Apr 03, 2014 • By

Consumer changes fuel global growth

The emerging middle class in countries such as China, India and Brazil represents a world of opportunity for General Mills.

That was the message that Ken Powell, chairman and chief executive officer, shared earlier this week with business leaders, students, faculty and staff at a sold-out University of Minnesota Carlson School of Management event.

“We are in the midst of a transformation that is completely changing the distribution of wealth around the world,” Ken said. “It is a change so historic that McKinsey calls it the ‘great transition,’ comparable to the industrial revolution of the 1800s.”

The statistics tell a compelling tale.

This emerging global middle class is expected to reach 50 percent of the world’s population by 2030, up from 29 percent in 2008. Two-thirds will be residents of Asia-Pacific, but Brazil and Mexico will also see projected growth of more than 50 percent. And across China, Indonesia, India and Brazil, the number of middle-class households is projected to grow by almost 200 million in this decade alone.

So what does this mean for General Mills?

“We are pursuing this with a sense of urgency,” Ken said, noting that “our company must seize this opportunity to remain relevant.”

Ken Powell

General Mills, which has completed several recent acquisitions in key markets, is laying the groundwork for this growth through its five global platforms: Cereal, super-premium ice cream, yogurt, convenient meals and snacks.

Today, China is the company’s largest emerging market. Starting with sales of a few million dollars in the mid-1990s, General Mills China in a few years is expected to become a billion dollar business, with brands such as Wanchai Ferry, Häagen-Dazs and Bugles. Soon, a new plant in China will begin producing yogurt, too.

To reach consumers in another important market, General Mills about a year ago acquired Brazil’s Yoki Alimentos, maker of meal and snack staples. In Brazil, the middle class increased by 20 percent between 2005 and 2012, and average monthly incomes almost tripled.

Yoki sales have grown rapidly since the acquisition, and there now are opportunities to expand distribution of brands such as Betty Crocker, Nature Valley and others.

In noting that the five platforms account for more than 80 percent of international sales, Powell also highlighted opportunities tied to cereal and yogurt.

Cereal Partners Worldwide (a joint venture with Nestlé) currently operates in more than 130 countries, with a 22 percent value share globally. It holds the No. 1 share in multiple emerging markets from Southeast Asia to Latin America.

As for yogurt, General Mills acquired 51 percent of Yoplait in 2011, and with nearly $3 billion in net sales worldwide, is now the world’s second-largest yogurt company. In fact, Yoplait now is the company’s largest business in Europe.

Not surprisingly, all this activity is changing General Mills. In 2008, less than 25 percent of sales were outside the U.S.

Today, fueled by the growth of emerging markets, nearly $6 billion of sales and one-third of revenues come from outside the U.S., and more than half of the company’s employees live outside America.

“At General Mills we believe we are on the journey of a lifetime – turning what began as a U.S.-centric milling and baking company into a truly global and diverse food company,” Ken said. “To get there we are focused on consumer needs, which vary by culture around the world. But we are finding areas of scale where we can succeed very well.”

Editor’s note: Photos courtesy of the University of Minnesota Carlson School of Management.