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Running Head: GENERAL MILLS, INC. - 1930 1 | P a g e

This paper was prepared for MG73, Business Organization, taught by Professor Anne Eckhardt.

General Mills, Inc.

1930

Plaza College

Fall 2018

Note (Facts, Opinions, Assumptions, and Quotes MUST be in your paper):

Facts that can be used in Appendix A are highlighted in Blue throughout this document

Opinions that can be used in Appendix A are highlighted in Green throughout this document

Assumptions that can be used in Appendix B are highlighted in Yellow throughout this

document

GENERAL MILLS, INC. – 1930 2 | P a g e

Part I: The Purpose of the Report and the Research Experience

I have chosen to perform an in-depth review of General Mills, Inc. (also referred to as

General Mills or the Company throughout this document) to determine if this Company would be

a good addition to my stock portfolio. General Mills peaked my interest as a possible investment

opportunity because over the years my family has enjoyed many of their products, such as

Cheerios, Cinnamon Toast Crunch, Häagen-Dazs ice cream, and Progresso soups.

I found several sources that were very useful in completing this research project. The

source that was most useful was the General Mills 2017 10K. Information found in this

document allowed me to complete Part VI of this project. All of the financial data necessary to

create the charts and tables were available in the 10K. I also used the Kellogg’ 2017 10K to

perform the profitability ratio comparison to General Mills in Part VI. The Annual Report was a

good source for completing Part III where I had to come up with two strategies the Company

implemented to be successful. The Company’s website was an excellent source to obtain all of

the information required in Parts II and IV of this project, which were about the history of the

Company and social responsibility. The Business In Action course textbook explained the

difference between ethics and corporate social responsibility, which was a requirement in Part

IV. The oneteam website was a great resource for finding out the Company’s industry code.

The Alberta Agriculture and Forestry website provided me with information regarding crops

grown in North America, which helped me compose my global warming industry issue. Yahoo!

Finance was used to find some interesting facts about the stock of the company, which was used

in Part II of this report. The Company’s Annual Report that contains the Letter to the

Shareholders from the chief financial officer was a good source for Part VII where I had to state

whether or not I agreed with the CEO’s future plans and expectations for the Company.

Commented [AE1]: Beginning of Part I Section 1

Commented [AE2]: This is an example of the PURPOSE of this project. Another purpose may be to determine if they would be a good employer.

Commented [AE3]: Beginning of Part I Section 2. You must explain what sources you used and where you used them!!

GENERAL MILLS, INC. – 1930 3 | P a g e

Overall, I found enough information to help me complete this assignment and all sources

were of value to me.

Part II: Introduction and History

According to the Company’s website “Cadwallader Washburn, founding father of

General Mills grew up on a rocky little farm in Maine. He had been a farmer, a school teacher, a

lawyer, and under Lincoln a major general. In 1866, at 48 years of age, Washburn began building

a flour mill at St. Anthony Falls” in Minnesota (“A Look,” 2018). In 1869 A New Hampshire

native—born to the same modest circumstances as Washburn—Pillsbury and his father

purchased an interest in a run-down flour mill on the opposite river bank. The Pillsbury family

had no experience in milling flour, which was deemed to be an unstable business with

questionable profits. However, their business flourished; they had the largest flour mill, and

Washburn had the second largest mill. I only mention Pillsbury here because in July 2000

General Mills and Pillsbury merged. The website states, “From its milling roots, General Mills

had leveraged its grain expertise into breakfast cereals, cake mixes and grain-based snacks.

Pillsbury had evolved to develop unmatched expertise in refrigerated dough products. It also had

a strong bakeries and foodservice business, and a growing international portfolio. Their strengths

complemented each other” (“A Look,” 2018).

In 1878 there was an explosion at the flour mill because dry millstones had caused a

spark and set the mill on fire; the property was destroyed. Washburn did not fold; instead, he

insisted that such a calamity would not happen again. His frustration sent him in pursuit of safer

milling. He rebuilt the mill. In 1882 Washburn died (“A Look,” 2018).

James Ford Bell became president of the Washburn Crosby Company in 1925. In the

spring of 1928 Bell received a telegram stating that an underwriting firm, Blair & Co., was

Commented [AE4]: Anything highlighted in blue, can be used as a FACT in Appendix A – you need 3 Facts for Appendix A.

Commented [AE5]: Refer to the CHECKLIST to make sure you have all of the required information in this section.

GENERAL MILLS, INC. – 1930 4 | P a g e

courting his Washburn Crosby Co. Bell took a detour from his vacation plans and met with Blair

executives in New York City. “A Look Back” (2018) states, “As the discussion with Blair sifted

to its essence—price—Bell said that he ‘fished a figure out of the air of $40 million.’ Smiling

Blair leaders rose from their chairs. Hands were pumped. Cash on the barrelhead for an outright

purchase. No entanglements.” The deal was made and, on June 20, 1928, "General Mills" was

born. Public trading debuted on the New York Stock Exchange on Nov. 30, 1928, at $65 per

share. The price climbed to $86 in early trading. During the Great Depression, General Mills

thrived (“A Look Back”, 2018).

I found some interesting facts about General Mills on the Yahoo! Finance website as

follows: General Mills corporate offices are located at Number One General Mills Boulevard,

Minneapolis, MN 55426. According to the website “General Mills,” (n.d.) the company is in the

Consumer Goods sector of the Processed & Packaged Goods industry. The Company trades its

stock on the New York Stock Exchange under the ticker symbol GIS. At the close of the market

on March 16, 2018, the stock price was $50.49, which was down $0.44 from the market open

(“General Mills,” n.d.). Mr. Jeffrey L. Harmening is the Chief Executive Officer and his annual

salary is $1.17 million. Kendall J. Powell is the Chairman of the Board (“General Mills,” n.d.).

General Mills has more than 100 brands, in more than 100 countries on six continents. Below is

a list of the Company’s product lines along with some brand names in each category (“Brands,”

n.d.):

Product Line Brand

Baking products Betty Crocker, Bisquick, Gold Medal, Pillsbury

Cereals Cheerios, Chex, Cinnamon Toast Crunch, Fiber One, Kix

Dough/pastries Jus-Rol, Knack & Back, Pillsbury

Fruit Cascadian Farm

Ice Cream Häagen-Dazs

Meals Annie's, Betty Crocker, Green Giant, Helper, Old El Paso

Organic / natural Immaculate Baking, Lärabar, Muir Glen

GENERAL MILLS, INC. – 1930 5 | P a g e

Product Line Brand

Pizza Annie's, Totino’s / Jeno’s

Snacks Fruit Snacks, Gardetto's, Nature Valley, Totino's, Yoki

Soup Progresso, Annie’s

Spices Parampara, Yoki

Vegetables Cascadian Farm, Green Giant, Muir Glen

Yogurt Liberté, Mountain High, Yoplait, Yoplait France

The Company’s financial statements are audited by KPMG LLP (“General Mills,” 2017).

Part III: Corporate Strategies

In the letter To Our Shareholders written by Kendall J. Powell, Chairman of the Board,

and Jeffrey L. Harmening, Chief Executive Officer, states, “Fiscal 2017 was a year of significant

change for General Mills. We implemented a new global organizational structure to enhance our

agility in a rapidly changing consumer environment. We also implemented a business plan that

aggressively shifted resources to our best growth opportunities and eliminated low-return

investments and volume” (“General Mills,” 2017). I believe this strategy helped the company on

the road to success because they eliminated a few low-return investments. The 10K states,

“During fiscal 2016, we recorded a $148 million divestitures gain from the sale of Green Giant,

our subsidiary in Venezuela, and our foodservice business in Argentina” (“General Mills,”

2017). These three segments of revenue were low-return investments. Now that these

investments were sold, the funds generated from the sale can be targeted to expand better

performing investments or used to acquire additional brands to broaden the General Mills family

of products.

Another strategy I believe the company used to be successful is they expanded their

global supply chain to further increase efficiency (“General Mills,” 2017). By implementing this

Commented [AE6]: Anything highlighted in green throughout this document, is an example of an OPINION that can be used in

Appendix A – You need 3 opinions for Exhibit A.

Commented [AE7]: You need to find 2 strategies that the company used to become/stay successful. Refer to the

CHECKLIST for further details. Examples of strategies are:

Merger, acquisition, divestitures, expanding their product line or geographic area, finding ways to decrease expenses by possibly

buying an intermediary, etc.

GENERAL MILLS, INC. – 1930 6 | P a g e

strategy, the Company can keep its production costs down, which will have a direct positive

impact on net income (profit) in the future.

Part IV: Ethics and Social Responsibility

Bovee, Thill and Paul (2017) state, “Ethics are the rules or standards governing the

conduct of a person or group” (p.75). The authors also state that “corporate social responsibility

is the idea that business has obligations to society beyond the pursuit of profits” (Bovee and

Thill, 2017, p. 79). I believe the difference between the two is ethics is your right vs. wrong

personal belief system; whereas, social responsibility is being a good citizen and giving back to

society in a positive way without expecting anything in return.

The General Mills (2017) website speaks about their four focus areas of social

responsibility as follows:

“Our Food – Goal: Provide people with nutritious, convenient food that can help them

live healthier lives. We are committed to making food with passion and improving the

variety and health profile of our products while adhering to high standards of food safety.

Our Planet – Goal: Protect the resources upon which our business depends. We do this

by promoting environmentally and socially responsible practices across our value chain.

Our Community – Goal: Strong people. Flourishing communities. A thriving planet.

Our philanthropic work is an extension of the company’s purpose and ties closely to our

core business and food systems knowledge.

Our Workplace – Goal: Foster a safe, inclusive and rewarding workplace where all

employees can thrive. We put our people first by focusing on best-in-class workplace

safety, creating a diverse and inclusive culture, and investing in our talent”.

Commented [AE8]: You must define ethics and corporate social responsibility. Then, in your own words explain the difference between the two. You must give 1 example of how your company

acts socially responsible. Refer to the CHECKLIST for further

details. Possible corporate social responsibility activities include: Donating money/products; setting up a foundation to support local

charities, allowing employees to volunteer their services on

company time, being environmentally friendly, etc.

GENERAL MILLS, INC. – 1930 7 | P a g e

By focusing on these four areas, I believe General Mills has fulfilled its corporate social

responsibility obligation to society.

Part V: The Industry

General Mills is a member of the Consumer Goods sector of the Processed & Packaged

Goods industry (“General Mills”, 2017). As stated on oneteam’s web page, “General Mills’

primary NAICS code is 311230 – Breakfast Cereal Manufacturing. This industry comprises

establishments primarily engaged in manufacturing breakfast cereal foods. However, because

General Mills produces such a wide range of products, they are also associated with the

following NAICS codes:

 311211 - Flour Milling

 311340 - Nonchocolate Confectionery Manufacturing

 311423 - Dried and Dehydrated Food Manufacturing

 311511 - Fluid Milk Manufacturing

 311520 - Ice Cream and Frozen Dessert Manufacturing” (NAICS)

I believe a major issue that can affect the industry is the economy. At the present time,

the economy is in the recovery stage. If the economy worsens and we enter a recession, this

would have a negative impact on the profitability of the companies associated with this industry.

The main reason for this is that the products manufactured by this industry tend to be expensive

and there are many substitutes available. Take for example the breakfast cereal product

category, top name brands of these products are very expensive in comparison to generic brands.

Also, if we enter a recession, people will not be willing to pay a high price for cereal if they are

concerned about the stability of their employment; a more common breakfast meal will probably

consist of toast and tea. For the purposes of this report, I have assumed that the economy will

Commented [AE9]: Possible industry issues: Use the economy as our #1 industry issue. ALL industries are affected by the state of the economy. Other issues might include: Global warming, food

contamination, cyber-attacks, FDA or other government regulations,

political instability with countries that manufacture your company’s products, etc.

Commented [AE10]: Anything highlighted in yellow throughout this document is an example of an ASSUMPTION you

can use in Appendix B – You need 3 Assumptions

Commented [AE11]: Describe the sector and industry for your company. State the NAICS code for your company’s industry.

Discuss 2 issues that can affect the INDUSTRY, not just your

company. Competition is NOT an industry issue. Make an assumption for each issue. Refer to the CHECKLIST for further

details.

GENERAL MILLS, INC. – 1930 8 | P a g e

remain in the recovery stage for the next three to five years, and therefore, will not have a

negative impact on the future profitability of the industry.

Another issue I think can affect the industry is global warming. Over the last several

years, we have experienced major changes in weather conditions on the planet that scientist

believe are associated with global warming. The side effects of global warming have been an

increase in the number of hurricanes, tornados, wildfires, etc. in North America, and elsewhere.

The Alberta Agriculture and Forestry website (n.d.) conveys the following information on the

types of crops that are grown in North America:

“The largest U.S. crop in terms of total production is corn, the majority of

which is grown in a region known as the ‘corn belt.’ The second largest crop grown

in the U.S. is soybeans. As with corn, soybeans are primarily grown in the

Midwestern states. The U.S. barley crop is of most interest to Canadian malt barley

growers. U.S. barley is grown over a wide area geographically and the U.S. produces

about 60 percent as much barley as Canada. Although the U.S. produces some oats,

Canada is the world’s largest oat exporter and supplies about 70% of the oats

imported into the U.S. (“Alberta Agriculture and Forestry,”n.d.).

The website further states, “The third largest crop grown in the United States is wheat.

The U.S. produces hard red, soft red, and white winter wheat and hard red and durum spring-

seeded varieties. The U.S. also produces very small amounts of white spring wheat” (“Alberta

Agriculture and Forestry”, n.d.).

The natural resources that companies within this industry use are crops grown in the

North American region, such as corn, wheat, and barley. If the side effects of global warming

continue, this could impact the industry’s ability to obtain the natural resources they need to

GENERAL MILLS, INC. – 1930 9 | P a g e

manufacture their products, which in turn, would have a negative impact on generating revenue

and on the profitability of the industry. For the purposes of this report, I have assumed that over

the next three to five years global warming will not be an issue for the industry; and, therefore,

will not have a negative impact on the profitability of the industry.

Part VI: Overview of the Organization’s Financial Condition

Using data from the most recent 10K of the company, I have created charts to show the

financial picture of the company during the last five years. The charts include data on revenue

by segment for the most current year, as well as a five-year trend analysis for net sales, net

income and earnings per share. I have also created a table that compares profitability ratios for

General Mills and its direct competitor, Kellogg’s (“General Mills,” 2017).

General Mills has four reportable segments as follows: North American Retail,

Convenience Stores and Foodservice, Europe & Australia, and Asia & Latin America. As you

can see in the above pie chart, the North American Retail segment generates the most revenue

Commented [AE12]: Refer to the CHECKLIST for further details on what is required in this section.

GENERAL MILLS, INC. – 1930 10 | P a g e

for the company. The North American Retail segments contribution to revenue is almost double

that of the other three segments combined.

As can be seen in the above graph, General Mills has been having difficulty generating

sales during the last three years. Net sales have decreased 12% over the last five years.

The above net income trend analysis shows that General Mills has been profitable every

year during the last five years. However, as was with the net sales data, General Mills is having

GENERAL MILLS, INC. – 1930 11 | P a g e

difficulty increasing their net income. Over the five-year period, net income has decreased by

11%.

The earnings per share graph above seems to be a replica of the net income graph.

Earnings per share have decreased by 1% over the last five years.

Calculation of % Change Over 5-Year Period

Total Revenue/

Net Sales Net Income EPS

2017 $15,620 $1,658 $2.77

2013 $17,774 $1,856 $2.79

Difference -$2,154 -$198 -$0.02

% Change Over 5 Years -12% -11% -1%

General Mills, Inc.

PROFITABILITY RATIO ANALYSIS

Ratio General Mills, Inc. Kellogg Company

Earnings Per Share $2.77 $3.62

Return on Equity 35.38% 57.37%

Return on Sales 10.61% 9.82%

GENERAL MILLS, INC. – 1930 12 | P a g e

According to the profitability ratio analysis above, it is very clear that Kellogg Company

outperforms General Mills (“General Mills,” 2017), (“Kellogg,” 2017).

Part VII: Conclusion

As stated in the Annual Report by the CEO and Chairman of the Board

“The new structure we implemented in 2017 has increased our

organizational agility to operate as a truly global food company. We accelerated

the global restructuring of our supply chain, organized under new operating

segments and streamlined our support functions, allowing for more fluid use of

resources and idea sharing around the world. We’re also building new capabilities

to support our businesses in the future. We’re enhancing our e-commerce know-

how to capture more growth in this emerging channel. And we continue to invest

in strategic revenue management tools to optimize our promotions, prices and mix

of products to drive sales growth” (“General Mills,” 2017).

I believe the General Mills executive team is committed to long-term results. Although

they did not meet their forecasted goals in 2017, I believe they are on the right track. For the

purposes of this report, I have assumed that if General Mills stays focused on their long-term

goals, their revenues, net income, and return to shareholders will improve in the coming years.

Based on the analysis I have done on General Mills, I would add their stock to my investment

portfolio.

Commented [AE13]: State the CEO/Chairman’s position on the future of the company. Explain whether or not you agree with their position. Make sure you refer to your original PURPOSE in Part 1,

Section 1 and state whether or not you would buy stock or want to

be employed by them. Refer to the CHECKLIST for further details.

GENERAL MILLS, INC. – 1930 13 | P a g e

Part VIII: Appendix A – Facts and Opinions

Facts Opinions

Cadwallader Washburn, founder of General

Mills in 1866 (p. 2)

I believe a major issue that can affect the

industry is the economy (p. 6).

On June 20, 1928, "General Mills" was

born (p. 2).

Another issue I think can affect the

industry is global warming (p. 6)

The company is in the Consumer Goods

sector of the Processed & Packaged Goods

industry (p. 2).

I believe the difference between the two is

ethics is your right vs. wrong personal

belief system; whereas social responsibility

is being a good citizen and giving back to

society in a positive way without expecting

anything in return (p. 4).

Commented [AE14]: Facts, Opinions, Assumptions, and Quotes MUST BE IN YOUR PAPER. All you have to do is copy and

paste the items and state what page it is on.

GENERAL MILLS, INC. – 1930 14 | P a g e

Part VIII: Appendix B – Assumptions and Quotes

Assumptions:

1. For the purposes of this report, I have assumed that the economy will remain in the

recovery stage for the next three to five years; and, therefore, will not have a negative

impact on the future profitability of the industry (p. 6).

2. For the purposes of this report, I have assumed that over the next three to five years

global warming will not be an issue for the industry; and, therefore, will not have a

negative impact on the profitability of the industry (p. 7).

3. For the purposes of this report, I have assumed that if General Mills stays focused on

their long-term goals, their revenues, net income, and return to shareholders will improve

in the coming years (p. 11).

Quotes:

1. As stated in the Annual Report by the CEO and Chairman of the Board

“The new structure we implemented in 2017 has increased our organizational

agility to operate as a truly global food company. We accelerated the global

restructuring of our supply chain, organized under new operating segments and

streamlined our support functions, allowing for more fluid use of resources and

idea sharing around the world. We’re also building new capabilities to support our

businesses in the future. We’re enhancing our e-commerce know-how to capture

more growth in this emerging channel. And we continue to invest in strategic

revenue management tools to optimize our promotions, prices and mix of products

to drive sales growth” (p. 11).

GENERAL MILLS, INC. – 1930 15 | P a g e

2. In the letter To Our Shareholders written by Kendall J. Powell, Chairman of the

Board, and Jeffrey L. Harmening, Chief Executive Officer they discuss two

strategies that they have implemented during 2017 “Fiscal 2017 was a year of

significant change for General Mills. We implemented a new global organizational

structure to enhance our agility in a rapidly changing consumer environment. We

also implemented a business plan that aggressively shifted resources to our best

growth opportunities and eliminated low-return investments and volume” (p. 3).

GENERAL MILLS, INC. – 1930 16 | P a g e

Exhibit A – Profitability Ratio Analysis Calculations

Term Definition Calculation General Mills, Inc Kellogg Company

Earnings

Per Share

Earnings per share (EPS) is the portion

of a company's profit allocated to each

outstanding share of common stock.

Earnings per share serves as an

indicator of a company's profitability.

(Net Income - Dividends on

Preferred Stock) / Average

Outstanding Shares

$2.77 $3.62

Return on

Equity

Return on Equity (ROE) reveals how

much profit a company generates with

the money shareholders have invested

in the company. ROE is useful for

comparing the profitability of a company

to other firms in the same industry.

Net Income divided by

Shareholders Equity

35.38% 57.37%

Return on

Sales

Return on Sales is a useful measure of

overall operational efficiency when

compared to a prior year or a competitor.

Return on sales varies widely from

industry to industry.

Net Income divided by Net

Sales

10.61% 9.82%

Data Inputs: Name of Company: General Mills, Inc Kellogg Company

Earnings Per Share Diluted 2.77$ 3.62$

Net Income 1,658$ 1,269$

Total Revenue or Net Sales 15,620$ 12,923$

Shareholder's Equity 4,686$ 2,212$

PROFITABILITY RATIO ANALYSIS

Sources: General Mills Company, 2017, Kellogg Company, 2017.

GENERAL MILLS, INC. – 1930 17 | P a g e

References

Alberta Agriculture and Forestry (n.d.). Agricultural Marketing Guide. Retrieved from

www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/sis5219

Bovee, C. L., Thill, J.V., and Paul, C.P. (2017). Business In Action (8th Edition). Pearson

Education, New York, NY: 2017.

General Mills. (2017). 10-K. Retrieved from investors.generalmills.com/2017-interactive-

annual-report/HTML1/tiles.htm

General Mills. (2018) 10-K. Retrieved from investors.generalmills.com/sec-filings?cat=1

General Mills. (26 Apr 2018). Brands. Retrieved from

www.generalmills.com/en/Brands/Overview

General Mills. (n.d.). General Mills Making Food People Love, Responsibility. Retrieved from

www.generalmills.com/en/Responsibility/Overview

General Mills. (n.d.). A Look Back on 150 Years. Retrieved from history.generalmills.com/the-

story.html

Kellogg’s. (2018). 10-K. Retrieved from

otp.investis.com/clients/us/kellogg_company1/SEC/sec-

show.aspx?FilingId=12563018&Cik=0000055067&Type=PDF&hasPdf=1Part V –

oneteam

NAICS Search Results (n.d.). NAICS. Retrieved from www.naics.com/naics-search-results/

YAHOO! Finance. (n.d.). General Mills. Retrieved from

finance.yahoo.com/quote/GIS/profile?p=GIS