Up From the Grass Roots: General Mills Brings New Ideas Into the Marketing of Cereals and the Evolution of American Business

I

THE milling art is older than written history, and from first to last has been the foundation of a steady, dependable industry. On one side it is anchored in agriculture, and on the other in the everlasting need of the human family for the cheapest and most dependable food — bread, the traditional staff of life. Between these eternal bastions — land and life — stands the miller, performing an essential task which men have held in honor through countless generations.

In the long advance from the primitive hand mill of the ancients down to the great modern automatized mills, the power sequence shifted from man muscle to animal muscle, from animals to water power, from water power to steam power, and from steam power to electricity in the early years of the twentieth century. Meantime, in the 1870’s came the purifier, and in the 1880’s steel rolls were substituted for the millstones which had dominated the milling process from time immemorial. These two innovations, by improving flour quality and lowering costs of manufacture, brought disaster to many small mills laggard in introducing the new equipment; this period of transition is sometimes spoken of as the milling revolution, but it was a revolution beneficial to the public. Since then the milling industry has been steadily adapting minor changes, while inventive genius has found play chiefly in improving operations which prepare the product for market — packaging, conveying, and shipping.

On the map of the world the shift in milling operations emphasizes the sweep of American history. Even in colonial days large American fortunes began to rise on the solid basis of overseas wheat shipments from Virginia, New York, and Pennsylvania. These areas remained leaders in wheat production until the Erie Canal, opened in 1825, began to pour Middle West wheat into Atlantic ports.

Millers followed the wheat farmers closely in their march west and north across the prairies of the old Northwest Territory, and beyond. Wherever wheat was grown a mill soon arose beside a near-by stream — the first industry to appear on the frontier. These small mills throve on local needs as population increased; the hazards of transport were still sufficient to make wheat safer to ship than flour, and the golden wheat of mid-America flowed eastward over the Great Lakes and new railroad systems to supply the rising milling centres of Oswego, Rochester, and Buffalo.

All through this period, exports to Europe were heavy, but ran more to wheat than flour. Wheat bread, the old Continent’s basic food, could be made more cheaply from imported grains than from native grains. The Industrial Revolution gathered headway as European labor, no longer needed on the land, flowed toward the manufacturing cities and towns. Europe, doubling and trebling in population, extended its trade and political dominion on the basis of food importations from America. The MississippiMissouri Valley became the bread basket of Europe.

Throughout most of the area, wheat was sown in the autumn and harvested the following summer. This ‘winter wheat’ became the staple of commerce. But in the Northwest, with its intense winter cold and long summer days, necessity drove the settlers to grow wheat which would mature in a single growing season. They developed and cultivated spring wheat of superior hardness and good baking quality when ground into flour; but many years passed before Northwestern flour could be freely sold elsewhere because of its discoloration through flinty particles. The future of Minneapolis as a milling centre waited for the coming of capital, commercial enterprise, and invention, all of which played decisive rôles in winning for spring wheat flour a place on the world’s table.

II

One of the chief figures in this great economic drama was Cadwallader C. Washburn, of a Maine family famous for political acumen and driving power, He came West as a boy of twenty, studied law and surveyed land in Illinois, and in 1842 settled in Mineral Point, Wisconsin. It is with the latter state that his fame is generally associated, as Congressman, as Brigadier General of Wisconsin troops in the Civil War, and as Governor. In 1856, however, he visited the Falls of Saint Anthony on the Mississippi River, present site of Minneapolis. Foreseeing the possibilities of this undeveloped water power, Congressman Washburn organized the Minneapolis Mill Company to control the west side of the Falls. In 1866 he built the first Washburn Mill at Minneapolis, the famous Washburn B, six stories high and the largest mill structure west of Buffalo.

The Washburn Mills went through several corporate changes before John Crosby came on from Maine to complete the trade name which has since become famous the world over. After passing through several partnerships the enterprise was incorporated as Washburn Crosby Company for $500,000 in 1889. This occurred shortly after the arrival from Philadelphia of James S. Bell, a third-generation miller who guided the Company successfully down to 1915, by which time he had lifted Washburn Crosby into an assured position with a capital of $6,000,000, soon afterward increased to $9,000,000.

During Mr. Bell’s presidency the full results of the milling revolution, 18701880, came home to Minneapolis and the Northwest. The middlings purifier had improved the quality of spring wheat flour from 1871 on; introduction of steel rolls in 1880 speeded up the milling process and made quantity production possible without loss of quality. Washburn Crosby, in its remodeled B mill, was the first American mill to use the steel rolls, which it introduced after study of secret Hungarian processes, Entering its new flours in the Millers’ National Exhibition at Cincinnati in 1880, it won the gold, silver, and bronze prizes on all three grades of flour exhibited, and a few months later adopted ‘ Gold Medal ’ as its trade-mark, now one of the best, known of American trade names the world over.

The milling revolution accomplished, it was inevitable that emphasis in the industry should pass from the problem of production to the problem of promoting consumption and sales. Quantity and quality were now assured; with close attention to details, products could be consistently guaranteed and the variety of wheat products could be increased.

Washburn Crosby realized this shift sooner than many others and met vigorously each of its several challenges. It pushed its foreign trade with energy, achieving greatest success in Britain, Germany, and the Scandinavian countries. During these years it led American commerce in securing revision of shipping regulations and eventually brought about an international agreement, signed by thirty nations, governing carriage of goods by sea.

Close cultivation of markets inevitably brought forward the advantages of spreading the Company’s milling activities. Wheat is of wide variety, owing to differences in soil and climate; local tastes had become fixed and persisted in some degree even after wheat blending had become common. Freight rates, always of the highest economic importance in a business of bulk transport, worked against maintaining Minneapolis as the sole base of operations. Accordingly, Washburn Crosby built in 1903 at Buffalo what is now its largest mill, with a capacity of 20,000 barrels of flour a day, the first completely electrified mill. The site, long favored for wheat milling because of its situation at the foot of the Great Lakes, gained availability at that time as a result of rate changes in water transport from the Northwest. Another expansion era, in 1922, took Washburn Crosby into Chicago and Kansas City, the latter having supplanted Saint Louis as the key milling centre of the productive Southwestern area.

The Chicago plant and a later acquisition of General Mills, the Sperry Flour Company’s plant at Portland, Oregon, have been developed particularly as specialty mills for a wide range of cereal foods in packages adaptable to changing diets and constricted kitchen space. The ample kitchens of Governor Washburn’s day could accommodate his full-size barrel of flour weighing 196 pounds. Then came the cotton halfbarrel sack, followed by paper sacks containing a quarter barrel. Now as little as twenty ounces of flour can be bought in a sack, and wooden barrels have vanished even in export trade. Specialties such as cake and biscuit flours — Softasilk and Bisquick — can be bought in packages of from twenty to forty-four ounces. Washburn Crosby makes and packages these and other special products at a cyclonic rate. On specially designed machines, arranged in batteries for rapid handling, ‘ Wheaties’ are boxed and sealed at the rate of one package per second on each machine, the contents untouched between oven and consumer.

From the standpoint of the public, advertising was the most evident reaction of this milling company to the expanding national market. Washburn Crosby began advertising Gold Medal Flour in a small way as soon as it hit upon that trade-mark. Ten years later it took the long leap of appropriating $40,667 for twelve months’ advertising, considered downright wasteful by other millers. By 1902 its advertising appropriation had grown to $100,000 a year; by 1906 to $200,000. In 1907, in response to a telling phrase originated by its advertising manager, Benjamin S. Bull, the directors appropriated the then colossal sum of $650,000 to impress that phrase on the country. Soon ‘Eventually — Why Not Now?’ had been linked with Gold Medal Flour in the mind of every American able to read. There is no rhetorical success in goods advertising equal to that achieved by Mr. Bull’s swinging question, pushed by annual appropriations which passed the million-dollar mark in 1917 and ever since have been consistently above that figure.

Washburn Crosby led off also in making early use of radio advertising, its Gold Medal station — WCCO — at Minneapolis being on the air since 1924. In this, as in other regards, General Mills has continued the aggressive policies inherited from Washburn Crosby. Of General Mills’ large annual advertising expenditure, approximately half goes into radio programmes. Flour and baked goods are bought almost entirely by women, and in addition General Mills seeks the ear of children; both housewives and children can be reached by radio more directly than by the printed word. Experience shows that the Betty Crocker household talks, the oldest continuous programme on the air, gain in effect by reaching women during the day even when they are busy with household tasks. By recognizing promptly the value of this new means of communication, this industry secured a favorable hearing which it has been careful to maintain by well-balanced programmes.

III

Marketing considerations led naturally to the creation of General Mills, Incorporated, in 1928. The cerealfoods business had become dependably standardized from the standpoint of production of staples; new trade and increased growth could come only from developing new products and securing more coverage for all products, old and new, through progressive merchandising and advertising. Part of the merchandising problem was delivery at least possible cost; in the vast area of the United States this meant manufacture at many strategic points and a network of warehouses covering the entire nation. The full benefits of national advertising could not be recovered unless the advertiser’s products and services were available to consumers everywhere in the United States. Also, a broader spread of operations meant diversification of risk as applied to wheat, insuring supply against local variations of yields in quality and quantity. Accordingly, Washburn Crosby took the lead in effecting a merger, under which the new corporation, organized with a capital of $50,000,000, has bought the entire capital stock of the following well-established companies: the Red Star Milling Company of Wichita, Kansas; the Wichita Mill & Elevator Company, Wichita Falls, Texas; the Great West Mill & Elevator Company, Amarillo Falls, Texas; the Waco Mill and Elevator Company, Waco, Texas; the Kell Mill and Elevator Company, Vernon, Texas; El Reno Mill & Elevator Company, El Reno, Oklahoma; Oklahoma City Mill & Elevator Company, Oklahoma City, Oklahoma; the Perry Mill & Elevator Company, Perry, Oklahoma; the Larrowe Milling Company, Detroit, Michigan, and Toledo, Ohio, specializing in animal feeds; Royal Milling Company, Great Falls, Montana, with subsidiaries at Kalispell, Montana, and Ogden, Utah, and the Rocky Mountain Elevator Company at Great Falls, Montana; the Sperry Flour Company, the most important group of flour mills on the Pacific Coast, with mills and elevators in California, Washington, Oregon, Utah, and Idaho.

In assembling these corporations General Mills effected a consolidation of successful enterprises each of which combined a record of stability with present competence. It sought out executive ability and bought bricks and machinery as secondary to management. The history of each of the associated companies would be as meaningful as that already given of Washburn Crosby, but space permits only brief mention of their growth.

Royal Milling Company at Great Falls, Montana, established in 1892 by men associated with Washburn Crosby, pioneered both wheat growing and wheat milling in an area which has since become a banner wheat country, notable for grains rich in protein content.

Some of the Royal properties in the Northwest were combined with those of the Sperry Flour Company in 1929 shortly after General Mills bought the latter, the foremost milling concern on the Pacific Coast, with a history running back to the famous Gold Rush, the first Sperry mill being erected at Stockton, California, in 1852 by Austin Sperry and George Lyon. Six California firms with eleven important mills became merged in the Sperry Flour Company in 1892. Six other important mills were added later, and Sperry also entered Oregon, Washington, and Utah. This company now operates five mills with a total daily capacity of 13,800 barrels of flour and 1850 tons of feed. Its specialized plant at Portland can produce 300,000 pounds of cereals daily. Storage capacities of Sperry and its allied Pacific Coast Elevator Company exceed 13,000,000 bushels at the five mills and eighty-eight county elevators.

The Kell group of four mills in Texas and two in Oklahoma; the El Reno Mill of the Humphreys in Oklahoma; the Red Star ‘Perfect Mill’ of the Hurds at Wichita, Kansas; and the Larrowe Mills of Detroit and Toledo, specializing in animal feeds, are all notable properties manned by leaders in the trade.

Consolidating operations and disposal of excess milling capacities in the first months of its exist ence left General Mills with twenty-seven principal operating associated companies in sixteen stales. Of these, seventeen conduct milling operations; the others are engaged in buying and storing wheat, merchandising, and other servicing activities. Total daily productive capacity is 81,700 barrels of flour, including bread wheat, durum, wheat rye, and corn; 5950 tons of commercial feeds, and 720,000 pounds of other cereal products. It has total terminal and mill elevator storage capacity of 36,424,000 bushels, and 10,498,000 additional storage capacity at 212 country stations. These tonnages make General Mills, which owns all the capital shares of its associates, the largest flourmilling company in the world.

IV

No one knew the dangers of mere size better than James F. Bell, the founder of General Mills and its first president. Bringing owner-managers into the General Mills fold, he determined to preserve the owner-manager interest to the full by maintaining both decentralized responsibilities and profit incentives. Men accustomed to operating large properties ‘on their own’ retained the precious opportunity to get ahead by personal initiative and ability. Mr. Bell believed that a corporation’s best assets cannot be found set down in black and white on the balance sheet; they arc the personal and group factors of intelligence, enthusiasm, and aggressiveness which hold men of talent together as they move confidently toward a common goal. Rather more than the usual coördination of effort was required in the case of General Mills, because of the effect of one associated company’s operations upon another. The problem was to introduce unity without decreasing the zeal of the various units, their executives and personnel in all ranks from top to bottom.

General Mills’ decentralized administration is based upon men rather than upon property. Its ownership of associated companies is complete; there are no minority interests to complicate its financial statements, yet it accords wide powers to executives in the field and holds them to high responsibilities. General Mills does no milling or selling; those basic activities are left to the associates, each of which sells the products of other mills in addition to its own. Local advertising is also placed by associated companies in their territories. In these respects as in others, General Mills, by giving intense and continuous thought to the proper relations between a holding company and its associates, has evolved definite relationships which preserve local autonomy in plant operations while giving the entire group the benefit of national organization in matters affecting all the scattered units.

Division of authority between a central staff and decentralized units is one of the prickly problems of modern business. Too much centralization is likely to slow down energy at the rim of the industrial circle, where goods are sold and contacts maintained with dealers and consumers, where bargains are made and good will created by fair dealing. Too great decentralization means lost motion and increased costs through unnecessary duplication of effort. Search for the correct balance between these forces goes on unceasingly in many large corporations, which swing periodically toward one extreme or the other. Not so with General Mills. Ever since its organization, a definite conception has been followed in dividing functions as between General Mills and its associate companies. A system of corporate government has been worked out along that line, under which men who formerly ran their own mills have been able to coöperate and coördinate comfortably and profitably, even in the depression years.

Before describing the General Mills plan of administration, let us review the background against which it was evolved. It is an old business in staple goods with well-established trade practices; at one time or another it has met all the crises and problems known to commerce. It has the poise and balance which comes of knowing that it is an absolutely indispensable industry, catering to a basic need of human sustenance. Style changes are so minor that they can be overlooked; the backbone of the business — flour — goes along regardless of fashion, and once a new cereal product has been established in the popular taste, it soon takes a place among staple wants. Moreover, the technical and mechanical processes, while by no means simple and continually being refined, are fixed in their main outlines and likely to remain so. The net result of all these stabilizing factors is to leave the leading executives of the milling world freer than most executives to concentrate upon organization problems rather than upon those of design and manufacturing.

No other business, as far as I know, has reached the point of bedrock selfanalysis expressed by James F. Bell, Chairman of the Board of Directors of General Mills, Incorporated: —

‘Our associates can be trusted for products; we in General Mills are selling results rather than products. Our primary functions are merchandising and advertising; on one side we act as a sales agency for wheat farmers and on the other side as a service agency for our customers — the grocers, bakers, and housewives of the nation. None of these groups are interested in flour as such, but only in what flour will do for them and theirs. The grocer wants turnover, goods that will sell. The baker wants flour which will give results pleasing to his customers. The housewife wants the utmost in nutrition and tasty diet for her family. Our job is n’t finished when flour is sold, but rather when it is consumed; consequently we maintain a continuous drive to get flour out of the grocer’s stock and the baker’s bins and off the kitchen shelves to the table in forms appealing to the appetite. To do this efficiently, at low cost and to the general satisfaction of the consuming public, requires a large organization, because the United States is a tremendous market. General Mills limits itself to those functions which have a national aspect, but even those functions are constantly subject to review by the men in the field who are making and selling our products. Our aim is to give the maximum of help to our associates with the minimum of interference. So far this plan has worked excellently, during bad years as well as good. Under it our earnings have been stable and our progress steady.’

The tasks which General Mills has blocked out for itself are entirely administrative functions. The parent company assumes all responsibility for finance, corporate records, national taxes, insurance, and accounting methods and policies. It borrows whatever funds are required by its associates to maintain a favorable position with respect to raw materials. Wheat flows seasonally from farms past mill doors, and this flow must be taken advantage of to save cross haulage with rising costs. This crop-moving period sometimes calls for large credits. A big, strongly rated borrower gets bank credit at lower interest rates in the national market than would be accorded to smaller borrowers in restricted areas. Each associate, with the advice of headquarters experts, buys its own wheat, maintaining a constant hedge to eliminate speculation from inventory account, but such outside funds as it needs from time to time for these market operations are drawn from the general treasury.

As previously mentioned, General Mills prepares and places all national advertising; in addition it advises associates on local and sectional advertising. Its Minneapolis offices place the buying orders on national contracts wherever lower prices can be obtained on large orders than on small ones. At headquarters also are centralized certain service functions manned by experts in their respective fields — research in food chemistry, nutrition values, and vitamin isolation; products control to ensure uniformity and maintain standards; a manufacturing service working on mill improvements; a sales service which recommends new merchandising methods to associates; a baking service for the assistance of bakers, which maintains, among other helps, a school containing the latest and most sanitary equipment that draws master bakers as students from all parts of the United States; and a packaging service whose results are open to all mills. Research departments are maintained at Minneapolis and Chicago, with scientific staffs at both places. The problem of distribution, particularly of farm supplies in relatively small communities, is a difficult one. Experiments in three major areas through the Farm Service Stores are revealing possible solutions. As a primary desire, a loyal and effective self-owned distributor is the goal in all areas. Where such a distributor is not available, a careful policy of acquisition, maintaining local management, is being worked out, all to the end of ensuring to the ultimate consumer adequate and effective service.

The central staff services originate and advise; they do not force or control. The associated companies are responsible for sales and results all along the fine; their own experts in each of the above branches report, not to General Mills, but to their own chiefs. This insistence upon selfreliance all through the organization has received formal status through the creation of the General Operating Board, composed of sixteen executives of the most important associates, whose chairman is F. F. Henry, Chairman of the Board of Washburn Crosby Company, Inc., Buffalo. This board recommends operating policies and programmes to the Executive Committee of General Mills. In responsibility for origination of operating policies, this representative body of executives approaches that of a Board of Directors.

General Mills makes another contribution to the enlarging science of business management by definitely delineating the relationship between plant executives and the central or headquarters staff in detail as well as in general matters. While central office experts are constantly in touch with like members of associated staffs in the field, suggestions from Minneapolis on which both agree go to the associate company executive for approval or rejection. If the latter formally accepts a suggested change in procedure, then his decision, if in line with standing policy, remains in effect and cannot be overturned without the approval or disapproval of the Board of Directors, which speaks on such subjects through its Executive Committee of six men, all at Minneapolis and ready to make prompt decisions. The result is that General Mills has reduced to order and system many routine and recurring adjustments which otherwise might produce discords and inefficiency; and, as one administrative problem after another is solved, a system of procedure is being built by common consent to head off future friction.

The clarity with which these functions have been divided between staff and line, and the decisiveness with which division of function is maintained, make General Mills an outstanding example of corporate organization, Here is a clean-cut holding company which is determined to maintain local self-government in its various units and at the same time perform for those units certain all-essential functions which, in the modern complex of national and international business, they would be handicapped in performing for themselves. The President of General Mills, Donald D. Davis, coördinates activities as between General Mills and its associates, and as between the Executive Committee of the Board of Directors and the Operating Board. Although relatively young in years, his prior experience included engineering, banking, and manufacturing before he came to General Mills as Secretary in 1922. Since then he has served as Treasurer and Vice President, and in 1934 was elected President of General Mills, Inc., in succession to James F. Bell, now Chairman of the Board. Altogether General Mills must be reckoned a group operation in which many able men coöperate effectively; but perhaps Mr. Bell can be singled out as best personifying the dynamic, constructive spirit of the enterprise, with its strong, confident emphasis on the morale of personnel, while Mr. Davis is the one who brought its internal relationships into harmony and order by his keen analysis and orderly presentation of his company’s objectives.

General Mills goes down to the grass roots for its raw material, and up to the skies with its radio advertising. It operates in one of the most stable fields of business, yet is one of the liveliest of American corporations in its point of view. Meeting adequately the growing demands of every stage in the development of their art, the companies and men in General Mills, Inc., have literally thought their way into leadership against stern competition. No student of American business practice can afford to overlook the policies and methods they have evolved.

Copyright 1935, by The Atlantic Monthly Company, Boston, Mass. All rights reserved.