General Foods Corp.

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In 1895, inventor Charles William Post created a coffee substitute called Postum. Two years later, he introduced Post Grape-Nuts, one of the earliest ready-to-eat breakfast cereals. Another cereal, Post Toasties, arrived on the grocery scene in 1904.

Mr. Post continued to expand his cereal and coffee substitute business, forming Postum Cereal Co. in Battle Creek, Mich. When Mr. Post died in May 1914, his daughter, Marjorie Merriwether Post, inherited the company and launched a period of expansion that led to the creation of General Foods.

In 1922, Postum Cereal Co. went public, and between 1925 and 1929, it acquired the companies making Jell-O gelatin, Maxwell House coffee, Swans Down cake flour, Minute tapioca, Baker's chocolate and coconut, Calumet baking powder and Log Cabin syrup, as well as Clarence Birdseye's frozen-food process. By acquiring the Birdseye operation, Postum also inherited the Birdseye corporate name, General Foods Co.

Soon after the Birdseye acquisition in 1929, the company, which had changed its name to Postum Co. in 1927, became General Foods Corp. Three years later, Sanka coffee was added to its product roster via acquisition.

The first major ad agency to work with General Foods was Young & Rubicam, which had been in business just over a year when it got the Postum account in 1924.

In 1929, General Foods' advertising was split between Y&R and Benton & Bowles, the latter agency handling, at various times, Log Cabin syrup, Maxwell House coffee and those Post cereals not on the Y&R roster. Over the years, the introduction of new products and extensions of existing product lines necessitated the hiring of more ad agencies.

Foote, Cone & Belding was added in 1949 to handle some Postum products and, later, several Post cereals and Calumet baking powder.

Ogilvy, Benson & Mather (for Maxwell House), Grey Advertising Agency (Kool-Aid) and Doyle Dane Bernbach (Gaines Meal) were brought aboard in the 1960s, and Ted Bates & Co. (Log Cabin, Maxim, Good Seasons salad dressing) and HCM/Chicago (Oscar Mayer) were added in the 1980s.

Meanwhile, the company continued to make acquisitions. Additions included Gaines dog foods (1943), Bird's Custard Powder (1947), Kool-Aid (1953), W. Atlee Burpee garden products (1970), Oscar Mayer & Co. meat products (1981) and Entenmann's bakery products (1982).

Early radio and TV advertising

General Foods entered radio in the late 1920s with a popular show sponsored by Maxwell House via Y&R. But the company jumped into the radio arena in a big way on Oct. 14, 1934, with a comedy-variety show starring Jack Benny and sponsored by Jell-O. General Foods spent $7,500 a week for production and network costs; after three months, Jell-O sales had increased to the point that the company declared the gamble a success. The company worked with Mr. Benny through June 1944, substituting Grape-Nuts for Jell-O for the last two years.

By 1937, the company was spending $1.4 million in magazines and $2.8 million on radio, making it the No. 2 radio advertiser in the U.S., after Procter & Gamble Co. with $4.5 million.

Through the years, General Foods was invariably among the top national advertisers in Advertising Age's annual rankings. In 1956, the company was the No. 4 advertiser, with expenditures of $77.7 million. In the 1958-59 fiscal year, the company reached $96 million in ad spending. In one year, 1979, the company was No. 2, trailing only P&G.

As with radio, the company was a major user of TV. In 1972, the marketer ranked No. 6 among TV advertisers, with its upfront money spread over 38 nighttime network shows, including "Ironside," "Sanford & Son," "Wonderful World of Disney" and "Marcus Welby, M.D." The company also used numerous star presenters in TV spots for its products, including Arlene Francis and Doris Day for Gaines dog food, Robert Young for Sanka coffee and Bill Cosby for Jell-O.

The contentious 1970s

In January 1972, the Federal Trade Commission brought a "shared monopoly" antitrust suit against the "Big Three" cereal makers. The suit claimed that the companies had maintained a concentrated, non-competitive market structure through brand proliferation, product differentiation and trademark promotion, backed by intensive and steadily increasing levels of advertising and by control of supermarket shelf space. Three new companies were to have been carved out of Kellogg Co. and one each out of General Foods and General Mills. However, the suit was thrown out in the fall of 1981 after Ronald Reagan became president, changing the political climate.

In another court case, the Committee on Children's Television filed a $260 million class-action suit in California against General Foods, Benton & Bowles and Safeway Stores, claiming that General Foods' presweetened cereal products and their supporting commercials caused "lasting poor nutrition habits and tooth decay in millions of children." (Safeway was included in the suit because the plaintiff held that these cereal products should be shelved in the store's candy department.) This suit, too, was thrown out.

In June 1974, General Foods announced the completion of a management reorganization. Responsibility for strategy moved to upper management whereas operating responsibility was moved down "into the hands of the people on the firing line who are best equipped to handle it." As part of the reorganization, all products were divided among three categories: businesses with great growth potential (e.g., decaffeinated coffee and pet foods); businesses operating in relatively mature markets where further growth was expected to be modest (e.g., Jell-O); businesses with little opportunity for either market growth or technical leadership (e.g., Swans Down cake mixes and Calumet baking powder).

Coffee wars

During this period, General Foods' coffee business was thriving. As late as the mid-1970s, the company had an estimated 49.5% of the total U.S. coffee market. Of this, the Maxwell House line accounted for 24.5%; Sanka, 11.1%; Maxim, 5.3%; Freeze-dried Sanka, 3.1%; Yuban, 2%; and Max-Pax and Brim combined, 3.5%. During this period, coffee accounted for approximately 40% of the company's revenue.

General Foods' dominance in the coffee realm was threatened, however, by Procter & Gamble Co. In the 1960s, P&G had purchased J.A. Folger Co., which sold its coffees primarily in the Midwest and West. Using its marketing muscle, P&G gradually expanded Folger's, introducing it into the populous eastern markets and precipitating a "coffee war" between the giant marketers. By January 1973, Folger's was estimated to have about 20% of the $1 billion regular (non-instant) coffee market to Maxwell House's 24%.

The two marketers also went head-to-head with TV spokeswomen. For 10 years, Folger's had been running TV spots featuring "Mrs. Olson," an all-knowing, Scandinavian-accented busybody who counseled wives that a key to a happier marriage was serving Folger's to their husbands. In 1971, Maxwell House introduced "Cora," a character similar to Mrs. Olson, played by veteran actress Margaret Hamilton. The Maxwell House spots, from Ogilvy & Mather, were strikingly similar to those for Folger's, from Cunningham & Walsh.

In 1976, the FTC issued a complaint against General Foods, charging it had attempted to monopolize the coffee market in the eastern U.S. General Foods responded that it was competing with a larger rival, P&G, and would continue to do so. The charges were dismissed in April 1984.

All through the 1970s, the "coffee war" continued to rage, as Folger's gained a foothold in the eastern markets and steadily ate into Maxwell House's market share. To underscore P&G's commitment to its brand, Folger's led all other company products in ad spending in 1979 at $33 million. At decade's end, Folger's had a 27.3% share in the regular coffee segment to Maxwell House's 22.3%, although General Foods still held a hefty 39.5% share of the overall grocery coffee market.

Reverses and acquisition

General Foods entered the 1980s as the No. 3 national advertiser, but its ranking declined steadily and its ad expenditures remained generally flat. One reason for the lack of advertising growth was the reduction-sometimes as much as 50% a year-in ad support for the pet foods division. In 1984, Gaines was sold to Anderson, Clayton & Co., a Houston-based food company, for an after-tax gain to General Foods of $59.8 million.

By 1984, another rumor was afoot: that General Foods would be taken over by Philip Morris Cos. On Nov. 1, 1985, Philip Morris acquired General Foods for $5.67 billion, the largest merger up to that time outside the oil industry. The combination brought together two operations that the previous year had total worldwide sales of $22.8 billion and a combined advertising budget of $1.02 billion.

In its final year of independent operations, General Foods was the No. 12 U.S. advertiser, with ad expenditures of $450 million, up from $397 million the previous year.

After the takeover, the General Foods name lingered for a decade. First, a General Foods unit was an arm of Philip Morris. Philip Morris acquired Kraft Inc. in 1988, and a Kraft General Foods subsidiary was created in 1989. This lasted until January 1995, when the unit was renamed simply Kraft Foods.

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