Cereal Success: Former CEO of Kellogg, U.S. Secretary of Commerce shares with Golden Seeds

Eric Nadler, managing director of Golden Seeds and co-leader of Sector Group for Consumer Products and Applications

October 16, 2018

Carlos Gutierrez, Sr. and Carlos Gutierrez, Jr.

During Golden Seeds September 2018 Forum, our featured speaker, Carlos Gutierrez, Sr., shared his views on innovation and business with our investors. He was introduced and interviewed by his son Carlos Gutierrez, Jr., a fellow Golden Seeds investor.

Carlos Gutierrez, Sr. is chair of Albright Stonebridge Group (ASG), a global strategic consulting organization. He joined ASG from Citi, where he was vice chairman of the Institutional Clients Group. He was also U.S. Secretary of Commerce under President George W. Bush, who called the business leader “a visionary executive.”

Gutierrez’s talk focused mainly on his work at the Kellogg Company, the global manufacturer and marketer of food brands. He began his 30-year career with the company selling cereal to small grocers out of a van in Mexico City. He would become its youngest CEO, was named chairman of the board and is credited with reviving the company. Fortune Magazine dubbed him “The Man Who Fixed Kellogg.”

When an executive like Gutierrez speaks, I listen. The following are some of his reflections — wisdom that’s invaluable to investors, entrepreneurs, executives, everyone.

Strategy and Direction

Gutierrez’s is known for a pioneering strategy, “Volume to Value,” which is a way to increase sales by focusing resources on higher-margin products. Extra income is then used for advertising, promotions and R&D, which further high-margin sales growth. It’s a specific tactical approach, and during his talk, Gutierrez said he felt strategy was too often aspirational and vision-like. He noted: “Strategy should be something that provides direction on a day-to-day basis. Good strategies come from simple insights.”

Empowering, Simplifying

Under his leadership, Kellogg moved from a hands-on company to one with a strategic process to be followed by all, advancing everyone towards the same goal in tandem. This freed up their senior leaders to manage the process, which resulted in the greatest string of innovation Kellogg’s ever had.

He recalled: “It was amazing for me, liberating in the sense that I sat in my office and knew the process they were following …. We gave them parameters, but they just ran with it. Empowerment of people is so important.” Gutierrez also remarked how a lot of executives today confuse complexity with sophistication: “Our job is to provide clarity in an age of ambiguity. Simplify, simplify!”

Innovation and Results

A favorite line from Gutierrez’s talk was direct and brief: “Innovation is important to driving growth — but execution drives results.” Ideas and advancements can attract interest and bring about expansion, but, in the end, making them a reality is what impacts the bottom line.

Fads vs. Trends

Gutierrez said one of the toughest and most important things an executive can do is distinguish between a lasting trend and fleeting fad. As he noted, “If you identify an important trend, companies will build plants and make large capital expenditures. However, if it turns out to be a fad, then you’ve wasted many corporate resources.” Kellogg was actually a “fast follower.”

As he explains, they didn’t invent Pop-Tarts, they just beat the competition with their go-to-market execution.

He further emphasized the need to provide clear consumer benefits when making claims; if you’re fuzzy or too conceptual, consumers will walk away. He cautioned that trends change; the current fading of diet soda after decades in the spotlight is an example. As for a current fad, he thinks a product being non-GMO (genetically modified organisms) sounds good but it isn’t clear that it delivers a true consumer benefit.

Building the Better Business

There was a lot to take in from his remarks, including tips that can build a better business. For instance, Gutierrez cautioned to closely monitor product margins: “Too little and you become a commodity, while a high gross margin can allow you to spend and build a brand.”

When it comes to acquiring companies, he recommends that it’s best to leave acquisitions alone and simply help all you can. He cites Kashi as an example, a brand with a unique niche that really only required Kellogg’s key contacts and resources for success. For startups, he advises not doing things just to look attractive for a potential exit — run a business as if you’ll have it for the long-term and buyers will find you.

Golden Seeds was honored to feature Secretary Gutierrez at our investors forum. His words of wisdom extend far beyond cereal!


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