A leaner organization with a bigger appetite for manufacturing partnerships is emerging in the Twin Cities.
Minneapolis-based General Mills is one of the biggest food processors on the international stage, with a production network sprawled across 13 countries and distribution into more than 100. That global profile helps explain an SKU count that has mushroomed to 35,000, more than triple the 10,000 from a decade ago.
Contract manufacturers and copackers long have helped fill the supply chain, but their role is growing as the cereal giant recasts itself as a leading provider of better-for-you natural and organic foods in step with young millennials.
Plant closures and divestitures are a very visible part of the changes afoot. Not all of the changes mean fewer food jobs: the 170 workers at a baking-mix plant in Martel, Ohio, will still be needed as the facility segues to its new role as a Big G copacker. And manufacturing continues at production sites of the recently sold Green Giant division.
Even before Jolly Green got his pink slip, a third of Green Giant’s orders for canned and frozen vegetables were filled by contract manufacturers, integral parts of a copacker network that is getting bigger. Last year’s $820 million Annie's Homegrown acquisition came with only one production site, and within months of the deal, General Mills shut it down.
Manufacturing was never Annie's thing anyway, but Annie's receptiveness to innovation suggestions from suppliers fit nicely with an outwardly oriented shift that has been building steam for several years at Big G. Shedding any not-invented-here reservations, the company increasingly is looking outward for ways to improve processes and packaging.
When the century began, in-house engineers designed and developed machinery to produce innovative packaging like an injection-molded overcap with spoon parts that yogurt eaters assembled before eating. By 2009, packaging innovation started arriving from outside. The first Supplier Summit led to a puncture-resistant snack bar wrapper that changed flow wrapping throughout the GM network.
While Annie's delivered the high-growth brand in what the corporation terms the “real food” segment, the premium paid caused General Mills to redouble efforts to latch onto innovative companies earlier in their development. Much of that work is being done by 301 Inc., its venture capital arm. Among recent investments in early-stage firms with high growth potential are Beyond Meat (pea protein entrees), Good Culture (cottage cheese), Rhythm Superfoods (kale chips), Kite Hill and Tio Gazpacho. One common link among them is little or no manufacturing capacity. (Rhythm had “retooled” manufacturing and doubled headcount to 12, but the $3 million it received from General Mills and other investors this year was earmarked for sales and marketing.)
Aided by General Mills’ retail sales organization and its supply-chain efficiencies, Annie's is the star of Big G’s natural and organic foods segment. An already strong growth rate is accelerating as the brand extends into cereal, soup and yogurt, product categories that can be produced within the parent company’s manufacturing network. Annie's foray into frozen foods was a flop, with only PB&J sandwiches and pizza snacks surviving.
General Mills still has a core competency in frozen foods. Totino’s pizza, appetizers and snacks constitute a billion-dollar brand. That’s enough to lump Totino’s with growth businesses, which also includes snack bars, yogurt, cereal and natural and organic products. Another growth division is Old El Paso, largely on the strength of the convenience meals in Europe, where sales volume exceeds the U.S.
The opposite of growth businesses are the euphemistically termed foundation businesses, such as Pillsbury refrigerated dough, Betty Crocker desserts and Progresso soups. Those low- or no-growth product lines are focused on cost-cutting that will increase their contribution to the bottom line. Rather than invest in manufacturing upgrades, the parent organization is more inclined to shutter some of those plants, as it already has indicated it will do with the original Progresso facility in Vineland, N.J.
Capital investments are reserved for factories that make growth brands. Rather than salvage equipment from two closed factories, the company is spending $25 million on two state-of-the-art cereal lines at its Buffalo, N.Y., facility.
Despite all the plant closures that have occurred in recent years, the corporation actually is increasing capital spending. This year’s $734 million budget is up 20 percent from three years earlier.
Nonetheless, a budget ax, not a construction shovel, is an apt symbol of today’s General Mills. The last greenfield project was in 2012, when a cereal plant opened in Malaysia. Three corporate initiatives — Projects Century, Catalyst and Compass — are focused more on eliminating bricks and mortar than adding them.
Project Catalyst takes aim at a U.S. manufacturing base built to mass-produce cereal and other high-volume products that thrived in a less fragmented marketplace. Domestic sales of breakfast cereal plunged 9.5 percent in the past four years, and while signs of a rebound exist, it is coming from products outside the presweetened mainstream – items like gluten-free and organic cereals. Still, excess capacity exists, which explains the closing of a Lodi, Calif., facility, one of seven U.S. plants that have been sold, shuttered or earmarked for closing in the past two years.
Project Compass takes aim at international operations. Two plants in Brazil and one in China were closed; adding in big cutbacks in Nanjing, China, where production of fruit snacks and Trix cereal is being terminated, a total of 860 foreign workers were eliminated, exceeding the target set in 2015. Plants also have closed in Venezuela, Argentina, New Zealand, Australia and the UK.
On the plus side, Project Century included a $253 million investment in two new lines and upgrades to existing ones at the company’s Murfreesboro, Tenn., facility, where Yoplait yogurt and Toaster Strudel baked goods are produced.
All told, announced manufacturing changes since 2014 will reduce overall head count by 5,800. Given the corporation’s commitment to automation and new technology, some reductions were inevitable. But workforce engagement and training remain a priority for those who will drive increased profitability for an organization wrestling with changes in consumer preferences and a diverse and complex international market.