Online Extra: Q&A with General Mills CEO Stephen Sanger

The Internet gives us capabilities that are beyond anything we've gotten from any other source to [operate] better and faster

A few years ago, the cereal business was turning soggy. Food categories were losing flavor, too. But rather than simply close plants to try cutting costs and boosting margins, General Mills CEO Stephen W. Sanger looked to the Net. The company has since found ways to save on transportation, market research, and procurement by using the Web. It even allows some customers to design their own cereal online -- an attempt to renew interest in the likes of Trix, Kix, and Cheerios. Sanger discussed the company's Web progress with Julie Forster, a correspondent in BusinessWeek's Chicago bureau. Here are edited excerpts of their conversation:

Q: Can you quantify the returns on the Net initiatives?

A:

The value of these initiatives is seen on our core business. In the case of market tools [online market research let's us] understand the consumer better and faster. In the case of operating our supply chain, [we're doing it] better and more economically.

Q: You mentioned that with market tools, it takes two days to get research instead of three to four weeks?

A:

Any given study is going to be different. But in some cases, we're -- I guess it takes as long as three to four weeks -- getting it down to three or four days.

Q: Why is it important to speed up the time to get the data?

A:

You're always trying to get good ideas into the marketplace faster. And so the time that it takes to get important data from the consumer to the marketing people...if you could shorten that time, that's going to help you get the whole thing faster.

Q: On using the Web to arrange transportation, can you quantify what your transportation costs were before using Nistevo [Web software]?

A:

The things we want to put our efforts into are all things that will make our fundamental business work better. And in the case of this Nistevo, it's our supply chain. In the case of market tools, it's our consumer research. These are things that we're always trying to find ways to do better and faster anyway. And if the Internet had never come along, we would have other initiatives that we'd be doing in these areas to try to do them better and faster.

But the Internet gives us capabilities that are beyond anything we've gotten from any other source to do these better and faster. I think that's the way we look at it. It's not a matter of starting the Internet. You start with what you do and what you need to do better -- to operate your business in the best way possible. And in almost every case where we've used the Internet...it has been something that we're looking for other ways to do more effectively as well.

Mycereal.com, for example...it didn't start with the idea of selling cereal over the Internet. What it started with is the ability to customize products for consumers.... We get hundreds of letters every month. We get letters from people saying: Why don't you make, you know, Total with soy nuggets in it. Or it would be great if you [had]...Fiber One mixed with Cheerios.

I mean, we get these all the time.... It would be great if we could just make them for one person or two people. But, you know, the Internet gives you the ability to actually respond to that in a way that you couldn't do through traditional grocery channels.

So the things that an individual might want to customize for themselves wouldn't be popular enough to sell in [the] kind of mass quantities that...retailers would want. But the Internet gives you a chance to respond to something that's a demand that was out there, that you had never been able to address before. Again, that's really an experiment, and we're not far along [enough] with it to be able to say what kind of scale it could reach.

Q: What are your goals for cereal? Do you expect it to be profitable in a year or two, or three? Or are you using that as a way to cull some research?

A:

Well, we know we have a business plan that if it met the expectations, it would be a profitable venture. It would be something that would earn money for General Mills. But what you don't know is whether enough people would use it often enough to make that business plan actually come to life. And that's why you experiment -- to learn.

We're still learning quite a bit from consumers about what kind of companies they like and how they think about cereals in a way that's very different than we've learned about before. So, we're getting good value and understanding on that.

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