on average, expected a drop of 2.11% to $4.80 billion, according to LSEG data.

The company reported a per-share profit of $1.07 on an adjusted basis, edging past estimates by 1 cent.

Shares of the company were up about 1% in early trading.

(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Pooja Desai)