Number One General Mills Boulevard
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.
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, Bisquick 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 Nestlé 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.
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 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 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, Cheerioats, 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.
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.
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.
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 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 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-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.
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 Europe 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.; Nestlé 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 Pillsbury Company; The Procter & Gamble Company; The Quaker Oats Company; Ralcorp Holdings, Inc.; Unilever.