General Mills Grapples With Modern Times

Cheeriois with ProteinHere are two interesting headlines from the past month about processed food giant General Mills:

“Fiscal 2014 Results Below Expectations: Fiscal 2015 Plans Include Strong Innovation, Productivity Savings, and New Cost-reduction Initiatives Designed to Sharpen Efficiency and Growth Focus”

“General Mills Is Serving Wheaties, the Breakfast of Champions, to Younger Consumers”

We can only hope that the “strong innovation” referred to in the first headline refers to something other than the initiatives outlined for the companies breakfast cereal business referred to in the latter.

Current trends are not being kind to General Mills, which reported flat sales in the U.S. for its 2014 fiscal year.

First, big food is rapidly morphing into Big Tobacco. Not a day goes by without a food writer, nutritionist or health expert railing against the evils of processed foods.

This has to be an especially hard pill to swallow for packaged foods companies, who still like to refer to their products, from breakfast cereals to cake mixes, as “wholesome.” Always shown with a glass of milk, milk in the bowl and a glass of orange juice, cereals like Lucky Charms were once referred to in ads and on packaging as “an important part of this nutritious breakfast.”

Despite the claim that Lucky Charms is “made with whole grain…fortified with 12 vitamins and minerals, and is a good source of calcium,” these old school cereals for kids, along with hosts of other packaged foods, are now thought to be poison by many.

Being cast as the villains behind childhood obesity, diabetes and other disease has to be an especially hard pill to swallow for an industry that has traditionally put nearly all of their products in a context of “wholesome.”

If this trend away from processed foods, which shows no signs of abating, weren’t hard enough, many Big Food brands have simply grown old and irrelevant. This point was driven home in a recent Wall Street Journal article titled “Nestlé U.S. Chief Looks for Brands to Fix or Toss,” which talked about Nestlé’s stalled packaged goods business.

“Paul Grimwood, (who) took over Nestlé’s struggling U.S. operations a year and a half ago…must deal with a sprawling hodgepodge of brands in the U.S., some of which are languishing. Oh Henry and 100 Grand candy bars are long past their heyday, market share for Juicy Juice children’s fruit drinks has declined for years, and Ovaltine…no longer bothers to run TV ads in the U.S.

“Nestlé has (also) been hit by a rapid shift away from frozen meals, as consumers gravitate to fresh foods that they think are healthier. Many of its frozen brands, like Lean Cuisine and Hot Pockets, have lost relevance with consumers.”

The third strike is that ineffective marketing efforts have eroded the importance of consumer packaged goods brands. Approximately two-thirds of marketing spend is now focused on short-term promotional efforts such as discounting. By moving away from image-building, long-term oriented advertising in favor of efforts to boost short-term sales, packaged goods companies have effectively trained consumers to buy whatever is on deal at any given time, rendering brand loyalty a thing of the past.

The fact that store brands have nearly become “name brands” in their own right, providing less expensive alternatives at essentially quality levels, only exacerbates the problem.

Which brings us back to the “strong innovation” that General Mills says they have in store for 2015 to right the ship. Here’s a statement from Peter Erickson, Senior VP of Innovation, Technology & Quality from the company’s Taste of General Mills blog:

“We are focused on the quality of our new product innovation, and have a strong slate of new products to bring consumers more of what they want…Consumers have unwavering high standards for food. They want products that deliver on quality, taste, health, convenience and value, but at the same time they want more. More flavor, more fun, more nutrition. The more we connect with consumers to truly understand their most significant needs, the better we are able to bring remarkable new products to market.”

That’s a lot of empty words to restate the obvious. You don’t need an MBA to understand that consumer needs must be met or that people want food that tastes good. A bit of specificity does emerge in a recent Business Week story, General Mills Has Plans to Spark a Breakfast Cereal Revival. Expecting that the declining cereal market will bounce back due to favorable demographics and the fact that breakfast cereal is still the number one food in the category of breakfast eaten at home, COO Jeff Harmening told investors recently that the company would grow its RTE cereal business by “harness(ing) such food trends as protein, gluten-free, and fiber.”

This is, in fact, reflected in the self-described “aggressive lineup of new products” that hit the shelves earlier this year. Familiar General Mills  brands now enhanced with protein, include Cheerios Protein, Fiber One Protein Cereal and Nature Valley Protein Granola.

On the other hand, recent arrivals such as Muliti Grain Cheerios Dark Chocolate Crunch and Chocolate Toast Crunch reflect the Dark Side of The Force working at General Mills,. Chocolate may be a “significant consumer need,” and health is but one element of the “quality, taste, health, convenience and value” formula cited by Mr. Harmening. But junking up “wholesome” brands such as Cheerios does seem to take the teeth out of any commitment to nutrition on the part of the company.

Making a value judgment on chocolate for breakfast is not my intention, but you have to wonder about a company under siege for contributing to America’s health problems that continues to roll out these kinds of products.

The packaged foods companies face a truly existential dilemma. What should they stand for as taste, quality and nutrition standards continue to rise? Value and convenience once established “packaged,” “frozen” and “canned” as desirable. Now those are dirty words.

Can a company like General Mills innovate their way out of stagnation? Yes, of course they can, but here it’s important to explore the nature of that innovation.

Another look at their “aggressive new lineup” reveals that virtually every item on the list is a line extension, new form or new flavor. Moreover, the company still relies many of the same characters (Buzz the Honey Nut Cheerios Bee, e.g.), icons and taglines that they’ve been using for decades.

No doubt that loyal customers would go ballistic if the Lucky Charms leprechaun were to disappear. Building a bridge from well-established brand equities to the sensibilities of younger consumers in ever-changing times is no easy task, but it can be done. P&G successfully brought Old Spice – your grandfather’s after-shave – back from the dead. The brand still stands for virility and masculinity the way it did in the 1960’s, but P&G was able to redefine the nature of masculinity in an edgy, contemporary way.

Virtually all the initiatives outlined in the referenced articles are late to the party line extensions based on obvious, well-established food trends du jour. That kind of reactive mode does not equate to meaningful innovation. As a result, it is unlikely that relatively old news like “protein, gluten-free and fiber” will turn these brands around.

Nor will the company’s efforts to connect younger consumers to the ancient Wheaties brand. Once the Nike of breakfast cereals, “The Breakfast Of Champions” stood for athletic achievement through hard work and healthy living. The product itself was plain and boring, but the brand message reflected that directly. Greatness could only be achieved through sacrifice, including lots of training and eating a Spartan, tasteless, “good for you” diet. That won’t fly today.

Moreover, General Mills’ epiphany, reported in the New York Times piece, that social media can be leveraged to engage younger consumers and “more contemporary” sports like women’s soccer or mixed martial arts will spark interest in the brand is not going to move the needle. That’s basic blocking and tackling, paint-by-numbers marketing, rather than anything that could be considered innovative.

General Mills is a huge company that’s not going anywhere anytime soon. But like other packaged goods companies, volume and growth have been generated by acquisitions and spinning off endless line extensions. These strategies have allowed the company to hang in there, but they are not sustainable.

Innovation, first and foremost, requires a hard look at brand architecture. People will always love chocolate and other indulgences, but Cheerios may not be the right brand to deliver them. Perhaps all those over-extended brands should simply be milked (no pun intended) at this point so that entirely new brands with ingredients, packaging and brand imagery consistent with contemporary tastes and needs can be developed.

Otherwise, a commitment must be made to repositioning old, tired brands like Wheaties with the kind of boldness and creativity demonstrated by Old Spice.

One thing is certain. Given the negative trends affecting packaged foods, tinkering at the margins with too little, too late, “me-too” efforts, is not a recipe for long-term viability.

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