MINNEAPOLIS -- At General Mills, an assessment process aimed at developing different strategies that would lead to business growth and improvement is constantly in place. And, in the process of developing such strategies, it didn't escape the notice of General Mills' management that one route to quick growth would be to acquire crosstown rival Pillsbury. After all, it possessed a striking mix of brands, many of which would dovetail nicely with General Mills.'
Interestingly, both share a great deal of local history. They were both founded in 1860 as flour millers, and both developed a considerably wider range of brands as they moved into the modern era.
One hurdle stood in the way of the unification of the two companies, though, and it was a high one: Pillsbury was owned by London-based Diageo, which evinced no desire to sell Pillsbury.
But, as Steve Sanger, General Mills chairman and chief executive officer, told Brand Marketing, things change.
"At General Mills, we constantly assess our business and look at ways to grow faster. For several years it has been clear to us that the combination of General Mills and Pillsbury would be the single best way to accomplish that.
"But up until a couple of years ago, there was no indication that Diageo would have an interest in selling Pillsbury.
"Then the world changed: Diageo narrowed down to its beverage business."
Diageo was formed in 1997 by means of a merger of GrandMet and Guinness. That resulted in a company with brands such as Smirnoff, Johnnie Walker, Guinness, J&B, Gordon's, Tanqueray and Burger King. It also owned Pillsbury.
And, for some months, Diageo has been in a joint effort with Penrod Ricard to jointly acquire Seagram's spirits and wine business.
Should that deal go through, the two would divide up the brands involved, but the Federal Trade Commission is moving to block such a merger.
In any case, because of those complex transactions, and perhaps to raise some cash, Diageo decided the time had come to divest Pillsbury.
"Diageo had decided to focus attention on beverage alcohol, so they were looking for a good acquirer for Pillsbury," Sanger said.
"Obviously we were the ones that made the most sense. Paul Walsh [Diageo's chief executive officer] actually called me.
"We had been studying that situation enough to know when that phone call came that we were quite anxious to begin discussions. From that point on, we moved quite quickly to announcement of the combination [in July 2000].
"Then the regulatory-review process took considerably longer than we expected, but if there's a benefit to that it is that we have been planning very carefully through the better-than 12 months of regulatory review.
"We're ready to hit the ground running now that the deal is completed, and that's what we're doing."
