Quaker Oats Company

views updated May 17 2018

Quaker Oats Company

Quaker Tower
321 North Clark Street
Chicago, Illinois 60604–9001
U.S.A.
(312) 222–7111
Fax: (312) 222–8392

Public Company
Incorporated: 1901
Employees: 31,000
Sales: $5.95 billion
Stock Exchanges: New York Midwest Pacific Toronto London Amsterdam
SICs: 2043 Cereal Breakfast Foods; 2037 Frozen Fruits & Vegetables; 2047 Dog & Cat Food

The product of a rocky union between three 19th–century millers, Quaker Oats Company maintains a portfolio of strong branded products within the food business. Long considered closed and old–fashioned, Quaker Oats now has one of the most dynamic and respected CEOs in the food industry. The company has also drawn consistent praise for its community involvement and social conscience.

Ferdinand Schumacher undertook an ambitious project in 1856 when he organized his German Mills American Oatmeal Factory in Akron, Ohio. His mission was to introduce steel–cut oats to the American table at a time when oats were considered an inappropriate food for anything but horses. German and Irish immigrants were his initial customers, since they were accustomed to eating oats and unused to the high cost of American meat. Oat milling was a low–cost operation, and competitors quickly appeared as oats gained acceptance as a food.

One competitor with an innovative approach to business was Henry Parsons Crowell of nearby Ravenna, Ohio. Crowell purchased the Quaker Mill in Ravenna, gave his oats the Quaker name, and packed them in a sanitary, two–pound paper package with printed cooking directions. He also advertised in newspapers with German, Scottish, and Irish readers, a practice which was at that time associated with disreputable showmen. Crowell became the first marketer to register a trademark for cereal, registering his Quaker symbol in 1877. Soon Crowell’s success impinged on Schumacher’s business, with urban customers often specifically requesting Quaker brand oats.

Another competitor, Robert Stuart, emigrated with his father from Embro, Ontario, to establish a mill in Cedar Rapids, Iowa, in 1873. Eventually he helped finance the building of a new oatmeal mill in Chicago and expanded the original mill. Under the same label the two mills established markets throughout the Midwest, especially in Chicago, Milwaukee, and Detroit, carefully avoiding territories dominated by Schumacher or Crowell.

In 1885 Crowell and Stuart joined forces in a price war against Schumacher’s larger operation. An attempt to form the Oatmeal Millers Association that year failed when Schumacher refused to join. One year later Schumacher’s largest mill burned to the ground; Crowell reacted by immediately raising his prices. Because Schumacher had been uninsured, he finally agreed to join Stuart and Crowell in their venture. Crowell became president of the Consolidated Oatmeal Company, Stuart was vice–president, and Schumacher, the former oatmeal king, was treasurer.

Consolidated, however, only made up half of the trade, and the other half was determined to destroy it. Competitors built mills they didn’t want, knowing Consolidated would purchase them simply to keep them out of production. Half of Consolidated’s earnings were spent this way, and in 1888, under financial and legal pressure, it collapsed.

A third and finally successful attempt at consolidation came that same year, when seven of the largest American oat millers united as the American Cereal Company. Schumacher ended up with a controlling interest, and he appointed himself president and Crowell vice–president. The company doubled production in two years by consolidating production into the two major mills at Cedar Rapids and Akron, Ohio, The concentration of facilities gave them the strength to survive the depression of the 1890s.

Crowell promoted Quaker Oats aggressively during the decade. However, Schumacher insisted that his own brand, F. S. Brand, be sold alongside Quaker, blunting the success of the better–selling Quaker.

As treasurer, Stuart crossed Schumacher by purchasing two food companies at bargain prices and investing in machinery for the Cedar Rapids mill. Opposed to both actions, Schumacher requested and secured Stuart’s resignation in 1897. The following year the president also voted Crowell out of the organization.

Crowell and Stuart, who together owned 24 percent of American Cereal, quietly began to buy available shares. In 1899, after a proxy fight, Schumacher lost control of the company to Stuart and Crowell. Stuart immediately built new facilities and diversified the product line while Crowell increased promotion. Quaker now produced wheat cereals, farina, hominy, corn meal, baby food, and animal feed.

In 1901 American Cereal became the Quaker Oats Company, with sales of $16 million. Twenty years of growth followed, including a wartime peak of $123 million in sales in 1918. With the 1911 acquisition of Mother’s Oats, Quaker owned half of all milling operations east of the Rocky Mountains. (The federal government filed a suit against the purchase, but eventually withdrew its last appeal in 1920, when national interest in trust–busting had faded.)

An interest in finding a use for discarded oat hulls led to the establishment of a chemical division in 1921. Although a profitable use for furfural (a chemical produced from oat hulls that has solvent and other properties) did not appear until World War II, postwar sales of the product exceeded oatmeal sales into the 1970s.

Also in 1921 the company weathered a grain–surplus crisis; dealers had been caught with an oversupply and prices fell rapidly, leading that year to the company’s first reported loss. Stuart’s eldest son John became president of Quaker the following year. John Stuart immediately changed Quaker’s retail sales strategy to one of optimum, rather than maximum, sales. The growth of the grocery chains helped to encourage a system of fast turnover rather than bulk purchasing.

Early in the century Crowell and Stuart invested in foreign markets by establishing self–supporting overseas subsidiaries. These subsidiaries operated mills in Europe and sold oats in South America and Asia. Under John Stuart’s company reorganization in 1922, foreign operations became a corporate division. Then, as now, approximately 25 percent of Quaker’s sales were abroad.

During John Stuart’s 34 years as CEO, the company increased its toehold on the growing market of ready–to–eat cereals with Puffed Wheat and Puffed Rice. Quaker further diversified its product line by purchasing name brands that were already established, such as Aunt Jemima pancake flour in 1925. Similarly, the company entered the pet–food industry through the purchase of Ken–L–Ration in 1942. Internal attempts to develop a cat food failed, and the company purchased Puss ‘n Boots brand cat food in 1950.

In 1942 sales reached $90 million. Wartime demand for meat and eggs pumped new life into the sagging animal–feed division as well as boosting sales of the company’s grains and prepared mixes. Quaker’s furfural became important in the manufacture of synthetic rubber, and during the war Quaker built and ran a bomb–assembly plant for the government.

During the war and in the years that followed, Quaker’s sales grew to $277 million generated by 200 different products, a broad product line requiring heavy promotion. John Stuart’s younger brother, R. Douglas Stuart, studied under Crowell and assumed control of promotions when John became CEO. After World War II he adopted the then–radical policy of using more than one advertising agency. The Stuart brothers recognized that the grocery industry would continue to expand into pet foods, convenience products, and ready–to–eat cereals, and matched the company’s product line and promotions accordingly.

The company’s first outside manager, Donald B. Lourie, rose to CEO in 1953. Under Lourie, Quaker retained the atmosphere of a family company with personal leadership; however, the company needed external support for its increasingly complex marketing decisions. National advertising for the Aunt Jemima brand came at a price of $100,000. The cost of introducing Cap’n Crunch in 1963 was $5 million.

For many food companies, the 1960s were a period of automatic growth as consumer demand for convenience increased and brand recognition grew. For Quaker, however, sales rose just 20 percent and profits only 10 percent as long–term development absorbed earnings. Quaker expanded in the industry’s fastest–growing areas: pet foods, convenience foods, and ready–to–eat cereals. By the end of the decade growth rates had increased, but not as much as hoped.

Robert D. Stuart, Jr., became CEO in 1966. The decade’s slow growth and a general corporate trend toward diversification prompted him to make acquisitions outside the food industry for the first time since 1942. Many of these acquisitions were eventually sold, but Fisher–Price Toy Company, purchased in 1969, was held and grew beyond expectations. Within ten years, it made up 25 percent of Quaker’s total sales.

Late in 1970 Stuart restructured Quaker’s organization around four decentralized businesses: grocery products, which now included cookies and candy; industrial and institutional foods, which contained the newly acquired Magic Pan restaurants; toys and recreational products; and international. Sales in 1968 had been frustratingly low at $500 million, but with Stuart’s acquisitions, the company reported $2 billion in sales by 1979.

Economic recession during the 1970s kept sales down. A second toy company, Louis Marx Toys, was purchased in 1972. During 1974 and 1975, Marx, which was purchased as a “recession–proof” company, drove earnings per share from $2.04 to $1.45. Magic Pan Restaurant’s profits fell for four consecutive years. The chemical division reported a net loss of $7 million when a cheaper substitute for furfural came onto the market. This introduction took the company by surprise, as it expected earnings from that division to climb steadily.

Looking to expand its foreign market in grocery and pet foods, Quaker made seven acquisitions of foreign companies during the decade. But while the company focused on diversification, product development slipped. Between 1970 and 1978, only one new major product, 100 Percent Natural Cereal, was introduced. Shelf space in major grocery chains did not increase. Stuart had successfully lessened the company’s dependence on grocery products, but profits also dropped, to a low of $31 million in 1975.

By the end of the decade, however, a turnaround was in sight. Quaker’s least profitable areas were limited to its smallest divisions, and since the entire industrial and restaurant industries had been weakening, the company was already preparing to divest its holdings in that field.

William D. Smithburg replaced Stuart as CEO in late 1979. Smithburg aggressively increased Quaker’s sales force and advertising budget, improvements that were badly needed. The company also refocused on its core food business. Quaker had two new successes as the 1980s dawned: Ken–L–Ration’s Tender Chunks became the second–best–selling dog food in its first year, and Corn Bran had a commendable 1.2 percent share of the ready–to–eat cereal market. In addition, Fisher–Price sales had increased tenfold since 1969, to $300 million. Quaker planned to expand the division by building plants in Europe, raising its target age group, and lowering unit selling prices.

By 1979 Quaker had a return on invested capital of 12.3 percent—higher than the industry average, but well below competitor Kellogg’s 19.4 percent. The company still needed to divest its interests in companies that absorbed profits.

In the first half of the decade, Quaker sold Burry, a cookie maker; Needlecraft; Magic Pan restaurants; its Mexican toy operations; and its chemical division. During the same period, the company made several acquisitions. Like many food companies at the time, Quaker entered specialty retailing, with purchases like Jos. A. Bank Clothiers, the Brookstone mail order company, and Eyelab, all purchased in 1981. All would be sold in late 1986. By then, Smithburg had decided that the price for retail chains was inflated and that Quaker could get a better return on food. He proved himself right. By 1987 Quaker’s return on shareholder equity matched Kellogg’s. Quaker confirmed its new path with its 1983 bid on Stokely–Van Camp, the maker of Gatorade sports drink and Van Camp pork and beans. By expanding Gatorade’s geographic market, Quaker made the drink its top seller in 1987.

Quaker’s revival came about through the strong potential of its low–cost acquisitions. Golden Grain Macaroni Company, the maker of Rice–a–Roni, gave the company a base to expand further into prepared foods. Anderson Clayton & Company, purchased in late 1986, gave Quaker a 15 percent share of the pet–food market with its Gaines brand, effectively challenging Ralston Purina’s lead in that market.

With the purchase of Anderson Clayton, financed by the sale of its unwanted divisions, Smithburg managed to strengthen Quaker’s position in existing markets and improve its product mix without overloading the company with specialty products. Products with leading market shares made up 75 percent of 1987 sales, and over half came from brands that Quaker hadn’t owned six years earlier.

The late 1980s tempered that success, however. Pet food sales were flat throughout the industry and Quaker took $112 million in charges related to its recently expanded pet division. The corporation was a rumored takeover candidate because of its high volume of shares outstanding and its strong branded products. In response, the company announced in April, 1989 that it would purchase seven million of its nearly 80 million outstanding shares, and that July, Smithburg reassigned some managerial duties. The company also decreased its advertising and marketing expenses.

Despite these minor setbacks, Quaker entered the 1990s with 14 years of unbroken sales growth. The company concentrated on three major divisions: American and Canadian grocery products; international grocery products; and Fisher–Price Toys. Quaker continued to streamline its operations into the early 1990s, spinning off Fisher–Price Toys in 1991, a move which made Quaker solely a packaged–food company for the first time in over 20 years. Sales that year hit a record $5.5 billion, and over 70 percent of the products in Quaker’s portfolio held either the first– or second–share position in their segments. Quaker’s international sales continue to be a significant percentage of the company’s total, and in 1991, the company restructured both its European and Latin American operations to focus marketing on a continental, as opposed to a country–by–country, basis.

As it divested itself of its non–grocery products, Quaker continued to expand its packaged foods portfolio. Its concentration was on healthful food brands, such as Near East rice and pasta products, Chico–San rice cakes, and Petrofsky’s bagels, all acquired in 1993. The buying spree continued through 1994 and into 1995 with the acquisitions of Proof & Bake frozen bagels, Maryland Club coffee, Arnie’s Bagelicious Bagels, and Nile Spice Foods, a maker of dried soups, pasta and beans. Quaker’s largest acquisition was its 1994 purchase of Snapple Beverage Corp., a maker of ready–to–drink juice beverages and teas, for $1.7 billion. Some industry experts considered the price too high for this upstart company with annual sales just below $1 billion, but the purchase boosted Quaker’s share of the nonalcoholic beverage market significantly. With combined sales of over $2 billion, Quaker was now the nation’s third–largest producer of non–alcoholic beverages.

On the international front, Quaker continued its aggressive Gatorade marketing drive, and by 1994 the beverage was available in 25 countries across Latin America, Asia, and Europe. The company also strengthened its foothold in the Latin American food products market with the 1994 acquisition of Adria Produtos Alimenticos, Ltd., Brazil’s top pasta manufacturer. Although much of Quaker’s expansion was through acquisitions, the company also sought to grow its products portfolio internally, especially in its historically strong rice and grains category. Between 1992 and 1995, volume in that category tripled with the addition of new products such as Quaker chewy granóla bars and flavored rice cakes. Company–wide sales in 1994 hit $5.95 billion, a record high for the nineteenth consecutive year.

Despite its record sales figures, Quaker’s overall financial outlook was not so bright as it entered 1995. Due to the acquisition of Snapple, Quaker held a high debt to total capitalization ratio and felt it necessary to divest itself of a number of businesses in early 1995. In February, its European pet foods division was sold to Dalgety PLC for $700 million. Soon later, H. J. Heinz acquired Quaker’s U.S. and Canadian pet foods operations for $725 million. The company also instituted what may prove to be an ongoing series of “efficiency moves,” eliminating a total of 300 positions worldwide.

As it nears its 100th anniversary, Quaker is once again a food company with a well–balanced portfolio of products. Many of Quaker’s products have strong potential for continued growth, both in the U.S. and overseas. Its ability to continue to deliver investor profits depends entirely on marketing and management. Maintaining market share, introducing successful new products, and streamlining operations are all essential in the years to come.

Principal Subsidiaries

The Quaker Oats Co. of Canada Ltd.; Quaker Oats Ltd. (U.K.); Quaker Oats, N.V. (Belgium); Quaker Oats, B.V. (the Netherlands); Quaker Produtos Alimenticos Ltda. (Brazil); Quaker France; OTA A/S (Denmark); Chiari & Forti, S.p.A. (Italy) (97.2%); Elaboradora Argentina de Cereales, S.A.; Quaker Products Australia Ltd.; Herrschners, Inc., Snapple Beverage Corp., Nile Spice Foods, Inc., Adria Productos Alimenticos, Ltd.

Quaker Oats Company

views updated Jun 08 2018

Quaker Oats Company

Quaker Tower
321 North Clark Street
Chicago, Illinois 60604–9001
U.S.A.
(312) 222–7111

Public Company
Incorporated: 1901
Employees: 31,300
Sales: $5.7 billion (1989)
Stock Index: New York Midwest Pacific Toronto London Amsterdam

The product of a rocky union between three 19th-century millers, Quaker Oats has always found success through aggressive marketing. Long considered closed and old-fashioned, Quaker Oats now has one of the most dynamic and respected CEOs in the food industry and maintains a portfolio of strong branded products within and outside the food business. Quaker has also drawn consistent praise for its community involvement and social conscience.

Ferdinand Schumacher undertook an ambitious project in 1856 when he organized his German Mills American Oatmeal Factory in Akron, Ohio. His mission was to introduce steel-cut oats to the American table at a time when oats were considered an inappropriate food for anything but horses. German and Irish immigrants were his original customers, since they were used to the idea of eating oats and unused to the high cost of American meat. Schumacher packed his oats in 180-pound barrels; his newly opened mill could produce 20 of these barrels a day, and by 1886 he was selling 360,000 pounds a day.

Oat milling was a low-cost operation, and competitors quickly appeared as oats gained acceptance as a food. But Schumacher controlled half of the trade, and resulting price wars did not diminish his position.

One competitor with a modern approach to business was located in nearby Ravenna, Ohio. Henry Parsons Crowell purchased the Quaker Mill in Ravenna, gave his oats the Quaker name, and packed them in a sanitary, two-pound paper package with printed cooking directions. He also advertised in newspapers with German, Scottish, and Irish readers, a practice which was at that time associated with disreputable showmen. The Quaker trademark was registered in 1877, the first cereal to do so. Soon Crowell’s success carved a significant niche out of Schumacher’s business, and urban customers often specified the Quaker name.

Another competitor migrated with his father from Embro, Ontario. Robert Stuart began a mill larger than Crowell’s in Cedar Rapids, Iowa in 1873. Eventually he helped finance the building of a new oatmeal mill in Chicago and expanded the original mill. Under the same label the two mills established markets throughout the Midwest, especially in Chicago, Milwaukee, and Detroit, carefully avoiding territories Schumacher or Crowell dominated.

During the price wars of 1885, Crowell and Stuart joined together against Schumacher’s larger operation. An attempt to form the Oatmeal Millers Association that year failed when Schumacher refused to join. One year later Schumacher’s largest mill burned to the ground; Crowell reacted by immediately raising his prices. Because Schumacher had been uninsured, he finally agreed to join Stuart and Crowell in their venture. Crowell became president of the Consolidated Oatmeal Company, Stuart was vice president, and Schumacher, the former oatmeal king, was treasurer.

A third and finally successful attempt at consolidation came that same year, when seven of the largest American oat millers united as the American Cereal Company. Through sheer force of will, Schumacher ended up with a controlling interest, and appointed himself president and Crowell vice president. The company doubled production in two years by condensing production into the two major mills at Cedar Rapids and Akron, Ohio. The concentration of facilities gave them the strength to survive the depression of the 1890s.

Crowell promoted Quaker Oats aggressively during the decade. However, Schumacher insisted that his own brand, F. S. Brand, be sold alongside Quaker, blunting the success of the better-selling Quaker.

As treasurer, Stuart crossed Schumacher by purchasing two food companies at bargain prices and investing in machinery for the Cedar Rapids mill. Opposed to both actions, Schumacher requested and got Stuart’s resignation in 1897. The following year the president also voted Crowell out of the organization.

Crowell and Stuart, who together owned 24% of American Cereal, quietly began to buy available shares. In the aftermath of the subsequent proxy fight, in 1899, Schumacher lost control of the company to Stuart and Crowell. Stuart immediately built new facilities and diversified the product line while Crowell increased promotion. Quaker now produced wheat cereals, farina, hominy, corn meal, baby food, and animal feed.

An interest in finding a use for discarded oat hulls led to the establishment of a chemical division in 1921. Although a profitable use for its commercially produced furfural (a chemical produced from oat hulls that has solvent and other properties) would not appear until World War II, postwar sales of the product exceeded oatmeal sales into the 1970s.

Also in 1921 the company weathered a grain-surplus crisis; dealers had been caught with an oversupply and prices fell rapidly, leading that year to the company’s first reported loss. Stuart’s eldest son John became president of Quaker the following year. John Stuart immediately changed Quaker’s retail sales strategy to one of optimum, rather than maximum, sales. The growth of the grocery chains helped to encourage a system of fast turnover rather than bulk purchasing.

Early in the century Crowell and Stuart invested in foreign markets by establishing self-supporting overseas subsidiaries. These subsidiaries operated mills in Europe and sold oats in South America and Asia. Under John Stuart’s company reorganization in 1922, foreign operations became a corporate division. Then, as now, approximately 25% of Quaker’s sales were abroad.

During John Stuart’s 34 years as CEO, the company increased its toehold on the growing market of ready-to-eat cereals with Puffed Wheat and Puffed Rice. Quaker further diversified its product line by purchasing alreadyestablished name brands, such as Aunt Jemima pancake flour in 1925. Similarly, the company entered the pet-food industry through the purchase of Ken-L-Ration in 1942. Attempts to develop a cat food failed and culminated in the outright purchase of Puss ’n Boots in 1950.

World War II temporarily severed relations with many European subsidiaries, but 1942 sales reached $90 million. Wartime demand for meat and eggs pumped new life into the sagging animal-feed division as well as the company’s grains and prepared mixes. Quaker’s furfural became highly valued in the manufacture of synthetic rubber, and during the war Quaker built and ran a bomb-assembly plant for the government.

During the war and in the years that followed, Quaker’s sales grew to $277 million and its operations to 200 different products. This broad consumer base needed heavy promotion behind it. John Stuart’s younger brother, R. Douglas Stuart, studied under Crowell and assumed control of promotions when John became CEO. After World War II he adopted the then-radical policy of using more than one advertising agency. The Stuart brothers recognized that the grocery industry would continue to expand into pet foods, convenience products, and ready-to-eat cereals, and matched the company’s product line and promotions accordingly.

The company’s first outside manager, Donald B. Lourie, rose to CEO in 1953. Under Lourie, Quaker retained the atmosphere of a family company with personal leadership. But the company needed outside influence as marketing decisions became more complex. National recognition for the Aunt Jemima brand came at a price of $100,000. The cost of introducing Cap’n Crunch in 1963 was $5 million.

For many food companies, the 1960s were a period of automatic growth as consumer demand for convenience increased and brand recognition grew. For Quaker, however, sales rose just 20% and profits only 10% as long-term development absorbed earnings. Quaker expanded in the industry’s fastest-growing areas: pet foods, convenience foods, and ready-to-eat cereals. By the end of the decade growth rates had increased, but not as much as hoped.

Robert D. Stuart Jr. became CEO in 1966. The decade’s slow growth and a general corporate trend toward diversification prompted him to make acquisitions outside the food industry, the first since 1942. Many of these acquisitions were eventually sold, but Fisher-Price Toy Company, purchased in 1969, continues to this day to grow beyond expectations. Within ten years, it made up 25% of Quaker’s total sales.

Hardships during the 1970s kept sales down. A second toy company, Louis Marx Toys, was purchased in 1972. During 1974 and 1975, Marx, which was purchased as a “recession-proof” company, drove earnings per share from $2.04 to $1.45. Magic Pan Restaurant’s profits fell for four consecutive years. The chemical division reported a net loss of $7 million when a cheaper substitute for furfural came on to the market. This introduction took the company by surprise, as it expected earnings from that division to climb steadily.

Looking to expand its foreign market in grocery and pet foods, Quaker made seven acquisitions of foreign companies during the decade. But while the company focused on diversification, product development slipped. Between 1970 and 1978, only one new major product, 100% Natural Cereal, was introduced. Shelf space in major grocery chains did not increase. Stuart had successfully lessened the company’s dependence on grocery products, but profits also dropped—to a low of $31 million in 1975.

But by the end of the decade a turnaround was in sight. Quaker’s least profitable areas were limited to its smallest divisions, and since the entire industrial and restaurant industries had been weakening, the company was already preparing to divest its holdings in that field.

William D. Smithburg replaced Stuart as CEO in late 1979. Smithburg aggressively increased Quaker’s sales force and advertising budget, improvements that were badly needed. The company also refocused on its core food business. Quaker had two new successes as the 1980s dawned: Ken-L-Ration’s Tender Chunks became the second-best-selling dog food in its first year, and Corn Bran had a commendable 1.2% share of the ready-to-eat cereal market. In addition, Fisher-Price sales had increased tenfold since 1969, to $300 million. Quaker planned to expand the division by building plants in Europe, raising its target age group, and lowering unit selling prices.

By 1979 Quaker had a return on invested capital of 12.3%—higher than the industry average, but well below competitor Kellogg’s 19.4%. The company still needed to divest its interests in companies that absorbed profits.

In the first half of the decade, Quaker sold Burry, a cookiemaker; Needlecraft; Magic Pan restaurants; its Mexican toy operations; and its chemical division. During the same period, the company made several acquisitions. Like many food companies at the time, Quaker entered specialty retailing, with purchases like Jos. A. Bank Clothiers, the Brookstone mail order company, and Eyelab, all purchased in 1981. All would be sold in late 1986. By then, Smithburg had decided that the price for retail chains was inflated and that Quaker could get a better return on food. He proved himself right. By 1987 Quaker’s return on shareholder equity matched Kellogg’s.

Quaker confirmed its new path with its 1983 bid on Stokely-Van Camp, the maker of Gatorade sports drink and Van Camp pork and beans. Quaker’s $77 a share surpassed Pillsbury’s offer, and critics called the bid extravagant. But by expanding Gatorade’s geographic market, Quaker made the drink its top seller in 1987.

Quaker’s revival came about through the strong potential of its low-cost acquisitions. Golden Grain Macaroni Company, the maker of Rice-a-Roni, gave the company a base to expand further into prepared foods. Anderson Clayton & Company, purchased in late 1986, gave Quaker a 15% share of the pet-food market with its Gaines brand, effectively challenging Ralston Purina’s lead in that market.

With the purchase of Anderson Clayton, financed by the sale of its unwanted divisions, Smithburg managed to strengthen Quaker’s position in existing markets and improve its product mix without overloading the company with specialty products. Products with leading market shares made up 75% of 1987 sales, and over half came from brands that Quaker hadn’t owned six years earlier.

The late 1980s tempered that success, however. Pet food sales were flat throughout the industry and Quaker took $112 million in charges related to its recently expanded pet division. The corporation was a rumored takeover candidate because of its high volume of shares outstanding and its strong branded products. In response, the company announced in April, 1989 that it would purchase 7 million of its nearly 80 million outstanding shares, and that July, Smithburg reassigned some managerial duties. The company also decreased its advertising and marketing expenses.

Despite these minor setbacks, Quaker entered the 1990s with 14 years of unbroken sales growth. The company now concentrates on three major divisions: American and Canadian grocery products; international grocery products; and Fisher-Price Toys. International sales continue to be a significant percentage of the company’s total, and Quaker plans to use its existing base to expand Fisher-Price overseas. Quaker will try to maintain independence through maintaining its market share, keeping pace with new product introductions, and keeping operations consolidated.

Principal Subsidiaries

The Quaker Oats Co. of Canada Ltd.; Quaker Oats Ltd. (U.K.); Quaker Oats, N.V. (Belgium); Quaker Oats, B.V. (the Netherlands); Quaker Produtos Alimenticious Ltda. (Brazil); Quaker France; Fabrica de Chocolates La Azteca (Mexico); OTA A/S (Denmark); Chiari & Forti, S.p.A. (Italy) (97.2%); Elaboradora Argentina de Cereales, S.A.; Quaker Products Australia Ltd.; Herrschners, Inc.