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Strategies & Market Trends : Sharck Soup -- Ignore unavailable to you. Want to Upgrade?

To: Jim Spitz who wrote (36462)	10/9/2001 8:39:18 AM
From: Jim Spitz	Read Replies (1) \| Respond to of 37746

Making the Doughboy do double-duty Ann Merrill Star Tribune Published Oct 9 2001 He's so cute, so giggly and instantly recognizable that everybody wants him. That's the problem. General Mills Inc., working with the Federal Trade Commission (FTC) for more than a year, has grudgingly agreed to share the Pillsbury brand and its Doughboy icon with International Multifoods Corp. if the $10.5 billion purchase of Pillsbury is finalized. But is that enough to seal General Mills' purchase of crosstown rival Pillsbury when FTC commissioners vote -- perhaps this week -- on whether to approve the merger? Speculation about the fate of the deal runs high, but there is consensus on one point: General Mills' plan for shared custody of an icon as valuable as the Doughboy is unusual. "It's rare and presents some potential problems," said Deborah Roedder John, a professor at the University of Minnesota's Carlson School of Management. "It would be in the companies' best interest to maintain consistency, but I'd say 'Good luck.' It's tough enough to be consistent within divisions, let alone with two different firms," Roedder John said. Pillsbury launched the Doughboy to promote crescent rolls in 1965 and has raised Poppin' Fresh carefully. "It's been textbook, picture-perfect brand management," delivering a consistent message to consumers, said Bridget Levin, founding partner of Edina-based Nametag International Inc. Indeed, Pillsbury has developed guidelines for ad agencies working with the Doughboy: his skin is off-white like dough, smooth but not glossy; his stomach is proportional to his entire mass; he is not portly. and rear views can not show "curvy buns." Pillsbury, also crafts how the Doughboy acts. The company, for example, rejected a pitch for a lighthearted "Got Milk?" campaign featuring the Doughboy as the one who drinks a family's last drop of milk. The company's guidelines stipulate he must be a helper, teacher or friend, not a scamp who swills milk. It will be painful for Pillsbury to hand over this carefully-crafted icon to a new owner, or share it, Levin said. "It's the classic divorced-parent scenario. Even if the parents are on the same page today, there will be different choices and directions going forward." General Mills finds itself in this position 15 months after announcing plans to buy Minneapolis-based Pillsbury. When the deal was announced, the maker of Cheerios said it would find a buyer for some of the Pillsbury brands in order to avoid antitrust issues. A surprise bidder In February, Minnetonka-based Multifoods emerged as the buyer, with plans to spend $305 million to acquire Pillsbury dessert mixes sold under the Pillsbury and Martha White brands, Pillsbury's Hungry Jack potato mix and nonperishable breakfast items. Multifoods was a bit of a surprise bidder because it's primarily a food-distribution company that would be shifting its focus to packaged-goods production with the acquisition of the Pillsbury brands. Officials from Multifoods were unavailable for comment Monday. The FTC, in its role of maintaining fair competition, apparently has concerns about Multifoods' viability as a strong competitor, leading it to push General Mills to sweeten the deal. In June, Multifoods said it anticipated "some favorable modifications to the original purchase agreement." The company's original licensing agreement specified it could use the Pillsbury brand for 20 years; after that it would pay an annual $1 million royalty fee. Multifoods also was given the right to to use the Doughboy symbol for a short period, reportedly a year or two. While the shared branding agreement is seen as unusual by some, others view it as a standard licensing agreement that will dictate how Multifoods can use the Pillsbury brand and remedies should it go astray. Licensing both ways is common at General Mills -- it allows outside companies, such as makers of kitchen utensils, to put the Betty Crocker brand on its products; and it has a licensing agreement with the French owner of Yoplait to market the yogurt in the United States. As the FTC negotiations dragged on, Golden Valley-based General Mills repeatedly rescheduled the deal's anticipated close date. "We continue to expect the FTC to complete its review this month," Tom Forsythe, General Mills' spokesman, said late Monday. Those familiar with the review say it's likely to be a close vote among the five-member commission. The new commissioner, Timothy Muris, is expected to remove himself from voting because he recently worked for a law firm that represented General Mills. The commission's two Democrats and two Republicans will vote on whether to sue to block the merger. If the vote results in a 2-2 tie, General Mills will complete the Pillsbury purchase. If the commission votes to block it, General Mills will be forced to decide whether to fight the issue in court or abandon the deal. The FTC, which in 2000 had a record 4,900 merger notifications, last year saw substantial activity in merger-related litigation. Officials at the FTC were unavailable for comment Monday because of the Columbus Day holiday. -- Ann Merrill is at amerrill@startribune.com . © Copyright 2001 Star Tribune. All rights reserved.