NABISCO WEIGHS FUTURE DIRECTION FOR SNACKWELL'S: GAINED IN '98 SECOND HALF, BUT FIRST QUARTER DOWN AGAIN

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Nabisco Biscuit Co.'s road to recovery for SnackWell's has hit a speed bump, leaving observers divided on whether it's gearing up or giving up on the brand.

Events on the surface seem to support the latter. Nabisco has moved its top SnackWell's executive, Terry Preskar, to the position of VP-marketing for Stella D'Oro, indicating the company's priority may have shifted to that long-ignored line.

"Stella D'Oro has long been an untapped opportunity. It's a move up [for Ms. Preskar]," a former Nabisco executive said.

She is succeeded on SnackWell's by Eileen Murphy, formerly director of new business, who moves to director of wellness brands-a post that includes Newtons and other lines.

Executives close to Nabisco said it has pulled the plug on an upcoming major promotion for SnackWell's, a report the company denied.

REDIRECTED RESOURCES

Analysts, too, have indicated Nabisco has decided to throw in the towel on the brand.

"They've implied that they're keeping the brand but devoting their resources elsewhere," said DLJ Securities analyst William Leach. "There's no sense beating a dead horse. They've changed advertising and the products, and it's not worked that well."

That view is bolstered by a recent report in The Wall Street Journal that quoted Nabisco CEO James Kilts as saying: "SnackWell's is not a big growth vehicle and isn't going to be a big investment area for us."

Mr. Kilts wasn't available to comment on that statement, and a Nabisco spokesman said he couldn't speak directly to the quote. However, he disputed its substance, noting that in February Mr. Kilts told analysts that although "relatively small, SnackWell's commands a big presence," noting the business is still as large as Pepperidge Farm.

DISCONTINUED PRODUCTS

The spokesman acknowledged Nabisco has discontinued some of its products under the SnackWell's name, including some toaster cakes and crackers. But he added that it's on track to introduce soon a new "indulgent" cookie under the brand name.

"We will continue to support SnackWell's at the right levels with new products, promotion and advertising," he said.

A move away from SnackWell's would represent a big course correction for Nabisco, which was starting to see positive results from a revitalized new-product program, including adding minimal amounts of fat to improve taste.

It also stepped up its marketing budget to fund advertising and a women-directed promotional tie-in with Girls Inc.

As recently as May 5, Nabisco Biscuit Co. President Rick Lenny called SnackWell's "the hood ornament of our being able to turn around the company."

But observers said the improvement was short-lived. In January, Ms. Preskar said dollar sales in the second half of 1998 were up 3%, a major achievement compared to a 25% decline in the prior year. However, SnackWell's cookie sales slid 2.3% to $187.7 million for the 52 weeks ended March 28, while cracker sales plunged 32% to $33 million, according to Information Resources Inc. data.

NO REASON FOR BEING

"When they added the fat back in, they added more taste-but then the product lost its reason for being," one observer said.

The former company executive said the debate whether to continue to support SnackWell's has raged internally for some time.

"The company put an inordinate amount of resources behind it from an R&D standpoint to plug the leaky bucket. But some people thought they were over-devoting resources because it couldn't be fixed," the former Nabisco executive said.

One thing is clear. If Nabisco is pulling back on SnackWell's, the retreat will apply only to that line.

"They have a lot of new things they have to invest in, and they have to look across the portfolio to see where to spend," said an executive close to the company.

And its overall portfolio is doing very well.

"The latest IRI data show [that] on a pound basis the cookie and cracker category is up 3%," said Janney Montgomery Scott analyst Mitchell Pinheiro. "On

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