General Mills in France Best in France Case Study, 2003 - 2006

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General Mills in FranceBest in France Case
Study, 2003 - 2006

• HEC MBA Program, Jan. 2005

Mark Bryce - July 2002
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General Mills

• Overview

• Overview General Mills
• Company Product and clients
• Why General Mills came to France
• Company values and adaptations to France
• Key Constrains and costs
• We thank General Mills France

20 Min.
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General Mills

• Overview of General Mills

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Overview General Mills

• Overview

• World's 6th largest food company
• 12.3 billion net sales in 2004
• Profits of 1.05 billion world-wide
• 27'000 employees globally
• Strong Brands and marketed in more than 100
  countries
• Global Headquarter is in Minneapolis
• Located in France since 2001

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Overview General Mills

• Global Food Beverage Companies, ranked by sales

Source Companies most recent Annual
Reports Sales figures reflect EITF accounting
changes Nestlé, Sara Lee, Unilever, ConAgra
figures reflect only packaged food sales
non-packaged food sales (i.e. Hanes, meat
processing etc.) not included.
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Overview General Mills

• Stock Price Performance, 1928-2004

Adjusted for Stock Splits and Spin-offs
Sources Economic History Services (Inflation
data) and Dow Jones Company, Inc.
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Overview General Mills

• International Production Facilities

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Overview General Mills
1866
Acquired the Pilsbury Company
1992
Activities in France
1960
Introduced snack food through JV with Pepsico
Bought Biscuiterie Nantaise -leading sweet
biscuit and sandwich cookie company
1990
Introduced cereals with joint ventures with Nestle
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Overview General Mills - France

• Overview France

• 558 million net sales in 2004-gt whole Europe
• Important and growing French market
• 175 people in France
• Average age in France 32 years
• Staff stays 5.2 years in company in average
• 58 female, 42 men ( in France)
• European Headquarter is in Nyon, Switzerland
• In France since 2001

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General Mills - Brand in France

• Green Giant premium quality vegetables
• Sweet Corn
• Asparagus.
• Palm hearts.

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General Mills - Brands in France

• Old El Paso-Mexican Food range
• Fajita Kit.
• Guacamole Seasoning Mix.
• Flour Tortillas.

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General Mills - Brands in France

• Betty Crocker Products
• Chocolate Fudge Brownie Mix.
• Blueberry Muffin Mix.
• Devil's Food Cake Mix.
• Vanilla Frosting.
• Bac-O's bits

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General Mills - Brands in France

• Häagen-Dazs American Ice cream.
• Crèmes glace
• Croustillante

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General Mills

• Company Products and Clients

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Company Products and Clients

• What products are produced in France?

General Mills offers a wide range of premium
products globally and in France. The following 4
are produced, packed and labelled in France

• Häagen-Dazs (Ice Cream)
• Green Giant (Corn)
• Chili Con Carnet
• Asparagus (only labeled in France)

(Géant Vert)
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Company Products and Clients

• Why are these products produced in France?

• Häagen-DazsPillsbury the former owner of the
  brand, built a plant near Arras, France. High
  quality Eggs and Milk were widely available.
  Arras offered Pillsbury very attractive
  conditions for building its plant. Nowadays,
  the factory is an important source of employment
  in that region.From a logistics point of view,
  Arras is very attractive.

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Company Products and Clients

• Why are these products produced in France?

• Green Giant (Géant Vert)South France offers one
  of the best places for corn production. The mix
  of earth and climate is unique.The corn plants
  were a joint venture between "Coop de Pau" and
  "Pillsbury" (the former owner of the the brand).
  Today, General Mills owns the whole production.
  The quality achieved is a realcompetitive
  advantage.The seeds come from USA.But only
  France can assure a 100GMO free production
  during thewhole Supply Chain. This is a major
  criteria for French customers.

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Company Products and Clients

• Expansion plans for these production lines.

• Häagen-DazsGeneral Mills increased the
  production plants in Arras with 4 new lines.
  Increasing sales and product range explain this
  extension

• Green GiantGreen Giant plant in South France
  increased its labeling activity. The Green Giant
  plant labels products also from Spain. Since
  Spain increased its production, Green Giant had
  to increase its activity as well.

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Company Products and Clients

• Company Clients

• Retail Business
• Super markets
• premium stores
• Food Services
• Restaurants
• Hotels
• Street Cafes
• Cinemas
• Food delivery services

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Company Products and Clients

• What are the clients expectations?

• Professional Service
• High Quality Product
• Lowest possible price
• Very fast and flexible delivery
• People in France whom they can meet and call
• Managers who can react quickly if issues arise
• Traceability of the whole supply chainA new law
  in France since 1. Jan. 05, requires suppliersto
  pass all product information to the customer.

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Company Products and Clients

• How the French presence helps to satisfy clients?

• Premium products in the food industry need local
  presence. Otherwise you do not understand the
  customers and hence, do not reach them.
• Although General Mills is a global company, it
  plays in a multi-domestic market.
• Customer preferences are different in France
  -gtneed adaptations
• Laws are different in France (especially in the
  food industry)
• General Mills is more successful in those
  countries in which it is locally present

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General Mills

• Why did General Mills come to France

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Why General Mills came to France

• Company approach to international growth

• Buying Pillsbury in 2001, was a strategic move to
  grow internationally and in Europe. With
  Pillsbury, General Mills acquired important
  brands and locations.
• General Mills plans to grow in Europe, ASIA, US
  and Latin America. General Mills invests in one
  country at a time, makes its business stable and
  then moves on.
• General Mills will follow its international
  expansion strategy-Product Innovation-Channel
  Expansion-International Market Expansion-Margin
  Expansion

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Why General Mills came to France

• International accusations

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Why General Mills came to France

• International expansion

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Why General Mills came to France

• Why was France important?

• With the acquisition of Pillsbury, Häagen-Dazs
  and Green Giant (Géant Vert), production
  facilities in France were acquired.
• The climate and earth for corn is very
  favourable. The production is at its right place.
• Arras (Häagen-Dazs production) is geographically
  very attractive. It is in the middle of Europe
  and has good Harbour, Airport and road access.

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General Mills

• Company values and adaptations to France

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Company values and adaptations

• Core Values of the company

• Championship brand
• Championship people
• Championship innovations
• Championship performance

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Company values and adaptations

• Core Values of the company

• Brands - building leading brands that our
  consumers trust around the world making lives
  easier, healthier and more fun
• People - diverse, talented, committed people
  constantly learning and growing and contributing
  to our communities.
• Innovation - developing and implementing
  innovative ideas to build our brands and drive
  our business
• Performance - delivering outstanding performance
  for our investors, our customers, our consumers
  and ourselves

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Company values and adaptations

• How company managed to instil its value in the
  French unit?

• In the US, the company is your family 24/7.
  People feel very attached to the company.
  Employees bring children to their workplace.
• In the US, the company organises much more events
  to integrate private and business world.
• In France, employees prefer more to distinguish
  between job and private life.
• This request for more privacy is embedded in
  local activities and the work environment.

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Company values and adaptations

• Examples of adaptations through HR in France

• What's on a chart, people follow
• You can fire somebody quickly
• Orders are stated straight forward
• People get rewarded in front of their colleagues

• Only what's in the contract must legally be
  followed
• Legally, you need evidence to fire somebody
• French do not like orders, wordings must be
  changed
• For a French, it is sometimes strange to be
  rewarded in public

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Company values and adaptations

• Cultural Challenges between USA and France in
  general

• Failures in US are seen as normal (you grow, so
  try out new things)
• If you do well, you get rewarded
• If you make mistakes, people motivate you to
  improve
• Education is flexible, so people become flexible

• French try to do no mistakes (hinders them
  sometimes to move on)
• People expect you to do everything correct. Why a
  reward?
• If you do mistakes, you get smashed by the
  others
• Education is very uniform, everything is
  standardised

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Company values and adaptations

• Cultural Challenges between USA and France in
  general

• General Mills tries more and more to profit from
  each country and combine the best (this counts
  not only for France)
• HR executives are seen as key to achieve this
  goal. Hence HR members travel to different
  locations to exchange knowledge
• Local reports are allowed to be written in the
  local language. Global reports are written in
  English.
• Bonus, benefit and training are available
  everywhere

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General Mills

• Key Constraint Costs

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Key Constraint Costs

• The high cost factors in France

• Labour cost is high for a company
• Production limitations -gt35h week
• Taxes are very high in France
• Hiring and firing policies are stricter in France

• But all the key benefit presented in the previous
  chapters require local presence in France. And
  since the French market is profitable and
  strategically important, the trade-offs are
  acceptable

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Key Constraint Costs

• The high cost factors in France... BUT

• For tax reasons, all European products belong to
  Switzerland until the physical sales gets done.
  Only after sales, the product gets officially
  "imported" to France. Marketing, RD, Production
  and 20 top executives are based in Nyon,
  Switzerland since 2002.

Infrastructure
Presence
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Key Constraint Costs

• BUT... how does it work?

• Called "The European Trading Model"
• All European brands and products belong to
  Switzerland
• RD, Marketing, Logistics and 20 top executives
  are in Nyon
• France has "only" factories and produces
  exclusively for Switzerland
• Products do not get physically moved to
  Switzerland
• But once a French customer gets invoiced, Nyon
  invoices General Mills immediately
• The "European Trading Model" is an invoice and
  money transaction model

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Key Constraint Costs

• Example of The European Trading Model

• France invoices 100 to a French customer
• French Sales effort, administration and wages
  expenses are 20
• Nyon invoices France immediately for its services
  and expenses -gt 75
• Profit for General Mills France 5 (100-20-75).
  This profit gets taxed in France.
• Nyon's Logistics, RD and Marketing expenses
  -gt50
• Profit for European Headquarter General Millsin
  Switzerland 25 (75-50)

These are not real figures. They were just chosen
for illustration purposes
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Key Constraint Costs

• Essential Advices for other food companies coming
  to France

• French culture is different. You need to know
  your customers and hence, have local people in
  your company.
• Don't just bring American Managers for
  negotiations. Even your global clients in France
  will be French.
• Food quality standards in France are very high.
  Luxury market is a niche market. Know in which
  niche you want to play in France.
• Several food products in France are protected. Do
  your "homework" before trying to import your
  product.
• Chose a non English name for your food product.
  French prefer non American Food brands.

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General Mills

• We thank

• Murielle SchultzHead of HR General Mills France
  Murielle Schultz_at_genmills.com
• Renata De StefanoKey Account Manager
  Häagen-Dazs Food Service FranceRenata.DeStefano_at_
  genmills.com
• Philippe RouviereLogistic Manager
  FrancePhilippe.Rouviere_at_genmills.com
• General Mills FRANCEEnergypark 1
• 32 Avenue de l'Europe
• 78941 VÈlizy Cedex

Mark Bryce - July 2002