World Grain -- December 2015 - 8

FROM THE EDITOR-IN-CHIEF

Milling differs from
Warren Buffett

hile quite a few exceptions may be
cited, it is not overreaching to deVFULEH JOREDO ÀRXU PLOOLQJ DV DQ LQdustry that in most parts of the world operates
within a business structure uniquely dedicated
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most of the leaders of American milling, including those owned by corporations headquartered in other countries like Japan. In the
Western Hemisphere, exceptions include a giant food company like General Mills, Inc. and
businesses operating in different parts of global
grain that have developed large milling holdings. Similar exceptions are noted in parts of
Southeast Asia and Russia but these rarely occur in Western Europe and Africa. On balance,
milling enterprises are now mostly devoted to
JULQGLQJ ZKHDW DQG SURGXFLQJ ÀRXU 8QGHUstanding the reasons for this single-minded focus is important to understanding the industry.
As one of the world's oldest industries, not
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company structures. A half century ago, the
industry saw many of its leading players become divisions of large conglomerates with as
broad a base of businesses as could be imagined. Conglomerates acquiring milling companies was the principal factor. Another cause
involved milling companies that themselves
became active acquirers, sometimes taking on
an amazing spread of businesses. The observation was often made in this era that relevance
to the business of food was totally neglected in
order simply to build size. In ways, the internationalization of the current strict milling focus
KDVVLJQL¿FDQWSDUDOOHOVLQKRZZKROHVDOHEDNing evolved.
Hardly anything symbolizes this focus on
companies solely engaged in milling better
than corporate creations in the past year. ArGHQW 0LOOV WKH ODUJHVW 86 PLOOLQJ FRPSDQ\
and also at the top of global milling, was created as a free-standing company by the merger
of milling companies that had been part of
Cargill, CHS, Inc. and ConAgra Foods. Going
from being divisions of such large enterprises
to a single milling operation represents an assessment that great advantages exist in operating in this manner. Similar initiatives may be

cited in other parts of the world. It has happened recently in Africa where a milling company headquartered in Nigeria as part of the
largest sub-Sahara corporation was spun out as
a new company separated totally from former
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Many different reasons may be cited for
the focus on milling that has gained broad acceptance. An important one is the demands of
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risks not always understood by a corporate
owner engaged in other businesses. Obtaining
a supply of wheat of desired quality mandates
purchasing skills that extend well beyond
conventional ideas about buying basic inputs
for a manufacturing plant. Logistics of successful milling have long been considered
among the most complex of any business,
where customers may be widely scattered as
compared with mills built to secure a quality
wheat supply while serving baking customers
whose locations are driven by totally different
considerations. Nothing spurs milling's consolidation and structure into highly focused
entities more powerfully than the long-time
FRQVROLGDWLRQRIODUJHÀRXUXVLQJFXVWRPHUV
whether baking bread, making noodles or
producing cake and cookies.
Addressing milling's tendency to operate
ÀRXU PLOOLQJ VHSDUDWH IURP DQ\ RWKHU EXVLness is prompted this year by numerous commentaries asking whether Warren Buffett and
his Berkshire Hathaway conglomerate do not
suddenly signal a different corporate direction. His buying this year of Precision Castparts for $37 billion and his earlier involvement in the creation of The Kraft-Heinz Co.
DVDKLJKO\GLYHUVL¿HGIRRGFRPSDQ\VLJQDOHG
rejection by this highly revered investor of
any hesitancy he might have about building
a totally disconnected conglomerate. Mr. Buffett says he runs a sprawling conglomerate
that is "constantly trying to sprawl further."
Milling's sharp difference from such a business makes for a global industry that has gone
in its own direction in a manner making great
promise for the future.
Morton I. Sosland
Editor-in-chief

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