Nabisco Brands, Inc.

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Nabisco Brands, Inc.

Nabisco Brands Plaza
East Hanover, New Jersey 07936
U.S.A.
(201) 503-2000

Wholly owned subsidiary of RJR Nabisco, Inc.
Incorporated: 1898 as the National Biscuit Company
Employees: 35,000
Sales: $6 billion

For nearly a century, Nabisco has been one of the most widely recognized names in the American food industry. Today the company is among the world’s largest manufacturers of cookies and crackers, featuring such famous brands as Oreo, Fig Newtons, and Premium Saltines.

Nabisco Brands was formed in 1981 through a merger of Nabisco and Standard Brands. In 1985 R.J. Reynolds Industries, Inc. acquired Nabisco Brands in one of the largest takeovers in business history. The origins of Nabisco, however, date back to the formation of the National Biscuit Company at the end of the 19th century. In its early years, the company was usually called N.B.C. In 1941 the company adopted Nabisco, already a popular nickname, as the preferred abbreviation, but it was not until 1971 that Nabisco became the official corporate name.

The National Biscuit Company resulted from the 1898 merger of the midwestern American Biscuit Company, itself the result of the merger of 40 midwestern bakeries, and the eastern New York Biscuit Company, formed from eight bakeries and a smaller firm, the United States Baking Company. Thus, N.B.C. represented the culmination of decades of amalgamation within the biscuit industry. With 114 bakeries and a capital of $55 million, the Chicagobased company held a virtual monopoly on cookie and cracker manufacturing in the United States.

The chief architect of the 1898 merger and the first chairman of the new company was Adolphus Green. Green, a Chicago lawyer and shrewd businessman who had negotiated the American Biscuit Company merger, remained the guiding force at N.B.C. during the first 20 years of its existence. It was Green who was responsible for N.B.C.’s legendary emphasis on standardized, brand name products. Every N.B.C. bakery adhered to exact recipes and uniform standards of production, and N.B.C. developed products that could be nationally identified with the company. All of its merchandise was marked with the company’s distinctive emblem: an oval topped by a cross with two bars. (Green found the symbol in a catalog of medieval Italian printers’ marks, where it was said to represent the triumph of good over evil.)

Green decided to launch the National Biscuit Company by introducing a new line of biscuits. He chose the ordinary soda cracker, but gave N.B.C.’s an unusual octagonal shape and packaged it in a special protective container. Until then, crackers had been sold in bulk from cracker barrels or large crates, which did little to retard sogginess or spoilage. N.B.C. took crackers out of the barrel and put them into small cardboard boxes with the company’s patented “In-er-Seal” waxed paper lining to retain freshness.

Novelty packaging was not enough. Green also commissioned the Philadelphia advertising agency N.W. Ayer & Son to come up with a catchy name for the new cracker. The Ayer agency suggested “Uneeda Biscuit,” and also helped promote the product with illustrations of a rosy-cheeked boy clutching a box of Uneeda Biscuits. The boy was dressed in a rain coat and galoshes to call attention to the packaging’s moisture-proof nature. The Uneeda Boy became one of the world’s best-recognized trademarks.

N.B.C. was a pioneer in company advertising, spending an unprecedented $7 million in its first decade to promote its products. Across the country, newspapers, billboards, and posters queried “Do you know Uneeda Biscuit?” By 1900, sales of Uneeda Biscuits surpassed 100 million packages, prompting Green to remark that Uneeda was the most valuable word in the English language.

A host of imitators attempted to cash in on the popularity of Uneeda, and the company’s attorneys were kept busy defending N.B.C. trademarks against infringement. The company won injunctions against rival bakeries marketing “Iwanta,” “Uwanta,” and “Ulika” biscuits. By 1906 N.B.C. had successfully prosecuted 249 cases of copyright infringement.

The National Biscuit Company built its reputation on securing customer loyalty to recognized brands such as Uneeda. In the early years of the 20th century, the company concentrated on expanding its line of cookies and crackers. Older products originally created by Nabisco’s precursor bakeries that continued to be successful included Fig Newtons and Premium Saltines. In 1902 N.B.C. introduced Barnum’s Animal Crackers in the famous decorative box resembling a circus cage filled with animals. In 1912 both Lorna Doones and Oreos were created, the latter eventually becoming the world’s best-selling cookie.

N.B.C. moved its headquarters from Chicago to New York in 1906, where the company’s factory on Manhattan’s lower west side was the world’s largest bakery. Yet Adolphus Green still managed the biscuit conglomerate as if it were a small family business. Green disliked delegating power. He personally inspected every company bakery once or twice a year, and most local managers communicated directly with Green. Green’s authoritarian style annoyed many of his colleagues and led to frequent resignations from the board of directors. As a result, when Green died in 1917, few of the original directors remained and company management was in disarray.

The most pressing task for Green’s successor, Roy E. Tomlinson, was reorganizing N.B.C.’s administrative network. Tomlinson had worked his way up the corporate ladder and was sensitive to the various levels of command. He delegated greater authority to other directors and to middle management, and remained company head until the 1940s.

The year Tomlinson took over was the year America entered World War I. During the war N.B.C. produced a special bread ration for soldiers and Tomlinson acted as advisor to the United States Food Administration. Wartime rationing of wheat flour and sugar also meant that cookies were less sweet and crackers were made of corn meal and rye. Company advertisements at the time depicted Uncle Sam holding boxes of N.B.C. products with the patriotic caption “made as he says.”

The 1920s were a period of great prosperity for N.B.C. The company built a number of new bakeries and, in 1925, established its first foreign subsidiary, in Canada. N.B.C. also expanded its product line to include pretzels, breakfast cereal, and ice cream cones. Much of this diversification came about through acquisitions of other companies. In 1928 N.B.C. purchased the Shredded Wheat Company for $35 million. That same year N.B.C. acquired the McLaren Consolidated Cone Corporation, the world’s largest manufacturer of ice cream cones.

The Depression years slowed company growth, but despite falling profits, N.B.C. managed to maintain and even raise dividend payments through a policy of severe wage reductions. The price of shareholder satisfaction, however, was labor unrest. In the early 1930s serious strikes broke out at Nabisco plants in New York, Philadelphia, and Atlanta, where angry picketers proclaimed “U-Don’t-Needa biscuit!”

Some new Nabisco products helped bolster company sales during the Depression. In 1931 Nabisco took over the Bennett Biscuit Company and concentrated on its most popular product line, Milk-Bone Dog Biscuits. Originally marketed as “a dog’s dessert,” N.B.C. boosted sales by advertising the product’s breath-sweetening properties. In 1934 Nabisco met with great success when it launched Ritz Crackers as a new prestige item. Throughout the 1930s, N.B.C. relied heavily on radio advertising, promoting its products on the company-sponsored “Let’s Dance” radio program featuring the orchestras of Xavier Cugat and Benny Goodman.

In 1941, the letters “N.B.C.” in the official trademark were exchanged for the word “Nabisco,” a popular nickname which had first appeared as a possible name for Uneeda Biscuits. The change was made in part to reduce confusion with the recently established National Broadcasting Company.

During World War II the company was again faced with the problem of rationed flour, sugar, butter, and oil. Recipes were altered and substitute ingredients used. Nabisco also developed an emergency field ration for pilots and paratroopers and even supplied the canine corps with dog biscuits.

The immediate postwar years were a troubled time for Nabisco. The company’s longtime leadership in the biscuit industry had led to a certain complacency. During the Depression Nabisco had neglected to make capital improvements, and many bakeries were now outdated and in dire need of renovation. In 1945 the Nabisco board elected the young and energetic George Coppers as president. The inertia of the 1930s gave way to an expansive new attitude as Coppers undertook the modernization of Nabisco’s antiquated bakeries. Within ten years he had spent more than $150 million renovating old plants and building new ones. The reconstruction program culminated in 1958 with the opening of an ultra-modern bakery and research center in Fair Lawn, New Jersey.

The 1950s also marked the beginning of overseas expansion for Nabisco. In 1950 the company formed a manufacturing partnership with La Favorita Bakery in Venezuela, and in 1953 it established another partnership with the Famosa Bakery in Mexico. From this foothold in Latin America, Nabisco has grown to become a major supplier of baked goods to the region.

In 1960 Lee S. Bickmore succeeded Coppers as president and the company accelerated acquisitions and overseas expansion. In 1961 Nabisco acquired the Cream of Wheat Corporation and the French firm Biscuits Gondolo. The next year, the company purchased the English bakery Frears, as well as New Zealand’s largest biscuit firm, Griffin and Sons. In 1963 Nabisco acquired Biscuits Belin of France, the Danish baking concern Oxford Biscuit Fabrik, and the James O. Welch Company, makers of Junior Mints and Sugar Babies. The following year, Nabisco bought Harry Trueller, one of West Germany’s largest confectioneries. Overseas acquisitions continued apace in 1965 with the addition of the Italian biscuit company Saiwa and the Spanish bakery Galletas.

By the end of the 1960s, Nabisco was the leading manufacturer of crackers and cookies not only in the United States, but in Canada, France, and the Scandinavian countries and was a major supplier to many other European and South American countries.

The 1970s were a period of continued growth. Nabisco sales reached the $1 billion mark for the first time in 1971, and the $2 billion mark only five years later. In 1970 the company made its first Asian investment by establishing a joint venture with the Yamazaki Baking Company of Japan. Nabisco also upgraded its facilities in 1975 with the construction of a modern flour mill in Toledo, Ohio and a computerized bakery in Richmond, Virginia. That same year the company moved its headquarters to a specially designed complex in East Hanover, New Jersey.

During the 1970s Nabisco made its first acquisitions outside the food industry, buying the toy maker Aurora Products and the drug company J. B. Williams, manufacturer of Geritol and Sominex, in 1971. Here, the company was in unfamiliar territory, and the results were not always satisfactory. Aurora proved largely unprofitable and was sold in 1977. The J.B. Williams unit was frequently at odds with the Federal Trade Commission, and in 1982 Nabisco sold Williams to the Beecham Group for $100 million.

Eventually the inflation and mounting energy costs of the 1970s led Nabisco to consider the possibility of a merger with another large food concern. Early in 1981, Nabisco Chairman Robert Schaeberle and Standard Brands Chairman F. Ross Johnson announced plans for a merger between their companies.

Standard Brands was formed in 1929 when the Fleischmann Company, the maker of products as diverse as yeast and gin; Chase & Sanborn, a coffee roaster; and the Royal Baking Powder Company all merged. The resulting company prospered through the Depression, finding new markets for its products (”Yeast for Health”) and expanding existing product lines. Between 1929 and 1981, when Standard Brands merged with Nabisco, Standard Brands acquired several more important businesses, including Planters Nut & Chocolate Co. in 1961 and the Curtiss Candy Company, makers of the Baby Ruth candy bar, in 1964.

Nabisco Brands wasted no time in demonstrating its enhanced potential for growth. In 1981 the company paid $250 million to buy the Life Savers Company. That same year the company bought a controlling interest in the Mexican cookie firm Gamesa for $45 million. In 1982 Nabisco Brands purchased the English biscuit company Huntley and Palmer Foods for $140 million. In 1985 the company formed a partnership with the Yili Food Company in China to produce Ritz Crackers and Premium Saltines for the Chinese market.

The nation’s growing health consciousness was a new concern for Nabisco Brands during the 1980s. To this end the company marketed low salt versions of Ritz Crackers, Saltines, and Triscuit Wafers. Nabisco also introduced Wheatsworth Crackers, made with whole wheat flour and containing no artificial flavors or colors.

In a friendly takeover in 1985, Nabisco Brands was purchased by R.J. Reynolds, a worldwide manufacturer and distributor of tobacco, food, and beverage products, for $4.9 billion, creating the nation’s largest consumerproducts company, with annual sales of more than $19 billion. Nabisco had sought the merger in part to avoid hostile takeover attempts, while Reynolds was interested in diversification. Later in the year R. J. Reynolds changed its name to RJR Nabisco, Inc. F. Ross Johnson, the president of Nabisco and the former chairman of Standard Brands, became RJR Nabisco’s new president.

In 1988 Johnson and a management group at RJR Nabisco attempted to take the company private in a $17.6 billion leverage buyout. The buyout was an attempt on Johnson’s part to boost stock prices, though he soon lost control of the situation as other firms entered the fray. The brokerage house of Kohlberg Kravis Roberts (KKR) upped the bidding for RJR Nabisco to $20.3 billion. The broker Forstmann Little, along with Procter and Gamble and Ralston Purina, became the third bidder. KKR ultimately won with a record $24.5 billion in cash and debt securities, and replaced Johnson with Louis V. Gerstner Jr., the former president of American Express.

KKR and Gerstner have pledged not to dismember the company but to manage it for the long run. Nonetheless, in order to cover the company’s monumental debt, RJR Nabisco does plan some asset sales; the first was its European cookie and cracker business to BSN, France’s largest packaged-food group, for $2.5 billion.

Today, as Nabisco Brands tries to maximize profitability, it must face the fact that most Nabisco bakeries are 30 to 35 years old and in need of modernization. Since the major reconstruction phase of the 1950s, the company has neglected capital improvements. On the other hand, Nabisco’s famous brand names are a tremendous strength. Ritz, Oreo, Triscuit—few companies can claim so many products that are household words.