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General Mills (US)

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General Mills is one of the world's leading food companies, although its principal focus is still on North America where it is a fierce rival to Kellogg in the breakfast cereal and snacks sector as well as a leader in yogurt and other chilled dairy products. Until comparatively recently General Mills operated in other territories primarily through joint ventures. However this changed in late 2000 with the acquisition of Diageo's Pillsbury division, including its operating subsidiaries in Europe and Asia. That purchase doubled the company's size and added such famed brands as Pillsbury and Haagen-Dazs to a portfolio which already included such well-known products as Cheerios, Betty Crocker and Gold Medal flour. General Mills' international footprint developed further in 2011 with the purchase of a 50% stake in the global Yoplait yogurt franchise. It already had rights to that brand in the US. The biggest change in recent years to General Mills' portfolio was its purchase of Blue Buffalo in 2018, heralding a first move into the petfood market.

Advertising

Who handles advertising? Click here for agency account assignments for General Mills. In addition to third-party agencies, General Mills also operates its own inhouse resource, known as The Bellshop. Including unmeasured media, the company declared advertising & media expenditures in ye 2018 of $576m.

Competitors

See also Food Sector index for other companies

Brands & Activities

Following the acquisition of Pillsbury, General Mills became the world's #6 food company. It now ranks 7th. It is the market leader in baked goods, refrigerated dough and yogurt, and joint leader in breakfast cereals. It has almost 70% of the US refrigerated dough market, as well as around 31% share of breakfast cereals, and 38% of dessert mixes. The company divides its operations into three groups of US Retail, Bakeries & Foodservice and International.

What is now the main North America Retail division reported sales of over $10bn for the first time in fiscal 2009, but remained more or less flat in the early 2010s at around $10.5bn or $10.6bn. It slipped to $10.51bn for ye 2015, but then fell back to $10.0bn for ye 2016, partly as a result of brand divestures, but also weakening performance across other units. The total for ye 2018 was $10.12bn. The division comprises five marketing groups.

The best-known arm is its Cereal division (known until 2015 as Big G), with reported total revenues of $2.68bn in ye 2018, including $2.25bn in the US. The latter figure was unchanged year on year after slow but steady decline for several years. Cheerios is the single-largest brand franchise in the US ready-to-eat cereal category, accounting for more than one of every 10 boxes of cereal sold and US sales of around $995m. There are numerous different variants (Frosted Cheerios, Chocolate Cheerios, Fruity Cheerios etc), but the overall top-seller in the US is Honey Nut Cheerios, with sales of around $497m in 2016. Regular Cheerios ranks #5 behind competitors Post Honey Bunches of Oats, Kellogg's Frosted Flakes, and General Mills' own Cinnamon Toast Crunch. Lucky Charms also features among the Top Ten. Big G's other leading brands in the US include Reese's Puffs (under license from Hershey), Trix, Cookie Crisp, Golden Grahams and Kix, as well as "adult" cereals Fiber One, Chex, Wheaties, Total and Sunrise. It also extended its Nature's Valley cereal bar brand into ready to eat breakfast cereal in 2015. The group also offers limited edition promotional tie-ins to movies. Recent special edition cereal brands have included Star Wars cereal, Minions cereal, and twin releases of Batman and Superman cereals to mark the Batman Vs Superman movie.

Separate division Small Planet Foods is a leading organic food manufacturer, producing more than 150 organic food items across seven major food categories including granola and other breakfast cereal under the Cascadian Farm brand. Combined sales were $348m in ye 2014, but the business was split up in 2015 for accounting purposes and divided between the other group divisions. General Mills also sponsors Cereal Adventure, a small-scale theme park.

General Mills and Kellogg's are fierce competitors for leadership of the US cereal sector. In 2016, according to IRI figures (52 weeks to Jan 2017, all retail channels, Grocery HQ), General Mills had the edge with 30.0% value share, equivalent to sales of $2.6bn, marginally ahead of Kellogg's 29.9%. Post was some way behind at 18.9%. Less than 8% was contributed by private label brands, and the rest by smaller manufacturers.

The group's cereals are marketed outside North America by Cereal Partners, a joint venture with Nestle, which generated additional sales of $1.73bn in the year to March 2018. General Mills reports only its share of profit from this business, not its share of revenues.

The company's snacks range (worldwide sales of $3.42bn in ye 2018) includes numerous cereal spin-offs. The overall top-sellers are Nature Valley granola bars and other products, supported by the Chex Mix, Trix and Golden Graham brands, as well as Bugles chips, Gardetto's, and various fruit snacks, such as Fruit By The Foot and Fruit Roll-ups, which are sold under the Betty Crocker umbrella. A range of weight management snacks under the Curves brand was introduced in 2007. Leading US popcorn Pop Secret was sold to Diamond Foods in 2008 for $192m; Humm Foods, makers of Larabar fruit and nut energy bars, was acquired in 2009. Organic snack chips brand Food Should Taste Good was acquired in 2012.

Following a restructure in 2017, there are now two other reporting divisions. The biggest of these combines the group's heritage range of Baking Products with Convenient Meals. The banking business is led by Gold Medal flour - still the US #1 after 130 years with 24% market share - Betty Crocker and Softasilk baking brands, Bisquick pancake and biscuit mixes, and Pillsbury refrigerated dough products. Pillsbury dominates the US refrigerated dough market with a 72% share. The Pillsbury name is also licensed out to JM Smucker for a range of baking mix products. Revenues from dough alone in ye 2018 were $1.68bn, with a further $1.65bn from baking mixes and ingredients.

Betty Crocker side dish mixes and meal kits form the heart of the group's Convenient Meals business, including Hamburger Helper, Chicken Helper and Tuna Helper add-to-meat dinners, and Old El Paso Mexican foods and meal kits. In 2007, the group launched a Chinese-themed range of meal kits under the Wanchai Ferry brand. The company's Progresso brand is the #2 behind Campbell's in the ready-to-serve "wet" soup market, with sales of $678m in 2016 and 40.3% share (IRI, 52 weeks to Jan 2017, all channels, Grocery HQ). The fierce rivalry between the two companies turned bitter in 2008 when the two launched a series of "attack ads", knocking each other's quality and ingredients. Muir Glen is a leading brand of organic tomato products, with sauces, ketchup, salsa, tomatoes and more. The group acquired organic snacks and pasta producer Annie's Homegrown in 2014 for $820m.

Frozen Foods previously occupied a separate business unit, but was absorbed into an expanded Meals division in 2015. The core brand here is Totino's frozen pizza and snacks (the branded #3 some way behind the Nestle and Schwan portfolios). Until recently, this division also housed Green Giant frozen vegetables and starters. However, that business had struggled for several years to hold its own against main rival Del Monte, as well as fresh vegetables, including those already marketed independently under the Green Giant Fresh brand by the Growers Express cooperative. General Mills wrote off a large impairment charge against the brand for fiscal 2015, and a few months later agreed to sell the North American business (and sister unit Le Sueur) to B&G Foods for $765m. It continues to market Green Giant in Europe and few other export markets. Combined sales from Convenient Meals were $2.68bn in ye 2018 with a further $309m from vegetables.

The group's hardest-pressed division currently is Yogurt. US sales fell by 18% in ye 2017, and then by another 12% in ye 2018 to $927m. Worldwide sales slipped just 4% to $2.32bn. Yoplait remains one of the top-selling yogurt brands, but sales have come under intense pressure in the US in recent years, first from the explosive growth of the Greek yogurt sub-segment, in which it has been a follower rather than a leader, and more recently from the similarly dramatic growth of organic yogurt. Undercut by Greek yogurt specialist Chobani, it lost its lead in the sector during 2012 to arch-rival Dannon. According to IRI Dannon had almost 28% of the market in the year ending March 2013 to Yoplait's 26%. The latter's share has fallen from as much as 37% two years previously. The combined power of Dannon and Stonyfield Farm makes Danone the leading manufacturer overall with a combined share in excess of 32%. The main Yoplait brand is supported by various spin-offs including Go-Gurt and Nouriche yogurt smoothies. The battle between those three companies has become increasingly bitter. In 2016, General Mills took Chobani to court over ads that suggested Yoplait contained additives and even pesticides. It has also introduced a range of organic yogurts under the Annie's umbrella.

Until recently, General Mills had only US rights to the Yoplait brand, but in Spring 2011 it agreed to acquire a 51% stake in Yoplait SAS, the French company which markets that brand's operations in France and other territories. The remaining shares in Yoplait are owned by dairy cooperative Sodiaal. The group also markets regional brand Colombo, mainly in the US North-East. In 2012, General Mills reacquired the rights to the Yoplait brand for Canada, from licensee Ultima Foods. Other brands include Liberte in Canada and Calin in France. At the end of 2015, General Mills inked a deal to buy Brazilian yoghurt brand Carolina. The 8th Continent soymilk business, a joint venture with DuPont, was sold in 2008.

General Mills Bakeries & Foodservice is now the world #3 in its market, selling mixes as well as unbaked, partially-baked, and fully-baked products to retail and wholesale bakeries and restaurants (including Dunkin' Donuts and Subway). It also sells branded products, including Big G cereals, yogurt and snacks for sale in cafeterias, restaurants and convenience stores. Revenues were $1.93bn in the year ending 2018.

The most dramatic - and indeed unexpected - development in General Mills' strategy was its move into petfoods in 2018 with a deal to acquire Blue Buffalo, owner of the Blue pet food brand, for around $8.0bn. That represented a generous multiple of Blue Buffalo's sales, which were just under $1.3bn in 2017. Yet the business is on a growth streak, with revenues growing by double-digit percentages every year. Blue specialises in the "natural wholesome" segment, with a range of foods and treats for dogs and cats made without grain or other such fillers. The deal establishes General Mills as the #5 manufacturer in US petfoods overall after Nestle Purina, Mars, JM Smucker/Big Heart and Colgate-Palmolive's Hill's.

The international market has become an important growth area for the company since the takeover of Pillsbury. Until that point, General Mills had mostly operated outside North America through joint ventures. Snack Ventures Europe was formed in 1992, merging General Mills' savoury snack and sweet biscuit businesses in France, Belgium and The Netherlands with PepsiCo's salty and sweet snack businesses in Spain, Portugal and Greece. It expanded to other markets over the following years, becoming continental Europe's largest snack food company, with annual sales of more than $1bn. However it was also increasingly dominated by PepsiCo brands, and in 2004 the partners called it a day, with PepsiCo agreeing to buy out GM's 40% stake for around $750m.

However Pillsbury, Green Giant, Betty Crocker and Old El Paso all have significant presence in the worldwide market, as does best-selling premium ice cream Haagen-Dazs. Although General Mills no longer controls the brand in North America (where Nestle has local rights), it does market the product directly in other territories, and through a joint venture in Japan. In 2015, General Mills was the world's third largest ice cream manufacturer, with global share estimated by Euromonitor at 3% (behind Unilever at 22.8% and Nestle at 10.8%). General Mills' own revenues from Haagen-Dazs in ye 2018 were $804m.

Other important international brands include pastry products Jus-Rol in the UK, La Saltena dough and Diabolitos devilled ham in Argentina and Knack und Back in Germany; Wanchai Ferry and V Pearl dumplings in China; and fresh pasta brand Latina in Australia. In May 2012, the group agreed to acquire Brazilian food company Yoki Alimentos, which produces a range of different types of foods. These include Yoki and Kitano branded flours and other basic foods, popcorn, convenient meals, soups and seasonings. It also markets Yokitos snacks for children, Lin Tea tea products and a line of ingredients under the Mais Vita brand.

Combined international revenues have grown steadily since 2006, rising by 24% in ye 2013 alone, and peaking in ye 2014 at $5.39bn. Sales have slipped back since then, mainly as a result of currencies. For ye 2018, the total was $4.6bn. A large proportion ($930m in ye 2018) of this comes from Canada, with a further $2.0bn from Europe & Australia combined, and $1.7bn from Asia Pacific and Latin America. However the US still accounts for the largest share by far of group revenues; 71% in ye 2018 or $11.12bn.

Financials

Group sales peaked in the year ending May 2014 at a record $17.91bn, before slipping back in ye 2015 to $17.63bn, the lowest figure since 2012. Gross sales including a proportionate amount from joint ventures would have been $18.7bn. The latest decline was mainly the result of exchange rates - at constant rates sales would have risen by 1%. However net earnings plunged by a third to $1.22bn as a result of a $344m restructuring charge against its North American manufacturing operations and $260m of impairments against the fading Green Giant brand (later sold). For the year to 2016, the group reported further declines in revenues as a result of currencies and the sale of Green Giant in the US. Topline slipped 6% to $16.56bn but without the impact of impairments earnings soared by 39% to just under $1.7bn. Revenues for the year to 2017 slipped by a further 6% to $15.62bn, but earnings tumbled by only 2% to $1.66bn.

The company reported flat performance for the year to May 2018. Net sales were virtually unchanged, up less than 1% to $15.74bn, largely as a result of the addition of Blue Buffalo pet foods in the final quarter. Attributable earnings jumped by 29% to $2.1bn, but only as a result of a huge reduction in tax charges resulting from the new Tax Act. Pretax earnings slipped by another 6%. The main pressure is still on the group's struggling yogurt business, where US revenues plunged by 12% in the year. The group's single biggest customer is Walmart, which accounted for 21% of worldwide sales in fiscal 2018 (or $3.3bn) and 30% of North America retail sales.

Background

Cadwallader Washburn founded the Minneapolis Milling Company in 1866, building a huge mill at St Anthony Falls to produce fine flour. A second mill followed in 1874, and the company pioneered new technology which allowed flour to be ground finer and whiter than any competitors. Washburn took on a partner, John Crosby, in 1877. Three years later the Washburn Crosby Company entered its products in the first International Millers' Exhibition. The company scooped the gold, silver and bronze medals, allowing it to claim that it produced the world's best flours. As a result, Washburn Crosby began to market its products under the Gold Medal brandname.

The company was acquired by James Stroud Bell in 1888, and he began an aggressive marketing campaign which established Washburn Crosby as North America's leading flour manufacturer. His son, James Ford Bell, took over the business in 1920, and began developing a series of other brands. One consumer promotion for Gold Medal flour in 1921 led to a flood of letters from customers. In order to respond to this correspondence, the company invented the character of Betty Crocker to reply on the company's behalf. The name Crocker was chosen in honour of one of the company's retiring directors, William G Crocker; Betty because its sounded war, and friendly. Female employees were invited to submit sample signatures for the fictional Betty Crocker, and the winner is still used today. Betty soon took on a life of her own, lending her name to cooking schools and coupon promotions across the range of company products. (The first "portrait" of Betty appeared on packaging from the 1930s and has been updated more than eight times since to reflect the changing looks of the times).

Also in the early 1920s, the company began developing a form of fried bran flake. These were launched in 1924 as Wheaties Whole Wheat Flakes. Always quick to exploit new marketing opportunities, Washburn Crosby acquired a small radio station the same year, and this became the platform for a new marketing vehicle. Betty Crocker took to the airwaves in 1925 as the hostess of a radio cooking show, eventually syndicated nationally from 1927. A year later, as the Depression began to take its toll on US companies, Bell engineered a mammoth merger of Washburn Crosby with more than 20 other regional millers, and renamed the resulting company General Mills.

A string of new products were introduced in the years that followed. Bisquick ready-to-bake mixes arrived in 1931; Kix was the company's first puffed cereal in 1937, followed four years later by Cheerioats, at the time America's first oat-based, ready-to-eat cereal. This brand name led to a court battle with Quaker, who claimed ownership of the word Oats in a brand name. In 1946, the name was finally shortened to Cheerios. By this time, the company's first cereal product Wheaties had successfully launched the career of a man who went on to become president of the United States. Ronald "Dutch" Reagan was originally one of several radio announcers for Wheaties-sponsored baseball matches on the radio. In 1937, the company organised a promotion which encouraged listeners to vote for their favourite Wheaties announcer. Reagan took first place, winning the prize of a Hollywood screen test which started his movie career.

In the 1940s, the company extended the Betty Crocker name to a range of cake mixes. Several new cereals were introduced during the following decade including pre-sweetened Jets (1953), followed by Trix in 1954. Instant mashed potatoes, later called Potato Buds, were launched in 1959. As its collection of packaged brands grew during the 1960s, General Mills focused its attentions away from commodity-based industry, closing or selling many of its regional flour mills. The push into consumer goods also led to massive diversification. Towards the end of the decade, General Mills became the world's biggest toys business with the purchase of Kenner toys and Parker Brothers games (now part of Hasbro). Other acquisitions included Monet jewellery, Izod clothing and Eddie Bauer apparel. The company also diversified into retailing and the hospitality business (through what is now Darden Restaurants), and ventured into frozen food with the purchase of Gorton's in 1973. It acquired US rights to the Yoplait yogurt brand in 1977.

By 1985, General Mills was spreading itself dangerously thin. That year it began a series of disposals, selling non-core assets, or spinning them off to shareholders. At the same time it began to look to the international market for the first time. In 1989, the group formed the Cereal Partners joint venture with Nestle to market both companies' breakfast brands, initially in Europe. A similar arrangement, Snack Ventures Europe, was struck with PepsiCo in 1992 to market both companies' snack foods in mainland Europe. International Dessert Partners was formed with Bestfoods in 1994 to target the Latin American market (but was dissolved in 1999).

In 1994, a contamination scare forced the company to destroy $150m worth of cereals. The group recouped some of its losses by selling Gorton's to Unilever and spinning off its Red Lobster and Olive Garden restaurant chains as Darden Restaurants Inc. In 1997, the group bolstered its product line with the purchase of Chex from Ralston Purina for $570m. Other purchases in the late 1990s included snack brand Gardetto's and ready-made meal lines Lloyd's Barbecue and Farmhouse Foods. Following the market trend, the group went organic in 2000, with the purchase of Small Planet, and its subsidiary brands Muir Glen and Cascadian Farms.

But the biggest purchase by far was the capture of Diageo's Pillsbury unit for $10.5bn in shares and debt. Ironically, the two companies shared a very similar origin. Charles Pillsbury built a flour mill close to Washburn Crosby in the late 19th century, and the two businesses were close rivals. After that they grew increasingly far apart, although they remained competitors in the baking mix sector. Under the terms of the deal, Diageo took a 33% stake in the merged General Mills-Pillsbury company, but sold off its shares in several tranches over the following few years.

As part of the Pillsbury deal General Mills also took over the company's stake in Ice Cream Partners USA, a joint venture with Nestle, formed to 1999 to distribute Haagen-Dazs and Nestle ice creams in North America. However, the change of ownership gave Nestle rights to buy control of Ice Cream Partners. In December 2001 the Swiss company paid $641m for General Mills' 50% share. In early 2002 the group confirmed plans to introduce as many as 100 new product line extensions and new brands over the following 12 months.

Last full revision 26th April 2018

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