GIS General Mills Inc

By Annie Gasparro and Joann S. Lublin 

General Mills Inc. is grooming Jeff Harmening as its next chief executive, putting an unflappable Midwesterner who bet on the all-natural trend in line to run the struggling food giant.

Mr. Harmening, 49 years old, could succeed current Chief Executive Ken Powell as soon as next year, say people familiar with key decision-making at the Minneapolis-based maker of everything from Bisquick to Yoplait.

General Mills wouldn't make Mr. Harmening available for an interview or elaborate on its succession plans. But the 62-year-old Mr. Powell acknowledged in an interview that his protege's promotion last month to president and chief operating officer was a step toward the corner office.

"The board considered multiple factors," Mr. Powell said of Mr. Harmening's selection. "He's very good and successful, both in the U.S. and importantly a couple other areas...he's got that global piece."

In effectively anointing Mr. Harmening as its CEO-to-be, General Mills has gone with a candidate whose career mirrors the path trod by Mr. Powell. Like the current CEO, Mr. Harmening is back at company's Minneapolis headquarters after spending several years in Europe. From 2012 to 2014, Mr. Harmening was based in Lausanne, Switzerland, as president of Cereal Partners Worldwide, General Mills' overseas joint venture with Nestlé SA.

His ascension comes at a time when General Mills like its competitors is struggling to make some of its older brands relevant. For instance, Betty Crocker cake mix and Hamburger Helper meals are stuck in the post-World War II era, when shoppers were driven by the novelty and convenience of packaged meals.

Since September 2014, General Mills has had to close factories and has outlined plans to cut nearly 5,000 jobs, more than a 10th of its workforce.

Mr. Harmening will be tested on how far he can extend the successful turn toward natural foods. Already, he singled out yogurt, a $2.8 billion line of products that drives 16% of company revenue, as in need of a makeover during an investor presentation last month.

Mr. Harmening, since his return, has helped spearhead General Mills' acquisition of natural-and-organic food maker Annie's Inc., one of the sources familiar with the matter said. The $820 million bet placed Annie's bunny-shaped pasta in more stores and expanded the brand to yogurt, soup, pancake mix and more. The deal was pricey -- a 37% premium to Annie's stock. General Mills drastically increased Annie's distribution in the first year, but the company has to be careful not to expand the brand too fast.

Last year, General Mills sold its Green Giant canned and frozen vegetable business to focus on brands that catered to consumers' hunger for fresh foods. Mr. Harmening drove that deal too, the person familiar with the matter said.

Mr. Harmening's natural-food crusade also spilled into the company's cereal business, to the delight of many investors. Cereal sales at General Mills rose in the latest quarter for the first time in four years after he expedited the removal of artificial colors in children' brands like Trix and made Cheerios gluten free.

Now attention is turning to the dairy aisle.

The company's U.S. yogurt sales fell 9.3% in the year ended in May, according to market research firm IRI, as Chobani Inc. and other popular new yogurt brands snatched customers. Mr. Harmening has said he would add organic options, smoothies and new brands like Go Big, yogurt pouches for children who outgrow its popular Go-Gurt tubes.

Mr. Harmening won over colleagues in Zurich during his tenure there with his booming laugh and efforts to learn French. But his disarming good humor belied a readiness to make tough decisions, said Luc Imbert, who runs the continental European operations for Cereal Partners.

"No one questioned who the boss was when Jeff was around," Mr. Imbert said.

Mr. Harmening's early anointment could also create uncertainty among other executives vying for the top slot. People familiar with the matter said the other internal front-runner for the CEO position was Christopher O'Leary, chief operating officer for General Mills' international operations.

With Mr. Harmening now second in command, Mr. O'Leary likely will be offered a CEO spot elsewhere, said Sandra Davis, founder of MDA Leadership Consulting, a succession planning firm that previously advised General Mills.

General Mills declined to comment on Mr. O'Leary's behalf.

General Mills' directors, potentially, could elevate Mr. Harmening as chief executive by the fall of 2017, if they follow the same timeline they did with Mr. Powell a decade ago. But Mr. Powell may not be ready to step aside just yet.

When asked whether he would retire soon, Mr. Powell said, "Hell, no."

"There is no required retirement age at General Mills," he said.

Write to Annie Gasparro at annie.gasparro@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

(END) Dow Jones Newswires

August 24, 2016 15:35 ET (19:35 GMT)

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