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General Mills CFO on importance of purpose

Kofi Bruce, CFO of the US food giant, explains in an interview how finance has been at the heart of the group's responses to the twin challenges of 2020

This year will be remembered for the pandemic outbreak and the killing of George Floyd. The first forced a scramble to save lives in almost every country in the world, the latter a rethink on how racial injustice and inequity has developed over the last 400 years.

For General Mills, the US food producer of global brands such as Cheerios and Haagen-Dazs ice cream, the two issues run to the core of its purpose, says the company’s CFO Kofi Bruce.

As finance leader of one of the leading employers in Minneapolis where African-American Floyd was brutally killed by police officers on May 25, Bruce says: “It brought a lot of questions about America’s long and troubled history with race.”

Shortly after the incident, General Mills chairman and CEO Jeff Harmening joined leaders of Minneapolis companies in saying “we are outraged about what happened in our hometown on Monday. George Floyd did not have to die.”

The unequivocal response underlines the role General Mills, which employs around a tenth of its 35,000 workers in Minneapolis, has in addressing challenges that affect its people and the community it operates in, says Bruce.

“I couldn’t be prouder, as an African American that our company didn’t hesitate to get out and make a statement less than 48 hours after the incident,” he says.

“It’s incredibly important that a company can speak authentically when things like this are wrong in the community, where there are acute disparities in racial equality, that show up from an economic and an education standpoint.

“It’s even more important to follow that up later with tangible commitments around representation within our company, but also in the community around access to education and food, where we’re making investments,” says Bruce.

Those comments reflect the sense of purpose felt by the company’s leadership team to the wider environment and the vital role of the food chain in global sustainability.

In 2015 General Mills promised to reduce its greenhouse gas emissions by 28 percent over 10 years and in February this year was recognised by CDP (Carbon Disclosure Project) as a global leader in corporate sustainability. It received a place on the CDP’s “A list” for its approach to climate change and water security.

In the same month, Bruce was appointed to the role of CFO, leading a finance function that plays a crucial role in measuring the group’s approach on climate change and sustainability. “If you look at our sustainability goals, we’ve got some hard metrics and measurable objectives around sustainability. “Our carbon footprint and net zero goals will be measurable, we will be able for example by 2030, we have got full, recyclable, sustainable packaging,” he says.

“Finance has a key role in tracking those, and also a role helping the company understand both the costs and the investment cycle of making some of these commitments. Because I about the long- term sustainability of our business,” he says.

Pandemic response

Bruce’s arrival at the top finance role, after more than a decade in General Mills, came as the coronavirus pandemic began to sweep across the globe, in what he describes as a “generation altering” event.

He says the whole business, at the heart of food supply chains, had to move quickly with finance playing a pivotal role at the initial response and planning stages. A set of global safety policies was instigated to protect workers after early signs of the dangers of coronavirus from the China-based parts of the business.

“Then we also started thinking about measures we would take if the virus took off in the US, to minimise risk of disruption from infection in plants through precautionary measures in plants such as distancing and crew changes. A Covid task force was set up to make decisions such as ensuring leave for employees who had sick family members or who were sick themselves,” adds Bruce.

At the same time, the finance function had to close on fourth quarter results despite staff working remotely, which is still the case for the majority of the team. “Before the pandemic, we would have said we wouldn’t be able to envision how it was possible.

At the end of March, General Mills tapped the bond market for $750m, even though the group was generating healthy levels of cash flow, a decision Bruce says was “mostly out of caution”. He adds: “We’re now in a position where I think we have a very, very strong liquidity position, virtually no commercial paper borrowings and cash on hand to meet upcoming maturities.”

The challenge was then how to plan for the huge increases in demand as global lockdowns stimulated demand for home food consumption, which comprises about 85 percent of the group’s portfolio. “So the challenge was what do you plan for over the next fiscal year because our fiscal year starts in June?

“We had to move very quickly from fixed horizon stable environment planning to something more scenario-based. We had to make assumptions about how long communities would be in lockdown in response to the virus, and therefore the amount of away-from-home consumption that shifts to at-home consumption,” says Bruce.

“And we’ve had to adjust as we’ve gone through the year, but that drove critical decisions, like how do we ensure that we have enough capacity for any scenario. As a finance professional you have to adapt the skills and approach to the way that you do things like setting targets, and making decisions on everything from capital to spending behind your brands.

“We also had to make sure that we kept enough flexibility in the business model, so don’t either miss out on the opportunity on the high side, or be left with an unworkable business model, if the demand is much less than we forecast,” he adds.

Cometh the hour

Bruce says his personal resilience was shaped by experiences at Ford, which he joined after a degree in international relations at Stanford University, and then environmental services group Ecolab, which is also based in Minnesota.

At the motor giant, seven different roles in six years saw him build a skill set across areas such as M&A, FP&A and Treasury, in some of the most profitable years in its history followed by sharp fall after the 9/11 terror attacks in 2001. “The resilience of managing through a cycle I certainly am using here,” he says.

Ecolab, “a place where initiative and entrepreneurship get rewarded”, offered the challenge of “straining to catch up with the growth and opportunity in the business. Being able to chart your own course is a lesson that I have brought into this environment.” says Bruce.

At General Mills, lessons were also learned along the way in positions including corporate controller and VP financial operations, but it was from an early role as VP finance of the group’s yoghurt business Yoplait USA, that he took away the strongest message.

“The growth of the Greek yoghurt market taught me some fundamental lessons about the importance of staying close to the consumer and understanding emerging consumer trends. It taught me about the importance of innovation for solving problems,” he says.

All that experience is now being put to work as General Mills assesses the opportunities for acquiring regional and smaller brands that “may not have the financial resources or the scale to compete as effectively in this environment”, says Bruce.

But he adds some caution to the suggestion of an M&A spree during this period of distortion. “There is some uncertainty about the value of a company that’s doing really well in the pandemic. How much of that is attributed to the pandemic and may abate after we come out of the pandemic.

“On the other side, businesses that maybe aren’t doing as well, may not be willing to sell on the basis of their financial performance during this window,” he adds.

In the meantime, things are looking up for General Mills. Second quarter net profit rose almost a fifth year-on-year to $688m on sales up seven percent to $4.72bn over the same period, while the group’s share price recovered from a dip in March to give the group a market value of around $36bn by the end of the year.

Looking ahead, Bruce says that the issue of producing food during a pandemic resonates highly with the purpose-driven ethos that he says runs through General Mills.

“When your purpose is making food in the middle of a pandemic, people security is tied very directly to some of the more basic needs in life, one of which is food access. I think the core of what we do, is made ripe for this moment.

“Some of the other things we do involve taking care of our communities. We have partnerships with large food banks, and food distribution organisations, such as Feeding America.

“We’ve made food donations where we’ve had excess capacity, such as our convenience food service business- helping provide food at a time when food scarcity is a big question in a lot of the communities in which we operate and serve. We view that as very directly linked to our purpose,” he adds.

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