General Mill is currently one of the largest food companies in the World. Its 2001 acquisition of Pillsbury, another leader in baking supplies, made it the number five food company in the world and number three in the United States. It is the United States’ leader in yogurt, number two in breakfast cereal (after Kellogg) and the third largest food service supplier in the world. Currently, it is a leading company in ready-to-bake products.
The broadly defined group of grains covered by General Mill are of many types, including maize, wheat, barley, sorghum and rice. Nearly half of the grain is used directly as feed grain in the livestock sector while General Mill’s plants further process the other half. The grain processing chain is very long. The first processing step consists of dry milling, resulting in flakes, flour, and white rice, or wet milling, which then result in malt, starch, and glucose.
These semi-finished products are used by the company as well as sold to a wide variety of food and no-food processing companies. Examples of food products include; bread and bakery products, beer, pasta and noodles. Nonfood products consist of textile, paper, animal feed and biofuels (Newton et al., 45). General Mill mostly deals with semi-processed products such as flour and starch as well as food products such as bread, bakery and pasta.
Consumer habits have shifted rapidly over the past few years, and food issues like health, indulgence, variety, money value, and convenience have become very critical (General Mill). Resultantly, General Mill has made bakery and bread products according to this shift in consumer behaviour. The Corn Flakes are produced from maize and provide guidelines daily amounts for each of the nutrients (Supromma). The corn flakes are recommended for both young children and adults. The special K are made from light, crisp flakes of rice and wheat with succulent red berries and it is a recommended for people intending to lose weight and those wanting to increase fiber intake (Supromma). Weet-Bix cereals are made from whole grains and can be enjoyed by both young and old (Newton 16).
Due to bulk market characteristics of the flour market, cost price efficiency and economies of the scale are significant. Besides, General Mill has engaged in forward integration towards the consumer so as to try to add more value to its products. While the breakfast cereal market is mature in the United States, General Mill is looking elsewhere to guarantee its future. It has done very well in snack food, especially in bugles chips. The company has strengthened its position in the joint venture. It works closely with Nestle and Cereal Partners Worldwide, which exchanges General Mill’s cereals and others outside North America. General Mills is also associated with PepsiCo in a joint endeavor called Snack Venture Europe (SVE) selling bugles and other snacks along with PepsiCo’s Frito-Lay snacks (Wright Investors’).
Competition
Besides the General Mills, the main players in the international cereal trading and processing industries are firms like Cargill, ConAgra and ADM (Howard 17). They all have a wide range of activities in processing and trading of various commodities. ADM is currently the leading industry in making products from soybean, cocoa, corn, wheat, rice, peanut, canola, barley, sunflower seeds and cottonseed. The firm has more than 280 processing plants. Among the product ADM sells are gasohol (mixed petrol and alcohol), corn sweeteners, lecithin, paint solvent and animal feed, all based on the rendering of agricultural products like soybeans and corn (Wright Investors’).
The organization has a universal presence with the recent acquisition in China, Brazil, Turkey, and Bolivia. Cargill Food Company is the second in the list of corn wet milling companies. The company produces sweeteners, food and industrial starches, various starch derivatives and wheat proteins. It has plants in the United States, and some parts of Europe including Poland, Turkey, and Russia. ConAgra, which a United States based company is probably the number three seller of retail food product in the universe after Nestle, Kraft, and Altria. Besides, the company is one of the top three buyers and processors of grain products and handles a significant portion of United States’ grain export. Also, it is actively involved in the cattle and hog feed sector, food services, poultry processing, trade in agricultural products and fertilizers.
The cereal industry is a business to the business environment. Its products are used and further processed by other industries like food, paper and textiles. Cereal business is identified by a high degree of concentration; a limited number of players account for a majority market share. Concentration has increased even further with the recent acquisition of Cerestar by Cargill and of Minnesota Corn Processors by ADM. The snags to the entrance are high given the capital-serious nature of this business and the scale needed to perform adequately. Cerestar was the European market leader until Cargill made a successful bid to acquire it.
Following the takeover, Cargill became number one and is currently well equipped to cater for the demand for value added cereals. Before the takeover, Cerestar had been investing substantially in its production plant in the Dutch, the biggest starch production in Europe. The other main players are Roquette Freres in France, Amylum in Belgium, Lyle in United Kingdom, and AVEBE in Netherlands (Wright Investors’). Amylum was one of the first to move into the wheat-based starch, a decision that was based on cost and efficiency and its search towards value added produce. Most of the leading players in the bakery industry have a North American background, indicating the most concentrated nature of the industry on this content. The top five bakeries account for nearly half of the United States market share. The European bakery industry is still highly fragmented; each country still has a large number of medium-sized and small players.
While observing the companies that are active in different phases of the grain chain, it becomes clear that most companies are either present in grain trading and milling or focus on the manufacturing of grain-based consumer products like bread and bakery. The concept of full integration (like being involved in all operation) is not widespread in the grain chain. As a result of the expanding retail and food industry and forced to narrow margins, a high consolidation is taking place in virtually all sectors of the grain chain. So as to survive, sufficient volumes need to be acquired. This explains the domination of a few players in the grain chain.
The grain meal industry has shown worldwide expansion in search of locations with either good sourcing of raw grains or good market prospects of their semi-processed products. The grain industry has also expanded into most Europe, Asia and Latin America (Wright Investors’). Also, the grain-based industry is now narrowing their range of products. Priorities are set regarding the processing activities and the choice of products to ensure a viable competitive position in the gain chain. In conclusion, consolidation and internationalization will continue thus resulting in a more concentrated grain based industry.
Works Cited
General Mills. 2015. Web.
Howard, Phil. “Consolidation in Food and Agriculture: Implications for Farmers and Consumers.” Natural Famers (2006). Web.
Newton, Adrian Clive, et al. “Crops That Feed the World 4. Barley: A Resilient Crop? Strengths and Weaknesses in the Context of Food Security.” Springer Science 3 (2011): 141-78. Web.
Planck, Nina. Real Food: What to Eat and Why. New York: Bloomsbury, 2006. Print.
Supromma, Sirabodee. “A History of Breakfast Cereal.” Food Editorials Meals Resources. 2015. Web.
“Wright Investors’ Service Comprehensive Report for General Mills, Inc,” Wright Reports. 2015. Web.