Cargill – Success Mantra…!!!

At 60, even in clean white shirt and rimless spectacles, he still looks like a farmer. He’s tall and angular with thick silver hair, ruddy skin, and a chin like a block of wood. At Cargill’s HQ Wayzata, Minnesota, just west of Minneapolis, in the Founders Room, surrounded by oil portraits of CEOs past. The Founder Room is only for Cargills and Macmillans, the two families joined by marriage at the turn of the last century; they built Cargill and ran it as a family business until CEO Whitney MacMillan’s retirement in 1995.

Mr. Greg Page only misgiving about the job offer he received from Cargill in 1974 was that it was from Cargill. He had grown up in tiny Bottineau, North Dakota, six miles from the Canadian border. Mr. Greg Page took the job anyway. He labored happily, for first 24 years at Cargill, beginning with the feed division, then in meat, a home and abroad, until he was picked for bigger things. Eventually he was promoted all the way, in 2007, to chairman and CEO of the US largest private company. Today he runs a business that is vastly larger and more influential that the Cargill of his youth.

Mr. Page is the third CEO in a row to come from outside the family. Today not a single Cargill or MacMillan remains in a senior executive position at the company. What hasn’t changed is the ownership. Cargill introduce a limited employee stock ownership plan in the ‘90s that allowed some family members to cash out. However, roughly 100 descendants of the founders still own around 90 per cent of the stock, worth some US$ 52 billion as of the last official tally. Generally, they’ve been content to plough profits back into the business and watch the value of their asset grow. Dividends are calculated on a rolling two-year cycle and paid at a minimum rate. “The capital’s not only private. It’s patient and permanent” says Page.

Cargill’s roots lie in the ancient, risky business of buying, storing, and selling grain. William Wallace Cargill, the second son of a Scottish sea captain, started with a single warehouse Conover, Iowa, in 1865. Conover is a ghost town now, but Cargill still deals heavily in grain. Wherever it grows and wherever is goes.

Cargill ships other commodities too: soybeans and sugar from Brazil; palm oil from Indonesia; cotton from Asia, Africa, Australia and the Deep South; beef from Argentina, Australia, and the Great Plains; and salt from all over North America, Australia, and Venezuela. The company owns and operates nearly 1000 river barges and charters 350 oceangoing vessels that call on some 6000 ports globally, ranking it among the world’s biggest bulk shipper of commodities. “In one sense, you can think of Cargill as just a big transportation company” says Wally Falcon at Stanford University. “Their game is: extremely efficient, high volumes, low margins, and just being smarter and quicker than anybody else”

Sometimes the same ship that picks up a load of soybeans at Cargill’s deepwater Amazon port in Santarem,  Brazil, after unloading in Shanghai, will carry coal from Australia to Japan before rinsing out its holds and returning to Brazil for more beans. In fact, Cargill ocean-transport business moves more coal and iron ore for third parties than it does foodstuffs, oils, and animal feeds for itself, by a factor of two. “From places of surplus to places of need” is the Cargill mantra.

In 63 countries markets in which Cargill operates around the world. It derives 60% of its income outside the U.S. – 531 million bushels Cargill’s US grain storage capacity, the largest of any company; it’s also No. 1 in beef.

When asked to Mr. Page What does Cargill mean when it talks about food innovation?  He replies “An array of things. In some cases it’s fiber you enjoy eating. In other cases it’s the sensation of sweetness that comes without a calorie burden. In some cases it is healthfulness promise: phytosterols from soybeans, antioxidants that people are concerned about. In some cases they’re high-performance sports drinks that have a glycemic response that coincides with an athlete’s needs. This is probably things that a lot of people don’t think about, but there are sports beverages where our role is to understand metabolism to the level that we understand how the energy is released into the bloodstream”

With US$ 119.5 billion (Rs. 6.31 lakh crore) in revenues in its most fiscal year, ended May 31, Cargill is bigger by half than it is nearest publicly held rival in the food production industry. Archer Daniels Midland, if Cargill were public, it would have ranked No. 18 on this year’s Fortune 500, between AIG and IBM. Over the past decade, periods when the S&P 500s’ revenues have grown 31% Cargill’s sales have more than doubled.

To be continued….

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~ by dawdayogesh on January 15, 2012.