General Mills, Inc.

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General Mills, Inc.

founded: 1928

Contact Information:

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

OVERVIEW

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

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

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

COMPANY FINANCES

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

ANALYSTS' OPINIONS

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

HISTORY

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

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

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

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

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

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

STRATEGY

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

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

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

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

INFLUENCES

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

CURRENT TRENDS

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

FAST FACTS: About General Mills, Inc.

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

Ticker symbol: GIS

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

Employees: 10,200 (1997)

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

PRODUCTS

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

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

CORPORATE CITIZENSHIP

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

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

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

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

CHRONOLOGY: Key Dates for General Mills, Inc.

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

BETTY CROCKER, AN AMERICAN LEGEND

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

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

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

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

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

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

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

GLOBAL PRESENCE

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

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

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

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

EMPLOYMENT

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

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

SOURCES OF INFORMATION

Bibliography

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

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

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

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

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

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

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

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

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

For an annual report:

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