Monday, May 21, 2001

Magnetic 40: Food Processors

Before 1989 one U.S. company dominated the international market for breakfast cereal—and it wasn't General Mills. "Kellogg was kicking everybody's rear end overseas," admits Ken Harris, partner and industry consultant at Cannondale Associates.

Rather than try to build an international cereal business from the ground up, General Mills found a partner: Nestlé. The joint venture, known as Cereal Partners Worldwide (CPW), combined General Mills' expertise in cereal with Nestlé's brand recognition and distri-bution throughout Europe.

The strategy worked. Since forming, CPW has expanded operations to 75 markets and captured 21% of the international cold cereal business. "The equation is pretty simple," explains Cannondale's Harris. "They find value in a partner's assets, send their best people to run the company and stay vigilant as to how to improve the partnership on an ongoing basis."

Not all of General Mills' international joint ventures have gone as smoothly. Analysts say the firm has had disagreements with PepsiCo over strategy regarding Snack Ventures Europe, a joint venture with $1 billion in annual sales. General Mills also shut down a Latin American dessert venture with Best Foods.

Still, international alliances alone accounted for $825 million of the company's $6.7 billion in sales last year.

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