General Mills is currently the most successful of the food giants and succeeds where others in this arena continue to fail. The reason for their success is simple.
And, it’s something that we frequently recommend to our clients – whether they are in the services industry, retail or other commercial enterprises. One can’t manage a company by embracing stasis. Things change rapidly in today’s marketplace – from the tastes and preferences of consumers to the game-changing additions of start-ups offering better ideas, more interesting products. Therefore, in order to stay in the game – that is to stay successful and to continue to sustain one’s company or organization – one must absolutely continue to reinvent the practices or products that comprise the corporation. We frequently tell our clients who run large, stabilized corporations that they must institute the entrepreneurial practices similar to those that got the company started in the first place. That is exactly what General Mills has succeeded at doing – they have managed to engage their entrepreneurial spirit and keep their product lines alive by innovating their so-called stable brands. It’s something that we have talked about in past posts – most food companies (that is, those who produce food products for sale in supermarkets) have long decided to rely on their established brands to sell themselves – and have done nothing to make these brands more attractive to the current, buying public. That public and its tastes change day-to-day, as they are impacted by new products from other manufacturers. Thus, holding brands “steady” and eschewing any change to the basic line of products is a practice that absolutely will not work in today’s marketplace. General Mills, on the other hand, is keeping its lineup fresh and appealing to today’s buyers while, at the same time, improving the company’s margins. Last week, the company reported that its organic net sales rose 1% from last year. This is extraordinary, particularly given the fact that most food companies report steady declines. General Mills’ earnings have risen during six of the last seven quarters. The company has definitely gone on the offense by instituting a wide range of product innovations, including revamped packaging for Annie’s macaroni and cheese, and adding interesting new cereal ideas like Cinnamon Toast Crunch Churros, along with the additions of some new products such as the new line of French-style Yoplait yogurts. You see how this works – ? It’s a simple idea that anyone, by employing some effort and creativity, can utilize. Yet. so few do. For some reason, the large food companies, for the most part, have steadfastly adopted the belief that they can’t touch their “legacy” brands and they keep doing incomprehensible things like buying other companies in an effort to try to make theirs work better. It’s an amazing piece of “logic.” In the meantime, General Mills’ profitability is improving, with its gross margins rising by two percentage points from last year to 34.4% in the past quarter. And, its pricing in North America retail rose 2%. Analysts are lauding General Mills’ successes, saying that the lesson for food makers is “that constant innovation is essential to maintaining pricing power.” I’d say that’s a valuable lesson for all companies.