BUSINESSWEEK ONLINE : APRIL 3, 2000 ISSUE
BUSINESS WEEK E.BIZ -- STRATEGIES

Pillsbury: A Digital Doughboy
New software will let the food giant slice and dice reams of data, changing everything about how it caters to consumers

On the banks of the Mississippi River, among a cluster of Minneapolis skyscrapers, Fred Hulting and a group of some 150 employees are quietly toiling away on a high-tech recipe. Their Web technology is helping remake Pillsbury Co. (DIA) into the Doughboy for the Digital Age. Led by Hulting, a PhD in statistics, the 131-year-old food giant is developing software that will analyze reams of data and change every aspect of Pillsbury, from the way it develops new products to how it capitalizes on consumers' tastes. Soon, all of Hulting's co-workers at Pillsbury will be able to get all sorts of data with a few simple keystrokes--whether it's how many consumers found vegetable stems in their soup to market research by AC Nielsen Corp.

On the surface, this might not seem like much more than a nifty point-and-click program. But for Pillsbury, it could mean the difference between languishing as a staid Old Economy food company and emerging as the cutting-edge New Economy brand to beat. Right now, Hulting's program, NetStat, which he designed by customizing a $40,000 software package from MathSoft Inc., is just coming out of a pilot phase mainly at Pillsbury's frozen breakfast food unit. But in May, it will be rolled out across the company's nine brands. With the ability to share information at Net speed, Pillsbury is already hastening the design of manufacturing lines from Illinois to Switzerland and allowing researchers across this 70-country conglomerate to dissect consumer habits more efficiently--even by regional tastes. Within a couple of years, Hulting expects the software to be as ubiquitous on Pillsbury desktops as photos and statues of the plump, blue-eyed Doughboy, Poppin' Fresh. ''We'll reach everyone who sits at a desk,'' Hulting promises. ''We will change the way people are doing their jobs.''

The food giant could use some fresh ideas. Investors, lusting after more innovative dot-com shares, have turned bearish on packaged-food stocks. In January, the Standard & Poor's food index sank 6%. Sales of the company's top products have slumped during the past year, and Pillsbury's parent, London's Diageo PLC (DEO), has been closing plants and cutting costs at the $6 billion division.

If Pillsbury's experiment goes well, it could rattle the food industry. Long considered a marketing leader, Pillsbury's nine brands--including Green Giant, Haagen-Dazs, and Old El Paso--ship 437 million cases of food a year. Pillsbury excels by developing intimate knowledge of its products and how consumers feel about them. To do so, it compiles buckets of statistics. For example, it gathers customer data by encouraging consumers to call an 800 number printed on the package of every product. Consumer relations staffers answer some 3,500 calls a day, logging the comments into a massive database that's organized into categories such as ''manufacturing code,'' as well as the likes and dislikes of consumers.

Thumbs-up. Take Toaster Strudel, a frozen breakfast pastry. Thousands of people called or wrote to say: ''Your fruit flavors are good, but how come you don't offer chocolate?'' Analysis of those calls led to a chocolate-flavored version introduced in February. But from start to finish, the process took months, as marketing and R&D staffers accumulated reports on consumers' strudel preferences. To produce the reports, Pillsbury's staff of analysts had to interpret the data. ''We had to go in and dig around,'' says Sally S. Shlosberg, vice-president for consumer relationships. It took Shlosberg's group several days to scour the information so Pillsbury could select the right new chocolate flavor. With NetStat, Pillsbury can get sharp analysis instantly. ''What I love about this is you go from data to pretty pictures immediately,'' Shlosberg says.

Getting those pretty pictures isn't a snap. Pillsbury had the good fortune of employing a tech whiz like Hulting. He took software from MathSoft, which specializes in statistical analysis programs, and designed NetStat. Without engineering expertise in-house, Hulting recommends hiring an outside consultant to help design this kind of sophisticated Web software. NetStat works like a supersmart Web site. The software resides on Pillsbury's Web server, where data from any worker's disk drive or machinery on the plant floor can be zapped to it. NetStat then shares the figures with another software program called S-Plus, which crunches the numbers in a split second and returns them to NetStat to be loaded back on the site. Because NetStat functions on the Web, employees located anywhere in the world--in a plant or on a sales call--can log on and put the program to work.

For Pillsbury, that's the cream. Every laptop-toting employee can snatch information when needed. By launching a Web browser, employees can crunch data that analysts at headquarters once had to do. Every 30 minutes, a scientist in a muffin manufacturing plant, for instance, could collect and interpret data that tracks the stability on each factory line of muffins. Doing this frequently means that muffins are made precisely to specs and the quality remains consistent. ''Pillsbury is aggressive,'' says food industry consultant Bill Bishop, president of Willard Bishop Consulting in Barrington, Ill. ''It's falling forward into the future.''

In that future, Shlosberg envisions handing knowledge-hungry Pillsbury employees a ''library card'' that gives them the freedom to roam (virtually, of course) through stacks of consumer information and pull just the data they need. Suddenly, departments that used to pay for info to be crunched can avoid a pricey fee that Pillsbury's stat department charges. Such work costs $50 to $75 an hour, or as much as $3,000 for a week's worth of analysis, Hulting says. Now employees get the analysis for free.

Pillsbury executives are as jolly as their leafy-toga-wearing Green Giant about the cost savings. But they're even more excited about using the software to build new plants. Although still in its infancy, NetStat already has helped Pillsbury ramp up plants in Europe and the U.S. quicker than ever before. A team of R&D engineers often come to the launch of a plant during the final days of testing--when, say, pizza or breakfast muffins are on a manufacturing line. They check that the machines are working to specifications. During the startup of a new plant in North America, two engineers performed rigorous tests on the equipment--checking belt speeds, dough-slicing measurements, oven and freezer temperatures. Without NetStat, data would have to be sent repeatedly to Minneapolis headquarters for analysis, each request taking about three days. Now, data are uploaded onto the Web site and interpreted on the spot. ''That could save tens of millions of dollars in working capital,'' says analyst John M. McMillin of Prudential Securities Inc.

Zestier. Managers are thinking up more tasks for NetStat. Pillsbury already knows that people in different regions of the country have different tastes. In the South, for example, many are fond of blueberry, but raspberry is more of a favorite in the West. It's tough for Pillsbury to make market research broadly available to employees in a timely fashion. But Eric J. Peterson, associate marketing manager for new products, is excited about the potential of taking consumer information gathered and instantly slicing it by zip code to determine where he can target a marketing campaign. With reliable information on consumer habits, it's easy to imagine marketing a zestier salsa in the Southwest or plumper blueberries for muffins sold in the Southeast.

Peterson also is dreaming up ways to nab new business. On sales calls to grocery chains, he and his team typically give a presentation to a team of buyers. They offer samples of the new product and pitch them on why it's a must for their shelves. The buyers who feel they know what their shoppers want often ask questions about the appropriateness of a Pillsbury flavor, color, or size of package. With their laptops and access to a dial-up modem line, marketers wouldn't have to say, ''I'll get back to you.'' They could use NetStat to dive into consumer data right there during the presentation. ''I think it's awesome,'' Peterson says of NetStat. ''It makes my mouth water with all the possibilities.'' The proof is in. One of the tastiest of Pillsbury's products is digital.

By ROGER O. CROCKETT

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