Gmi in the 1980s General

GMI in the 1980s

General Mills Inc. (GMI) has long been known for its dominance of the general (as opposed to specialty) cereal and grain-based market. Since the 1970s onward, it has grown increasingly diverse, both inside and outside of the food industry. Acquisitions include steak houses, pretzel companies, and fashion companies. This suggests an attempt to balance two dueling advice profiles given to companies in terms of their expansion and investment strategies: companies can invest in industries in which they have considerable knowledge and which generate synergies with their main product or conversely, they can diversify their profile to engage in risk management. Restaurants, toys, crafts, and specialty retailing made up more of half of GMI sales in 1982; but, nearly half of the growth of the company came from products developed internally in its core food sector (560)

During the 'stagflation' of the 1970s to early 1980s, consumer spending was shaky but General Mills continued to prosper, thanks to its ability to innovate within its product lines to suit changing consumer food preferences. However, overall, there were several unfortunate blows to its overall portfolio. Its 'restaurant' segment went into notable decline, because of the decreasing popularity of Red Lobster. It could be noted that this is not necessarily surprising, given that Red Lobster is a mid-priced restaurant chain (neither high nor low in terms of its target market). During recessionary periods, poorer and lower middle-class consumers tend to eat out less, or eat at very cheap restaurants like fast food establishments while upper class customers are less affected and continue to dine out at high-end places. Consumer tastes were also changing, and Red Lobster has had to remake its image to incorporate fresher, healthy foods into its product offerings (562).

The 'toy group' was equally hard-hit, given Parker Brothers' failure to compete in the video game sector. It was able to sustain its growth through popular product lines like Strawberry Shortcake, Care Bears, and Star Wars but overall the market in this realm remained extremely competitive. Much like eating out, toys are not strictly a necessity, and they are very easy to cut back from a consumer's budget when 'times are tough.' This could likewise be argued about the brands in the 'fashion line' of GMI's acquisitions. Brands like Izod are not necessities but are bought primarily for their labels, often by young people who wish to portray a particular image. This was true of Izod and the 'preppy craze' of the 1980s, when sporting an Izod polo shirt with the iconic crocodile was the height of fashion, particularly amongst young girls. However, fashion is fickle even during the best of economic circumstances. Given Izod's expense, the volatility of the economy and teenage fashion trends, the reliability of a sustained profit from the 'fashion line' of GMI's acquisitions seems questionable.

As General Mills itself noted, in the 'rag trade,' it is very easy to acquire a pile of useless inventory, while ultimately with staples such as cereal, people need to eat and the food must be sold. Demand for food is more predictable. Of course, it is possible for food to go out of fashion, such as during a low carb craze or a fat free phase. But the products sold by GMI are such staples, this is unlikely, and its food products are fairly diverse and palatable to a large, general audience. It has also shown the ability to innovate and swiftly offer customers products with new, different formulas based upon shifts in demand. Thus, its 'fashion line' seems considerably less secure than its food lines, much like its restaurant and toy components.

The need to focus on necessary products with durable sources of sustained demand vs. non-specialty products with volatile demand is further underlined in GMI's specialty retailing. Certain brand names such as Eddie Bauer and Talbots are doing extremely well. Although these are clothing lines, these retailers do not offer 'trendy' clothes and instead market themselves to broad niche markets that are older and more reliable in terms of their preferences. Eddie Bauer offers clothing targeted to the 'outdoorsy' consumer who is in search of comfortable clothing that can be worn in a wide variety of weather (such as wet, cold, or hot weather when camping). Talbots' consumers tend to be older and trend-resistant and capitalize upon its brand name for quality, versus being 'of the moment.' Although officially the specialty retailing sector is mixed, this is only because non-necessary products like collectibles are not doing particularly well. Even more so than toys, collectibles often have trouble sustaining demand once a trend burns out and consumers tend to eliminate these components of their personal budgets during economically shaky times (563).