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General Mills, Inc.

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.

FURTHER READING

Adamy, Janet, and Chad Terhune, "PepsiCo Buys General Mills' Stake in Europe Venture for $750 Million," Wall Street Journal, December 14, 2004, p. B6.

Bary, Andrew, "Right Recipe: General Mills Cooks Up a Comeback," Barron's, March 1, 2004, pp. 2023.

Beam, Alex, and Judith H. Dobrzynski, "General Mills: Toys Just Aren't Us," Business Week, September 16, 1985, pp. 106+.

Burns, Greg, "Has General Mills Had Its Wheaties?" Business Week, May 8, 1995, pp. 6869.

Deogun, Nikhil, and Jonathan Eig, "General Mills Agrees to Acquire Pillsbury," Wall Street Journal, July 17, 2000, p. A4.

Dubashi, Jugannath, "Bon Appetit: General Mills Wants to Change the Breakfast Habits of Continentals," Financial World, July 23, 1991, pp. 40+.

Edgar, William C., The Medal of Gold: A Story of Industrial Achievement, Minneapolis: Bellman Company, 1925, 373 p.

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General Mills, Inc.

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 companys 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 countrys 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 Washburns 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.

Bells 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.

Bells 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 companys 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.

Bells 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 Bells 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 mixesthe 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 companys 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 Crockers 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 consumers 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 companys 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 companys 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 Gortons, 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 companys sales, at $482.3 million. General Mills was no longer the worlds largest miller, but it was now the worlds 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 companys 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 Talbots (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:
Bells 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 Gortons frozen seafood and several toy and game outfitsRainbow 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:
Talbots 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 Talbots 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 Gortons 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:
Lloyds Barbecue Company, Farmhouse Foods Company, and Gardettos Bakery, Inc. are acquired.

In the early 1970s the FTC attempted to dismiss General Mills 1968 acquisition of Gortons. 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 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. 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 Talbots 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 companys 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 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 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 companys 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 yearsan impressive 42.8 percent compared with the industry median of 17 percentmanagement 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 Gortons 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 companys 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 Kelloggs 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 Kelloggs $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 Lloyds 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 Gardettos 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.; Lloyds 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.

Further Reading

Beam, Alex, and Judith H. Dobrzynski, General Mills: Toys Just Arent Us, Business Week, September 16, 1985, pp. 106 +.

Burns, Greg, Has General Mills Had Its Wheaties?, Business Week, May 8, 1995, pp. 6869.

Dubashi, Jugannath, Bon Appetit: General Mills Wants to Change the Breakfast Habits of Continentals, Financial World, July 23, 1991, pp. 40 +.

Gibson, Richard, For General Mills, Cereal Will Be Main Course Again, Wall Street Journal, December 16, 1994, p. B3.

______, General Mills Gets in Shape for Turnaround, Wall Street Journal, September 26, 1995, p. B1.

______, General Mills to Buy Ralcorps Chex, Other Branded Cereals for $570 Million, Wall Street Journal, August 15, 1996, p. B8.

______, General Mills to Spin Off Restaurants in Effort to Focus on Its Core Business, Wall Street Journal, December 15, 1994, p. A3.

Gray, James, Business Without Boundary: The Story of General Mills, Minneapolis: University of Minnesota Press, 1954.

Helliker, Kevin, A New Mix: Old-Fashioned PR Gives General Mills Advertising Bargains, Wall Street Journal, March 20,1997, p. A1.

Houston, Patrick, and Rebecca Aikman, General Mills Still Needs Its Wheaties, Business Week, December 23, 1985, pp. 77 +.

Kennedy, Tony, The General Mills Spinoff, Minneapolis Star Tribune, May 15, 1995, p. lD.

Knowlton, Christopher, Europe Cooks Up a Cereal Brawl, Fortune, June 3, 1991, pp. 17578.

Long-Term Vision, Forbes, January 3, 1994.

Merrill, Ann, Hungry for Productivity: At a Time of Slow Growth in the Cereal Industry, General Mills Has Promised Double-Digit Earnings Increases, Minneapolis Star Tribune, May 7, 2000, p. lD.

______, Is the Cereal Bowl Half Full or Half Empty?, Minneapolis Star Tribune, August 16, 1998, p. lD.

______, A New Kind of Energy: Chairman, CEO of General Mills Earning Himself a Gold Medal, Minneapolis Star Tribune, July 22, 1996, p. lD.

Mehler, Mark, Nagging Problems for the Other GM, Financial World, January 9-22, 1985, pp. 84 +.

Mitchell, Russell, Big G Is Growing Fat on Oat Cuisine, Business Week, September 18, 1989, p. 29.

The Other GM, Financial World, June 15, 1981, pp. 28 +.

Rawlings, Edwin W., Born to Fly, Minneapolis: Great Way Publishing, 1987.

Rublin, Lauren R., Crunch Time: General Mills Hopes to Put the Fiber Back into Its Sales Growth, Barrons, February 22, 1999, pp. 1719.

Sellers, Patricia, A Boring Brand Can Be Beautiful, Fortune, November 18, 1991, pp. 169+.

Weiner, Steve, and Janis Bultman, Calling Betty Crocker, Forbes, August 8, 1988, pp. 88 +.

Wojahn, Ellen, Playing by Different Rules, New York: AMACOM, 1988.

Zehnpfennig, Gladys, Harry A. Bullis, Champion American: A Biography of a Business Leader Who Was a Champion of Human Rights, Minneapolis: T.S. Denison, 1964.

Thomas Derdak

updated by David E. Salamie

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General Mills, Inc.

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 countrys 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 Washburns 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.

Bells 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.

Bells 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.

Bells early interest in diversification and technology made mobilization for World War II easier. General Millss 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 Bells industrial lead, Bullis immediately entered the animal feed industry by processing soybeans, a venture which ultimately became General Mills 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 companys 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 Crockers name, signature, and radio voice had been introduced in connection with General Millss consumer goods. General Mills also sponsored radio programs and pioneered the use of athlete endorsements on its own radio station, WCCO.

The postwar consumers interest in convenience complemented General Millss 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 Millss 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 Millss 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 Millss mills and renewed the companys 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 companys 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 Gortons, 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 companys sales, at $482.3 million. General Mills was no longer the worlds largest miller, but it was now the worlds 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 companys 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 Millss 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 Millss 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 Gortons. 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 Talbots 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 Talbots.

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 companys 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 didnt 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 companys 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 yearsan 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.; Gortons; Rainbow Crafts; Kenner; Parker Bros.; David Crystal, Inc.; Monet Jewelry; Red Lobster Restaurants; Olive Garden Italian Restaurants.

Further Reading:

Kennedy, Gerald S., Minutes & Moments in the Life of General Mills, 1971.

Long-Term Vision, Forbes, January 3, 1994.

Thomas Derdak

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General Mills, Inc.

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 companys 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 countrys 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 Washburns 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.

Bells 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.

Bells 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.

Bells 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 Bells industrial lead, Bullis immediately entered the animal-feed-industry by processing soybeans, a venture which ultimately became GMs 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 companys 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 Crockers 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 consumers 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. GMs 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 GMs 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 GMs mills and renewed the companys 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 companys 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 Gortons, 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 companys sales, at $482.3 million. General Mills was no longer the worlds largest miller, but it was now the worlds 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 companys 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 GMs 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 GMs 1968 acquisition of Gortons. 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 Talbots 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 Talbots.

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 companys 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 companys 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.

Further Reading:

Kennedy, Gerald S. Minutes & Moments in the Life of General Mills, Minneapolis, 1971.

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