Why General Mills isn’t concerned about the changing landscape of retail and food health
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Major disruptions in how we order our food have led many food companies to reconsider how they market, brand and distribute their products. Meal kit companies like Blue Apron are doing away with the process of grocery shopping and sending meal ingredients directly to consumers, delivery apps like Grubhub are making more restaurants accessible and Amazon’s recent acquisition of Whole Foods has led the e-commerce giant to get into the grocery delivery business.
All this, however, doesn’t scare General Mills CEO Jeff Harmening, who spoke with David Brancaccio at the Aspen Ideas Festival. While the way we order our food is changing all the time, we’re still a lot eating cereal and breakfast foods — and that means good business for General Mills.
Below is an edited transcript of the interview:
David Brancaccio: Help me figure out this food universe that we now live in. We’re buying more fresh food, produce I see, yet then I saw a statistic the other day that we’re buying more frozen food in boxes. This is a resurgence. We’re supposedly getting pickier about our health yet salty snacks are flying out the door. You track this, do you see some trends?
Jeff Harmening: Well of course there are trends in food. The thing that makes it complex is that people are complex. And when you multiply that by 350 million Americans you have a lot of complexity and so you have several trends going on at one time. I mean, on the one hand consumers want to eat more things with fewer ingredients, they want to stay fuller longer so they’re eating more protein [and] eating more fiber. Snacking is on the rise, it’s a 25 year trend. And so the thing that makes it tricky and the reason our strategy is consumer first is that consumers want something different at different parts of the day and between consumers they want something different.
Brancaccio: So that’s interesting. Are we looking at the package and if we see long lists of mysterious ingredients that’s becoming maybe a turnoff for some people?
Harmening: Look, some people look at the packages, some people don’t look at the packages, I will say the trend is for simpler ingredients, ingredients you can pronounce, things you’d find in your cupboard but not everybody behaves that way.
Brancaccio: What if it’s not, Mr. Harmening, a food thing but it’s a brand thing? That reaching for Cheerios seems to some people like old school like a cassette tape for your audio. But if you bought another one of your brands, Cascadian Farm, seems more 21st century. Is there any element of that going on?
Harmening: You know I really don’t think so. Our job is to make brands relevant. I’ll give an example; Lucky Charms been around since the early 1960s and we grew it at 20 percent this year. What did we do? We talked about marshmallows.
Brancaccio: You didn’t hide the sugar in it? You said there are marshmallows.
Harmening: We said there are marshmallows because it turns out people who eat Lucky Charms actually like the marshmallows. And so for us as brand builders, our job is to make sure we keep our brands relevant to the extent we keep them relevant they keep growing. I mean, Nature Valley has grown wildly but so are brands like Annie’s and Lara Bars so I think, people ask me a lot, “are consumers looking for small brands?” I say no, they’re looking for brands that reflect their values. And that can be Cheerio’s or that could be Annie’s or that could be Lucky Charms.
Brancaccio: What about cereal in general, in boxes, isn’t that going down?
Harmening: Well General Mill’s cereal sales in the U.S. were actually up this past year and brands like Cinnamon Toast Crunch and Lucky Charms and Reese’s Puffs and Cocoa Puffs lead the way so cereals that taste really good. And so overall the cereal category is a little bit less than flat so it’s not really declining much and our cereal brands grew this last year.
Brancaccio: Alright. You know what is changing though is the retail environment and does General Mills have to adjust or respond when you see this story crossing that, the big story from the last two years, Amazon buying say Whole Foods. Does that change your life?
Harmening: I think the biggest change we’re going to see in food over the next five years is the way food is delivered and so by necessity then retail is going to change and as true in the United States, that’s true in China, that’s true in France and the U.K. We have a global business, we see all this, we have been changing. And what’s interesting is that I hear a narrative about how food companies are going to be in trouble as food goes online and yet our market shares online are about 20 percent higher than our market shares in-store and the reason that is that great brands travel across different mediums and so for us, e-commerce we see as a big opportunity. Yes it’s dynamic, yes we have to adjust but we are and that’s why our sales last year through e-commerce channels were up 50 percent globally and 70 percent here in the U.S.
Brancaccio: But that’s so interesting, [what you’re] saying is you already know what a box of Annie’s macaroni and cheese is. And so if you go online you might buy it because you know what you’re getting?
Harmening: Yeah the key is when you shop online, if you’ve ever shopped for food online, I mean it can be it can be a pretty laborious process. You have to go down through and pick out the things you want. And usually what’s the top of the list are people want the brands they love. And so I think that brands have a real advantage when it comes to online shopping. If you have great brands which is why we remain focused on you know buying and developing fantastic brands. If you’re the third or fourth brand in the category, [that] probably isn’t going to work out well for you.
Brancaccio: What about if we start preparing food for ourselves completely? We have these companies that are emerging. DoorDash, Grubhub, it’s an app based way to get restaurant food quickly to you. That could take away from what General Mills does.
Harmening: There are only two places you can eat food and that’s at home or away from home. And you know we have we have good businesses in both. We have a good convenient food service business away from home and we’ve got a big business in home and those are really the only two places people can eat. And so, as different models develop, we’ll make sure that we take advantage of them just like we have over the years, whether it’s selling yogurt to people like McDonald’s or whether it is selling Cheerios through grocery stores or pet food through places like Chewey.com.
Brancaccio: We’re not always exactly sure what it means when something is labeled organic. But what about this phrase “sustainable food,” there’s no precise definition of that. Is that a term you use?
Harmening: Our focus when it comes to sustainability … we have a couple of focuses, one is soil health because it turns out if the things you grow and the dirt you grow it in is healthy you’re going to get more out of what you grow which I know is common sense. But sometimes we have to get back to that. The second is that great soil holds more water. You know, one of the big challenges of our time is clean water and so there are a lot of really fancy things we could do but one of the things that we could really do is develop better soil and what we have found as we’ve developed a partnership with the nature conservancy to develop a soil road map to improve soil health in at least half the farms by 2025 and when it comes to big societal problems whether soil health or water quality [or] regenerative agriculture, one of the things we find you can’t really go it alone. You need partners.
Brancaccio: General Mills not going to go in and fully revolutionize agriculture but you could play a role.
Harmening: We can play a big role and you know, we sponsored this study that the Nature Conservancy did and this soil whole health road map. So we kicked it off, we have a big piece in it, we just partnered with a company in South Dakota to purchase organic and sustainable agricultural products from a farm that’s about 50 square miles and we partnered with Midwestern BioA, we partnered with [a] financing company and we’re doing stuff ourselves. We can play a role, we can play a big role but we cannot do it ourselves. It requires the whole food chain.
Brancaccio: Now before we go a personal thing. While 90 percent of mornings I eat one of your General Mills cereals — some day I could be a brand ambassador for this stuff but I have to wait till this part of my career ends — is there any chance I could veto one of your products? Bugles. Really? You’re still selling Bugles? Those things are nasty.
Harmening: You know on behalf of Bugles I would like to say that Bugles are really tasty.
Brancaccio: Difference of opinion here in the studio!
Harmening: They are really tasty. I’m glad that 90 percent of your mornings start with something from General Mills. I won’t get greedy and ask for 100, 90 percent share of stomach is pretty good in the morning and I got to tell you, Bugles is growing. People love Bugles and you’re sitting down to watch a game, having a little Bugles or have some friends over it, it’s a great snack and really tasty.
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