Making food people love is at the center of General Mills' corporate philosophy. This remains a key growth strategy, explains Ken Powell, General Mills chairman. "In a time of rapid change, with consumers constantly moving, we believe this 'consumer first' strategy is more important than ever," he said at February's Consumer Analysts Group of New York conference.
The company's research and development group creates a new product lineup twice a year, in addition to updating core products to meet changing consumer preferences. Current priorities are boosting levels of nutrition, taste and convenience as well as product transparency.
The hub technical center is in hometown Minneapolis, although product development centers also are in France, India, Brazil and Shanghai. Shanghai is the newest, having just opened in July. In addition, the Cereal Partners Worldwide joint venture with Nestlé operates a research center in Switzerland. Research and development expenditures were $222 million in fiscal 2016, $229 million in fiscal 2015, and $244 million in fiscal 2014.
Furthering commitments to improve health and nutrition is the company's Bell Institute of Health, named after James Ford Bell, lifelong scientist and former General Mills chairman and CEO (1929-1948). With locations in the U.S., Canada, France and the U.K., the institute, headquartered in Minneapolis, has a staff of doctorate- and master-level scientists and registered dietitians who help the R&D group develop food products and nutrition information, and research everything from cereal and whole grains to micronutrients and breakfast.
"Consumers are broadening their perspective and thinking more holistically about the role food plays in their overall health and wellness," explains Maha Tahiri, a corporate vice president, chief health & wellness officer and leader of the global Bell Institute of Health and Nutrition.
"General Mills is innovating to deliver products that link nutrition with health and promote wellness while providing great taste."
Peter Erickson, executive vice president of innovation, technology and quality, says the R&D group has shifted its thinking to become what he calls the best "big small food company" in the industry. "It’s about having the spirit of a small company − the consumer-centricity and empathy, as well as the speed and frugality," he told the New York Stock Exchange earlier this year.
More than ever, shoppers demand transparency about where their food comes from and how it is produced, says Erickson. Natural and organic foods are increasingly in demand, particularly among the millennial generation. General Mills is adapting to such trends, with a wider selection of yogurt, cereal and snack products under such brands as Larabar, Cascadian Farm and Annie’s.
"We need to be willing and ready to evolve our company at the same pace as our consumers are evolving," he says.
"When we fully embrace this spirit, we can increase our speed to market from 24 months to less than 12 months. The closer we get to our consumers earlier in the development process, the more successful we can be on delivering foods that meet their needs."
In the past five years, General Mills' $2.3-billion U.S. domestic cereal business has been challenged as consumers began switching to other breakfast options. Cereal sales fell 9 percent from 2011 to 2015, but thanks to the efforts of Powell, Erickson and recently appointed COO/president Jeffrey Harmening, the cereal group is on the rebound. Cereal sales climbed this year, as the company is cleaning up labels and introducing new products, even as it bolsters legacy brands.
R&D spending on health and wellness has grown 84 percent since 2004, according to the company's Global Responsibility Report. "We continue to invest in products throughout our portfolio," adds Kelsey Roemhildt, a spokesperson. "This includes innovation in our natural and organic portfolio, the fourth largest in the U.S."
And it's now a considerable natural and organic portfolio. Past acquisitions Larabar, Cascadian Farm and Muir Glen were joined by Annie’s Homegrown in 2014. General Mills paid $820 million for the small company but now sees the parent-trusted brand as one of its greatest growth drivers.
In addition to its own R&D organization, General Mills partners with external innovators, startups and consumers for current product enhancements and new product development. In October 2015, General Mills launched 301 Inc., part venture capital fund and part incubator, to guide promising food startups that address the new priorities and values customers have about food. "We re-created the 301 Inc. division from an idea-generator to an idea-backer," notes Roemhildt. "301 is focused on partnering with emerging food brands to create breakthrough innovations and build successful businesses." Theses companies are looking to reinvent in the dairy case, snack aisle or in ready-to-eat cereal, adds Erickson. "Those are all areas where we are excited to find partners who can help us see the reinvention possibilities in categories critical to our growth."
Also, R&D techs often "partner" with company business teams in groups of 10 to 20 to discuss product concepts, generate feedback or sample early prototypes. Product developers also learn what consumers want by shopping in grocery stores and farmer's markets, even cooking together with them in home kitchens. They also set up and sell product concepts in grocery stores or even fitness centers, gauging interest and learning consumers' likes and dislikes early in the development cycle.
According to Erickson, engaging with people in consumer environments helps the group quickly understand if they're on target with a concept. It also cuts the time to launch products by about half, while vastly speeding up first-market exposure. The teams take the feedback to one of the technical centers and refine the product; then roll out the product on a larger scale, resulting in better on-trend innovations that hone in on specific needs.
Through the R&D group's efforts, the company has made great strides replacing certain questionable ingredients. In 2015, General Mills phased in a multi-year program for its cereals to remove artificial flavors and colors, which affected roughly 40 percent of the U.S. products. By January of 2016, some 75 percent of the brands, including Reese’s Puffs and Trix, were free of the artificial ingredients. By January 2017, the plan is to have 90 percent of the cereal portfolio free of those ingredients.
Other goals this year include reducing sodium by 20 percent in seven out of 10 food categories.
This past June saw the introduction of Tiny Toast, the first completely new cereal brand in 15 years. The miniature toast-shaped strawberry or blueberry cereal pieces get their flavors from blueberry and strawberry powders that arouse the taste and smell senses, says Mike Everson, a product developer in the innovation, technology and quality division. "We watched consumers when they first opened a box, and they were stunned at how good it smelled," he explains. "Consumers told us both varieties tasted real, not like artificially fruit-flavored cereals."
Limited-edition Girl Scott Cookie cereals will debut nationally in January.
Perhaps the biggest breakthrough recently was the launch of gluten-free cereals. Spearheaded by R&D engineer Phil Zietlow, they're the culmination of several years of hard work by hundreds of General Mills employees. Going gluten-free required modifications to plant structures, cleaning procedures, the supply chain and product testing practices and the construction of a multilevel facility dedicated to oat separation. A special sorting process was developed using existing, reconfigured milling equipment to separate the small amounts of wheat, rye and barley in supplies of whole oats that are inadvertently introduced at farms where the oats are grown or in transportation of the oats to mills.
Most of the Chex line is gluten-free and has been since 2008, when Rice Chex became the first mainstream gluten-free cereal. Then came gluten-free Cheerios, a major addition. According to Harmening, the results have been encouraging. After being made gluten-free, Honey Nut Cheerios –the top-selling cereal in the ready-to-eat category – recently posted its best quarter of growth in almost four years. Many other products in other categories, such as Nature Valley snack bars, also unveiled gluten-free choices. As of December 2015, General Mills offered more than 980 gluten-free products in the U.S., based on Nielsen figures.
As Erickson says, the business environment today is as challenging as he's ever seen it. That's why thinking big and small is so important, he says. "It’s an exciting time to be at General Mills, and I’m optimistic about what we can do to drive growth in the future."