Jeffrey L. Harmening, who joined General Mills 23 years ago as a marketer, on Wednesday was named chief executive, taking the lead of one of Minnesota’s economic powerhouses at a challenging time for both the company and the food industry.
He succeeds Ken Powell, who has been CEO and chairman since 2007. Powell will remain chairman until his retirement, likely next year.
Harmening’s familiar presence within General Mills will help smooth the transition. But he steps into the role at a tumultuous time as the industry consolidates and consumer tastes shift to foods that are less processed than many of General Mills products.
Harmening, 50, has been widely seen as Powell’s successor since he was named president of the Golden Valley-based company last July. The company on Wednesday also announced Harmening’s election to its board of directors.
“The board unanimously cast its vote for Jeff as the best candidate to lead this venerable 150-year-old company,” said R. Kerry Clark, independent lead director of the General Mills board, in a statement. “Jeff knows how to build talented teams and has extensive experience both in the U.S. and globally. He is not afraid to challenge the status quo and he is a tenacious and resilient leader.”
With the news, General Mills becomes the third Minnesota-based Fortune 500 company in the past year to make a seamless transition at the top. U.S. Bancorp in Minneapolis completed a CEO handover last month and Hormel Foods Corp. in Austin did last year.
It is crucial that companies have a clear succession plan, said Tracy Yue Wang, a finance and corporate governance professor at the University of Minnesota Carlson School of Management.
“The management has a big impact on a firm’s values, therefore, when there is a change in management it causes a lot of uncertainty in the market,” Wang said.
Her research suggests that without a clear succession plan and heir apparent, a company’s cost of debt and cost of equity skyrockets immediately following the announcement, taking up to three years into the new CEO’s tenure to normalize. “It shows the market really cares about this,” she said. “Having a smooth transition will reduce uncertainty, which nobody benefits from.”
Harmening’s transition mirrors his predecessor’s — Powell also served as president for a year before becoming CEO — but he takes the reins at a far more challenging time for the company.
Powell took power following a period of strong growth at the company. But shifting consumer preferences, as well as a growing number of smaller competitors, have slowly eroded the market shares of General Mills and its Big Food peers.
Today, General Mills is coming off seven straight quarters of declining sales and has maintained profitability chiefly through cost-cutting. It has trimmed more than 5,000 jobs since 2014, a temporary suture as it searches for a way to produce longer-term growth.
“This year, the company will be able to keep its operating income stable through greater efficiency and reduced spending in incentives and media, but this isn’t a sustainable course,” Alexia Howard, a food analyst for Bernstein, told investors in March. “More importantly, management doesn’t seem to show the level of concern that we feel is warranted for a situation like this.”
Brittany Weissman of Edward Jones at that time expressed confidence in the company’s executives. “In our view, brand power of food companies is a key factor in determining the long-term winners and losers in the industry,” Weissman wrote. “We view General Mills favorably in this respect, as it competes on a number of categories that we believe are on-trend with consumer preferences for health and wellness.”
Harmening is credited with General Mills’ expanded market position in the natural and organic food segment. During his tenure as head of U.S. Retail, General Mills acquired Annie’s and Epic Provisions, helping make it the fourth-largest maker of natural and organic foods in the U.S. These younger brands are helping buoy General Mills’ sales.
Major food companies are also navigating what some people in the industry call the “3G Era,” named after 3G Capital, the Brazilian firm that drove the megamerger of Kraft Foods Group and H.J. Heinz Co. Analysts have speculated that General Mills and Mondelez International, the maker of Oreo cookies, are potential takeover targets of 3G.
Harmening has held a variety of positions at General Mills, including executive vice president of the company’s U.S. retail business and chief executive of Cereal Partners Worldwide, a joint venture of General Mills and Switzerland-based Nestlé. Harmening has also been president of General Mills’ cereal operating unit and held other U.S. marketing roles.
He was not available for an interview on Wednesday. In a statement, he said, “I am honored to take the helm of General Mills at such an important point in its history. Building on the legacy of those that have led this great company before me is an exciting challenge and one I do not take on alone.”
Powell, meanwhile, has a full plate as he moves out of day-to-day responsibilities at General Mills. He will continue to serve as deputy chair of the Minneapolis Federal Reserve Bank through 2019 and was recently elected to the University of Minnesota’s Board of Regents, a high-profile position that demands 30 to 40 hours per month of volunteer work.
“General Mills has a long tradition of delivering top-tier returns that our shareholders have counted on for generations,” Powell said in a statement. “We are focused on growth and feel strongly that Jeff is the right leader for the next leg of our journey.”