Golden Grain Foods produces consumer food products including cereals, dessert mixes, microwave popcorn, snack foods, and mixes that enhance and simplify meal preparation. During the previous year, reported sales grew at a rate of \(8 \%\) to reach \(\$ 6\) billion. Earnings after taxes grew at a rate of \(10 \%\) to \(\$ 522\) million. Every one of Golden Grain Foods' domestic operating divisions posted earnings gains of at least \(10 \%\), and combined international earnings grew at an even stronger rate.

The double-digit earnings growth was driven by unit volume gains. Worldwide unit volume increased \(9 \%\), with good performance from established businesses and strong contributions from the cereal and snack brands. In addition, productivity improvements helped lower the cost per case of manufactured products. In spite of double-digit earnings growth, the stock price grew just \(6 \%\) while the S\&P index grew \(29 \%\). The growth differential reflects concern among investors about the market for ready-to-eat cereal in the United States Investors also are concerned that recent sales growth of lower-priced bagged cereals and store brands will inhibit sales of premium quality brands such as those produced by Golden Grain Foods.

Management is optimistic about the future of cereal products because of favorable demographic trends and cereal's fit with today's emerging health and nutrition recommendations. Golden Grain Foods will use product improvement, health news and brand-building marketing, effective trade merchandising programs, and good new products to drive cereal growth.

The company's financial goals are to achieve \(12 \%\) average annual growth in earnings per share, to generate a minimum \(25 \%\) return on invested capital, to exhibit financial strength that merits an "A" bond rating, and to pay out between \(50 \%\) and \(60 \%\) of earnings as dividends. Three factors will be key to achieving \(12 \%\) earnings per share growth as follows:

- Strong unit volume

- Improved productivity

- Profit contributions from international operations Actions have been taken to stimulate more and better innovation throughout the company by sharpening the focus and increasing the level of resources committed to new products and business development. In addition, management has consolidated the supply chains for flour milling, foodservice, and packaged foods business. These changes will create productivity opportunities.

The company plans to keep leading brands vital with a steady diet of product improvements, innovation, and consumer-focused marketing. Plans include meaningful improvement on several key products, such as cake mixes and frosting. New products are critical to the company's long-term growth. In recent years, an average \(27 \%\) of volume has come from products five years old or less.

Innovation will be focused on consumer needs. When it comes to snacks, consumers crave variety. New variations of microwave popcorn and new fruit snack products drove volume and share growth in the past. Consumers want mix products that make popular foods a snap to prepare. In addition, consumers are asking for nutritious foods to eat on the go. Strong levels of innovation have been key to increasing dollar market share for yogurt brands to nearly \(\mathbf{2 7 \%}\). The company used a steady stream of indulgent new flavor varieties to drive growth in the core yogurt lines.

To meet its long-term goals, the company is after really big ideas-everything from new packaging concepts to new health benefits to new food technologies. Consistent with key strategic objectives, employee teams have been empowered to design and develop new and creative ways to use information and manufacturing technology. Additionally, procedures are in place to supply information to key users within the company. Management has recently taken ac-

tions to accelerate the flow of their innovation pipeline. Operating divisions now focus at least \(25 \%\) of total resources on new products and new business ideas.

In addition to innovations in production, Golden Grain Foods is exploring new distribution channels. The company is targeting a broader penetration of products in vending machines and other foodservice outlets. New retail outlets include convenience stores, membership clubs, drug stores, and mass merchandisers.

Management has been finding ways to buy smarter, manufacture more efficiently, and distribute products at a lower cost. Strong productivity and improved operating leverage combined to lower average cost an additional \(5 \%\). Golden Grain Foods seeks to deliver ongoing productivity gains with innovative thinking and breakthrough performance. For example, the company borrowed techniques from racing pit crews to achieve a \(30 \%\) reduction in the time it takes to change a cereal line from one product to another. The results are significant cost savings and an important increase in manufacturing capacity. In addition, managers are working to more closely integrate the flour milling, foodservice, and packaged foods supply chains. Across all functions, Golden Grain Foods is exploring outsourcing and other strategies to increase efficiency and reduce administrative expense.

Assume corporate managers at Golden Grain Foods want to develop a set of performance indicators to help align decision making with the company's strategic plans. These measures should encourage key activities within the four elements of the balanced scorecard, financial, internal, customer, and innovation and learning.

\section*{Required}

A. In what businesses does Golden Grain Foods operate?

B. Discuss the financial performance of the company.

C. What are the primary concerns and opportunities identified by management?

D. Prepare a balanced scorecard for Golden Grain Foods. You may wish to classify key activities or initiatives cited in the case as financial, internal business processes, learning and growth, or customer satisfaction. Having identified key initiatives, develop a performance measure that could be used to evaluate progress in that particular activity or initiative.