Milling & Baking News - October 27, 2015 - 7

Editorial

Milling differs from Warren Buffett

hile quite a few exceptions may be cited, it in operating in this manner. Similar initiatives may be
is not overreaching to describe global flour cited in other parts of the world. It has happened recentmilling as an industry that in most parts of ly in Africa where a milling company headquartered in
the world operates within a business structure uniquely Nigeria as part of the largest sub-Sahara corporation
dedicated to milling. That is definitely the case among was spun out as a new company separated totally from
most of the leaders of American milling, including former associates in cement and sugar refining.
those owned by corporations headquartered in other
Many different reasons may be cited for the focus
countries like Japan. In the Western Hemisphere, excep- on milling that has gained broad acceptance. An imtions include giant food and grain companies like ADM portant one is the demands of wheat procurement,
and General Mills, Inc. and businesses operating in dif- which can create financial risks not always underferent parts of global grain that have developed large stood by a corporate owner engaged in other busimilling holdings. Similar exceptions are noted in parts nesses. Obtaining a supply of wheat of desired quality
of Southeast Asia and Russia but these rarely occur in mandates purchasing skills that extend well beyond
Western Europe and Africa. On balance, milling enter- conventional ideas about buying basic inputs for a
prises now mostly are devoted to grinding wheat and manufacturing plant. Logistics of successful milling
producing flour. Understandlong have been considered
Logistics of successful milling long
ing the reasons for this singleamong the most complex of
have been considered among the
minded focus is important to
any business, where custommost complex of any business.
understanding the industry.
ers may be widely scattered
As one of the world's oldas compared with mills built
est industries, not just in milling but as an operating to secure a quality wheat supply while serving bakindustry, flour milling has seen many different com- ing customers whose locations are driven by totally
pany structures. A half century ago, the industry saw different considerations. Nothing spurs milling's conmany of its leading players become divisions of large solidation and structure into highly focused entities
conglomerates with as broad a base of businesses as more powerfully than the longtime consolidation of
could be imagined. Conglomerates acquiring milling large flour-using customers, whether baking bread,
companies were the principal factor. Another cause in- making noodles or producing cake and cookies.
volved milling companies that themselves became acAddressing milling's tendency to operate flour
tive acquirers, sometimes taking on an amazing spread milling separate from any other business is prompted
of businesses. The observation often was made in this this year by numerous commentaries asking whether
era that relevance to the business of food was totally Warren Buffett and his Berkshire Hathaway conglomneglected in order simply to build size. In ways, the in- erate do not suddenly signal a different corporate diternationalization of the current strict milling focus has rection. His buying this year of Precision Castparts for
significant parallels in how wholesale baking evolved. $37 billion and his earlier involvement in the creation
Hardly anything symbolizes this focus on compa- of The Kraft Heinz Co. as a highly diversified food
nies solely engaged in milling better than corporate company signaled rejection by this highly revered increations in the past year. Ardent Mills, the largest U.S. vestor of any hesitancy he might have about building
milling company and also at the top of global milling, a totally disconnected conglomerate. Mr. Buffett says
was created as a free-standing company by the merger he runs a sprawling conglomerate that is "constantly
of milling companies that had been part of Cargill, CHS, trying to sprawl further." Milling's sharp difference
Inc. and ConAgra Foods. Going from being divisions from such a business makes for a global industry that
of such large enterprises to a single milling operation has gone in its own direction in a manner making
represents an assessment that great advantages exist great promise for the future. MBN
MORTON SOSLAND, EDITOR-IN-CHIEF
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