General Mills, Inc.

views updated Jun 27 2018

General Mills, Inc.

Number One General Mills Boulevard
Post Office Box 1113
Minneapolis, Minnesota 55440-1113
U.S.A.
Telephone: (763) 764-7600
Fax: (763) 764-7384
Web site: http://www.generalmills.com

Public Company
Incorporated: 1928
Employees: 28,100
Sales: $11.64 billion (2006)
Stock Exchanges: New York
Ticker Symbol: GIS
NAIC: 311211 Flour Milling; 311230 Breakfast Cereal Manufacturing; 311340 Nonchocolate Confectionery Manufacturing; 311411 Frozen Fruit, Juice, and Vegetable Manufacturing; 311412 Frozen Specialty Food Manufacturing; 311421 Fruit and Vegetable Canning; 311422 Specialty Canning; 311423 Dried and Dehydrated Food Manufacturing; 311511 Fluid Milk Manufacturing; 311520 Ice Cream and Frozen Dessert Manufacturing; 311812 Commercial Bakeries; 311822 Flour Mixes and Dough Manufacturing from Purchased Flour; 311919 Other Snack Food Manufacturing; 311999 All Other Miscellaneous Food Manufacturing

General Mills, Inc., one of the world's leading producers of packaged consumer foods, is best known for its Big G Cereals unit, the number two cereal maker in the United States, trailing only Kellogg Company. The Big G line of well-known cereal brands includes Cheerios, Chex, Cocoa Puffs, Kix, Lucky Charms, Total, Trix, and Wheaties. In addition to its breakfast cereal products, the company produces some of the top names in other food lines, some of which were added through the October 2001 acquisition of the Pillsbury Company. These brands include Gold Medal flour, Bisquick baking mixes, Betty Crocker dessert mixes, Hamburger Helper dinner mixes, Old El Paso Mexican foods, Progresso soups, Green Giant canned and frozen vegetables, Pillsbury refrigerated and frozen dough products, Totino's and Jeno's frozen pizza and snack products, Chex Mix and Gardetto's snack mixes, Pop Secret microwave popcorn, Nature Valley granola bars, and Yoplait, Go-Gurt, and Colombo yogurt. General Mills also has two organic food brands operating through its Small Planet Foods, Inc., subsidiary: Cascadian Farm, specializing in frozen fruits and vegetables, cereals, and other products; and Muir Glen, concentrating on canned tomato products. About 16 percent of the company's revenues are derived from its international businesses, which produce products in 17 countries and market them in more than 100 countries worldwide. Internationally, General Mills is also involved in several joint ventures, including a 50-50 enterprise with Nestlé S.A. called Cereal Partners Worldwide, which makes and sells ready-to-eat cereals outside North America. General Mills is also active outside the grocery sector through its bakeries and foodservice unit, which markets a variety of products to educational, hospitality, and healthcare institutions, convenience stores, and vending machine operators.

From the late 19th to the early 21st century, General Mills evolved from its Minneapolis milling roots into a global packaged food giant. From the 1960s to the early 1990s the company embarked on numerous adventures outside of food, owning at various times toy companies (Kenner Products, Parker Brothers), fashion businesses (Monet Jewelers, Foot-Joy), specialty retailers (Eddie Bauer, Talbots), and restaurants (Red Lobster, Olive Garden). With the 1995 spinoff of its restaurant division into Darden Restaurants, Inc., General Mills completed its transformation back into a strictly packaged food company. This set the stage for a new round of acquisitions within the food industry, culminating in the 2001 acquisition of Pillsbury.

EARLY HISTORY

General Mills was incorporated in 1928, but its origins go back to 1866, when Cadwallader Washburn opened the first flour mill in Minneapolis, Minnesota. His business, originally called the Minneapolis Milling Company, competed with local miller Charles A. Pillsbury, who founded the Pillsbury Flour Mills Company (forerunner of the Pillsbury Company) in 1869. That same year, they joined forces to form the Minneapolis Millers Association. Pillsbury and Washburn both wanted to find a way to make midwestern winter wheat into a higher grade of flour. Eventually, with the help of a French engineer, Washburn not only improved the method but also made his product the best flour available in the United States. When Pillsbury adopted the same technique, Minneapolis became the country's flour milling center.

When John Crosby entered into partnership with Washburn in 1877, the Minneapolis Milling Company was renamed Washburn Crosby Company. The following year the Minneapolis Millers Association was reorganized to appease farmers who found its business practices unfair. In 1880 Washburn Crosby flours were awarded the gold, silver, and bronze medals at the first International Millers' Exhibition in Cincinnati, Ohio; the company soon changed the name of its best flour to Gold Medal. In 1888, James S. Bell succeeded Washburn as head of the Washburn Crosby Company, ousting Washburn's heirs. The mill prospered into the new century. In 1928, the year General Mills was formed, the company had 5,800 employees and annual sales of $123 million. Its strongest products were Gold Medal flour, Softasilk cake flour (introduced in 1923), and Wheaties, a ready-to-eat cereal that had debuted in 1924 (and were originally called Whole Wheat Flakes).

Bell's son, James Ford Bell, was responsible for creating General Mills, Inc., in 1928 by consolidating the Washburn mill with several other major flourmilling companies around the country, including Red Star Milling Company of Kansas; Sperry Milling Company from the West Coast; Larrowe Milling Company of Michigan; the Kell Group from the Southwest; and the Rocky Mountain Elevator Company, the Royal Milling Company, and the Kalispell Flour Mill, all based in Montana. Within five months Bell had collected 27 companies operating in 16 states, making General Mills the largest flour-milling company in the world. As a part of General Mills, these mills kept their operational independence but left advertising and product development to General Mills headquarters. This consolidation was well timed, as it gave the company the strength to survive and even prosper through the Great Depression, when earnings grew steadily and stock in the company was stable.

COMPANY PERSPECTIVES

General Mills traces its roots to the 1860s and a pair of flour mills on opposite banks of the Mississippi River. These two flour mills revolutionized the milling industry and created the foundation for the General Mills of today.

From flour mills to Nerf balls, the history of General Mills is rich and diverse. From Betty Crocker to Bullwinkle, from the Lone Ranger to the Pillsbury Doughboy, General Mills has been involved with some of history's most memorable characters. Our company has played supporting roles in the exploration of the Titanic and in launching the career of Ronald Reagan. But, from the beginning, we have remained steadfast in our dedication to consumers and to providing innovative new products.

Bell's research emphasis put General Mills in a strong position for the changing demands of increasingly urban consumers. The company soon introduced Bisquick, the first baking mix, which debuted in 1931; the company's first ready-to-eat puffed cereal, Kix, in 1937; and another ready-to-eat cereal, Cheerioats, in 1941. To resolve a trademark dispute, Cheerioats was renamed Cheerios five years after its introduction; under its new name it eventually would become the number one cereal in the United States.

Bell's early interest in diversification and technology made mobilization for World War II easier. General Mills' factories were restructured to produce equipment for the navy, medicinal alcohol, and bags to make into sandbags, as well as the expected dehydrated food. In 1942 Donald D. Davis, president of General Mills since Bell moved to chairman in 1934, resigned to head the U.S. War Production Board.

Henry Bullis, who began at General Mills as a mill hand after World War I, replaced Davis. Following Bell's industrial lead, Bullis immediately entered the animal feed industry by processing soybeans, a venture that ultimately became General Mills' chemical division.

KEY DATES

1866:: Cadwallader Washburn, owner of Minneapolis Milling Company, opens the first flour mill in Minneapolis.
1877:: John Crosby enters into partnership with Washburn, whose company is then renamed Washburn Crosby Company.
1880:: Company wins gold medal at the first International Millers' Exhibition, leading to the later creation of the Gold Medal brand.
1888:: James S. Bell takes over leadership of Washburn Crosby.
1921:: The fictional Betty Crocker is created by Washburn Crosby.
1924:: Launch of Wheaties ready-to-eat cereal (originally called Whole Wheat Flakes).
1928:: Bell's son, James Ford Bell, leads the creation of General Mills through the merger of Washburn Crosby with several other regional millers.
1931:: Bisquick, the first baking mix, is introduced.
1941:: Cheerioats ready-to-eat cereal debuts.
1945:: Cheerioats is renamed Cheerios.
1947:: The first Betty Crocker cake mix is introduced.
1954:: Trix, a presweetened cereal, hits the market.
1961:: Edwin W. Rawlings is appointed president and ushers in a period of wide diversification.
1964:: Company enters the snack food sector with the purchase of Morton Foods.
1965:: First of several toy companies, Rainbow Crafts, is acquired.
1968:: Company acquires Gorton's frozen seafood.
1969:: Company moves into specialty retailing with purchases of Lacoste clothing and Monet Jewelry.
1970:: Red Lobster restaurant chain is acquired; Hamburger Helper makes its debut.
1977:: Company purchases the U.S. rights to the Yoplait yogurt brand.
1982:: The Olive Garden Italian restaurant chain is launched.
1985:: Company divests its toy, fashion, and nonapparel retailing operations; Pop Secret microwave popcorn is introduced.
1989:: Cereal Partners Worldwide, a joint venture with Nestlé S.A., is formed.
1992:: Company establishes Snack Ventures Europe in partnership with PepsiCo, Inc.
1995:: The Gorton's brand is sold to Unilever; the restaurant division is spun off to shareholders as a separate public company, Darden Restaurants, Inc.
1997:: The branded ready-to-eat cereal and snack mix businesses of Ralcorp Holdings, Inc., are acquired, including the Chex brand.
2000:: Organic food maker Small Planet Foods, Inc., is acquired.
2001:: General Mills acquires The Pillsbury Company for $10.4 billion.
2005:: Company sells stake in Snack Venture Europe to PepsiCo; the entire Big G cereal line is converted to whole grain.

Postwar demand for consumer foods allowed the company to de-emphasize industrial activity and to concentrate on the success of its cereals and Betty Crocker cake mixes, the latter having been launched in 1947. Consumers demanded less time in the kitchen and continued to buy foods that required less preparation. Ready-to-eat cereals, which were by this time the company's staple, grew dramatically, and more brands were introduced, including Trix, a presweetened cereal that hit the market in 1954.

Throughout the 1920s Bell and his associates had invested heavily in advertising, which was becoming a significant force in selling products to a national market. Betty Crocker, created in 1921, was a legacy from Washburn Crosby. By 1928 Betty Crocker's name, signature, and radio voice had been introduced in connection with General Mills' consumer goods. General Mills also sponsored radio programs and pioneered the use of athlete endorsements on its own radio station, WCCO. In 1933 the advertising slogan "Wheaties. The Breakfast of Champions" was used for the first time. The Wheaties brand sponsored the first commercial sports broadcast on television, a game between the Brooklyn Dodgers and the Cincinnati Reds on August 29, 1939, which was presented by NBC and featured the sports-casting of the famed Red Barber.

The postwar consumer's interest in convenience complemented General Mills' growing advertising efforts. The company continued to refine its advertising methods after World War II, and such promotions as the Betty Crocker Cookbook (first published in 1950) and advertisements on TV, an exciting new medium at the time, helped to increase sales and consumer recognition of the company. Capitalizing on its research and media prominence, the company soon held the second position in breakfast food sales (behind Kellogg).

Another career General Mills man, Charles H. Bell (son of James Ford Bell), rose to the presidency in 1952. Since advertising had become the main force in marketing its various brands, centralization had crept into the organization. Bell found it necessary to reassign management decisions closer to operations. In 1958 he moved headquarters out of downtown Minneapolis and into suburban Golden Valley. Still stronger changes were needed, but the company was hesitant. General Mills' 1940s ventures into electronics and appliances had failed, and the company had begun to post losses in animal feeds and flour milling. Consumer foods remained the main moneymaker, but General Mills' stock value dropped to $1.25 a share in 1962, its lowest point in 12 years.

DIVERSIFYING WIDELY

Bell recruited an outsider, Edwin W. Rawlings, in 1959, and two years later Rawlings was appointed president. Rawlings reevaluated company output and shook up management positions. The family flour market was declining 3 percent a year, and Rawlings decided consumer preferences had shifted once again. Although the company was then the largest flour miller in the world and flour made up the greatest volume of output, Rawlings closed half of General Mills' mills and renewed the company's commitment to packaged foods by introducing foodservice products for restaurants and hotels. He also divested its interests in electronics, appliances, formula feeds, and other smaller operations. These actions caused a short-term, five-year sales decline for the company.

Next Rawlings began a series of acquisitions that would alter corporate structure for the next 20 years and provide two decades of continual earnings growth. Snack foods entered the company's portfolio with the purchase of Morton Foods, Inc., in 1964. In 1966 came the Tom Huston Peanut Co., and in 1968 General Mills went abroad with the purchase of Smiths Food Group, Ltd., of England and Belgium. The French Biscuiterie Nantaise soon followed, as did snack food companies in Latin America and Japan.

Other major acquisitions included Gorton's, a frozen fish company bought in 1968, and the company also launched an aggressive move into the toy and game industry with the purchases of Rainbow Crafts (Play-Doh), Kenner Products, and Parker Bros. in 1965, 1967, and 1968, respectively. In ten years international toy operations would comprise one-third of the company's sales, at $482.3 million. General Mills was no longer the world's largest miller, it was also the world's largest toy manufacturer. The company also entered the fashion market through the purchase of Monocraft Products, maker of Monet jewelry, in 1968.

Early in 1969 the Federal Trade Commission (FTC) issued a consent order blocking General Mills from further acquisitions within the snack food industry. At the time of purchase, both Morton and Tom Huston were among the top ten producers of potato and corn chips.

During his seven years as General Mills chief, Rawlings managed to double the company's earnings and bring consumer foods to 80 percent of total sales, up from 45 percent. Although Rawlings wanted another outsider to succeed him, the board of directors chose James P. McFarland in 1969. General Mills was the only company for which McFarland had ever worked, and in choosing him the corporation renewed its commitment to balance and stability.

ADDING SPECIALTY RETAILING AND RESTAURANTS

Seeking controlled growth, McFarland slowed, but did not stop, acquisitions. The first of many clothing company purchases was David Crystal, Inc., (Lacoste clothing) in 1969. Along with the purchase of Monet, the Crystal purchase introduced General Mills to specialty retailing; the company later bought Eddie Bauer, Inc., (1971), Talbots (1973), and Foot-Joy (1975). Although the company missed the growth of fast food, purchasing and developing the Red Lobster restaurant chain (1970) would eventually make the new restaurant group General Mills' second largest division. Meantime, Hamburger Helper was introduced nationally in 1971.

McFarland, an experienced salesman, involved himself with day-to-day operations and left long-term planning to COO James A. Summer. In his first two years as CEO, McFarland saw sales rise from $885 million to $1.1 billion and operating profits from $37.5 million to $44 million. His goal was to reach $2 billion in sales by 1976. Sales that year were actually $2.6 billion, four times the 1969 level, with earnings of more than $100 million. He then announced E. Robert Kinney as his successor.

Like most quickly expanding companies of this period, however, not all of General Mills' forays were successful. Between 1950 and 1986, General Mills made 86 acquisitions in new industries; 73 percent of those made by 1975 had been divested within five years. A profitable core business in consumer foods eased the burden of these failed efforts.

In the early 1970s the FTC attempted to dismiss General Mills' 1968 acquisition of Gorton's. The block was lifted in 1973. Later, by allying itself with General Foods Corp., the firm succeeded in blocking a 1977 FTC proposal to forbid advertisements aimed at children. Late in 1980, the FTC again filed a complaint against cereal companies, this time an antitrust suit following a ten-year investigation. It charged that between 1958 and 1972 cereal manufacturers had an average after-tax profit of 19.8 percent, compared with a general manufacturing average of 8.9 percent, and suggested that Kellogg Company, General Mills, and General Foods shared a monopoly over the cereal industry. The charges were dismissed in 1981 after the companies had lobbied for and won congressional favor.

By heavily promoting its brands, the company did well in the 1970s, reporting gains in the toy division and the tripling of sales for consumer foods. Between 1973 and 1978, sales increased $1.7 billion. Of this growth, 41 percent came from new products developed internally, 15 percent from acquisitions, and 18 percent from expansion of restaurant and retail centers. General Mills' management system, in which one manager directed the production, marketing, and sales of each brand, also got credit for some of the increase. After the 1977 sale of the chemical division, General Mills divided its business into food processing, restaurants, games and toys, fashion, and specialty retailing. The food sector was bolstered in 1977 when the company purchased the U.S. rights to the Yoplait yogurt brand. Among the new food products introduced during this period was Nature Valley granola bars.

REFOCUSING ON FOOD

In 1981 H. Brewster Atwater, Jr., became president of General Mills. The following year was a solid one for the company, as consumer foods, restaurants, toys, fashion, and retailing reported sales increases of between 12 percent and 24 percent. Retailing profit was half that of its previous year, however, and although the toy and game division had grown, the toy industry worldwide had decreased 2.9 percent.

Izod Lacoste (the rebranded Lacoste line) also performed well. With $400 million in sales, General Mills intended to develop more items under the label. By 1985, however, sales had dropped to $225 million, and the company hoped to cut overhead to break even at $180 million by 1986. In 1985 the largest toymaker in the world divested items representing more than 25 percent of its sales, including toys, fashion, and nonapparel retailing. Former President Kinney became head of the spun-off Kenner Parker Toys, Inc. The other spinoff, called Crystal Brands, Inc., consisted of Monet Jewelry, Izod Lacoste, Foot-Joy, and Ship 'n Shore. The company kept its furniture group (Pennsylvania House, Kittinger) for future sale. Also kept was Eddie Bauer, despite its reported loss because of excess inventory. General Mills reported a net loss of $72 million due to the restructuring and a 21 percent increase in advertising expenses.

As expected by analysts, General Mills quickly recovered. Earnings were up to $222 million by 1987. Its core businesses were the Big G cereals, Red Lobster, and Talbots in its consumer foods, restaurants, and specialty retailing divisions. The food division had expanded in 1985 with the introduction of Pop Secret, a microwave popcorn product.

The consolidation process begun in 1985 continued in the latter half of the 1980s. Pared down somewhat, the company originally planned to expand its remaining retailing operations. However, the takeover climate of the late 1980s and a disappointing Christmas in 1987 forced the company to exit retailing altogether by selling Eddie Bauer and Talbots in 1988.

General Mills had divested itself of many of its holdings since 1976, but its surviving businesses had a firm footing in their markets. More than 90 percent of the company's food sales came from products with a first or second place market share position. Streamlining also had allowed the company to keep up with the rapid pace of new product development. From 1985 to 1988, 24 percent to 29 percent of the food division's growth came from new products.

General Mills also increased its share in the fastgrowing cereal market, boosted by the oat bran craze of the late 1980s (Cheerios' market share alone climbed 3.1 percent in one year) and the accompanying breakfast food boom. General Mills was the only top cereal producer prepared to respond to these trends.

VENTURING OVERSEAS, EXITING THE RESTAURANT BUSINESS, ADDING CHEX

In 1989 General Mills began to expand into international markets, a sector that archrival Kellogg had been exploiting for years. By forming Cereal Partners Worldwide with Nestlé S.A., the Swiss-based food products giant, General Mills planned to cut into the European cereal market long dominated by Kellogg. By 1991 the partnership was doing so well in Europe that it ventured into the Mexican market. In 1992 General Mills established Snack Ventures Europe, a $600 million partnership with PepsiCo, Inc., to take advantage of the growing market for snack foods in Europe.

After the growth in market share during the late 1980s and early 1990s, by 1993 General Mills experienced a slowdown in its core business of brandname cereal and food products. Nevertheless, in an unprecedented move, the company hired approximately 10,000 new employees during the same year. The reason for this was the growth of the restaurant division. Having already acquired the Red Lobster seafood chain in 1970, General Mills attempted other formats that did not work, including steakhouses and Mexican and health food eateries. In 1982 the company came up with its own Italian restaurant chain called Olive Garden Italian Restaurants and in 1991 launched China Coast, an attempt to fill the void in Chinese food restaurant chains. At the end of 1993, there were 657 Red Lobster and 429 Olive Garden restaurants located throughout the United States, and nine China Coast units in Orlando, Indianapolis, and Fort Worth. With restaurant profits increasing rapidly, General Mills planned to open 100 new locations annually for the next two or three years.

During 1993, in a widely publicized decision amid growing consumer complaints, General Mills decided not to increase its cereal prices to keep pace with Kellogg. Kellogg implemented a 2.1 percent increase on all of its brand-name cereals, but between 1988 and 1992 General Mills had hiked prices nearly 28 percent. As a result, General Mills actually cut prices from 11 to 16 percent on three of its most well-known brands. This discounting strategy increased volume sales on all three of the cereal brands. Also in 1993, the company broadened its position in the yogurt sector by purchasing the Colombo brand.

General Mills reaped more than $8 billion in sales during 1993, with the company's packaged goods accounting for two-thirds of its revenues and the restaurant division making up the remaining amount. With the highest return on equity of any company in the entire industry for the previous five years, an impressive 42.8 percent compared with the industry median of 17 percent, management was confident enough to predict an average growth in profits of 14 percent annually through 2000.

In 1995 General Mills completed its transformation back into a strictly packaged foods company. In May of that year the company sold the Gorton's brand to Unilever and spun off its restaurant division to its shareholders as a separate public company, Darden Restaurants, Inc. As a result, General Mills saw its 1995 revenues reduced by more than $3.5 billion, compared with 1994, but the company emerged with an increased focus and greater profitability. Upon the completion of these moves, Atwater retired, having led the dismantling of a conglomerate. Taking over as chairman and CEO was Stephen W. Sanger, a 21-year company veteran with a marketing background.

In September 1995 General Mills launched Frosted Cheerios, a sugar-frosted version of the company's flagship cereal. Frosted Cheerios went on to become one of the most successful new cereals in history, capturing 1.5 percent of the market in its first year. In addition to developing successful new products, General Mills also returned to the acquisition arena, but in a core area rather than a new one. In January 1997 the company made its largest purchase in history when it spent $570 million for the branded ready-to-eat cereal and snack mix businesses of Ralcorp Holdings, Inc. The brands gained included Chex and Cookie Crisp cereals and Chex Mix snacks. General Mills thereby solidified its number two position in the U.S. ready-to-eat cereal market (behind Kellogg), increasing its share to about 26 percent. Meanwhile, to mark the 75th anniversary of Betty Crocker, a new portrait of the icon was created based on a computer composite.

In 1999, for the first time in its history, General Mills passed Kellogg to claim the top spot in the U.S. cereal sector. General Mills had gained on the longtime industry leader through its consistent rollout of successful new products, its ability to maintain the highest price per box average among the leading cereal makers ($3.30, compared with Kellogg's $2.91), and the more distinctive nature of its cereals, such as Cinnamon Toast Crunch, which were less likely to be successfully challenged by generic cereals than such easier-to-copy Kellogg brands as Corn Flakes and Raisin Bran. At the same time, General Mills was moving forward on other fronts. Focusing on convenience foods, the company in 1999 introduced a 12-item line of Betty Crocker rice and pasta mixes, a new Chicken Helper dinner mix line, and Yoplait Go-Gurt, a line of yogurt packaged in a squeeze-and-eat tube that eliminated the need for a spoon. Also debuting was a new Colombo yogurt package that featured a spoon built right into the lid. General Mills added to its product lines in 1999 through several modest acquisitions. In January the company acquired St. Paul, Minnesota-based Lloyd's Barbeque Company, a maker of refrigerated, microwaveready entrees. The following month saw the purchase of Union City, California-based Farmhouse Foods Company, seller of rice and pasta side dish mixes. In August General Mills bought Milwaukee-based Gardetto's Bakery, Inc., maker of baked snack mixes and flavored pretzels. Early in 2000 the company acquired Small Planet Foods, Inc., a maker of organic food products under the Cascadian Farm and Muir Glen brands. This move was part of General Mills' entry into the burgeoning natural foods sector and came around the same time that the company introduced Sunrise organic cereal.

ACQUIRING AND INTEGRATING PILLSBURY

At this time, the food industry, contending with weak sales and low inflation and facing pressure for discounts from ever-larger retailers such as Wal-Mart Stores, Inc., was in the midst of a wave of consolidation. By mid-2000 the industry had been rocked by two pending megamergers: Philip Morris Companies Inc.'s $18.9 billion deal for Nabisco Holdings Corp. (which was subsequently merged into Kraft Foods Inc.) and Unilever's $20-billion-plus takeover of Bestfoods. General Mills joined this trend in July when it agreed to acquire crosstown rival Pillsbury Company from Diageo plc in a deal ultimately valued at $10.4 billion.

Though both were based in Minneapolis and traced their origins back to milling concerns founded in the 1860s, General Mills and Pillsbury had developed largely complementary product lines. In spite of this, General Mills had to endure a lengthy antitrust review that delayed the deal's consummation until October 2001. To gain regulatory approval, General Mills sold Pillsbury's dessert mixes business, along with certain specialty products such as the Hungry Jack potato and breakfast food business, to International Multifoods Corporation for $316 million. After completing the Pillsbury acquisition, which made it the third largest U.S. food company behind Kraft and ConAgra Foods, Inc., General Mills stood poised to nearly double its revenues from the addition to its portfolio of Pillsbury refrigerated dough products, Progresso soups, Old El Paso Mexican foods, and Totino's and Jeno's frozen pizza and snack products, plus a large domestic foodservice operation. General Mills also gained the Green Giant canned and frozen vegetable brand, which it retained despite originally announcing plans for its divestment. Through Pillsbury, General Mills also controlled the Häagen-Dazs ice cream brand, but in December 2001 Nestlé paid General Mills $641 million to gain full ownership of a U.S. joint venture with Pillsbury that included the Häagen-Dazs brand. General Mills, however, retained the Häagen-Dazs business outside North America. In the meantime, Diageo emerged from its Pillsbury divestiture with a 33 percent stake in General Mills, but the British company gradually divested this stake over the next several years.

General Mills entered into a joint venture with E.I. du Pont de Nemours & Company in 2001 to create the 8th Continent brand of soy foods and beverages. Most of the top management's attention during the year, however, was focused on completing the Pillsbury takeover, and thereafter integration took center stage, a process that did not go entirely smoothly. General Mills' profit margin fell sharply in 2002 as new product introductions were curtailed in favor of integration initiatives and competitors aggressively targeted such key company lines as prepared meals and refrigerated dough. In the most dramatic development, a resurgent Kellogg regained the lead in breakfast cereal in 2002 by launching a slew of new products and heavily promoting certain adult brands.

Over the next two years, General Mills improved its performance in part by reinvigorating its own new product development efforts. In 2002, for example, a line of Cascadian Farm cereals was launched that quickly captured the number two position among organic cereals. The following year General Mills introduced the best-selling extension of its Cheerios line since the Honey Nut version debuted in 1979. Berry Burst Cheerios were a big hit, ringing up sales of more than $100 million during the product's first year on grocer's shelves.

In July 2004, looking to prop up its profit margins, General Mills announced plans to eliminate 20 percent of its overall product line, eliminating about 400 of its smaller and less profitable items. The company was also working to shave its debt load, which had ballooned to more than $9 billion following the Pillsbury deal. General Mills therefore sold its stake in Snack Ventures Europe to PepsiCo for $750 million in February 2005 and two months later sold the Lloyd's barbecue business to Hormel Foods Corporation for about $50 million. Thanks to the cash received through these divestments and the firm's strong cash flow, General Mills managed to reduce its total debt to $6.19 billion by the end of 2005.

In July 2005, in what Sanger touted as perhaps the "biggest single health-related product improvement in the history of the cereal category," General Mills converted its entire Big G cereal line to whole grain to meet growing consumer demand for more healthful food options. This trend was also evident in the company's results for 2006, which showed a 27 percent jump in sales at Small Planet Foods, General Mills' organic food subsidiary. Overall revenues for 2006 edged up 4 percent, to $11.64 billion, while net earnings were a healthy $1.1 billion. In May 2006 Ken Powell was promoted to president and chief operating officer, a move that seemed to place the 26-year company veteran in position to eventually succeed Sanger as General Mills' CEO.

Thomas Derdak

Updated, David E. Salamie

PRINCIPAL SUBSIDIARIES

Colombo, Inc.; Gardetto's Bakery, Inc.; General Mills Argentina S.A.; General Mills Asia Pacific Limited (Hong Kong); General Mills Asia Pte. Ltd. (Singapore); General Mills Australia Pty Ltd; General Mills Belgium, SNC; General Mills Berwick Limited (U.K.); General Mills Brasil Ltda. (Brazil); General Mills Canada Corporation; General Mills China Limited (Hong Kong); General Mills Continental, Inc.; General Mills de Mexico, S. de R.L. de C.V.; General Mills de Venezuela, C.A.; General Mills Direct Marketing, Inc.; General Mills Finance, Inc.; General Mills Foods, Inc. (Philippines); General Mills Foundation; General Mills France (SAS); General Mills GmbH (Germany); General Mills Hellas S.A. (Greece); General Mills Holding B.V. (Netherlands); General Mills Holland B.V. (Netherlands); General Mills Hong Kong Limited; General Mills ICF SARL (Switzerland); General Mills India Private Limited; General Mills International Limited; General Mills Israel Ltd.; General Mills Italia SRL (Italy); General Mills Korea Co., Ltd.; General Mills Lebanon S.A.L.; General Mills Luxembourg S.A. R.L.; General Mills Maghreb SARL (Morocco); General Mills Malaysia Sdn. Bhd.; General Mills Mauritius, Inc.; General Mills Missouri, Inc.; General Mills Netherlands B.V.; General Mills New Zealand Limited; General Mills Operations, Inc.; General Mills Products Corp.; General Mills Scandinavia AB (Sweden); General Mills Services, Inc.; General Mills Snacks Holding B.V. (Netherlands); General Mills South Africa (Proprietary) Limited; General Mills Taiwan Limited; General Mills UK Limited; GM Cereals Holdings, Inc.; Gold Medal Insurance Co.; Green Giant International, Inc.; Häagen-Dazs Arras SNC (France); Häagen-Dazs Belgium (S.A. N.V.); Häagen-Dazs International Shoppe Company, Inc.; Häagen-Dazs Nederland B.V. (Netherlands); Pet Incorporated; The Pillsbury Company; Popcorn Distributors, Inc.; Progresso Quality Foods Company; Small Planet Foods, Inc.; Yoplait USA, Inc.

PRINCIPAL DIVISIONS

Big G Cereals; Meals; Pillsbury; Baking Products; Snacks; Yogurt; Health Ventures; Bakeries & Foodservice; International.

PRINCIPAL COMPETITORS

Kellogg Company; Kraft Foods Inc.; ConAgra Foods, Inc.; Campbell Soup Company; Groupe Danone; Nestlé S.A.; Ralcorp Holdings, Inc.

General Mills, Inc.

views updated May 29 2018

General Mills, Inc.

Number One General Mills Boulevard
Post Office Box 1113
Minneapolis, Minnesota 55440
U.S.A.
Telephone: (612) 764-2311
Fax: (612) 764-2445
Web site: http://www.generalmills.com

Public Company
Incorporated: 1928
Employees: 10,660
Sales: $6.25 billion (1999)
Stock Exchanges: New York Midwest
Ticker Symbol: GIS
NAIC: 311211 Flour Milling; 311230 Breakfast Cereal Manufacturing; 311340 Nonchocolate Confectionery Manufacturing; 311423 Dried and Dehydrated Food Manufacturing; 311511 Fluid Milk Manufacturing; 311822 Flour Mixes and Dough Manufacturing from Purchased Flour; 311919 Other Snack Food Manufacturing; 311999 All Other Miscellaneous Food Manufacturing

General Mills, Inc. is one of the leading breakfast cereal companies in the world, with such well-known brands as Cheerios, Chex, Cocoa Puffs, Kix, Total, Trix, and Wheaties stocking the shelves of supermarkets everywhere. In addition to its breakfast cereal products, the company includes some of the best names in other food lines such as Gold Medal flour, Bis-quick baking mixes, Betty Crocker dessert mixes, Hamburger Helper dinner mixes, Yoplait yogurt, Pop Secret microwave popcorn, and Nature Valley granola bars. General Mills markets its products in more than 90 countries worldwide, with much of this activity stemming from two joint ventures: a 50-50 enterprise with Nestle S.A. called Cereal Partners Worldwide, which makes and sells ready-to-eat cereals outside North America; and Snack Ventures Europe, a venture with PepsiCo, Inc. 40.5 percent owned by General Mills, which makes and markets snack foods in continental Europe. General Mills is also active outside the grocery sector through its foodservice unit, which markets products under the company’s various brands to educational, hospitality, and healthcare institutions, convenience stores, and vending machine operators.

Early History

General Mills was incorporated in 1928, but its origins go back to 1866, when Cadwallader Washburn opened the first flour mill in Minneapolis, Minnesota. His business, originally called the Minneapolis Milling Company, competed with local miller C.A. Pillsbury. In 1869 they joined forces to form the Minneapolis Millers Association. Pillsbury and Washburn both wanted to find a way to make Midwestern winter wheat into a higher grade of flour. Eventually, with the help of a French engineer, Washburn not only improved the method but also made his product the best flour available in the United States. When Pillsbury adopted the same technique, Minneapolis be-came the country’s flour milling center.

When John Crosby entered into partnership with Washburn in 1877, the Minneapolis Milling Company was renamed Washburn Crosby Company. The following year the Minneapolis Millers Association was reorganized to appease farmers who found its business practices unfair. In 1880 Washburn Crosby flours were awarded the gold, silver, and bronze medals at the first International Miller’s Exhibition in Cincinnati, Ohio; the company soon changed the name of its best flour to Gold Medal. In 1888, James S. Bell succeeded Washburn as head of the Washburn Crosby Company, ousting Washburn’s heirs. The mill prospered through the turn of the century. In 1928, the year General Mills was formed, the company had 5,800 employees and annual sales of $123 million. Its strongest products were Gold Medal flour, Softasilk cake flour (introduced in 1923), and Wheaties, a ready-to-eat cereal that had debuted in 1924.

Bell’s son, James Ford, was responsible for creating General Mills, Inc. in 1928 by consolidating the Washburn mill with several other major flour-milling companies around the country, including Red Star Milling Co., Sperry Milling Co., and Larrowe Milling Co. Within five months Ford had collected 27 companies, making General Mills the largest flour-milling company in the world. As a part of General Mills, these mills kept their operational independence but left advertising and product development to General Mills headquarters. This consolidation was well timed, as it gave the company the strength to survive and even prosper through the Great Depression, when earnings grew steadily and stock in the company was stable.

Bell’s research emphasis put General Mills in a strong position for the changing demands of increasingly urban consumers. The company soon introduced Bisquick, the first baking mix, which debuted in 1931; the company’s first ready-to-eat puffed cereal, Kix, in 1937; and another ready-to-eat cereal, Cheeri-oats, in 1941. Cheerioats was renamed Cheerios five years after its introduction; under its new name it eventually would become the number one cereal in the United States.

Bell’s early interest in diversification and technology made mobilization for World War II easier. General Mills’ factories were restructured to produce equipment for the navy, medicinal alcohol, and bags to make into sandbags, as well as the expected dehydrated food. In 1942 Donald D. Davis, president of General Mills since Bell moved to chairman in 1934, resigned to head the U.S. War Production Board.

Henry Bullis, who began at General Mills as a mill hand after World War I, replaced Davis. Following Bell’s industrial lead, Bullis immediately entered the animal feed industry by processing soybeans, a venture that ultimately became General Mills’ chemical division.

Postwar demand for consumer foods allowed the company to deemphasize industrial activity and to concentrate on the success of its cereals and Betty Crocker cake mixes—the latter having been launched in 1947. Consumers demanded less time in the kitchen and continued to buy foods that required less preparation. Ready-to-eat cereals, now the company’s staple, grew dramatically, and more brands were introduced, including Trix, a presweetened cereal that hit the market in 1954.

Throughout the 1920s Bell and his associates had invested heavily in advertising, which was becoming a significant force in selling products to a national market. Betty Crocker, created in 1921, was a legacy from Washburn Crosby. By 1928 Betty Crocker’s name, signature, and radio voice had been introduced in connection with General Mills’ consumer goods. General Mills also sponsored radio programs and pioneered the use of athlete endorsements on its own radio station, WCCO. In 1933 the advertising slogan “Wheaties. The Breakfast of Champions” was used for the first time. The Wheaties brand sponsored the first commercial sports broadcast on television, a game between the Brooklyn Dodgers and the Cincinnati Reds on August 29,1939, which was presented by NBC and featured the sportscasting of the famed Red Barber.

The postwar consumer’s interest in convenience complemented General Mills’ growing advertising efforts. The company continued to refine its advertising methods after World War II, and such promotions as the Betty Crocker Cookbook and advertisements on TV, an exciting new medium at the time, helped to increase sales and consumer recognition of the company. Capitalizing on its research and media prominence, the company soon held the second position in breakfast food sales.

Another career General Mills man, Charles H. Bell, rose to the presidency in 1952. Since advertising had become the main force in marketing its various brands, centralization had crept into the organization. Bell found it necessary to reassign management decisions closer to operations. In 1958 he moved headquarters out of downtown Minneapolis and into suburban Golden Valley. Still stronger changes were needed, but the company was hesitant. General Mills’ 1940s ventures into electronics and appliances had failed, and the company had recently begun to post losses in animal feeds and flour milling. Consumer foods remained the main moneymaker, but General Mills’ stock value dropped to $1.25 a share in 1962, its lowest point in 12 years.

Diversifying Widely in the 1960s

Bell recruited an outsider, Edwin W. Rawlings, in 1959, and two years later Rawlings was appointed president. Rawlings reevaluated company output and shook up management positions. The family flour market was declining three percent a year, and Rawlings decided consumer preferences had shifted once again. Although the company was then the largest flour miller in the world and flour made up the greatest volume of output, Rawlings closed half of General Mills’ mills and renewed the company’s commitment to packaged foods by introducing foodservice products for restaurants and hotels. He also divested its interests in electronics, appliances, formula feeds, and other smaller operations. These actions caused a short-term, five-year sales decline for the company.

Next Rawlings began a series of acquisitions that would alter corporate structure for the next 20 years and provide two decades of continual earnings growth. Snack foods entered the company’s portfolio with the purchase of Morton Foods, Inc. in 1964. In 1966 came the Tom Huston Peanut Co., and in 1968 General Mills went abroad with the purchase of Smiths Food Group, Ltd. of England and Belgium. The French Biscuiterie Nantaise soon followed, as did snack food companies in Latin America and Japan.

Other major acquisitions were Gorton’s, a frozen fish company, and an aggressive move into the toy and game industry with Rainbow Crafts (Play-Doh), Kenner, and Parker Bros., all in 1968. In ten years international toy operations would comprise one-third of the company’s sales, at $482.3 million. General Mills was no longer the world’s largest miller, but it was now the world’s largest toy manufacturer.

Company Perspectives

Consumers choose General Mills because we offer competitively superior products and services. Employees choose General Mills because we reward innovation and superior performance and release their power to lead. Investors choose General Mills because we consistently deliver financial results in the top 10 percent of all major companies.

Early in 1969 the Federal Trade Commission (FTC) issued a consent order blocking General Mills from further acquisitions within the snack food industry. At the time of purchase, both Morton and Tom Huston were among the top ten producers of potato and corn chips.

During his seven years as General Mills chief, Rawlings managed to double the company’s earnings and bring consumer foods to 80 percent of total sales, up from 45 percent. Although Rawlings wanted another outsider to succeed him, the board of directors chose James P. McFarland in 1969. General Mills was the only company for which McFarland had ever worked, and in choosing him the corporation renewed its commitment to balance and stability.

Adding Specialty Retailing and Restaurants in the 1970s

Seeking controlled growth, McFarland slowed, but did not stop, acquisitions. The first of many clothing company purchases was David Crystal, Inc. (Lacoste clothing) in 1969. Along with the purchase of Monet Jewelry in the same year, the purchase introduced General Mills to specialty retailing; the company later bought Eddie Bauer, Inc. (in 1971) and Talbot’s (1973). Although the company missed the growth of fast food, purchasing and developing the Red Lobster restaurant chain (in 1970) would eventually make the new restaurant group General Mills’ second largest division. Meantime, Hamburger Helper was introduced in 1970.

McFarland, an experienced salesman, involved himself with day-to-day operations and left long-term planning to COO James A. Summer. In his first two years as CEO, McFarland saw sales rise from $885 million to $1.1 billion and operating profits from $37.5 million to $44 million. His goal was to reach $2 billion in sales by 1976. Sales that year were actually $2.6 billion, four times the 1969 level, with earnings of more than $100 million. He then announced E. Robert Kinney as his successor.

Like most quickly expanding companies of this period, however, not all of General Mills’ forays were successful. Between 1950 and 1986, General Mills made 86 acquisitions in new industries; 73 percent of those made by 1975 had been divested within five years. A profitable core business in consumer foods eased the burden of these failed efforts.

Key Dates

1866:: Cadwallader Washburn, owner of Minneapolis Milling Company, opens the first flour mill in Minneapolis.
1877:: John Crosby enters into partnership with Washburn, whose company is then renamed Washburn Crosby Company.
1880:: Company wins gold medal at the first International Millers’ Exhibition, leading to the later creation of the Gold Medal brand.
1888:: James S. Bell takes over leadership of Washburn Crosby.
1921:: The fictional Betty Crocker is created by Washburn Crosby.
1924:: Wheaties ready-to-eat cereal debuts.
1928:: Bell’s son, James Ford, leads the creation of General Mills through the merger of Washburn Crosby with several other regional millers.
1931:: Bisquick, the first baking mix, is introduced.
1941:: Cheerioats ready-to-eat cereal debuts.
1946:: Cheerioats is renamed Cheerios.
1947:: The first Betty Crocker cake mix is introduced.
1954:: Trix, a presweetened cereal, hits the market.
1961:: Edwin W. Rawlings is appointed president and ushers in a period of wide diversification.
1964:: Company enters the snack food sector with the purchase of Morton Foods.
1968:: Company acquires Gorton’s frozen seafood and several toy and game outfits—Rainbow Crafts, Kenner, and Parker Bros.
1969:: Company moves into specialty retailing with purchases of Lacoste clothing and Monet Jewelry.
1970:: Red Lobster restaurant chain is acquired; Hamburger Helper makes its debut.
1971:: Eddie Bauer is purchased.
1973:: Talbot’s is acquired.
1977:: Company purchases the U.S. rights to the Yoplait yogurt brand.
1983:: The Olive Garden Italian restaurant chain is launched.
1985:: Company divests its toy, fashion, and nonapparel retailing operations; Pop Secret microwave popcorn is introduced.
1989:: Eddie Bauer and Talbot’s are sold; Cereal Partners Worldwide, a joint venture with Nestle, S.A., is formed.
1992:: Company establishes Snack Ventures Europe in partnership with PepsiCo, Inc.
1995:: The Gorton’s brand is sold to Unilever; the restaurant division is spun off to shareholders as a separate public company, Darden Restaurants, Inc.
1997:: The branded ready-to-eat cereal and snack mix businesses of Ralcorp Holdings, Inc. are acquired, including the Chex brand.
1999:: Lloyd’s Barbecue Company, Farmhouse Foods Company, and Gardetto’s Bakery, Inc. are acquired.

In the early 1970s the FTC attempted to dismiss General Mills’ 1968 acquisition of Gorton’s. The block was lifted in 1973. Later, by allying itself with General Foods Corp., the firm succeeded in blocking a 1977 FTC proposal to forbid advertisements aimed at children. Late in 1980, the FTC again filed a complaint against cereal companies, this time an antitrust suit following a ten-year investigation. It charged that between 1958 and 1972 cereal manufacturers had an average after-tax profit of 19.8 percent, compared with a general manufacturing average of 8.9 percent, and suggested that Kellogg Company, General Mills, and General Foods shared a monopoly over the cereal industry. The charges were dismissed in 1981 after the companies had lobbied for and won congressional favor.

By heavily promoting its brands, the company did well in the 1970s, reporting gains in the toy division and the tripling of sales for consumer foods. Between 1973 and 1978, sales in-creased $1.7 billion. Of this growth, 41 percent came from new products developed internally, 15 percent from acquisitions, and 18 percent from expansion of restaurant and retail centers. General Mills’ management system, in which one manager directed the production, marketing, and sales of each brand, also got credit for some of the increase. After the 1977 sale of the chemical division, General Mills divided its business into food processing, restaurants, games and toys, fashion, and specialty retailing. The food sector was bolstered in 1977 when the company purchased the U.S. rights to the Yoplait yogurt brand.

Refocusing on Food in the 1980s

In 1981 H. Brewster Atwater, Jr., became president of General Mills. The following year was a solid one for the company, as consumer foods, restaurants, toys, fashion, and retailing reported sales increases of between 12 percent and 24 percent. Retailing profit was half that of its previous year, however, and although the toy and game division had grown, the toy industry worldwide had decreased 2.9 percent.

Izod Lacoste also performed well. With $400 million in sales, General Mills intended to develop more items under the label. But by 1985 sales had dropped to $225 million, and the company hoped to cut overhead to break even at $180 million by 1986. In 1985 the largest toymaker in the world divested items representing more than 25 percent of its sales, including toys, fashion, and nonapparel retailing. Former president Kinney became head of the spun-off Kenner Parker Toys Inc. The other spinoff, called the Fashion Co., consisted of Monet Jewelry, Izod Lacoste, and Ship ‘n Shore. The company kept its furniture group (Pennsylvania House, Kittinger) for future sale. Also kept was Eddie Bauer, despite its reported loss because of excess inventory. General Mills reported a net loss of $72 million due to the restructuring and a 21 percent increase in advertising expenses.

As expected by analysts, General Mills quickly recovered. Earnings were up to $222 million by 1987. Its core businesses were the Big G cereals, Red Lobster, and Talbot’s in its consumer foods, restaurants, and specialty retailing divisions. The food division had expanded in 1985 with the introduction of Pop Secret, a microwave popcorn product.

The consolidation process begun in 1985 continued in the latter half of the 1980s. Pared down somewhat, the company originally planned to expand its remaining retailing operations. But the takeover climate of the late 1980s and a disappointing Christmas in 1987 forced the company to exit retailing altogether by selling Eddie Bauer and Talbot’s in 1989.

General Mills had divested itself of many of its holdings since 1976, but its surviving businesses had a firm footing in their markets. More than 90 percent of the company’s food sales came from products with a first or second place market share position. Streamlining also had allowed the company to keep up with the rapid pace of new product development. From 1985 to 1988, 24 percent to 29 percent of the food division’s growth came from new products.

General Mills also increased its share in the fast-growing cereal market, boosted by the oat bran craze of the late 1980s (Cheerios’ market share alone climbed 3.1 percent in one year) and the accompanying breakfast food boom. General Mills was the only top cereal producer prepared to respond to these trends.

1990s: Venturing Overseas, Exiting from Restaurateuring, Adding Chex

In 1989 General Mills began to expand into international markets, a sector that archrival Kellogg had been exploiting for years. By forming Cereal Partners Worldwide with Nestle S.A., the Swiss-based food products giant, General Mills planned to cut into the European cereal market long dominated by Kellogg. By 1991 the partnership was doing so well in Europe that it ventured into the Mexican market. In 1992 General Mills established Snack Ventures Europe, a $600 million partnership with PepsiCo, Inc., to take advantage of the growing market for snack foods in Europe.

After the growth in market share during the late 1980s and early 1990s, by 1993 General Mills experienced a slowdown in its core business of brand name cereal and food products. Nevertheless, in an unprecedented move, the company hired approximately 10,000 new employees during the same year. The reason for this was the growth of the restaurant division. Having already acquired the Red Lobster seafood chain in 1970, General Mills attempted other formats that did not work, including steakhouses and Mexican and health food eateries. In 1983 the company came up with its own Italian restaurant chain called Olive Garden Italian Restaurants and in 1991 launched China Coast, an attempt to fill the void in Chinese food restaurant chains. At the end of 1993, there were 657 Red Lobster and 429 Olive Garden restaurants located throughout the United States, and nine China Coast units in Orlando, Indianapolis, and Fort Worth. With restaurant profits increasing rapidly, General Mills planned to open 100 new locations annually for the next two or three years.

During 1993, in a widely publicized decision amid growing consumer complaints, General Mills decided not to increase its cereal prices to keep pace with Kellogg. Kellogg implemented a 2.1 percent increase on all of its brand name cereals, but General Mills had previously hiked prices nearly 28 percent between 1988 and 1992. As a result, General Mills actually cut prices from 11 to 16 percent on three of its most well-known brands. This discounting strategy increased volume sales on all three of the cereal brands.

General Mills reaped more than $8 billion in sales during 1993, with the company’s packaged goods accounting for two-thirds of its revenues and the restaurant division making up the remaining amount. With the highest return on equity of any company in the entire industry for the previous five years—an impressive 42.8 percent compared with the industry median of 17 percent—management was confident enough to predict an average growth in profits of 14 percent annually through 2000.

In 1995 General Mills completed its transformation back into a strictly packaged foods company. In May of that year the company sold the Gorton’s brand to Unilever and spun off its restaurant division to its shareholders as a separate public company, Darden Restaurants, Inc. As a result, General Mills saw its 1995 revenues reduced by more than $3.5 billion, compared with 1994, but the company emerged with an increased focus and greater profitability. Upon the completion of these moves, Atwater retired, having led the dismantling of a conglomerate. Taking over as chairman and CEO was Stephen W. Sanger, a 21-year company veteran with a marketing background.

In September 1995 General Mills launched Frosted Cheerios, a sugar-frosted version of the company’s flagship cereal. Frosted Cheerios went on to become one of the most successful new cereals in history, capturing 1.5 percent of the market in its first year. In addition to developing successful new products, General Mills also returned to the acquisition arena, but in a core area rather than a new one. In January 1997 the company made its largest purchase in history when it spent $570 million for the branded ready-to-eat cereal and snack mix businesses of Ralcorp Holdings, Inc. The brands gained included Chex and Cookie Crisp cereals and Chex Mix snacks. General Mills thereby solidified its number two position in the U.S. ready-toeat cereal market (behind Kellogg), increasing its share to about 26 percent. Meanwhile, to mark the 75th anniversary of Betty Crocker, a new portrait of the icon was created based on a computer composite.

By 1999 General Mills was neck-and-neck with Kellogg in the U.S. cereal sector, claiming 31.6 percent of U.S. cereal sales, to Kellogg’s 31.7 percent. General Mills had gained on the industry leader through its consistent rollout of successful new products, its ability to maintain the highest price per box average among the leading cereal makers ($3.30, compared with Kellogg’s $2.91), and the more distinctive nature of its cereals, such as Cinnamon Toast Crunch, which were less likely to be successfully challenged by generic cereals than such easier-to-copy Kellogg brands as Corn Flakes and Raisin Bran. At the same time, General Mills was moving forward on other fronts. Focusing on convenience foods, the company in 1999 introduced a 12-item line of Betty Crocker rice and pasta mixes, a new Chicken Helper dinner mix line, and Yoplait Go-Gurt, a line of yogurt packaged in a squeeze-and-eat tube that eliminated the need for a spoon. Also debuting was a new Colombo yogurt package that featured a spoon built right into the lid. General Mills added to its product lines in 1999 through several modest acquisitions. In January the company acquired St. Paul, Minnesota-based Lloyd’s Barbeque Company, a maker of refrigerated, microwave-ready entrees. The following month saw the purchase of Union City, California-based Farmhouse Foods Company, seller of rice and pasta side dish mixes. In August General Mills bought Milwaukee-based Gardetto’s Bakery, Inc., maker of baked snack mixes and flavored pretzels. Early in 2000 the company acquired Small Planet Foods, a maker of organic food products under the Cascadian Farm and Muir Glen brands. This move was part of General Mills’ entry into the burgeoning natural foods sector and came around the same time that the company introduced Sunrise organic cereal.

In early 2000 Sanger announced a series of long-term goals for the first decade of the 21st century. The company aimed to achieve seven to eight percent compound annual sales growth, to generate $500 million in pretax cost savings through productivity enhancements, and to sustain double-digit earnings per share growth. By meeting or exceeding these goals, General Mills would likely be able to remain independent in a food industry that was coming under increasing pressure to consolidate.

Principal Subsidiaries

Colombo, Inc.; C.P.A. Cereal Partners Handelsgesellschaft m.b.H. (Austria; 50%); C.P.D. Cereal Partners Deutschland Verwaltungsgesellschaft m.b.H (Germany; 50%); CPW Mexico S.A. de C.V. (50%); CPW S.A. (Switzerland; 50%); CPW-CI Limited (Cayman Islands; 50%); FYL Corp.; General Mills (BVI) Ltd. (British Virgin Islands); General Mills Continental, Inc.; General Mills Direct Marketing, Inc.; General Mills Eu-rope Limited (U.K.); General Mills Finance, Inc.; General Mills France S.A.; General Mills Holding B.V. (Netherlands); General Mills International Limited; General Mills Maarssen B.V. (Netherlands); General Mills Mauritius, Inc.; General Mills Missouri, Inc.; General Mills Operations, Inc.; General Mills Products Corp.; General Mills Services, Inc.; Gold Medal Insurance Co.; Lloyd’s Food Products, Inc.; Mills Media, Inc.; Nestle Asean Philippines, Inc. (30%); Popcorn Distributors, Inc.; Torun-Pacific Sp. Z o.o. (Poland; 50%); Yoplait USA, Inc.

Principal Competitors

Aurora Foods Inc.; Bestfoods; Borden, Inc.; Campbell Soup Company; ConAgra, Inc.; Groupe Danone; Diageo plc; Gilster-Mary Lee Corporation; H.J. Heinz Company; International Home Foods, Inc.; Kellogg Company; Malt-O-Meal Company; Mars, Inc.; McKee Foods Corporation; Nabisco Holdings Corp.; PepsiCo, Inc.; Philip Morris Companies Inc.; The Pills-bury Company; The Procter & Gamble Company; The Quaker Oats Company; Ralcorp Holdings, Inc.; Unilever.

General Mills, Inc.

views updated May 17 2018

General Mills, Inc.

9200 Wayzata Boulevard
Minneapolis, Minnesota 55440
U.S.A.
(612) 540-2311

Public Company
Incorporated: 1928
Employees: 74,453
Sales: $5.18 billion
Stock Index: New York Midwest

For more than 60 years General Mills has survived as an independent corporation by relying on its flour milling and breakfast cereals. From the 1930s through the 1980s the company attempted to diversify into several industries, but a restructuring in 1985 sent ripples through the company’s makeup and earnings, and today it has trimmed itself down to focus exclusively on consumer foods and restaurants.

General Mills was incorporated relatively recently, but its origins go back to 1866, when Cadwallader Washburn opened a flour mill in Minneapolis, Minnesota. His business, which soon became the Washburn Crosby Company, competed with local miller C. A. Pillsbury. In 1869 they joined forces to form the Minneapolis Millers Association. Pillsbury and Washburn both wanted to find a way to make midwestern winter wheat into a higher grade of flour. Eventually, with the help of a French engineer, Washburn not only improved the method but made his product the best flour available in America. When Pillsbury adopted the same technique, Minneapolis became the country’s flour-milling center.

In 1878 the Association was reorganized to appease farmers who found its business practices unfair. James S. Bell succeeded Washburn as head of the Washburn Crosby Company, ousting Washburn’s heirs, and the mill prospered through the turn of the century. In 1928, the year General Mills was formed, the company had 5,800 employees and annual sales of $123 million. Its strongest products were Gold Medal Flour, Softasilk Cake Flour, and Wheaties, a recently introduced ready-to-eat cereal.

Bell’s son, James Ford, was responsible for creating General Mills in 1928 by consolidating the Washburn mill with several other major flour-milling companies around the country, including the Red Star Milling Company, the Sperry Milling Company, and the Larrowe Milling Company. Within five months Ford had collected 27 companies, making General Mills (GM) the largest flour-milling company in the world. As a part of GM, these mills kept their operational independence but left advertising and product development to General Mills headquarters. This consolidation was well timed, as it gave the company the strength to survive and even prosper through the Depression, when earnings grew steadily and stock in the company was stable.

Bell’s research emphasis put General Mills in a strong position for the changing demands of increasingly urban consumers. The company soon introduced Bisquick, the first baking mix, and another ready-to-eat cereal, Cheerios, which 50 years later would be the best-selling cereal in America.

Bell’s early interest in diversification and technology made mobilization for World War II easier. General Mills’ factories were restructured to produce equipment for the navy, medicinal alcohol, and bags to make into sandbags, as well as the expected dehydrated food. In 1942 Donald D. Davis, president of GM since James Bell moved to chairman in 1934, resigned to head the War Production Board.

Henry Bullis, who began at the company as a mill hand after World War I, replaced him. Following Bell’s industrial lead, Bullis immediately entered the animal-feed-industry by processing soybeans, a venture which ultimately became GM’s chemical division.

Postwar demand for consumer foods allowed the company to de-emphasize industrial activity and to concentrate on the success of its cereals and cake mixes. Consumers demanded less time in the kitchen and continued to buy foods that required less preparation. Ready-to-eat cereals, now the company’s staple, grew dramatically, and more brands were introduced.

Throughout the 1920s Bell and his associates had invested heavily in advertising, which was becoming a significant force in selling products to a national market. Betty Crocker, created in 1921, was a legacy from Washburn Crosby. By 1928 Betty Crocker’s name, signature, and radio voice had been introduced in connection with General Mills’ consumer goods. General Mills also sponsored radio programs and pioneered the use of athlete endorsements on its own radio station, WCCO.

The postwar consumer’s interest in convenience complemented General Mills’ growing advertising efforts. The company continued to refine its advertising methods after World War II, and promotions like the Betty Crocker Cookbook and advertisements on TV, an exciting new medium at the time, helped to increase sales and consumer recognition of the company. Capitalizing on its research and media prominence, the company soon held the second position in breakfast-food sales.

Another career GM man, Charles H. Bell, rose to the presidency in 1952. Since advertising had become the main force in marketing its various brands, centralization had crept into the organization. Bell found it necessary to reassign management decisions closer to operations. In 1958 he moved headquarters out of downtown Minneapolis and into suburban Golden Valley. Still stronger changes were needed, but the company was hesitant. GM’s 1940s ventures into electronics and appliances had failed, and the company had recently begun to post losses in animal feeds and flour milling. Consumer foods remained the main moneymaker, but GM’s stock value dropped to $1.25 a share in 1962, its lowest point in 12 years.

Bell recruited an outsider, Edwin W. Rawlings, in 1959, and two years later Rawlings was appointed president. Rawlings reevaluated company output and shook up management positions. The family flour market was declining 3% a year, and Rawlings decided consumer preferences had shifted once again. Although the company was then the largest flour miller in the world and flour made up greatest volume of output, Rawlings closed half of GM’s mills and renewed the company’s commitment to packaged foods by introducing food-service products for restaurants and hotels. He also divested its interests in electronics, appliances, formula feeds, and other smaller operations. These actions caused a short-term, five-year sales decline for the company.

Next he began a series of acquisitions that would alter corporate structure for the next 20 years and provide two decades of continual earnings growth. Snack foods entered the company’s portfolio with the purchase of Morton Foods, Inc. in 1964. In 1966 came the Tom Huston Peanut Company, and in 1968 General Mills went abroad with the purchase of Smiths Food Group, Ltd. of England and Belgium. The French Biscuiterie Nantaise soon followed, as did snack-food companies in Latin America and Japan.

Other major acquisitions were Gorton’s, a frozen-fish company, and an aggressive move into the toy and game industry with Rainbow Crafts (Play-Doh), Kenner, and Parker Brothers, all in 1968. In ten years international toy operations would comprise one-third of the company’s sales, at $482.3 million. General Mills was no longer the world’s largest miller, but it was now the world’s largest toy manufacturer.

Early in 1969 the Federal Trade Commission issued a consent order blocking General Mills from further acquisitions within the snack-food industry. At the time of purchase, both Morton and Tom Huston were among the top-ten producers of potato and corn chips.

During his seven years as GM chief, Rawlings managed to double the company’s earnings and bring consumer foods to 80% of total sales, up from 45%. Although Rawlings wanted another outsider to succeed him, the board of directors chose James P. McFarland in 1969. General Mills was the only company McFarland had ever worked for, and in choosing him the corporation renewed its commitment to balance and stability.

Seeking controlled growth, McFarland slowed, but did not stop, acquisitions. The first of many clothingcompany purchases was David Crystal, Inc. (Lacoste clothing) in 1969. Along with the purchase of Monet Jewelry in the same year, the purchase introduced General Mills to specialty retailing. Although the company missed the growth of fast-food opportunities, purchasing and developing the Red Lobster Restaurant chain would eventually make the new restaurant group General Mills’ second-largest division.

McFarland, an experienced salesman, involved himself with day-to-day operations and left long-term planning to operating chief James A. Summer. In his first two years as CEO, McFarland saw sales rise from $885 million to $1.1 billion and operating profits from $37.5 million to $44 million. His goal was to reach $2 billion in sales by 1976. Sales that year were actually $2.6 billion, four times the 1969 level, with earnings of more than $100 million. He then announced E. Robert Kinney as his successor.

Like most quickly expanding companies of this time period, however, not all of GM’s forays were successful. Between 1950 and 1986, General Mills made 86 acquisitions in new industries; 73% of those made by 1975 had been divested within five years. A profitable core business in consumer foods eased the burden of these failed efforts.

General Mills’ advertising budget is typically as large as its earnings. Although spending less than it did in the late 1970s and early 1980s, General Mills still ranks as the thirteenth largest spender in all media, at $572 million a year. Being such a highly visible company has not always provided favorable attention.

In the early 1970s the Federal Trade Commission (FTC) attempted to dismiss GM’s 1968 acquisition of Gorton’s. The block was lifted in 1973. Later, by allying itself with General Foods, the firm succeeded in blocking a 1977 FTC proposal to forbid advertisements aimed at children. Late in 1980, the FTC again filed a complaint against cereal companies, this time an antitrust suit following a ten-year investigation. It charged that between 1958 and 1972 cereal manufacturers had an average after-tax profit of 19.8%, compared to a general manufacturing average of 8.9% and suggested that Kellogg Company, General Mills, and General Foods Corporation shared a monopoly over the cereal industry. The charges were dismissed in 1981 after the companies had lobbied for and won congressional favor.

By heavily promoting its brands, the company did well in the 1970s, reporting gains in the toy division and the tripling of sales for consumer foods. Between 1973 and 1978, sales increased $1.7 billion. Of this growth, 41% came from new products developed internally, 15% from acquisitions, and 18% from expansion of restaurant and retail centers. General Mills’ management system, in which one manager oversees the production, marketing, and sales of each brand, also got credit for some of the increase. After the 1977 sale of the chemical division, General Mills divided its business into food processing, restaurants, games and toys, fashion, and specialty retailing.

In 1981 H. Brewster Atwater Jr. became president. The following year was a solid one for the company, as consumer foods, restaurants, toys, fashion, and retailing reported sales increases of between 12% and 24%. However, retailing profit was half that of its previous year, and although the toy and game division had grown, the toy industry worldwide had decreased 2.9%.

Izod Lacoste also performed well. With $400 million in sales, General Mills intended to develop more items under the label. But by 1985 sales had dropped to $225 million, and the company hoped to cut overhead in order to break even at $180 million by 1986.

In 1985 the largest toymaker in the world divested items representing over 25% of its sales, including toys, fashion, and non-apparel retailing. Former President Kinney became head of the spun-off Kenner Parker Toys Inc. The other spin-off, called The Fashion Company, consisted of Monet jewelry, Izod Lacoste, and Ship ’n Shore. The company kept its furniture group (Pennsylvania House, Kittinger) for future sale. Also kept was Eddie Bauer, despite its reported loss because of excess inventory. General Mills reported a net loss of $72 million due to the restructuring and a 21% increase in advertising expenses.

As expected by analysts, General Mills quickly recovered. Earnings were up to $222 million by 1987. Its core businesses were the Big G cereals, Red Lobster, and Talbot’s in its consumer-foods, restaurants, and specialty-retailing divisions.

The consolidation process begun in 1985 continued in the latter half of the 1980s. Pared down somewhat, the company originally planned to expand its remaining retailing operations. But the takeover climate of the late 1980s and a disappointing Christmas in 1987 forced the company to exit retailing altogether by selling Eddie Bauer and Talbot’s.

General Mills has divested itself of nearly 50 businesses since 1976, but its surviving businesses have a firm footing in their markets. More than 90% of the company’s food sales come from products with a first or second place market share position. Streamlining has also allowed the company to keep up with the rapid pace of new-product development. From 1985 to 1988, 24% to 29% of the food divisions’ growth came from new products.

General Mills now focuses on its remaining restaurants, its cereals, and its Betty Crocker brand foods. Food production guarantees a return that can be used in the expensive planning necessary to tap growing demand for restaurants. Keeping its range in the restaurant industry narrow, General Mills finds it growth in sales-per-unit exceeds the industry norm. Red Lobster, for instance, has yet to turn in a decline in average sales-per-unit.

GM has also increased its share in the fast-growing cereal market, boosed by the oat-bran craze of the late 1980s (Cheerios’ market share alone climbed 3.1% in one year) and the accompanying breakfast-food boom. General Mills alone among top cereal producers was prepared for these trends. During the 1990s, General Mills should begin to expand into international markets, a sector which rival Kellogg has been exploiting for years.

In 1989 General Mills began showing return for its restructuring efforts. Sluggish since 1983, the company’s stock rose 20% toward the end of the decade. Intent on remaining independent despite the acquisition of several of its main competitors, large-scale, tangential acquisitions are unlikely as General Mills faces the 1990s more tightly focused on the food industry than it has been in decades.

Principal Subsidiaries:

Alternative Care Capital Corp. (50%); Biscuiterie Nantaise - BN S.A.; General Mills Export Co.; General Mills Europe Co.; General Mills Products Corp.; General Mills Finance, Inc.; General Mills Restaurants, Inc.; GMD Distributing, Inc.; Gold Medal Insurance Co.; Vroman Foods, Inc.; Yoplait USA, Inc.

General Mills, Inc.

views updated May 29 2018

General Mills, Inc.

1 General Mills Blvd.
P.O. Box 1113
Minneapolis, Minnesota 55440
U.S.A.
(612) 540-2311
Fax: (612) 540-4925

Public Company
Incorporated: 1928
Employees: 121,300
Revenues: $8.1 billion
Stock Exchanges: New York
SICs: 2043 Cereal Breakfast Foods; 2045 Blended and Prepared Flour Mixes & Doughs; 2092 Fresh or Frozen Prepared Fish; 5812 Eating Places

General Mills, Inc. is one of the leading breakfast cereal companies in the world, with such well-known brands as Cheerios, Cocoa Puffs, Total, and Wheaties stocking the shelves of supermarket stores everywhere. In addition to its breakfast cereal products, the company also includes some of the best names in other food lines such as Gold Medal flour, Betty Crocker dessert mixes, Hamburger Helper dinner mixes, and Yoplait yogurt. Although General Mills derives nearly two-thirds of its revenues from cereal and other food products, the company also operates a restaurant business with the remaining revenues coming from its Red Lobster and Olive Garden restaurant franchises, and its Chinese food venture called China Coast.

General Mills was incorporated in 1928, but its origins go back to 1866, when Cadwallader Washburn opened a flour mill in Minneapolis, Minnesota. His business, which soon became the Washburn Crosby Company, competed with local miller C. A. Pillsbury. In 1869 they joined forces to form the Minneapolis Millers Association. Pillsbury and Washburn both wanted to find a way to make midwestern winter wheat into a higher grade of flour. Eventually, with the help of a French engineer, Wash-burn not only improved the method but made his product the best flour available in America. When Pillsbury adopted the same technique, Minneapolis became the country’s flour milling center.

In 1878 the association was reorganized to appease farmers who found its business practices unfair. James S. Bell succeeded Washburn as head of the Washburn Crosby Company, ousting Washburn’s heirs. The mill prospered through the turn of the century. In 1928, the year General Mills was formed, the company had 5,800 employees and annual sales of $123 million. Its strongest products were Gold Medal flour, Softasilk cake flour, and Wheaties, a recently introduced ready-to-eat cereal.

Bell’s son, James Ford, was responsible for creating General Mills in 1928 by consolidating the Washburn mill with several other major flour-milling companies around the country, including the Red Star Milling Co., the Sperry Milling Co., and the Larrowe Milling Co. Within five months Ford had collected 27 companies, making General Mills the largest flour-milling company in the world. As a part of General Mills, these mills kept their operational independence but left advertising and product development to General Mills headquarters. This consolidation was well timed, as it gave the company the strength to survive and even prosper through the Depression, when earnings grew steadily and stock in the company was stable.

Bell’s research emphasis put General Mills in a strong position for the changing demands of increasingly urban consumers. The company soon introduced Bisquick, the first baking mix, and another ready-to-eat cereal, Cheerios, which 50 years later would be the best-selling cereal in America.

Bell’s early interest in diversification and technology made mobilization for World War II easier. General Mills’s factories were restructured to produce equipment for the navy, medicinal alcohol, and bags to make into sandbags, as well as the expected dehydrated food. In 1942 Donald D. Davis, president of General Mills since Bell moved to chairman in 1934, resigned to head the U.S. War Production Board.

Henry Bullis, who began at General Mills as a mill hand after World War I, replaced Davis. Following Bell’s industrial lead, Bullis immediately entered the animal feed industry by processing soybeans, a venture which ultimately became General Mill’s chemical division.

Postwar demand for consumer foods allowed the company to de-emphasize industrial activity and to concentrate on the success of its cereals and cake mixes. Consumers demanded less time in the kitchen and continued to buy foods that required less preparation. Ready-to-eat cereals, now the company’s staple, grew dramatically, and more brands were introduced.

Throughout the 1920s Bell and his associates had invested heavily in advertising, which was becoming a significant force in selling products to a national market. Betty Crocker, created in 1921, was a legacy from Washburn Crosby. By 1928 Betty Crocker’s name, signature, and radio voice had been introduced in connection with General Mills’s consumer goods. General Mills also sponsored radio programs and pioneered the use of athlete endorsements on its own radio station, WCCO.

The postwar consumer’s interest in convenience complemented General Mills’s growing advertising efforts. The company continued to refine its advertising methods after World War II, and promotions like the Betty Crocker Cookbook and advertisements on TV, an exciting new medium at the time, helped to increase sales and consumer recognition of the company. Capitalizing on its research and media prominence, the company soon held the second position in breakfast food sales.

Another career General Mills man, Charles H. Bell, rose to the presidency in 1952. Since advertising had become the main force in marketing its various brands, centralization had crept into the organization. Bell found it necessary to reassign management decisions closer to operations. In 1958 he moved headquarters out of downtown Minneapolis and into suburban Golden Valley. Still stronger changes were needed, but the company was hesitant. General Mills’s 1940s ventures into electronics and appliances had failed, and the company had recently begun to post losses in animal feeds and flour milling. Consumer foods remained the main moneymaker, but General Mills’s stock value dropped to $1.25 a share in 1962, its lowest point in 12 years.

Bell recruited an outsider, Edwin W. Rawlings, in 1959, and two years later Rawlings was appointed president. Rawlings reevaluated company output and shook up management positions. The family flour market was declining 3 percent a year, and Rawlings decided consumer preferences had shifted once again. Although the company was then the largest flour miller in the world and flour made up the greatest volume of output, Rawlings closed half of General Mills’s mills and renewed the company’s commitment to packaged foods by introducing food service products for restaurants and hotels. He also divested its interests in electronics, appliances, formula feeds, and other smaller operations. These actions caused a short-term, five-year sales decline for the company.

Next Rawlings began a series of acquisitions that would alter corporate structure for the next 20 years and provide two decades of continual earnings growth. Snack foods entered the company’s portfolio with the purchase of Morton Foods, Inc. in 1964. In 1966 came the Tom Huston Peanut Co., and in 1968 General Mills went abroad with the purchase of Smiths Food Group, Ltd. of England and Belgium. The French Biscuiterie Nantaise soon followed, as did snack food companies in Latin America and Japan.

Other major acquisitions were Gorton’s, a frozen fish company, and an aggressive move into the toy and game industry with Rainbow Crafts (Play-Doh), Kenner and Parker Bros., all in 1968. In ten years international toy operations would comprise one-third of the company’s sales, at $482.3 million. General Mills was no longer the world’s largest miller, but it was now the world’s largest toy manufacturer.

Early in 1969 the Federal Trade Commission (FTC) issued a consent order blocking General Mills from further acquisitions within the snack food industry. At the time of purchase, both Morton and Tom Huston were among the top ten producers of potato and corn chips.

During his seven years as General Mills chief, Rawlings managed to double the company’s earnings and bring consumer foods to 80 percent of total sales, up from 45 percent. Although Rawlings wanted another outsider to succeed him, the board of directors chose James P. McFarland in 1969. General Mills was the only company McFarland had ever worked for, and in choosing him the corporation renewed its commitment to balance and stability.

Seeking controlled growth, McFarland slowed, but did not stop, acquisitions. The first of many clothing company purchases was David Crystal, Inc. (Lacoste clothing) in 1969. Along with the purchase of Monet Jewelry in the same year, the purchase introduced General Mills to specialty retailing. Although the company missed the growth of fast food opportunities, purchasing and developing the Red Lobster restaurant chain would eventually make the new restaurant group General Mills’s second largest division.

McFarland, an experienced salesman, involved himself with day-to-day operations and left long-term planning to operating chief James A. Summer. In his first two years as CEO, McFarland saw sales rise from $885 million to $1.1 billion and operating profits from $37.5 million to $44 million. His goal was to reach $2 billion in sales by 1976. Sales that year were actually $2.6 billion, four times the 1969 level, with earnings of more than $100 million. He then announced E. Robert Kinney as his successor.

Like most quickly expanding companies of this time period, however, not all of General Mills forays were successful. Between 1950 and 1986, General Mills made 86 acquisitions in new industries; 73 percent of those made by 1975 had been divested within five years. A profitable core business in consumer foods eased the burden of these failed efforts.

General Mills’s advertising budget is typically as large as its earnings. Although spending less than it did in the late 1970s and early 1980s, General Mills still ranks as the thirteenth largest spender in all media, at $572 million a year. However, being such a highly visible company has not always provided favorable attention.

In the early 1970s the FTC attempted to dismiss General Mills 1968 acquisition of Gorton’s. The block was lifted in 1973. Later, by allying itself with General Foods Corp., the firm succeeded in blocking a 1977 FTC proposal to forbid advertisements aimed at children. Late in 1980, the FTC again filed a complaint against cereal companies, this time an antitrust suit following a ten-year investigation. It charged that between 1958 and 1972 cereal manufacturers had an average after-tax profit of 19.8 percent, compared to a general manufacturing average of 8.9 percent and suggested that Kellogg Company, General Mills, and General Foods shared a monopoly over the cereal industry. The charges were dismissed in 1981 after the companies had lobbied for and won congressional favor.

By heavily promoting its brands, the company did well in the 1970s, reporting gains in the toy division and the tripling of sales for consumer foods. Between 1973 and 1978, sales increased $1.7 billion. Of this growth, 41 percent came from new products developed internally, 15 percent from acquisitions, and 18 percent from expansion of restaurant and retail centers. General Mills’ management system, in which one manager oversees the production, marketing, and sales of each brand, also got credit for some of the increase. After the 1977 sale of the chemical division, General Mills divided its business into food processing, restaurants, games and toys, fashion, and specialty retailing.

In 1981 H. Brewster Atwater, Jr. became president of General Mills. The following year was a solid one for the company, as consumer foods, restaurants, toys, fashion, and retailing reported sales increases of between 12 percent and 24 percent.

However, retailing profit was half that of its previous year, and although the toy and game division had grown, the toy industry worldwide had decreased 2.9 percent.

Izod Lacoste also performed well. With $400 million in sales, General Mills intended to develop more items under the label. But by 1985 sales had dropped to $225 million, and the company hoped to cut overhead in order to break even at $180 million by 1986. In 1985 the largest toymaker in the world divested items representing over 25 percent of its sales, including toys, fashion, and nonapparel retailing. Former President Kinney became head of the spun-off Kenner Parker Toys Inc. The other spin-off, called the Fashion Co., consisted of Monet Jewelry, Izod Lacoste, and Ship ’n Shore. The company kept its furniture group (Pennsylvania House, Kittinger) for future sale. Also kept was Eddie Bauer Inc., despite its reported loss because of excess inventory. General Mills reported a net loss of $72 million due to the restructuring and a 21 percent increase in advertising expenses.

As expected by analysts, General Mills quickly recovered. Earnings were up to $222 million by 1987. Its core businesses were the Big G cereals, Red Lobster, and Talbot’s in its consumer-foods, restaurants, and specialty retailing divisions.

The consolidation process begun in 1985 continued in the latter half of the 1980s. Pared down somewhat, the company originally planned to expand its remaining retailing operations. But the takeover climate of the late 1980s and a disappointing Christmas in 1987 forced the company to exit retailing altogether by selling Eddie Bauer and Talbot’s.

General Mills has divested itself of many of its holdings since 1976, but its surviving businesses have a firm footing in their markets. More than 90 percent of the company’s food sales come from products with a first or second place market share position. Streamlining has also allowed the company to keep up with the rapid pace of new product development. From 1985 to 1988, 24 percent to 29 percent of the food divisions’ growth came from new products.

General Mills also increased its share in the fast-growing cereal market, boosted by the oat bran craze of the late 1980s (Cheerios’ market share alone climbed 3.1 percent in one year) and the accompanying breakfast food boom. General Mills alone among top cereal producers was prepared for these trends. During the early 1990s, the company introduced Fingos, a cereal eaten by hand, and Ripple Crisp, a cereal which stays crisp in milk.

In 1989, General Mills began to expand into international markets, a sector which archival Kellogg has been exploiting for years. By forming Cereal Partners Worldwide with Nestle S.A., the Swiss-based food products giant, General Mills planned to cut into the European cereal market long dominated by Kellogg.

By 1991, the partnership was doing so well in Europe that it ventured into the Mexican market. In 1992, General Mills established Snack Ventures Europe, a $600 million partnership with PepsiCo, Inc. to take advantage of the growing market for snack foods in Europe.

After the growth in market share during the late 1980s and early 1990s, by 1993 General Mills experienced a slowdown in its core business of brand name cereal and food products. Nevertheless, in an unprecedented move, the company hired approximately 10,000 new employees during the same year. The reason for this was the growth of the restaurant business division. Having already acquired the Red Lobster seafood chain in 1970, General Mills attempted other formats including steak houses, Mexican, and health food eateries that didn’t work. In 1983, the company came up with its own Italian restaurant chain called the Olive Garden Italian Restaurants and in 1991 launched China Coast, an attempt to fill the void in Chinese food restaurant chains. At the end of 1993, there were 657 Red Lobster and 429 Olive Garden restaurants located throughout the United States, and nine China Coast units in Orlando, Indianapolis, and Fort Worth. With restaurant profits increasing rapidly, General Mills plans to open 100 new locations annually for next two or three years.

In a widely publicized decision amid growing consumer complaints, during 1993 General Mills decided not to increase its cereal prices to keep pace with Kellogg. Kellogg implemented a 2.1 percent increase on all its brand name cereals, but General Mills had previously hiked prices nearly 28 percent between 1988 and 1992. As a result, General Mills actually cut prices 11 percent to 16 percent on three of its most well-known brands. This discounting strategy increased volume sales on all three of the cereal brands.

General Mills reaped over $8 billion in sales during 1993, with the company’s packaged goods accounting for two-thirds of its revenues and the restaurant division making up the remaining amount. With the highest return on equity of any company in the entire industry for the past five years—an impressive 42.8 percent compared to the industry median of 17 percent— management has been confident enough to predict an average growth in profits of 14 percent annually until the year 2000.

Principal Subsidiaries:

Morton Foods, Inc.; Tom Huston Peanut Co.; Smiths Food Group, Ltd.; Gorton’s; Rainbow Crafts; Kenner; Parker Bros.; David Crystal, Inc.; Monet Jewelry; Red Lobster Restaurants; Olive Garden Italian Restaurants.

General Mills, Inc.

views updated Jun 11 2018

General Mills, Inc.

founded: 1928

Contact Information:

headquarters: 1 general mills blvd. minneapolis, mn 55426-1348 phone: (612)540-2311 fax: (612)540-4925 url: http://www.generalmills.com

OVERVIEW

General Mills is a producer of packaged consumer foods and ranks second (behind Kellogg) as the nation's leading cereal producer. Forty-five percent of the company sales are in cereals. Its Cheerios brand is the country's most popular cereal. General Mills is the leading producer of flour (Gold Medal), dessert and baking mixes (Betty Crocker and Bisquick), dinner and side-dish products (Hamburger Helper, Suddenly Salad) and fruit snacks (Fruit Roll-Ups). The company's yogurt brand, Yoplait, is ranked second in sales. In addition to Kellogg, the company's chief competitors are Philip Morris and Procter & Gamble.

General Mills has focused on international expansion, recently entering joint ventures with Cereal Partners Worldwide, Snack Ventures Europe, International Dessert Partners, and Tong Want in China.

In 1997 General Mills made the largest acquisition in the company's history with its $570-million purchase of the branded cereal and snack mix lines of Ralcorp Holding, Inc., including Chex cereals and Chex Mix snacks.

COMPANY FINANCES

Company sales for 1997 were $5.6 million. In that year earnings fell, due in part to cereal price cuts and in part to the acquisition of the Chex snack and cereal lines. The company's major cereal competitors reduced their prices and cut marketing spending levels in 1996. In June that year General Mills implemented its own price cuts, which reduced sales by approximately $100 million. In 1997 prices increased 2.6 percent, which was the first increase in three years. General Mills' stock value ranged from a low of 56 7/8 to a high of 71 11/16 over a 52-week period. Net earnings per share for the first half of 1998 before unusual items were $1.88, an increase of 4 percent.

ANALYSTS' OPINIONS

General Mills firmly expects its earnings growth to improve in 1998, following the flat figures posted in 1997. Many analysts would agree with this prediction. The Value Line Investment Survey reported that it expects "General Mills' earnings growth to accelerate in the second half of the current fiscal year (ending May 1998). Earnings increases out to 2000-2002 should come close to management's target of 12 percent a year." Value Line also states that the company's joint ventures look very promising and should begin to help the bottom line. Stronger and more steady profit growth should become a reality in 3 to 5 years.

HISTORY

General Mills traces its history to the establishment of the Washburn-Crosby Company. This flour miller was awarded a gold medal at an 1880 exhibition, giving rise to its newly named Gold Medal Flour. The company continued operations under this name through the 1920s, primarily selling flour, but in 1924 introduced a ready-toeat cereal called Wheaties.

In 1925 company president James Bell began a program of consolidation with other mills. The result was General Mills, which became the world's largest miller by 1928. In the 1930s the company began developing so-called convenience foods for consumers. With the advent of World War II, the company produced war goods, including ordnance equipment, and established new divisions in chemicals and electronics. The company paid dividends to its stockholders steadily throughout the 1930s and 1940s.

Diversification of the company began in the 1960s under Edwin Rawlings, then chief executive officer. Rawlings closed half the company's flour mills and divested from unprofitable ventures, a strategy that cost the company $200 million in sales. In the late 1960s Rawlings began acquiring other companies, a practice that continued into the early 1970s. His purchase of both Kenner Products and Parker Brothers ultimately made General Mills the leading toy company worldwide. Rawlings also bought jewelry companies and clothing companies (David Crystal, makers of Izod; Eddie Bauer; Talbots), and purchased Red Lobster in 1970. The latter purchase encouraged the company to form Olive Garden restaurants.

When some of these divisions faltered in the 1980s, they were promptly spun off into other companies or sold. In 1995 General Mills spun off its restaurants as Darden Restaurants to resume its focus on its consumer foods business.

One of the most important parts of the General Mills, Inc. corporate story has been its creation of American pop-culture icons. The most visible of these has been Betty Crocker. Arguably the most important household icon in the United States, Betty has been a fixture on baking mixes since 1936. Her name first appeared on William G. Crocker baking products in 1921. In 1945 Betty was voted the second-most-admired American woman, after Eleanor Roosevelt. Betty's appearance changed only once from 1936 to 1965. As women's roles began to change in the late 1960s, Betty's image was updated five times in a span of 20 years.

The current Betty Crocker, the eighth such recreation, was introduced in 1996 to mark Betty's 75th birthday. The company created a new "look" for Betty Crocker in which the 75 faces of customers who won an essay contest were combined by computer into a composite image representing a wide cross-section of Americans.

STRATEGY

Since the spin-off of its restaurant business in May 1995, General Mills has refocused its attention on its consumer foods business. With the addition of the newly acquired Chex and Cookie Crisp brands and the introduction of three new cereals, the company expected to renew earnings growth in 1998. Following marketing spending cuts in 1997, the company's 1998 marketing expenditures are balanced across the full year. The company's sponsorship of the 1998 Winter Olympics was one of the key elements of its renewed marketing efforts.

Ongoing cost-cutting moves by General Mills included the restructuring of its North American cereal operations. In September 1997 the company closed its two smallest plants in south Chicago, Illinois, and Etobicoke, Ontario, and a cereal production line at its Lodi, California, plant.

According to the company's annual report, General Mills' success over the long term "depends on building unit volumes across our domestic business, increasing our productivity, expanding our international presence and leveraging the benefits of our strong cash flow."

Long-term financial goals for the company have remained essentially unchanged since 1995 when General Mills focused its business on its consumer foods. Those goals, according to the company's annual report, are: 12 percent average annual earnings per share growth; a minimum 25 percent return on capital; balance sheet strength that merits an "A" bond rating; and a 50-60 percent dividend payout.

INFLUENCES

The most significant influence on General Mills' recent operations came in the spring and summer of 1996 when the company's major competitors in the U.S. ready-to-eat cereal market lowered prices up to 20 percent. Big G followed suit in June 1996 and also cut spending for its marketing programs. The company expected this move to reduce its fiscal 1997 sales by approximately $100 million.

CURRENT TRENDS

General Mills plans to continue building its brands through increased marketing activity in 1998, particularly in the area of advertising. The company's sponsorship of the U.S. Winter Olympic Games kicked off its renewed marketing effort. Colombo yogurt was the sponsor of the women's hockey team, and the snowboarding and curling events were sponsored by Frosted Cheerios. The Wheaties brand cereal box cover featured the gold medal-winning U.S. Women's Ice Hockey Team. Three additional Wheaties packages featured top-ranked golfer Tiger Woods, who also appeared in the company's television commercials.

FAST FACTS: About General Mills, Inc.

Ownership: General Mills is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: GIS

Officers: Stephen W. Sanger, Chmn. of the Board & CEO, age 51 salary, $1,062,050; Raymond G. Viault, VChmn., age 53, salary, $1,040,000; Charles W. Gaillard, Pres., age 56, salary, $930,700.

Employees: 10,200 (1997)

Chief Competitors: General Mills' chief competitors in the ready-to-eat cereal business are Kellogg, the number-one cereal company; Post, the number-three cereal company (owned by Philip Morris); Quaker Oats, Dannon competes with General Mills' Yoplait brand. The company's primary competitors in the dinner, side-dish, and snack lines include: RJR Nabisco; Procter & Gamble; Hershey; Mars; and Nestle.

PRODUCTS

General Mills' product line includes cereals such as Cheerios, Cocoa Puffs, Kix, Lucky Charms, Total, Trix, and Wheaties; desserts and baking mixes under the trade names Betty Crocker, Bisquick, and Gold Medal; Sweet Rewards reduced-fat and fat-free frostings, cake mixes, and snack bars; snack products and other foods such as Pop Secret popcorn, Bugles, Bac*O's, and Yoplait yogurt; and dinner and side-dish products including Hamburger Helper, Tuna Helper, and Suddenly Salad.

The company's limited-time-offer products tied to the 1998 Winter Olympic Games were Betty Crocker Team USA (TM) muffin, cake, brownie, and cookie mixes; and USA Olympic Crunch cereal. New products for 1988 included Homestyle Pop Secret popcorn and the Stir 'n Bake dessert mixes, Italian Herb Hamburger Helper, Tuna Melt Tuna Helper, and Betty Crocker seasoned mashed potato side dishes in roasted garlic, sour cream and chives, and butter and herb flavors. New cereals included Team Cheerios, Cinnamon Grahams, and French Toast Crunch. Snack products introduced in 1997 included Fun 'n Games Fruit Roll-Ups, Golden Grahams Treats, and Pop Secret Jumbo Pop.

CORPORATE CITIZENSHIP

Innovation, speed, commitment, and citizenship are the key values General Mills emphasizes in its effort to create a better future for its consumers and communities. The General Mills Foundation demonstrated this commitment with 742 grants totaling $13.1 million targeted to hundreds of organizations in fiscal 1997. The General Mills Foundation also committed more than $2.9 million in matching grants for individual employee contributions, bringing its total grantmaking to nearly $16 million. Its commitments in 1997 included grants to Ohio State University to build a General Mills Cereal Chemistry Lab, the United Negro College Fund for scholarships, Morehouse School of Medicine for physician training, and seven grants funding various educational programs.

General Mills employees and retirees have been actively involved as volunteers in their communities. In 1997, 80 percent of all General Mills employees and 40 percent of retirees gave freely of their time. The company's numerous volunteer projects include a mentoring program for at-risk children, relief efforts for the victims of the record floods of 1997, and Camp Sunrise, a youth employment and camping program for urban youth.

As a food manufacturer, General Mills demonstrates its responsibility to help provide food to hungry Americans through the donation of more than 70 million pounds of food. Grants from the General Mills Foundation also support the Harvesters Community Food Network in Kansas City, Missouri, and other local food banks and meal programs. More than $9 million in product donations were made to Second Harvest, the country's largest food distribution network.

General Mills' community participation as a corporate citizen extends to its involvement in meeting the challenges and problems of our complex society. Challenge U is General Mills' comprehensive student achievement and school improvement program, the goal of which is to reduce the incidence of teenage pregnancy and the high-school dropout rate by providing scholarship

CHRONOLOGY: Key Dates for General Mills, Inc.

1928:: Founded as General Mills
1933:: Creates the slogan "Wheaties. The Breakfast of Champions."
1941:: Introduces Cheerios
1945:: Betty Crocker is voted second most admired American woman
1947:: Betty Crocker cake mixes are introduced
1961:: Edwin Rawlings becomes CEO
1967:: Kenner Products is acquired
1968:: Acquires Parker Brothers and Gortons
1970:: Purchases Red Lobster
1971:: Acquires David Crystal and Eddie Bauer
1977:: Buys rights to Yoplait yogurt
1983:: Starts Olive Garden restaurant chain
1985:: Spins off Kenner Parker Toys and Crystal Brands
1989:: Sells Eddie Bauer and Talbots
1995:: Spins off restaurants to form Darden restaurants
1997:: Purchases Ralcorp Holding, Inc.

BETTY CROCKER, AN AMERICAN LEGEND

From baking mixes and cookbooks, to housewares and appliances, Betty Crocker has long been a household name in America—appearing on more than 250 products. The red spoon logo bearing her name is recognized throughout the world as a symbol of quality.

Betty was "born" in 1921 when General Mills mailed thousands of flour-sack pin cushions to consumers as a reward for completing a promotional puzzle. Each recipient was also mailed a congratulatory letter, and General Mills wanted to sign the letter with a friendly name. The last name of a company director, William G. Crocker, was used, and the first name Betty was chosen for its approachable feel. Consumers liked the name so much that it soon appeared on cooking and baking information to answer the demand for dependable cooking advice.

In 1924, Betty made her radio debut on "Betty Crocker Cooking School of the Air," a program broadcasted in Minneapolis. The show was so popular that it became part of NBC's network lineup soon after. She made an important contribution to America during the Great Depression and World War II through the publication of meal-planning booklets and radio broadcasts. Betty Crocker became a brand name in 1947 when Betty Crocker Ginger Cake mix was released. Until that point, her name had only been used for cooking and baking advice. Since then, consumers have come to recognize the Betty Crocker name and image as well. In the 1950s, Betty hosted her own television show and appeared on several others.

Throughout the years, Betty underwent many changes to her appearance, but none as big as her alteration in 1996, the year of her 75th birthday. To celebrate, General Mills used a computer to combine 75 women's faces into one to create a more ethnically diverse Betty. This was the eighth version of Betty since her creation.

Today, General Mills continues to vigorously promote Betty Crocker. The company announced in 1998 that it would combine Betty Crocker and its Gold Medal division into a new integrated Betty Crocker division that was projected to produce about one-third of the company's total sales. The same year, General Mills reported that it would open a Betty Crocker Experience store at the Mall of America in Bloomington, Minnesota. Betty Crocker also played a part in the 1998 Olympic Winter Games at Nagano, Japan. General Mills, the sponsor of the US Olympic Team that year, launched a host of Betty Crocker Team USA products such as blueberry muffin and cookie mixes.

With more than 200 cookbook titles, and 250 other cooking and baking-related products carrying her name, Betty Crocker is one of the most popular names among consumers today, and General Mills has taken steps to ensure that she will keep her status for years to come.

assistance and school improvement grants. The Power Hour program, funded by the General Mills Foundation, is designed to help increase student academic achievement and improve social interaction for youth in crime and poverty-plagued areas of Southern California. General Mills is addressing the growing problem of violence in communities via grants to the National Coalition of Survivors for Violence Prevention.

GLOBAL PRESENCE

In 1997 General Mills' goal was to raise revenues from international product sales from 4 to 10 percent by the year 2000. The company functions in Europe under the umbrella of Snack Ventures Europe, a joint venture established in 1992 with PepsiCo that combined six existing snack companies. Snack Ventures Europe is the largest snack company on the continent. A similar venture with Nestle, Cereal Partners Worldwide, makes General Mills the second-largest cereal maker in the world.

In 1994 General Mills joined with CPC International to create International Dessert Partners, which expanded baking and dessert mix business to Latin America. The company operates in Mexico, Argentina, Colombia, Brazil, Uruguay, Peru, and Chile.

General Mills Canada holds the number-one market position in desserts, dinner mixes, and fruit snacks in that country. It also ranks as Canada's third-largest cereal company, boasting a gain of two share points in 1997.

Tong Want is General Mills' newest joint venture, located in the People's Republic of China. This 50-50 partnership with Want Want Holdings Ltd. joins General Mills with China's number-one manufacturer of rice crackers in an effort to focus on snack products, including Bugles and other grain-based snacks.

EMPLOYMENT

The modernization of General Mills' breakfast cereal plants in the mid-1990s was part of an ongoing capital improvement plan; however, labor union officials say automation and restructuring have cost employees their jobs. Capital improvement spending at General Mills food division totaled $208 million in 1993. At the company's Buffalo, New York, facility more than $30 million has been spent on improvements since 1981. General Mills Inc. closed its Woodland, California, temporary manufacturing plant in 1994. The breakfast cereal plant had been opened in 1991 to augment cereal production until a new facility in Albuquerque, New Mexico, could be constructed.

The closing of General Mills' two smallest plants and one cereal production line cost 235 employees their jobs in September 1997.

SOURCES OF INFORMATION

Bibliography

1997 u.s. public companies, directory of corporate affiliations, vol. iii. providence, new jersey: national register publishing, 1997.

1998 american big business directory, vol. i. omaha, ne: american business directories, 1998.

"general mills dismissing workers and closing 3 plants."the new york times, 30 september 1997.

general mills home page. 8 april 1998. available at http://www.generalmills.com.

"general mills, inc." hoover's handbook of american business 1998. austin, tx: hoover's business press, 1998.

"general mills, inc." market guide inc. 9 april 1998. available at http://www.marketguide.com/mgi/industry/industry.htm.

moody's handbook of common stocks. ny: moodies investors service inc., 1997.

sanborn, stephen. "general mills." value line investment survey. value line publishing co. 13 february 1998.

waxler, caroline. "breakfast champion." forbes, 24 february 1997.

For an annual report:

general mills' annual report is available on the internet at: http://www.generalmills.com/financial/report/or write: investor relations, general mills inc., po box 1113, minneapolis, mn 55440 or telephone: (800) 245-5703 or (612) 540-2444.

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. general mills' primary sics are:

2024 ice cream & frozen desserts

2026 fluid milk

2043 cereal breakfast foods

2045 prepared flour mixes and doughs

2099 food preparations nec

5099 durable goods nec

5141 groceries-general line

Company Profiles for Students

General Mills, Inc.

views updated May 14 2018

General Mills, Inc.

One General Mills Boulevard
Minneapolis, Minnesota 55426
USA
Telephone: (763) 764-7600
Fax: (783) 764-7384
Web site: www.generalmills.com

STORIES CAMPAIGN

OVERVIEW

In 2003 General Mills, Inc.'s brand Cheerios was the top-selling cold-cereal brand in the United States, claiming $334 million in sales of the $8 billion cereal market. But General Mills believed that the aging brand, which had been introduced in 1941 as Cheerioats, was losing its edge. The company began looking for ways to move the brand out of the kitchen cupboard and to make the cereal part of American families on a more emotional level.

To help achieve that goal, the Cheerios packaging was changed, replacing the bowl of Cheerios on the box's front with a heart. And General Mills' agency, Saatchi & Saatchi New York, which had worked with the company for almost 80 years, was charged with creating a new advertising campaign that focused less on the nutritional message that the brand's oat ingredients were healthy and more on the emotional benefits of the cereal. Saatchi & Saatchi's co-chief operating officer Mike Burns said in an interview with Fast Company, "It became very much about motherhood and nurturance—that Cheerios is an expression of love and doing the best for your family." The "Stories" campaign, which presented a series of television spots sharing the true experiences of consumers that involved Cheerios, began in 2003.

According to Saatchi & Saatchi, the campaign succeeded in reaching mothers as well as consumers of all ages, which helped to drive sales. The campaign also inspired consumers to log on to the "Stories" website to post their own heartwarming family experiences involving Cheerios and to read those of others. In addition, the ongoing campaign was recognized by the advertising industry, beginning in 2003 with one spot, "Breakfast in Bed," being named a Best Spot by Adweek. In 2005 the "Heartbeat" spot won a Gold EFFIE Award, and the "Adoption" spot garnered four ADDY Awards, including the National Gold.

HISTORICAL CONTEXT

General Mills introduced Cheerioats in 1941 with a marketing strategy that included a cute little-girl spokes-character named Cheery O'Leary and the tagline "Cheer up with Cheerioats." The brand also signed on in 1941 as sponsor of the radio Western The Lone Ranger, and it maintained the relationship during the program's run through 1949. The popularity of the masked man and his show pushed sales of Cheerios to nearly 1.8 million cases of the cereal in the first year of sponsorship. When the program moved to television in 1949, Cheerios stayed on as its sponsor until the 1960s. During the years that it sponsored The Lone Ranger the brand experienced numerous changes.

In 1945 the cereal's name was changed to Cheerios, and sweet little Cheery disappeared into the cereal-character history books. The tagline was changed to "Cheerios: the first ready-to-eat cereal." In the 1960s General Mills began promoting the health benefits of its Cheerios brand with marketing taglines such as "Go with the goodness of Cheerios" (introduced in 1964), which was followed by "Nutrition: that's the Cheerios tradition" (1971). Almost from the beginning, Cheerios' marketing targeted children, and in 1974 it got a boost with moms as the preferred first finger-food for their toddlers when pediatricians began recommending it to parents. In 1994 the tagline "The one and only" was introduced, and when the "Stories" campaign began in 2003, the long-running tagline continued to be used.

TARGET MARKET

According to Saatchi & Saatchi, the "Stories" campaign targeted and was designed to resonate with anyone who had a tender spot in their heart, regardless of their age. But beyond that, the campaign targeted moms by portraying real situations that busy women could relate to. In an E-mail correspondence Saatchi & Saatchi representative Blair Meisels wrote, "We know the world isn't perfect and neither is her family, but it's the special moments when they come together that make it all worthwhile." The campaign also targeted all generations of consumers looking for diet support for a healthier life by promoting the product's cholesterol-lowering benefits as well as its value as a nutritious first finger-food for toddlers.

COMPETITION

The Kellogg Company was the number one breakfast-cereal maker in the United States in 2004, with a 33.5 percent share compared to General Mills' 31.5 percent share. With its Frosted Flakes brand falling in at number two behind General Mills' Cheerios, a long-standing favorite with parents of toddlers, Kellogg determined to meet the competition head-on by introducing its own toddler-friendly cereal. The new brand, Tiger Power, was tagged "food to grow" and targeted the mothers of toddlers and preschool-age children. Supporting the new cereal's launch was a $20 million television, print, and Internet marketing campaign created by Leo Burnett Chicago. It used Tony the Tiger, Kellogg's iconic spokes-character for the Frosted Flakes brand. Even though the new cereal resembled Cheerios (it had three O-shapes connected to form a triangle) and had a strong supporting campaign and a well-known spokescharacter touting it as "Gr-r-reat to grow," Tiger Power lacked power and failed to grow. The new cereal hit the shelves in January 2005, and by May sales had reached only $3.4 million, a small number compared to Cheerios' reported $550 million in sales in 2004. Kellogg announced plans to increase the advertising budget for the new brand, but according to a report in Advertising Age, some were questioning whether the cereal would still be on store shelves by the end of the year.

CHEERIOS PROJECT PROMOTES CHILDREN'S LITERACY

To promote children's literacy, General Mills' Cheerios brand kicked off its "Spoonfuls of Stories" project in 2002. During the holiday season that year the company packaged one of five different children's book titles in five million boxes of Cheerios. The first free books, in what was planned as an annual holiday giveaway, included Rosie's Walk; Alexander and the Terrible, Horrible, No Good, Very Bad Day; Sylvester and the Magic Pebble; Cloudy with a Chance of Meatballs; and Salt in His Shoes: Michael Jordan in Pursuit of a Dream. Supporting the project was a new website, www.spoonfulsofstories.com, that had a variety of age-appropriate activities and stories that parents and their children could share. The books were published by Simon & Schuster.

Kraft Foods, Inc., the number one food company in the United States, was best known for its expansive line of cheeses, crackers, and cookies. Also in the Kraft Foods arsenal was the Post Cereals line with more than 23 varieties. One was Grape-Nuts, which was introduced to consumers in 1897 and was one of the first ready-to-eat cereals, and another was kid-targeted Alpha-Bits (introduced in 1957), cereal shaped like the letters in the alphabet and loaded with sugar. Despite its broad selection of cereals, Post ranked a distant third behind Kellogg and General Mills, claiming just a 16 percent market share at the beginning of 2000. To help drive sales, in 2000 Post began a promotional effort that included offering items from the Universal Studios Land Before Time movies, a dinosaur-themed series that had been a hit with kids aged two to seven. The effort was supported by print advertising that targeted mothers of children in that age group, but it seemed futile, as Post reported a 1.9 percent drop in sales in 2001 from the previous year. In a 2003 promotion Post put mini-bobblehead statues of Major League Baseball players in boxes of its different cereal brands, including Alpha-Bits. Again the effort did not noticeably increase sales. Post took a different approach to reach moms and their kids in 2005; it reformulated its Alpha-Bits cereal, making it sugar free and whole grain. To promote the improved cereal as a healthy finger food for toddlers, Post partnered with the Reach Out and Read program to introduce letter recognition and reading to young children. The children's literacy effort included distributing new books to children ages six months to five years old through pediatricians' offices. In addition, learning activities using the alphabet cereal in what the company described as "eat-ertainment" could be found on the website www.alpha-bits.com.

MARKETING STRATEGY

Cheerios was the top-selling cold cereal in the United States in 2003, but General Mills wanted to give the brand a creative edge that promoted the cereal's health benefits while also connecting with consumers on a meaningful and emotional level. Saatchi & Saatchi, which had been General Mills' agency for nearly 80 years, was charged with creating a new marketing campaign for Cheerios that would achieve the desired edge for the brand, connect with consumers, and drive sales. Working with the idea that customers' real-life experiences with Cheerios would resonate with consumers, the agency developed the "Stories" campaign. It was released in 2003. No specific budget for the campaign was announced, but according to a report in Advertising Age, in 2003 General Mills spent $40 million advertising the Cheerios brand overall.

The campaign, limited to television, told the true stories of various customers' life experiences in which Cheerios had played a role. The 10 unique spots included the titles "Breakfast in Bed," which aired in 2003, and "Heartbeats" and "Adoption," both of which aired in 2005. "Breakfast in Bed" depicted a young boy in the wee hours of the morning carrying bowls, spoons, and a bottle of milk into the semidark bedroom where his parents were sleeping. He used a box of Cheerios as a tray, and he advised his sleepy parents, "You've got to take some cholesterol off of you." In the "Heartbeat" spot, a small boy was shown cuddling with his father on a sofa. The boy said, "I hear something. Thump, thump, thump." The father said that the sound was his heart talking to the boy. The little boy then asked, "Does it ever say anything else?" A voice-over stated the health benefits of eating Cheerios. This was followed by the boy saying, "I hear gorp, gorp," to which the man responded, "That's my stomach." The boy asked, "Your stomach talks too?" The spot ended with the Cheerios tagline, "The one and only." In "Adoption" a young couple was shown riding in the back seat of a car in an unknown but clearly foreign city. They were picking up two small children who they were adopting. Both children were reluctant to leave the orphanage or foster home where they had been living, but the couple had an opportunity to begin bonding with the children when they offered them Cheerios as a treat.

Supporting the campaign was a new website, www.cheerios.com/stories, that enabled consumers to share their own "Cheerios Moments" and read those of others. The stories shared on the website touched upon Cheerios lovers from all generations. Many of the posted stories were from parents whose children were adults but continued to eat Cheerios. In one story, "Cheerios Bandit," the mother of a toddler wrote that her daughter began walking at 10 months old and quickly learned how to help herself to the box of Cheerios, earning her the nickname that titled the story. Another person said that her daughter, who had eaten Cheerios since she was a toddler and was then 23 years old, still considered Cheerios her favorite "comfort" food. The writer of "88 Years of Dedication" told of the person's 88-year-old mother, who ate a bowl of Cheerios for breakfast every day and occasionally a bowl of the cereal before bed if she was hungry. It noted that the elderly mother was in good health, volunteered, and cut her own grass using a riding mower. People who visited the website could also view the "Adoption" television spot.

OUTCOME

The "Stories" campaign was well received by consumers and was recognized with numerous advertising-industry awards. Consumers motivated by the television spots took time to log on to the "Stories" website to share their own "Cheerios Moments" stories, read the stories of others, and comment on the commercials. One customer who posted her comments on the site wrote that the spot featuring a young boy serving his parents breakfast in bed was "the most wonderful, delightful, and adorable ad I've ever seen."

The commercial "Breakfast in Bed" was named an Adweek Best Spot in 2003. The campaign's spot "Heartbeat," telling the story of a young boy hearing his father's heart beating, garnered a 2005 Gold EFFIE Award. The award's summary credited the campaign with boosting Cheerios' sales and getting to the heart of what was important to consumers. In addition, the "Adoption" commercial, which related the story of a couple on their journey to pick up the two small children they had adopted, won four 2005 ADDY Awards in the cinema and television categories, including the National Gold award. The American Advertising Federation presented the awards each year in recognition of creative excellence in advertising.

General Mills, Inc.

General Mills, Inc.

EARLY HISTORY

COMPANY PERSPECTIVES

KEY DATES

DIVERSIFYING WIDELY

ADDING SPECIALTY RETAILING AND RESTAURANTS

REFOCUSING ON FOOD

VENTURING OVERSEAS, EXITING THE RESTAURANT BUSINESS, ADDING CHEX

ACQUIRING AND INTEGRATING PILLSBURY

PRINCIPAL SUBSIDIARIES

PRINCIPAL DIVISIONS

PRINCIPAL COMPETITORS

FURTHER READING

General Mills, Inc.

General Mills, Inc.

Early History

Diversifying Widely in the 1960s

Company Perspectives

Adding Specialty Retailing and Restaurants in the 1970s

Key Dates

Refocusing on Food in the 1980s

1990s: Venturing Overseas, Exiting from Restaurateuring, Adding Chex

Principal Subsidiaries

Principal Competitors

Further Reading

General Mills, Inc.

General Mills, Inc.

Principal Subsidiaries:

Further Reading:

General Mills, Inc.

General Mills, Inc.

Principal Subsidiaries:

Further Reading:

General Mills, Inc.

General Mills, Inc.

Contact Information:

OVERVIEW

COMPANY FINANCES

ANALYSTS' OPINIONS

HISTORY

STRATEGY

INFLUENCES

CURRENT TRENDS

FAST FACTS: About General Mills, Inc.

PRODUCTS

CORPORATE CITIZENSHIP

CHRONOLOGY: Key Dates for General Mills, Inc.

BETTY CROCKER, AN AMERICAN LEGEND

GLOBAL PRESENCE

EMPLOYMENT

SOURCES OF INFORMATION

Bibliography

For an annual report:

For additional industry research:

General Mills, Inc.

General Mills, Inc.

STORIES CAMPAIGN

OVERVIEW

HISTORICAL CONTEXT

TARGET MARKET

COMPETITION

CHEERIOS PROJECT PROMOTES CHILDREN'S LITERACY

MARKETING STRATEGY

OUTCOME

FURTHER READING

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General Mills Inc

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