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Term Paper Three Company Comparison

By Warren Condon

AEB 3133 Principles of Agribusiness Mgmt. Spring 2007

Reviewed by Jane L. Bachelor


University of Florida Indian River Research and Education Center Fort Pierce, Florida

Table of Contents
Introduction 3 Wrigley Company Executive Summary... 4 History and Background ....5 Form of Ownership 6 Goals and Objectives 6 Organization, Management and Staffing... 8 The Market 8 Marketing Plan.. 9 Financial Plan 10 Company News. 11 Evaluation and Management Conclusion.. 12 H.J. Heinz Executive Summary.. 13 History and Background .. 13 Form of Ownership... 15 Goals and Objectives 16 Organization, Management and Staffing... 16 The Market 17 Marketing Plan.. 18 Financial Plan 18 Company News. 19 Evaluation and Management Conclusion.. 20 General Mills Executive Summary.. 22 History and Background .. 23 Form of Ownership... 24 Organization, Management and Staffing... 24 Goals and Objectives. 25 The Market 25 Marketing Plan.. 26 Financial Plan 26 Company News. 27 Evaluation and Management Conc lusion.. 28 Three Company Comparison. 30

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Computed Financial Ratios - Wrigley 31 - H.J. Heinz 32 - General Mills... 33

Introduction

This term paper was prepared by Warren Condon for presentation to Professor Jane Bachelors Principles of Agribusiness Management course at the University of Florida. It will be presented to the class on Monday, April 30th, 2007.

The objective of this paper is to analyze three businesses chosen by the writer using the format as described by Professor Bachelor, followed by a comparison as to the similarity and differences between the companies. The companies selected were General Mills, H.J. Heinz and the Wrigley Company.

Information used in the compilation of the financial ratios was obtained from documents included in the Annual Reports of the selected companies. These reports were available online at the individual organizations websites as of April 16, 2007.

Any and all questions related to the material presented within should be directed to Warren Condon via the following e-mail address: fruitguy@ufl.edu

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Wrigley Company
Executive Summary The Wrigley Company is a multi-national corporation selling goods in over 180 countries around the globe. The company, which traces its roots back to the 1890s, is best known as the leader in the chewing gum market. Two of its original products, Juicy Fruit and Wrigleys Spearmint have been sold since its inception. Today, it continues to drive gum sales with such recognizable brands such as Big Red, Extra, Eclipse, Orbit, Freedent and Hubba Bubba, to name a few. Through acquisitions, recent history has demonstrated a diversification into the confectionary industry, with a focus on sales of mints, candies, breath strips, and just recently, premium chocolates. Brand names in this new arena include long-time favorites such as Altoids and LifeSavers. These acquisitions have allowed Wrigley to expand its presence to large markets with expanding populations, including India, China and Russia. In 2006, total company sales surpassed the $4.6 billion mark. The customer base for Wrigley is without end. Nearly every person in the world has experienced eating chewing gum, mints or chocolates. The emerging markets mentioned above have been underserved, and provide an excellent opportunity for the firm to increase its market share. Today, Wrigley controls nearly 50% of the world chewing gum market, with 60% of the U.S. market, and almost 90% in Great Britain. Gum sales are expected to grow as the company focuses on touting the health advantages associated with gum. Benefits of chewing gum include better oral hygiene, a reduction in cavities, use as a stress relief and a low-calorie alternative to fat-heavy junk foods. Sugar-free products are another segment that the company is marketing to. The management team is led by Executive Chairman and Chairman of the Board, William Wrigley, Jr., and President and CEO William D. Perez. Together, they assume responsibility for growing the company and increasing the return to the companys shareholders. The plan to accomplish these objectives revolves around a few key strategies. One goal is to deliver big wins, a phrase that entails enlarging the business through carefully selected expansions into complementary confectionary markets. Frequently this has been done through purchases of existing operations that reflect the high-quality products that Wrigley has become known for. An example is the procurement of A. Korkunov, the 2nd leading producer of premium packaged chocolates in Russia. Another objective critical to the businesss future is responding to customer needs through innovation. This requires continual feedback from their client base, and the company has responded by creating the Consumer Center, a facility that focuses on identifying and solving issues raised by their customers. Making connections with these -4-

consumers is also an important focus of their success strategy. Accomplishing this requires reaching out and supporting the local area through community grants and programs. This can be part of a product rollout, such as a recent Dance-a-thon in Times Square to promote Extra gum, or the creation of a website for on-line computer game players. Concept History and Background The Wrigley story began back in 1891, when William Wrigley Jr. moved to Chicago from Philadelphia to start a business selling the familys brand of soap, Wrigleys Scouring Soap. His philosophy was to give vendors who sold his soap something for nothing. Baking powder was one such item, and he soon found that there was more demand for his baking powder than the soap. The following year he went into the baking powder business. He continued to provide his retailers with a little something extra. This time, it was a couple of packs of chewing gum. Once again, the bonus became more popular than the product he was selling. He saw an opportunity in an otherwise undeveloped market, and by 1893, Juicy Fruit and Wrigleys Spearmint were on the market. Hard work and perseverance overcame the lean, early years. A great deal of the companys success can be attributed to Mr. Wrigleys ability to view things from the customers perspective and resolving their needs. Respect, together with dignity and trust, is an integral part of the companys business philosophy. The vision of the Wrigley Company is to have WRIGLEY BRANDS WOVEN INTO THE FABRIC OF EVERYDAY LIFE AROUND THE WORLD. - Mission Statement, Wrigley Company. From the Wrigley website, we find the Companys values: We treat each other with trust, dignity, and respect We believe in and embrace diversity acknowledging that it is critical to our success We support the aggressive development and recruitment of the best people We grow and develop through lifelong learning and personal development We expect every associate to demonstrate leadership and be accountable We demand of ourselves high standards of ethical behavior We develop long-term internal and external relationships for mutual growth and profitability

The Wrigley Company is the largest of the 15-20 chewing gum manufacturers in the United States, controlling about 60% of the market. On a worldwide scale, Wrigleys brands account for close to 50% of all chewing gum sales. These brands include Big Red, Doublemint, Excel, Extra, Eclipse, Freedent, Hubba Bubba, Orbit and Winterfresh. In addition to gum, the company also sells products such as lollipops, mints, breath strips, and candies. This further diversification into confectionary industry came about through the acquisition of popular name brands like Altoids, Crme Savers, Life Savers, Pim Pom and Solano.

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Form of Ownership Starting out as a sole proprietorship in 1891, Wrigley has evolved into a large, multinational corporation with production facilities in 13 countries and offices in more than 30 nations. The companys products are sold in 180 countries. Wrig ley has been publicly traded since joining the New York and Midwest Stock Exchanges in 1923. The companys more than 14,000 employees are led by William Wrigley, Jr., the Executive Chairman and Chairman of the Board of Directors, and Bill Perez, President and CEO. There are several advantages to organizing as a corporation. One such benefit is that the stockholders, or owners, of the corporation are limited in liability to the amount of their investment in the corporation. Ownership is also easily transferable by the sale of stock. There is no need to draw up a new agreement every time there is a new owner, as occurs in a partnership. Additionally, the raising of capital is easier for a corporation than other forms of business. Banks are typically more willing to lend money to corporations than either sole proprietorships or partnerships. Corporations can also raise capital through the issuance of stock. Structuring a business as a corporation also has some disadvantages. The most commonly cited is that of double taxation. For tax purposes, the IRS considers the corporation to be a separate entity from its owners, the shareholders. Therefore, first the business must pay corporate taxes on its profits, and then when the disbursements are made, the shareholders must also pay taxes on any dividends received. Another disadvantage is increased compliance with recordkeeping. Records must be kept of all current officers, directors and shareholders, as well as any changes that occurred with respect to these positions. Further, if the corporation is publicly traded, the financial documents of the organization must also be made public.

Goals and Objectives Employees are important to the organization. Benefits include a retirement plan and a savings plan, as well as traditionally offered incentives such as vacation, holiday and sick leave. Emphasis is placed on providing health, dental and prescription drug coverage. The company recognizes the need to balance work and personal lives, and offers an employee assistance program (EAP) in addition to a 100% reimbursement for job-related educational studies, including graduate programs.

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Concerns related to safety and health or the environment are addressed in the Companys Environmental, Safety and Health Policy, which applies to both domestic and foreign operations and associated companies: As responsible members of the Wrigley Team we recognize the need to conduct all of our activities in a manner which seeks to protect the well-being of the environment, our associates and others, including contractors, visitors and our communities, who may be affected by our processes or operations. Specifically, we commit to: - Comply with all applicable Environmental, Health and Safety laws and regulations. - Establish and maintain a safe, secure and healthy workplace for all those who we employ. - Continuously improve our environmental, safety and health performance through the implementation of internal initiatives, goals, programs, policies and procedures and the adoption of proven best practices. - Ensure through effective communication, that all of our associates understand the impact that their actions can have on the environment, their own safety, the safety of others and the security of company assets. - Integrate environmental, safety and health considerations into our business planning, decision making process, manufacturing operations and our products and services. - Conserve resources and minimize waste by the promotion of reduction, reuse and recycling methods. - Encourage our suppliers, distributors and contractors to follow procedures that will benefit the safety and health of those who may be affected by their business activities. - Encourage the correct disposal of all forms of waste arising from the manufacture or use of our products. - Provide the resources, training and support to make this policy effective. - Review, update and communicate this policy on a regular basis. Wrigley is committed to supporting various environmental education and awareness programs in the United States, Great Britain, Ireland and Australia. In other countries, the company strives to meet or exceed the local environmental regulations. The firm also seeks out creative solutions to conserve energy and water, as well as ways to reduce air emissions and wastewater. As part of the companys Pollution Prevention/Energy Efficiency (P2/E2) initiative, water from the production process that is not potable is provided to farmers, who mix the sweetened water into their compost, giving them an excellent source of carbon. The company has promoted efforts to increase the proper disposal of chewing gum in England and Ireland, where the problem of cleaning up improperly discarded gum has reached the point of a proposal to tax the product. Wrigley is also a charter member of the Keep America Beautiful campaign.

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Wrigley supports the world-wide community through the Wrigley Company Foundation. The foundation directly gave $2,500,000 to charitable organizations in 2005, as well as provided double-matching funds for causes supported by its employees. One focus is on youth organizations, such as the Boys and Girls Clubs of Chicago and the Jobs for Youth program. Another focus is on education enhancement programs like United Negro College Fund and the Hispanic Scholarship Fund. This amount is supplemented when disasters such as the Asian Tsunami or Hurricane Katrina strike.

Organization, Management and Staffing The Wrigley Company offers a wide variety of career opportunities and is proud to be an equal opportunity employer, and is committed to diversity in the workplace. A sample of recent U. S. job openings follows. In the financial arena, positions to be filled included Innovation Financial Analyst, Supervisor Financial Planning, and Accounts Receivable Specialist Cash Applications; for science-related jobs, applications were being accepted for Sr. Scientist Flavors, Sr. Sensory Scientist, and Sr. Process Engineer; and for those in the business field, Wrigley was looking for Global Sr. Marketing Development Manager, Quality Manager External Manufacturing; and Senior Human Resources Manager. For students interested in obtaining experience, internships were posted for Business Application Analyst and Human Resources Coordinator. With over 15,800 employees worldwide, opportunities exist in such diverse locations as Russia, India and China.

The Market It is difficult to describe precisely where Wrigley is in the market cycle. On one hand, the company is mature, as it has a long history and has well-established brand names, several of which have been popular for over 100 years. At the same time, the company can be portrayed as developing, based upon its extension into new markets. These new markets can be either new product types, such as the expansion into the chocolate confectionary business with the acquisition of A. Korkunov in Russia, or the introduction of existing product lines into new countries. On a global basis, Wrigleys main competitors are Mars and Cadbury. Hershey is the main challenger in the United States and North America, Lotte is the main rival in the Asian market; and Perfetti is the challenger in Europe. Wrigley strives to distinguish itself from its competition by focusing on four key areas: igniting imagination; ensuring quality and value; delivering big wins and connecting with customers. To spark imagination, the Global Innovation Center was created, which brings together teams of employees to develop new products ideas, and unites them with the scientists that design and produce the new product ideas. Providing quality and value

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has been part of the organizations philosophy since the beginning when Mr. Wrigley gave his customers baking soda with their soap. This thinking continues today. Wrigley brands are marketed to emphasize their premium quality. Big wins simply refer to successes, and connecting with customers involves listening to the customers needs and then providing them. By emphasizing these key areas, it keeps all members of the organization focused on what is important for the company to succeed. Nearly every person in the world is a potential customer of Wrigley. It is difficult to imagine many people who do not like chewing gum, mints, or chocolates. Some people chew gum as it provides added health benefits, such as strengthening gums, reducing plaque and helping to reduce cavities. Mints are often used to refresh ones breath. Chocolates are consumed for both pleasure and possible health benefits. Currently Wrigley is expanding into the premium, packaged chocolate industry in Russia with the acquisition of A. Korkunov, which was already the 2nd largest segment of that market. This is a good market to enter as there is always demand for chocolate. The company also has set up operations in China and India, two additional countries with large, expanding populations. These two markets provide a large opportunity for continuing double-digit returns. Wrigley already has the largest segment of the chewing gum market in both Russia and China, and is the leading confectionary business in China. Another market that Wrigley has entered that still has potential for further expansion is the sugar-free products market. The rise in Type 2 diabetes in the United States has contributed to this emerging market.

The Marketing Plan Wrigley markets itself as a hip, innovative company selling quality products. Their goal is to connect in a more direct manner than the simple use of billboards. They strive to take advantage of new technologies, such as the creation of a website for online gamers. Recently when launching Eclipse mints in Taiwan and Hong Kong, they made use of non-traditional advertising, including airline tickets and taxi cabs. They continue to reach out to Middle America with the sponsoring of professional race cars. When viewing their advertising, one gets a sense of life, enjoyment, and happiness. The first thing you see when you see their product packaging and advertisements is the use of bright, contrasting colors. Do you recall the pea green-colored package that Doublemint gum previously came in? That is a thing of the past. Now the package had three shades of green to make it stand out. The newer, updated look also gives the appearance of a higher quality.

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Financial Plan The following is analysis of the financial status of the business, interpreted by reviewing the past three years of financial date and developing key ratios in four categories, liquidity, profitability, activity and leverage. Liquidity The current ratio shows some decline from 2004 to 2006, but the company still appears able to satisfy any pending liabilities with current assets. The quick ratio however shows us a different picture. In 2004, the ratio was 1.54, but the following two years reveal a drop below one. Without the inventory in the equation, it appears that the company would not have enough liquid assets to meet its current liabilities. Profitability The profit as a % of sales ratio has been showing signs of weakening over the period with a 15% decline. While income has increased in the last three years, so to has interest expense, leading to this lower ratio. The return on investment ratio is lower the last two years than in 2004. This indicates that the management has not been able to maximize the use of its resources efficiently enough to increase profits. The return on equity ratio has been fairly stable. Both income and stockholders equity have risen. Leverage The Companys debt to equity ratio more than doubled from 2004 to 2005, with only a slight change in 2006. This higher number reflects a reduction in the firms ability to pay back its debt, should it become necessary. This figure is still below 1.6, the industry average. The times interest earned ratio shows a decline from 186.75 to 13.44 in only two years, and warrants further review. The reason includes an increase in income that has been outpaced by an increase in debt and interest expense. Should debts continue to rise, interest payments could eventually be jeopardized. Activity The inventory turnover ratio has remained consistent. Unfortunately, it has been consistently slow, requiring on average 90 days. This does not reflect well on management. On the other hand, the accounts receivable turnover, which also has remained consistent, reflects positively on management as payments are received in only 34 days. Payment time, as indicated in the accounts payable turnover ratio, has steadily increased and now requires 52 days, which is not too good. The companys sales increased to over $4.6 billion in 2006, a 12% increase over the previous year. Dividends have increased over the past two years and now disburse nearly $1.00 per share. Stock prices have risen just over $2.00 per share in the past 3 months.

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Company News This past February, Wrigley introduced the latest flavors of their Orbit brand, Mint Mojito and Orbit Raspberry Mint. These releases keep in line with their goal of being innovative and responsive to customers desires by focusing on the popularity of lime and berry flavors. Another announcement this February was the start of a new website for Nintendo Wii video game players. This move takes advantage of updated technology and insures that their marketing efforts reach a key audience. This new game site compliments their existing free site for on-line game players [www.Candystand.com]. In January, Wrigley jumped into the chocolate portion of the confectionary industry when it acquired an 80% share in the Russian chocolate company, A. Korkunov. This purchase put them in position as the 7th largest member of the overall Russian chocolate business, and in the 2nd position with respect to premium-boxed chocolates. This was consistent with the firms stated goals of expanding their product line and focusing on a quality product. Another press release showcased Wrigleys sponsorship of a race car which will debut at a NEXTEL Cup event this summer, as well as revealed the new color schemes for a sponsored NASCAR racecar. Big Red, Juicy Fruit, and Winterfresh logos will be prominently featured. Environmental issues could involve the availability of raw materials, and issues related to energy use, wastewater disposal, air emissions and use of recyclable materials. The former is not currently a problem as materials such as corn syrup and sugar are readily available on the market. The later is an issue with most large, manufacturing companies. Legal issues include the possibility of product liability arising from the use of ingredients such as Aspartame, should they be determined to be neuro-toxic food additives. In 2005, Wrigley lost a case in Australia involving a patent for Hard Coated Sugarfree Chewing Gum to its rival, Cadbury. The High Court ruled that the process described in the patent was unclear and unenforceable. Matters involving taxes, import duties and environmental controls can also have an effect on the companys bottom line. One example of this was a proposed tax on gum in Ireland to combat a growing problem of gum being left in public areas. The company managed to get the proposed tax withdrawn.

Evaluation and Management Conclusions Wrigley must continue to stick to its strategy by effectively marketing its high quality product lines, seeking and responding to the needs identified by its consumers, and creating new exciting products in order to maintain its corporate image. To be

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successful, the company must keep up its image and expand into new markets and lines of the confectionary industry. Further, they should continue their expansion into new, emerging markets such as China, India and Russia, which provide expanding population growth, so as to increase its market potential. On the environmental front, corn and sugar are widely grown commodities, so their availability should not pose a problem. The wide natural range where these products are grown limits their susceptibility to weather-related events. If one supplier is affected, others can step in. The legal issue over the use of Aspartme presents a potentially large problem, not just for Wrigley, but the entire sugar-free segment of the industry. Should court rulings go against the company, there could be significant adjustments to the firms profitability. One option the firm should consider is the use of xylitol, which is said to be a healthier, natural alternative to the artificial sugar replacements used in the marketplace today. The Australian patent case may cause an impact on regional sales due to increased competition, but that is unclear. Increased marketing may overcome this potential loss. Income-related taxes are always a concern, especially for large corporations such as Wrigley. On a local level, the threatened tax on chewing gum in Ireland was successfully countered by the companys ability to promote the efforts of the Chewing Gum Action Group, an organization dedicated to the proper disposal of gum in that country. Such proactive efforts are more cost effective than countering the loss of sales that the tax would have had. The item I found most interesting during my research of the Wrigley Company was that gum in made of 5 key ingredients, four of which dissolve in your mouth. If someone swallows chewing gum, the only insoluble ingredient is the gum base, which passes through the body within a few days without any detrimental effect. This company seems to be heading in the right direction with its business. It is expanding into new markets that with name brands that reflect quality. The expansion into the chocolate industry presents a new opportunity for the Wrigley. It also opened up Russia as a new market. Combined with China and India, the company is operating in some of the largest population areas with potentially millions of new consumers. Sticking to their core ideals of listening and responding to their customers concerns has proven successful in the past. Over the past century, they have effectively gained control of large portions of the gum industry, its main product. In the United States, Wrigleys market share is 60%, while in Great Britain, the market controlled is upwards of 90%. If Wrigley can manage to reincarnate this successful formula into its new brands, then they should be poised for a major expansion of their operations. With good management, increased profitability should follow.

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H.J. Heinz Company


Executive Summary The H.J. Heinz Company is a multi-national firm doing business in the Diversified Foods industry. The latest figures show sales of more than $8.6 billion. While the name Heinz is synonymous with ketchup the world over, and the company offers many other types of products as well. In the condiment sector alone, they produce mayonnaise, mustard, relish, soups, and a host of sauces to compliment any meal. New lines are focused on products that are organic, low-carbohydrate and low-sugar. On top of their signature name-brand are other popular brands, such as Lea & Perrins and Classico. The Meals and Snacks category is expanding and hosts complete frozen dinners sold under familiar names like T.G.I. Fridays, Boston Market and Weight Watchers, as well as frozen fruits and vegetables, marketed under names like Ore-Ida, and snacks with household names including Nancys and Bagel Bites. Heinz has offered infant products since the 1930s, sold under Tinytums and Farleys. The customer base is constantly expanding as more people are exposed to their products, and counted among them are restaurant chefs, housewives, people on-the-go, new parents and the health-conscious. Further expansion into newer markets in Indonesia, China, India, Russia and Poland are expected to drive strong growth by exposing these expanding markets to the Heinz brand. The business has undergone a restructuring which started in 2002 under the leadership of William R. Johnson is the companys Chairman, President and CEO. His guidance led to a re-focusing by the organization on its ten core brands in eleven key markets, and eliminated extraneous layers of management. Sales of ketchup have increased, both domestically and internationally. The plan for continued growth in the next couple of years will focus on cutting costs, expanding the current market segments through innovation, and increasing returns to the shareholders. The introduction of improved information systems is expected to reduce waste and improve efficiency in both procurement and inventory management on a global basis, resulting in a savings of $60 million. Emphasize the core products together with a spending increase of $19 million in advertising will result in increased name brand recognition. Innovations such as the Top Right and Fridge Door Fit bottles continue to separate Heinz from its competitors. A stepped-up share repurchasing program should bring rewards to its investors.

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Concept History and Background Products from the H.J. Heinz Company are sold in more countries of the world than any other U.S.-based food company, with sales of $8.6 billion in 2006. Their products occupy the top two market spots in over 50 countries. The Heinz brand is closely associated with ketchup, condiments and sauces. The business was started by Henry John Heinz back in 1869, a time when the food processing industry was in its infancy. The first product he sold was horseradish. What set him apart from his rivals was that he sold his product in clear jars. He did this to show his customers that there were no fillers, a practice common to processors of that time period. The year 1875 was a bad one in terms of finances, and when a banking scare exposed the overextended position of his business, he was forced into bankruptcy. He started anew with his brother and a cousin that same year, and had a new product: tomato ketchup. Before long, he also brought to the market peppers sauces, apple butter, baked beans, pickled onions, chili sauce, mustard and tomato soup. The result was a win-win situation. The American people got a wide variety of items to spice up their meals, and Mr. Heinz got a handsome return on his investment. He introduced his goods to the international market when he visited England in 1886 with 7 items from his product line. They were in instant success, and ten years later, Heinz opened its first factory there. By the time Henry died in 1919, his son Howard had already taken over the business, expanding its operations to 25 factories and more than 200 smaller facilities. It was in 1958 that the company became larger through acquisition, a practice that quickly became more commonplace and continues today. In the last few yeas, Heinz has taken over companies in Costa Rica, Netherlands, Philippines and Singapore. VISION - "The Worlds Premier Food Company, Offering Nutritious, Superior tasting foods to people everywhere H.J. Heinz Company

PREMIER VALUES: Passionto be passionate about winning and about our brands, products and people, thereby delivering superior value to our shareholders Risk Toleranceto create a culture where entrepreneurship and prudent risk taking are encouraged and rewarded Excellence..to be the best in quality and in everything we do Motivation..to celebrate success, recognizing and rewarding the achievements of individuals and teams Innovation..to innovate in everything, from products to processes

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Empowermentto empower our talented people to take the initiative and to do whats right Respect..to act with integrity and respect towards all The use of the PREMIER Value program helps keep the firms 15,100 employees focused. The businesss product line has evolved over the last 100 years, and Heinz now offers over 1,000 different products under various brand names. Some of the product categories are beans, sauces, pickles, peppers, relishes, jams and jellies, salad dressings, vinegar, ketchup, mustard, mayonnaise, tomato products, soups, infant and frozen foods. Other than Heinz, a few of the more recognizable brand names which they operate under include Lea & Perrins, Ore Ida, Bagel Bites, Weight Watcher, Smart Ones and Boston Market. Heinz is classified as being in the Food Major Diversified category.

Form of Ownership The H.J. Heinz Company was founded in 1869 as a partnership between Henry John Heinz and L. C. Noble. It is incorporated in 1900, and became a publicly held corporation, having gone public in 1946 at an initial offering of $25.00. Organizing as a corporation offers multiple advantages. The owners of the corporation, its stockholders, are limited in liability to the amount of their investment in the corporation when it comes to business debt. Another benefit is that ownership of the corporation is easily transferable through the sale of stock. Therefore, it is unnecessary to draw up a new agreement every time a new owner enters the picture, as is required with partnerships. Further, it is easier for a corporation to raise capital than other forms of business. Banks are typically more willing to lend money to corporations than either sole proprietorships or partnerships. Another option that corporations offer is the capacity to obtain capital through the issuance of stock. However, there are also some disadvantages to doing business as a corporation. The most apparent is the issue of double taxation. For tax purposes, the IRS considers the corporation to be a separate entity from its owners, the shareholders. As such, first the business must pay corporate taxes on its profits, and then the shareholders must also pay taxes on any dividends received. Increased compliance with recordkeeping is another disadvantage. Up-to-date records must be kept of all current officers, directors and shareholders, and as changes occur with respect to these positions, so to must records be kept as to these changes. Additionally, in situations such as Heinz where the corporation is publicly traded, the financial documents of the organization must also be made available to the public.

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Goals and Objectives H.J. Heinzs commitments to their employees and the general public are set forth in their Global Operating Principles. These principles apply to both foreign and domestic operations. Health and safety issues are addressed in the Heinz Safety Process, which outlines safety goals. An employee at each manufacturing location is responsible for ensuring that these objectives are effectively communicated and adhered to. Company-wide, the firm issues an Environmental, Health and Safety Report addressing compliance on an annual basis. Commitments to employees include a workplace free from sexual harassment, and open to diversity in hiring and promotion. Heinz does not permit the use of forced/prison labor, nor does it permit the hiring of anyone under the age of sixteen. The company also respects the rights of workers to associate and organize with respect to unions. Heinzs commitment to the environment start with the implementation of ISO 14001, which is an international standard used to measure how well a business is minimizing any possible harmful effects to the environment. This standard applies to all of Heinzs relationships, both foreign and domestic. The company moves towards compliance through the efficient use of raw materials, water, energy and packaging, and provides training to all employees on environmental control and how it affects their operations. Looking for ways to provide assistance in communities where they operate demonstrates the commitment Heinz has made. This assistance is provided through the H.J. Heinz Company Foundation, which focuses on the areas of nutrition, volunteerism, healthy children and families, youth and education, quality of life and diversity. Recent beneficiaries of the foundation include United Jewish Federation, Big Brothers and Big Sisters of Greater Pittsburgh, Womens Center and Shelter of Greater Pittsburgh, National Future Farmers of America, United Way of Allegheny, and Americas Second Harvest. Heinz also pledges to offer diversity with respect to its minority suppliers. The company believes both sides profit from such a mixture. The supplier receives increased investment and can compete on an equal basis with more established firms. The benefit to Heinz is not only economic growth, but a cost savings is realized as well due to increased competition.

Organization, Management and Staffing

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The Heinz tradition of caring for its employees started at the beginning. Mr. Heinz believe that his employees were the keys to his success, and he demonstrated this by paying them wages that were higher than normal wages and providing good working conditions. This commitment to caring for the people who work at Heinz continues today. The company strives to provide a balance between work and family life, and offers a variety of family-supportive programs and benefits to all of its 36,000 employees. There are presently a multitude of job openings available in the United States. For example, in the area of Finance, open positions exist for a Compliance & Security Manager, a Supply Chain Financial Analyst, and an Associate Category Development Manager. Those wishing to pursue a marketing position might apply for employment as an Associate Brand Manager, a Marketing Analyst, or an Associate Design Manager. Sales positions are available and include Director KCS Category Development, Regional Business Manager Kroger, and Manager Specialty Sales (Foodservice Corporate Accounts). Two executive level positions currently open are Senior Auditor and Plant Engineer. Students are provided with internship opportunities to get their foot in the door.

The Market The H.J. Heinz Company falls under the category of a mature company, having been in existence for over 130 years. Heinz has instant name recognition in nearly every country in the world, lead by Heinz ketchup. Heinzs top competitors include ConAgra, Nestle and Campbell Soup. The company continues to separate itself from its competitors through innovation. The introductions of the Top Down bottle and the Fridge Door Fit bottle have both come in response to customer suggestions. Heinz even invites customers to its IQ Center kitchens where it can see how they use Heinz products. An increase in advertising of 19% will also serve to differentiate themselves from their rivals, as spending in this area, or lack of it, has a large influence in public opinion. It is hard to imagine that there is anyone who is not a potential customer of H.J. Heinz. Every family could potentially enhance their current diet with the multitude of condiments that the company offers, from ketchup to mayonnaise to relish. New parents could use infant formula. People on-the-go might purchase name brand frozen meals. Every individual is a potential customer, as well as restaurants and institutional foodservice businesses. It is unlikely that Heinz will expand into new industries anytime soon, as they have been shedding unprofitable segments and refocused their efforts on ten key brands. However the potential for expanding in current markets is high. Heinz intends to introduce over 100 new products during the current fiscal year. Low-sugar, low-fat and low-sodium are

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newer market segments that have not yet been fully realized. Heinz has already introduced products in this segment, and there is great potential for further expansion of their product line. With the increase in obesity in the United States on the rise, this market presents a great opportunity to increase their market position with foods that are healthy for the consumer. They already promote the fact that their tomato-based products are high in lycopene, an antioxidant which is said to play a role in preventing some types of cancer. The company is well positioned in the emerging markets of India and China, two countries which have growing populations and thus potential customers.

The Marketing Plan Heinz markets its products as safe, wholesome and of good quality. Safety is a critical requirement for any business in the food industry. Quality is important to distinguish its name brand from its competitors. With over a century of positive market exposure, Heinz has a decided advantage in this category. That its foods are wholesome plays an integral role in the marketing plan. Emphasis is placed on the health aspects of items, such as lycopene in its tomato products, low-fat salad dressings, and its over 200 certified Kosher products. Its name brand is synonymous with ketchup, and is recognized by consumers everywhere around the world, symbolizing quality, convenience and great taste. Offering Good Food Every Day TM Heinz is recognized as one of the worlds leading marketers and producers of nutritious foods in ketchup, condiments, sauces, meals, soups, snacks and infant foods. Heinz focuses on portraying its products as providing superior quality, taste and nutrition to people eating at home, at the office, at restaurants, or simply on-the-go.

Financial Plan The following is analysis of the financial status of the business, interpreted by reviewing the past three years of financial date and developing key ratios in four categories, liquidity, profitability, activity and leverage. Liquidity While the current ratio has declined slightly over the period, the ratio is still above one, indicating that the current assets are greater than current liabilities, and the company should be able to meet its financial obligations without trouble. The quick ratio shows a decline over the reporting period as well, however this ratio is below one, which reflects that they would have to sell off some of their inventory in order to pay off current liabilities if necessary. Profitability Heinzs profit as a % of sales ratio has fallen precipitously over the 3 -year period, dropping from 0.14 in 2004 to 0.08 in 2006. Operating costs and other expenses

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have increased in the last two years. The company also had a loss on impairment that was much higher in 2006 that it was in 2005. Analyzing the return on investment ratio, which has fallen steadily since 2004, we note that net income before taxes was much higher in 2004 than in 2005 or 2006 which was the cause of the higher ratio in 2004. In 2005, total assets increased but net income decreased due to impairments on investments. In 2006, net income decreased and the loss on investments increased, further lowering the ratio. The return on equity ratio has fallen all three years as well, which is not unexpected considering the decline in net income. Contributing to the lower owners equity was the companys repurchase of outstanding stock. Leverage The debt to equity ratio has varied considerably in the last three years, from a high of 4.21 in 2004, down to 3.06 the following year, and currently at 3.75 in 2006. Average owners equity increased in 2005, which led to the lower ratio. The ratio climbed again in 2006 when the company purchased treasury stock. Even the lowest of these ratios is higher than the industry average of 0.7, which indicates that this issue should be looked into further. The times interest earned ratio has declined sharply over the period. This is reflective of the decrease in net income as well as an increase in interest expense. If the companys income keeps decreasing, payments could be jeopardized. Activity The inventory turnover ratios has risen steadily over the 3-year period, reducing the period an inventory is held from 92 to 76 days. This reflects an improvement in the management of this area. The accounts receivable turnover ratio has also shown a steady rise, also a good reflection on management. This improvement has reduced the time required to collect outstanding payments by 10 days. The accounts payable turnover ratio has seen a considerable drop, which reflects the longer time it is taking for the company to pay its bills. This should be an area of further investigation due to the high debt to equity ratio. Sales have increased approximately $500 million each of the last two years, with sales in 2006 of $8.6 million. The dividend history reflects consistent quarterly disbursements, with a yield of $1.40 over the last 4 quarters. The stock price has fluctuated during the last 3 months, with a $0.75 rise during that time period.

Company News As noted an April 2007 press release, investment analysts gave Heinz the highest score among U.S. socially- and environmentally-conscious businesses, as measured by the LOHAS Index. Complimentary comments described Heinz as performing especially well in diversity, community and employee relations. Another new development announced in December 2006 was the relationship established with Trivial Pursuit during the release of a new, online trivia game. New product introductions include Organic Heinz ketchup and a greater variety of Weight-Watcher frozen meals. One of their greatest innovative introductions has to be the Fridge Door Fit bottle, which fits

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in the door of typical refrigerators. Another innovation, the Top Down solves the age old problem of having to shake the bottle to get the last of the ketchup out by having the opening on the bottom of the bottle. The environment can have a substantial impact upon the success of the organization. An enormous amount of raw foods are essential to the production of Heinz products. Tomatoes, onions, potatoes and other fruits and vegetables are typically arranged for with advanced contracts with farmers. Others items, such as milk, meat, sugar and spices are acquired on the open market. A variety of circumstances can prevent these materials from becoming available. Natural disasters, such as hurricanes, droughts, tsunamis can have devastating effects on crops. Animals are subject to pests and diseases as well. Another environmentally related item that can affect the business is oil. Rising transportation costs can quickly reduce the profitability of an operation, even to the point where it may have to be discontinued. The Company is subject to various changes in food safety laws in the many countries in which it operates. These changes could involve marketing, manufacturing or distribution aspects of the operation, and can vary from new regulations to changes in the taxing structure. These modifications to the cost structure can affect the bottom-line if prices are not increases or costs are not cut.

Evaluation and Management Conclusions The most important industry issue regarding the companys image is food safety. There can be no compromise in this area. Every aspect of the food chain must be controlled by Heinz to insure its quality, from the farmers field, to the processing centers, to the packaging houses, and finally to the retail shelf. Failure to ensure safety at any part of the process can lead to a recall of Heinz products. This could be disastrous to the Companys image and consequently, long-term profitability. The businesss success will be driven by how it markets itself and its innovative new products. There are really only minor ingredient differences between Heinz and the next leading brand of ketchup. Some taste-tests show Heinz as the winner, others show different brands winning. To differentiate themselves from their competition, Heinz must continue to be innovative and respond to the needs and wants of their customers. One recent product introduction was organic ketchup. Organic products face a growing demand in the market. Selling organic products reinforces the companys image as both health-conscious and concerned about the local environment. Another excellent innovation was the creation and design of the Fridge Door Fit bottle, which can be used with a wide variety of the products that they currently offer. This design was introduced in response to complaints of consumers that there was always wasted ketchup when the bottle was nearly empty. This product alleviates those complaints. Another industry issue key to the companys success is portraying itself as a good corporate citizen. Heinz

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has already been recognized for its environmentally and socially conscious efforts. Now the firm has to build those good efforts into a financial return by advertising this fact. The environmental factors noted previously, hurricanes, droughts, pests, diseases and tsunamis can all have a severe impact on the availability of the food necessary for Heinz to produce its products. Advanced planning can lessen the effect of these factors by having alternative procedures in place should such circumstances arise. On a long-term basis, the Company will have to prepare for an eventual climate changes that may be brought on by global warming. Crops may no longer be found available in their traditional locations. Company-based farms may have to be sold or relocated. While some are playing down the impact of climate change, all food industry businesses will have to carefully monitor the situation so that they can be poised to adapt. Legislative impacts, such as the imposition of new taxes or regulations, can have a significant impact upon the both this business and the industry as a whole. Heinz reportedly spent $160,000 USD on lobbyists in 2006. It is through these efforts that Heinz can attempt to influence legislation that would be unfavorable to its bottom-line. With the food industry being so vital, lobbyists are often employed to point out that while new regulations may force an industry to change its practices, the new guidelines should not be so obtrusive as to force the industry to abandon a desired product, either completely or in specific areas. Even though not directly related to the industry, increased gas taxes would cause a rise in transportation costs for the company, with said increases often passed onto the consumer in the form of higher prices. This can also have a negative effect on inflation. The most surprising item revealed to me during my research was that Heinz sold over 225 kosher food products. While I am not their target audience for these products, I felt certain that I would have come across this interesting item before through their advertising. There is even an entire section devoted to the kosher tradition on their website. My recommendation is to keep on the present course. The company is currently restructuring itself to focus on 10 key brands. This turnaround began in 2002, when Heinz divested itself of some companies that did not fit into its long-term philosophy. The company has three goals to provide growth over the next two years. The first is to reduce costs to improve profit margins. This is a smart approach. The next step is to grow the key brands through innovation. Being innovative is something that Heinz excels at. The Fridge Door Fit and Top Down bottles are two examples. Another involves the introduction in China of a low-cost infant food, for citizens who were unable to afford Heinzs premium class infant food. With over 1 billion people each, new markets such as China and India present another opportunity for increased profitability. The last step is to deliver superior shareholder returns. While the firm has some issues related to liabilities, focusing on shareholders must be part of any business plan. They are the investors in the business and should be a priority for compensation. I believe this plan will be a formula for success.

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General Mills
Executive Summary General Mills is a multi-national business which operates in over 100 countries and had combined sales of over $11 billion last year. The company is divided into four sectors, U.S. Retail, International, Bakery and Food Service and Joint Ventures. By far the largest in sales is the U.S. Retail division, which is led by the sale of ready-to-eat cereal. Popular brand names include Cheerios, Lucky Charms, Chex, Total, Wheaties, Cocoa Puffs and Fiber One. The firm acquired Pillsbury in 2001 and sells doughbased products, such as dinner rolls, frozen pizza rolls, breakfast pastries and waffles. Ready-to-eat meals, side dishes, soups, baking mixes and add-to-meat products are all part of the product line, and marketed under familiar names such as Totinos, Betty Crocker, Hamburger Helper, and Old El Paso. Yogurts and snacks also make up part of the product mix, with well-known brands such as Yoplait, Fruit Roll-up, and Nature Valley. Less publicized is the companys foray into the wholesale food arena. Prepared dry mixes and ingredients are now sold to a variety of institutions like restaurants, bakeries, corporate and school cafeterias, and convenience stores. This division returned sales of over $1.7 billion last year. Everyone is a potential consumer of General Mills products. Many of the products are packaged for convenience of preparation, from ready-to-eat cereals to heat-and-eat frozen dishes and sides. People who do not have time to fix a hot meal can utilize the snack products. Those with health concerns can obtain products fortified with vitamins and minerals, or choose some of the low-fat and low carbohydrate products that the company offers. Institutional organizations can now benefit from their prepackaged mixes as well. With its long history of providing great tasting food, generations of people long for products that they remember from childhood. The leader of this organization if Ken Powell, the President and CEO. His vision to lead the company involves focusing on four key areas. The first involves maintaining the trust that consumers have in General Mills products. This trust is built upon providing products that are healthy and convenient. The second area is people centered and deals with maintaining quality employees, as well as keeping partnerships in the surrounding communities. The third prong is innovation related. Companies can not remain stagnant, so reacting to changing environments by producing desired products is critical. The final area is related to performance, both in response to consumer and shareholder desires. By sticking to these core values, the business should continue to grow.

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Concept History and Background The story of how General Mills came to be starts back in 1866, when a gentleman by the name of Cadwallader C. Washburn built a flour mill on Mississippi River in Minneapolis. He added a second, larger mill eight years later, and in 1878, saw it destroyed in a flour dust explosion. Undaunted, he built another mill. He used the newest technology of the era, automatic steel rollers, to improve the quality of his flour and the safety of the operation. In 1880, he and then partner, John Crosby, entered the first International Millers Exhibition and took all three places in the best flour competition. They soon renamed their flour Gold Medal, which continues today as the number one flour brand in the United States. In 1928, Company President James Ford Bell initiated a merger of some of the largest millers in the United States, twenty-six in all. The resulting company was called General Mills, Inc. Five months later, the firm was the largest flour miller in the world. In 2000, General Mills bought out its biggest rival, The Pillsbury Company. Last year, the company had sales of more than $11.2 billion in over 100 countries. General Mills chooses to use a Values Statement as opposed to a Mission Statement. It reads as follows: We reinforce our values everyday through our people, our brands, our innovation and our performance. - Championship Brands ... building leading brands that our consumers trust around the world making lives easier, healthier and more fun. diverse, talented, committed people constantly learning and growing and contributing to our communities. developing and implementing innovative ideas to build our brands and drive our business. delivering outstanding performance for our investors, our customers, our consumers and ourselves.

- Championship People

- Championship Innovation .

- Championship Performance...

General Mills sells a wide range of food products. They are best known for their lineup of Big G ready-to-eat cereals, including such brands as Cheerios, Wheaties, Lucky Charms, Chex, Total, Cocoa Puffs and Fiber One. Other popular products include Mexican foods, soups, frozen vegetables, frozen dough, frozen breakfasts, frozen pizzas,

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biscuits, microwaveable popcorn, snacks, yogurt, canned tomato products and granola bars, to name a few. A roster of General Mills other instantly recognizable brand names under which they market their products would list Betty Crocker, Progresso, Pillsbury, Old El Paso, Green Giant, Hamburger Helper, Nature Valley, Pop Secret, Haagen-Dazs, Yoplait and Totinos. For business consumers, such as bakeries, convenience stores, schools and wholesale distributors, the company produces snacks and quick serve meals. General Mills is listed as a leading member of the Processed & Packaged Goods industry.

Form of Ownership General Mills, Inc. was incorporated in the State of Delaware in 1928. It is a publicly traded corporation on the New York Stock Exchange. Being a corporation has its advantages over other forms of business organization. For instance, the limited liability aspect is one that is appreciated by the stockholders, for they are limited in liability to the amount of their investment in the corporation. Should they desire to sell their piece of ownership, they need simply contact their broker and make the arrangements. Were they in a partnership, a new agreement would have to be drawn up each time somebody wanted in or out of ownership. Further, having a business formed as a corporation makes any need to raise capital a lot easier than other forms of business, as banks are usually considerably more likely to lend money to corporations as opposed to either sole proprietorships or partnerships. Corporations have the added benefit of being able to raise capital through the issuance of stock. Corporate forms of business also have some down sides. Double taxation is the first thing that comes to the mind of the investor. The IRS considers a corporation to be a separate entity from its owners when it comes time to compute taxes. First the business must pay corporate taxes on its profits, and then the shareholders must also pay taxes on any dividends earned. Corporations must also keep records of their officers, directors and shareholders, which can be a considerable task when shares have been issued in the millions. This increase in recordkeeping is another added cost that must be taken into consideration. Another disadvantage is that should a corporation be publicly traded, the financial documents of the organization must also be made public.

Goals and Objectives General Mills commitment to quality and safety emphasizes taking steps to prevent potential problems in the development process. Each step in the production line, from the plants that are harvested in the field through the storage, processing and packaging stages, up until the product is finally sold, is monitored and checked for quality assurance. The packaging is also designed towards preventing tampering, with clear indications to the purchaser if it should occur.

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In addition to salary and benefits, employees of General Mills can expect non-traditional benefits, for example, flexible schedules and telecommuting where possible. The firm demonstrates that it values its employees by offering health and wellness programs, and even workout rooms. The firm is committed to providing a diverse, open workplace, and pledges to provide training and seek employee feedback on workplace conditions. General Mills vows to comply with all environmental regulations and laws in the locations in which they operate. They are working on reducing their greenhouse gas emissions as well as reducing the release of ozone depleting substances. Lowering energy and water usage are goals the company has set. General Mills is committed to the use of recycled products whenever possible, and attempts to minimize its packaging to preserve resources. One example is oat hulls that are culled during processing. They were determined to be a cleaner burning biomass fuel than coal. The company fulfils is commitment to community through the General Mills Foundation. The foundation uses a three-prong approach: grants, scholarships and matching employee gifts. Over $20 million was distributed in grants during FY 2006 to various causes, from educational purposes to youth nutrition and fitness campaigns to the United Way. During that same time period, General Mills donated over $17 million in food products to programs that assist those in need of food, through organizations like the American Red Cross and Second Harvest.

Organization, Management and Staffing Career possibilities in the United States are quite attractive for a wide range of fields. Applicants experience in the computer field could fill openings for Oracle Developer or Senior Technical Specialist UNIX. Those interested in marketing could apply for positions such as Licensing Specialist or Manager of Database and E-mail Marketing. There are also positions in the legal arena, for those with manufacturing or engineering experience, sales representatives, human resources and research and development. Summer internships are offered in each of these areas and more. International opportunities can be sought in distant locations including India, Philippines, China, Korea, Hong Kong, Australia, Israel, and New Zealand. The company currently employs over 28,100 people.

The Market Having been in operation since the 19th Century, this firm qualifies as a mature in the market cycle. Its name brands are well established by now, so it must focus on providing added value to its customers.

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General Mills competitors are companies like Kraft Foods, Inc., Kellogg Company, and the French-based Groupe Danone. The company attempts to distinguish itself from these companies by focusing on providing superior quality in its products, promoting its products, being innovative in its advertising and product design, and through better pricing. The companys customer base is limitless. Food is something that everyone needs. Add to that their diverse offering of products and it becomes unfathomable that anyone could not have a use for any of their goods. Cereals are a mainstay at the breakfast table in the developed world. Frozen fruits and vegetables can be distributed anywhere there is electricity. Soups can be eaten in the desert and in the snow. All one needs is hot water and they then have a warm meal. Expansion of General Mills is currently further extending its international reach by investing in operations in India, China, Australia and Japan. This not only has the effect of introducing their current products to those populations, it has also resulted in some products that are developed in those markets being introduced into neighboring countries and the United States as well. New markets are established when these products find favor with expatriates from these international locations.

The Marketing Plan General Mills markets its products as great tasting, quick to prepare, convenient to eat while on the run, and providing specified health advantages. Nutrition is important to consumers so the firm focuses on feedback from its customers so that it can provide a product that satisfies the customers needs. The company strives to build upon the bond of trust they have established between themselves and the buyer based on prior purchases. The companys advertising and imaging portrays happy, energetic people eating their products. Everyone in the advertising is smiling. The subjects are usually engaged in some form of activity, which supports the health benefits that are often ascribed to the item being marketed.

Financial Plan The following is analysis of the financial status of the business, interpreted by reviewing the past three years of financial date and developing key ratios in four categories, liquidity, profitability, activity and leverage.

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Liquidity - The current ratio has declined over the past three years from 1.17 to 0.52, indicating that the amount of current liabilities has increased substantially as compared to current assets. At this point, the company will have trouble meeting its current liabilities. The quick ratio has also seen a significant decline from 0.78 to 0.34 during the period. This confirms that the firm is not sufficiently liquid to meet its current liabilities, should they become due. Profitability - Both the profit as a percentage of sales ratio and the return on investment ratio have remained fairly consistent during the period. The first tells us that operating costs have held steady. The second tells us that the management of the business has been consistent, but not outstanding. Slight increases for both ratios in 2005 are due to the selling off of operations that yielded a gain. The return on equity ratio is down slightly in the current year. This can be explained by the companys continued increase in the repurchasing of its own outstanding stock over the 3-year period. Leverage The debt to equity ratio saw a significant drop from 2004 to 2005. The company paid off a significant amount of its debt in 2005, resulting in a drop from 2.46 to 1.98, which then held steady at 1.96 in 2006. The times interest earned ratio also reflects the increased debt load the company was carrying in 2004, again holding steady between 2005 and 2006. Activity The inventory turnover ratio shows a steady increase during the 3-year period, going from 6.26 in 2004 to 6.66 in 2006. This is a positive development, indicating that the firm is turning over its inventory at a faster pace. The accounts receivable turnover ratio has remained relatively stable, indicating a small improvement in payment collecting ability. The accounts payable turnover ratio has remained steady for the last two years, but has dropped slightly lower than the first year of the reporting period, indicating that it is taking a little longer to make payments. This should be investigated further in light of the reduced liquidity of the organization. General Mills has made payments uninterrupted to its investors for over 100 years and has never lowered the dividend amount. Disbursements are made quarterly, and have totaled $1.42 per share for the last year. The stock price has risen $1.90 in the past three months. Total revenues have risen by an average of 10.46% over the last 5 years, and now top $11.64 billion.

Company News Some new products introduced in the last year include Fruity Cheerios, Hamburger Helper Microwaveable Singles, and new varieties of Nature Valley Sweet & Salty Nut Bars.

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Press releases support General Mills involvement in the community. A recent posting announces a joint effort with childrens book author Eric Carle to promote Give a Child a Book Week (June 10, 2007 June 16, 2007) and distribute Cheerios boxes showing characters that the author has illustrated. Included is a book donation challenge which will be used to determine where Cheerios distributes 100,000 copies of Mr. Carles book , The Tiny Seed. Another press release in February 2007 noted a limited -edition release of Wheaties brand cereal with Bill Russell on the box, part of the companys tradition of promoting African-American athletes as part of Black History Month. That same month, General Mills announced the creation of a $5,000 grant program to recognize those making contributions to reduce heart disease. Each of these releases showcases the companys involvement in the local community and their commitment to practicing what they preach when it comes to diversity. There are many environmental factors that affect the organization. Like other major food producers, the companys bottom line can easily be affected by weather, pests or diseases that affect the growers they obtain their raw materials from. A majority of these input materials are purchased on the open market, which is a practice widely used in this industry. Therefore, a disruption to supplies can result in considerably higher prices for these commodities as competition between the various food producers drives up demand. Increased costs related to extracting, processing or purchasing oil used in both factories and transportation can also have detrimental effects to the firms profitability. Legislative issues affecting the company include new codes involving interpretations of terms such as dietary supplement and fiber. How these words are interpreted could result in changes as to how the company produces their goods, markets their products or even how they obtain patents. Future legislation related to disclosure and labeling of product ingredients poses further considerations as to how General Mills will consider the use of genetically-modified organism (GMO) source materials. These types of regulations may force the company to choose between potential increased profits from the use of GM ingredients and a possible backlash from consumers who are wary of such scientific modifications. Implications of changes to the tax codes in countries where General Mills operates are a perennial issue.

Evaluation and Management Conclusions The critical issues of most importance related to the maintenance of the companys image are advertising and corporate goodwill. In 2006, General Mills spent $515 million to promote its products. This amount represented an 8% increase over the previous year. This continued promotion of its products is required in order to maintain its share of the market in the face of well-heeled competitors. Corporate goodwill is established through the support of the local communities in which the firm operates. General Mills performs well in this area and should continue to announce such activities though the media.

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For the reasons stated above, advertising and corporate goodwill are important to the success of the business as well. Other factors critical to success are (1) responding to the changing needs of their customers; (2) doing so in an timely fashion; (3) maintaining a steady stream of supply inputs, and (4) continuously re-evaluating the standards by which the firm operates. Failure at any of these will lead to a reduction in the most important aspect of a business, its profitability. The environmental factors affecting the business are an industry-wide problem. Severe weather in any form can affect food harvests. No region is immune from these events. If the accounts of increased surface temperatures are accurate, then planning for the future locations of crop plantings will be critical. This situation will have to be closely monitored because acting too quickly will result in wasted resources and acting too slowly will result in loss of market share to their competitors. In the interim, securing additional long-term fixed price contracts will give the company some stability in product availability. It will not guarantee that the business has adequate resources, but in lean times it will ensure that the company has a leg up on its competition. Legislation of the particular issues previously raised presents a potential pitfall for the industry and should be presented by the industry as a united front. Much of the legislation involving ingredient or benefit descriptions revolves around the industry wanting to disclose less information than the regulatory agency proposing the change. This appears stand in contradiction to food industry companies claims of wanting to be responsive to their customers, therefore any firm acting on their own risks disenfranchising its customer base. The issue of declaring GMOs in produc t ingredient lists is of concern to a large number of customers, some of which are particularly vocal in their opposition. The companys Report on Corporate Social Responsibility 2006 states they believe that the commercialization of GMO goods should only be undertaken after approved by international regulatory and market reviews that show that consumers are accepting of them. Next the report notes that all current applications are approved by the U.N. World Health Organization (WHO) and the U.S. Food & Drug Administration. These statements, taken in conjunction with efforts to avoid disclosure of GMOs in their products, gives little comfort to the consumer that these ingredients are not currently a part of the ingredient mix. Legislation regarding tax schematics does not necessarily need to be defeated in order for the company to gain an advantage. Reducing the amount of the proposed tax, or even delaying its implementation can bring financial reward. Most surprising to me was the number of brands that General Mills operates under and the number of products that it sells. I have always thought of the company as being in the cereal business. I was quite surprised to find out many things that I have eaten for years, as diverse as 8th Continent soy milk, Fruit Roll-ups, Old El Paso Mexican foods, and Totinos frozen pizza were actually manufactured by General Mills. It is hard to argue with a business formula that has resulted in a company with over $11 billion in revenues, net earnings of over $1 billion, and consistently pays its investors. My advice is to keep the formula currently in place, with a few modifications. The focus on being innovative is consistent with successful business management. This requires

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constant feedback from consumers in order to discover changes to the market as they happen. Once the changes are identified, adjustments to the current product line can be made to market to the new paradigm. Newly acquired ventures in under-explored markets in India and China are a good idea. Both of these countries have large population bases and present a golden opportunity to further develop these markets. It will be important to buy businesses that have reputations consistent with the values of safety and good taste that General Mills is known for. One change that I would implement is a move away from using GMOs as possible ingredients in the product line. While there are potential cost savings if these modified gene crops prove successful, it seems that it will take decades, not years, before the general public will come to accept them as part of their food supply. Keeping vague references to GMOs without clearly indicating whether or not they are included in their food products, does not serve the company well, as the perception is that they are including them by not clearly stating that they are not. If it turns out that they are not including them, then the company has missed out on a societal goodwill opportunity for not saying so. If they are using them, which it appear they do when they oppose labeling requirements, and have not disclosed as much, then they will receive a negative reaction from the general public. Instead, the focus should be on showcasing organic products, which return higher revenues and dovetail into the companys focus on health and healthy foods.

Three Business Comparison The Wrigley Company, H.J. Heinz and General Mills all have a lot in common. In fact, they are more alike than they are different. The three firms each have histories dating back to the 1800s, and each of the businesses is an international corporation and has sales measured in billions of dollars. Each is actively pursuing their interests in emerging markets such as Russia, China and India. All three firms include focusing on innovation as part of their business strategy, which is a key to maintaining and/or increasing their current share of the market. Failure to adapt to changes in the marketplace will certainly cause poor performance. Common marketing characteristics focus on providing a high quality, good tasting product. This may not be so important in situations where a business is the only game in town, but it is vital to the success of any organization that is trying to differentiate themselves from similar competitors, especially in a global market. There are also some differences. To begin with, let us look at their sales figures and workforce. Wrigleys sales last year amounted to $4.6 billion with slightly more than 15,000 employees. Heinzs sales figures reached up to $8.6 with 28,000 workers, and leading the group with over $11.6 billion in sales and more than 35,000 staff was General Mills. They also serve slightly different markets, though recent acquisitions have begun to blur the line between them. Wrigley is in the gum and confectionary market, Heinz deals with condiments and General Mills is well established in the cereal market. Recent events have seen both Heinz and General Mills expand operations to include frozen meals and organic offerings. One major issue currently facing General Mills is publics apprehension about genetically-modified organisms. As most cereals are made from

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grains which are easier to modify than other food items, this topic will affect them sooner than the other two firms. However, it should be noted that due to the increased use of whole grain and wheat ingredients in a wide range of goods, this concern will affect all of them in the future.

Computed Ratios for Wrigley Company


12/31/06 Liquidity Ratios Current Ratio Quick Ratio 1.34 0.81 1.41 0.92 1.46 0.99 12/31/05 12/31/04

Profitability Ratios Profit as a % of Sales Ratio Return on Investments Ratio Return on Equity Ratio 0.17 0.17 0.34 0.18 0.17 0.34 0.20 0.23 0.36

Leverage Ratios Debt to Equity Ratio Times Interest Earned Ratio 1.22 13.44 1.28 24.85 0.59 186.74

Activity Ratios Inventory Turnover Ratio Accounts Receivable Ratio Accounts Payable Ratio 4.04 10.70 6.90 4.14 10.81 7.03 4.32 10.65 7.63

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Computed Ratios for H.J. Heinz


5/3/06 Liquidity Ratios Current Ratio Quick Ratio 1.34 0.81 1.41 0.92 1.46 0.99 4/27/05 4/28/04

Profitability Ratios Profit as a % of Sales Ratio Return on Investments Ratio Return on Equity Ratio 0.08 0.07 0.30 0.12 0.09 0.44 0.14 0.11 0.69

Leverage Ratios Debt to Equity Ratio Times Interest Earned Ratio 3.75 3.19 3.06 5.25 4.21 6.05

Activity Ratios Inventory Turnover Ratio Accounts Receivable Ratio Accounts Payable Ratio 4.76 8.25 5.01 4.20 7.42 4.52 3.96 6.68 7.33

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Computed Ratios for General Mills


5/28/06 Liquidity Ratios Current Ratio Quick Ratio 1.34 0.81 1.41 0.92 1.46 0.99 5/29/05 5/30/04

Profitability Ratios Profit as a % of Sales Ratio Return on Investments Ratio Return on Equity Ratio 0.14 0.09 0.29 0.17 0.11 0.35 0.14 0.09 0.34

Leverage Ratios Debt to Equity Ratio Times Interest Earned Ratio 1.96 5.09 1.98 5.18 2.46 4.12

Activity Ratios Inventory Turnover Ratio Accounts Receivable Ratio Accounts Payable Ratio 6.66 11.03 6.09 - 33 6.51 11.00 6.09 6.26 10.84 6.40

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