Harvard business school---Pillsbury Customer Driven Reengine

Harvard Business School9-195-144

Rev. April 26, 1995

Pillsbury: Customer Driven Reengineering

We entered our Customer Driven Reengineering intiative expecting to achieve

significant levels of cost reduction and efficiency. To our delight, we also discovered anew way to compete.

Paul S Walsh

CEO, The Pillsbury Company

Company

The Pillsbury Company was founded in 1869 as a flour milling firm in Minnesota. Its

milling operations soon extended into branded bakery goods products, and, during the next century,the company expanded to become one of the leading branded food product companies. In 1989, GrandMetropolitan (GrandMet), a persified UK-based consumer goods and retailing corporation,purchased The Pillsbury Company for $5.8 billion (see Exhibit 1 for a summary of Pillsbury'sfinancial information prior to its acquisition in 1989). The acquisition was part of GrandMet's newstrategy to become a world leader in branded food and drinks businesses.

In 1994, the annual sales of GrandMet's North American Food operations, now called the

Pillsbury - North America sector, were $4.0 billion. Included in the sector, of course, was thePillsbury brand of prepared dough products, baking mixes and flour, a leader in the U.S. market,with refrigerated dough products achieving a 75 percent market share of the refrigerated doughcategory. The Green Giant pision was the number one branded vegetable producer in the U.S. andCanada, producing canned, jarred, frozen and fresh vegetables such as corn, peas, and beans. Thefrozen pizza business, with Totino's, Jeno's and Pappalo's brands, held the number one position in itsmarket segments. Häagen-Dazs was the world's leading maker of superpremium ice cream andfrozen yogurt products. GrandMet Foodservice was a leading provider of flour, dry baking mixes andfrozen unbaked and pre-baked products to in-store, foodservice and wholesale bakery markets.Pillsbury products were perhaps most identified with two well-known characters—the Jolly GreenGiant and Poppin' Fresh the Pillsbury Doughboy. Pillsbury's strongest competitors included DeanFoods (Bird's Eye Brands), Del Monte, General Mills and Nestle food companies.

Professor Robert S. Kaplan prepared this case with assistance from Doctoral Student Ken Koga as the basisfor class discussion rather than to illustrate either effective or ineffective handling of an administrativesituation.

© 1995 by the President and Fellows of Harvard College. To order copies or request permission toCopyright

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GrandMet, with its origins in hotel operations had acquired over the years a persified

collection of food, beverage, and retailing companies. In the late 1980s, GrandMet began the sale ofbillions of dollars of assets, including its original hotel operations, so that it could concentrate onbecoming a leader in the branded food, and drink businesses. Exhibit 2 presents a summary ofGrandMet's recent financial information.

Consistent with Paul Walsh's strategy of focusing on core businesses, Pillsbury itself had

recently sold all of its flour mills, some of whose ownership dated back more than a century. In 1991,four mills were sold to Cargill with Pillsbury continuing to receive the processed flour output fromthese plants through supplier contracts. Two years later, Pillsbury sold its four remaining mills toArcher-Daniels Midland (ADM), a large grain producer. Pillsbury retained access to the outputfrom these ADM mills through a long term supply agreement. Tom Debrowski, Senior VicePresident of Operations, explained the rationale for the flour mill sales:

It became apparent that we were not the low cost producer of flour. In a

rapidly consolidating and highly competitive market, we wanted to focus ourassets on the more value-added parts of the bakery business, our branded foodproducts. The sale of the flour mills enabled us to get large amounts of aging, under-utilized assets off our balance sheet, while gaining guaranteed access to a long-termsupply of low-cost, high-quality flour, produced to our specifications.

Pillsbury Capabilities

Competitive pressures, technology advances, and demanding consumer preferences were

causing all companies in the food industry to reexamine their operations and attempt to eliminatewaste and inefficiency throughout the food chain. The Efficient Consumer Response (ECR) effortwas a multi-industry project, involving food processors, manufacturers, distributors, wholesalers,brokers, and retailers. ECR's goals were to reduce costs and drive inventory levels down throughoutthe system, while simultaneously enhancing capabilities to meet the needs of perse consumermarket segments. Pillsbury executives were unsure whether their company was prepared for thenew ECR environment. Larry McWilliams, Vice President, Frozen Sales, identified the currentchallenge for Pillsbury:

When I came to the company 18 months ago, I encountered a company with

strong brands but with little prospect for volume growth. Customers perceived us asan average company, not the best, not the worst, and without much innovation.

John Mann, Senior Vice President and General Sales Manager, and another newcomer to thePillsbury senior management team, concurred with McWilliams' assessment: "We were viewed as alaid-back Midwestern company, one that found it difficult to create a sense of urgency."McWilliams felt that Pillsbury had to become a di …… 此处隐藏：34510字，全部文档内容请下载后查看。喜欢就下载吧 ……