In late March, General Mills learned that a supplier wouldn’t be able to deliver cranberries to its Albuquerque, N.M., plant, threatening to disrupt production of Nature Valley granola bars for a week.
The company’s logistics experts and food scientists quickly searched for substitutes, eager to meet surging demand for the snack bars from Americans stuck at home by the need to slow the spread of the coronavirus. They asked several other suppliers to send cranberry samples to the company’s test kitchens by overnight shipping.
“Within 24 hours, we were able to get a new supplier qualified and new product in,” said John Church, the top supply chain and logistics executive at the company. The plant never stopped churning out granola bars.
In less than two months, the COVID-19 pandemic has driven the U.S. economy into a swift, steep downturn, damaging thousands of businesses and pushing 30 million people out of their jobs. But for Golden Valley-based General Mills, it has led to skyrocketing demand for its products and an extreme test for 40,000 workers around the world.
“Now is a time when people are depending on us more than ever,” Jeff Harmening, the company’s chief executive, said last week.
In North America, where it makes most of its $17 billion in annual sales, General Mills’ factories have been running flat out for two months. The company’s Progresso soups, Gold Medal flours and Betty Crocker and Pillsbury baking mixes at times have sold out in stores. Cereals like Cheerios and Lucky Charms are selling at multiples of their normal levels.
By case volume, production is running 10 to 20% higher at each of its 26 domestic plants. In March, the company told headquarters employees they were welcome to temporarily work in the plants to help out.
And like all companies, General Mills is also trying to stay ahead of the virus. To date, just 20 of its more than 15,000 plant and office workers in the U.S. have contracted COVID-19 as confirmed by testing.
It’s a performance that stands out not just among big food companies but all large U.S. firms after the pandemic remade everyday life. General Mills shares are up 11% since the start of the year while the broader market is down about 12%.
And it’s one that even the company’s leaders acknowledge is a bit surprising. General Mills, while financially efficient, tends like most large companies to innovate at a slower pace and take more time to make a big change.
“Moving fast and being agile is probably not one of our strengths normally,” Harmening said. Over the past two months, he added, “I have seen us move faster than we ever have before.”
The effects of the coronavirus first took hold in January on the company’s operations in China. Workers in its four plants took their normal, two-week New Year break. But while the rest of the country stayed shut down after the break because of the virus, General Mills workers were called back because the Chinese government deemed the company’s operations essential.
By February, headquarters executives watched as their Chinese counterparts started working from home. They had little thought Americans might soon be doing the same thing.
“I don’t think we understood how contagious this would be and how quickly it could spread,” Church said.
On the last weekend in February, Harmening called Don Mulligan, the company’s retiring chief financial officer who had already handed off his job. “I said, ‘Don, I have an opportunity for you,’ ” Harmening recalled, chuckling over the euphemism bosses use for hard work. “Everyone knows what that means.”
He asked Mulligan to put together a task force to steer the company’s defense against the virus, work that would allow nearly everyone else in the firm to concentrate on the surging demand for its products.
Mulligan roped together 20 executives around the world and found a Minneapolis physician who worked at the Centers for Disease Control and Prevention to advise them. Among their first decisions: canceling business travel, restricting visitors to plants and offices, putting up hygiene notices and buying more IT equipment for remote work.
“Our role is to look forward and see how the situation could play out in coming weeks and decide what actions we need to take now,” Mulligan said.
By mid-March, General Mills had sent its office workers home in Europe and North America and ordered face masks, gloves and other protective equipment for workers in plants. Now, the task force meets via videoconference three times a week, tracking progress in the scientific understanding of COVID-19, government directives and their own initiatives.
‘Calm and confidence’
General Mills never planned for a pandemic, but it has a record of assessing risk born from difficulties in its 154-year history.
Its board of directors and top executives have gamed out cyberattacks and food recalls. Mulligan said such simulations “ensure we have the right people in the conversation at the right time and that we come at problems with a sense of calm and confidence.”
General Mills archivists recently found pages from a company newsletter a century ago with mentions of the Spanish flu in 1918 and 1919. Then called Washburn-Crosby Co., the firm’s health department advised in the newsletter hand-washing and face coverings, steps that apply to today’s pandemic.
And in his weekly video message to employees last week, Harmening noted the anniversary of the May 2, 1878, explosion of the Washburn-Crosby A Mill in downtown Minneapolis, which killed 14 workers.
“What we’re going through now is not unprecedented in the company’s history,” Harmening said. “It certainly is unprecedented for all of us going through it.”
As Mulligan’s task force handled logistics, plant and building managers came up with contingencies to keep operating even if up to 40% of employees couldn’t work. Some plants had production lines spaced too tightly to keep workers 6 feet away from one another. In those, every other line was shut down.
Production at General Mills plants is more automated than at meat processors where hundreds of workers have been stricken in recent weeks. Even so, using contact tracing each time a worker was diagnosed with COVID-19, General Mills at times discovered their safety efforts weren’t sinking in.
“When you start doing testing of one case and it turns out you might have a dozen people impacted by that one person, you’re not social distancing enough,” Church said. “You’re not taking it seriously enough. That’s been an important lesson.”
As U.S. stores began to sell out of flour and soups in mid-March, General Mills narrowed its offerings. Fewer changes on production lines meant output could increase for goods most in demand.
Progresso’s soup lineup dropped from 90 to 50 varieties. Cereal flavors and package sizes were cut. “We’re being very open with retailers about when we can do things. ‘I can’t get you this size of Honey Nut Cheerios. I can get these other two sizes. Is that going to work?’ ” Church explained.
The company shifted marketing away from products and to services for cooks and bakers at home. New products are still rolling out, but the pace may slow in coming months to reduce complexity for the company and retailers.
Surveys show consumers may rely on grocery food more heavily for months to come. Michael Lavery, an analyst at Piper Sandler in Minneapolis who follows the company and its competitors, forecasts sales growth well above the company’s historic average for the next year.
Looking ahead, General Mills executives are again taking cues from China, where most workers are back in offices. Mulligan said they’ve seen there that bringing workers back is difficult. School closings complicate things for some, and offices need makeovers for social distancing. Executives expect less travel and more reliance on technology for some time.
While General Mills has had a relatively easier time than companies forced by the outbreak to shrink or close,, Harmening said everyone feels anxious about the virus and the changed world around them. “There’s a lot of stress for our employees,” he said.
“We don’t feel like we have all the answers, but we’re very clear on how we’re acting and what’s important to us,” Harmening said. “In a time of great uncertainty, it’s more important to be clear than it is to be certain. For us, that clarity is the safety of employees, the safety of the food supply and executing on the here and now.”
Evan Ramstad • 612-673-4241