Milling & Baking News - August 21, 2012 - 7

Globalization, integration drive new growth

t the turn of the 20th century, from 1889 to to expand their interests. Focusing on what has been 1908, the largest flour milling company in called “fully integrated assets” has seen these compathe United States was owned by a group of nies step up investing in places like South America, English investors. The company, Pillsbury-Washburn Eastern Europe and China. Emphasis on achieving Flour Mills, Ltd., was created through a combination significant cost reductions via growth explains many of once independent companies bearing names still moves. Even the development of higher-value prodprominent today. The English investors had been at- ucts has been cited as a step to lower costs. It is obvitracted by tales of great profitability, but they were ous that moving closer to consumers is meant to boost sorely disappointed by the results, as reflected in few margins. Acquisition of a grain origination business or no dividends. That business was dismantled after with a line of country elevators is now equated with less than two decades of operation. But it stands in enhancing supply chain efficiencies. milling history as a development well worth recalling Even as companies pursue opportunities in every at a time more than a century later when the interna- corner of the world, competition is emerging from tionalization of businesses engaged in food process- unexpected places, like sovereign wealth funds opering is proceeding at a heady pace. Events of this year ated by nations as a way of centralizing investment alone would most certainly have amazed those earlier decisions as well as by an international organization investors who reached across continents in order to like the World Bank. Having made a decision within build markets beyond their own countries. the past year to shift its focus to improving food proIt may be argued that the internationalization of food duction, especially in developing nations, the bank, has speeded up this year in a through its investment arm, It may be argued that the way that never occurred beInternational Finance Corpointernationalization of food has fore. Several driving forces ration, has elected to make speeded up this year in a way that appear to be at work. One equity investments in global never occurred before. is the desire of companies trading houses, beginning that once limited their business to commodity trading with a stake in a food-related enterprise. An I.F.C. ofto be active participants along the entire supply chain. ficial said, “In order to reach the poorest parts of the Rather than being satisfied with premier positions as world’s population, you need to work with the interoriginators and suppliers of basic ingredients, not just mediaries.” The latter are, of course, the trading housin food, but also in industries like mining, these compa- es. Given this new source of funding, traders have exnies have aggressively pursued acquisitions of compa- panded their ambitions primarily by making their own nies that extend their operations nearer to consumers investments “in companies which integrate the supply than ever before. At the same time, the outlays required chain.” Note has been made of the manner in which by this level of investing, spanning oceans and reach- World Bank support gives many of the smaller houses ing into territories where foreign ownership is new, has added credibility in seeking to extend their business. prompted extraordinary capital raising. Hardly anyNot all that long ago, investing in international thing symbolizes the dimension of these changes more trading companies was viewed as a way of being vividly than the few moves toward public ownership upfront in investing in commodities like wheat and of once private, secretive firms. other grains. While nothing that has happened has This reaching out by commodity trading firms, changed that singular attraction, it is important to which has brought new management to places like the realize that internationalization and supply chain inprairie provinces of Canada and, yes, the U.S. flour tegration suddenly have become the most powerful milling industry, has naturally spurred companies forces affecting how many processing industries are that long have had an international reach in milling evolving. MBN MORTON SOSLAND, EDITOR-IN-CHIEF
WE’RE EAGER TO GET YOUR FEEDBACK: E-mail editor@sosland.com or write to us at Milling & Baking News, 4800 Main Street, Suite 100, Kansas City, Mo, 64112 EDITORIAL STAFF
Editor-in-chief Morton I. Sosland Executive editor, markets Neil N. Sosland Editor L. Joshua Sosland Senior editor, markets Jay S. Sjerven Managing editor Eric J. Schroeder Associate editor Jeff Gelski Associate editor Ron Sterk Assistant editor, markets Laura Lloyd Internet editor Allison Gibeson Graphic designer, market graphics, data Christina Sullivan

PUBLISHING STAFF
Chairman Charles S. Sosland Vice-chairman L. Joshua Sosland President and publisher Mark Sabo Associate publisher G. Michael Gude Vice-president, chief ﬁnancial ofﬁcer Melanie Hepperly

Audience development director Don Keating Director of e-business Jon Hall Director of on-line advertising and promotions Carrie Fluegge Promotions manager Taré Torres Advertising manager Nora Wages

Director of design services Sadowna Conarroe Circulation manager Judith Arnone Digital systems analyst Marj Potts Manager of advertising design Becky White

7bakingbusiness.com Milling & Baking News / March 13, 2007 / world-grain.com

Milling & Baking News August 21, 2012 / 7 bakingbusiness.com / world-grain.com



Editorial

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - August 21, 2012

Table of Contents for the Digital Edition of Milling & Baking News - August 21, 2012