That story will ultimately be about marketing. Investors have cheered the notion of a food industry consolidation in hopes it will reignite earnings growth in a stock category that's been in the doldrums for a long time. The earnings picture will get an initial boost from the post-merger savings that come from phasing out redundant corporate costs, from more efficient materials and services buying and from leaner management. Those savings come but once and are gone.
The challenge of making these deals look smart in the long haul -- of generating the real source of the added value in these combinations -- will come to rest with the marketing managers at these new and bigger food companies. Whether the earnings curve marches upward will be determined by what they do with the broader portfolio of brands now at their companies' disposal.
Nabisco, International Home Foods and Bestfoods bring prime brand assets to their new owners. With Kraft cheese and Ritz crackers under the same corporate roof, for example, or Hunt's ketchup and Gulden's mustard, ideas should flow. But sales and profit growth won't be automatic just because the company behind a brand is bigger. Brand name foods still face a struggle for the favor of price-conscious consumers. Food has not been a "glamour" business recently, but some of the hottest jobs in marketing and advertising in the next few years will be making these bigger food companies deliver on their potential.