Its chairman, Hamish Maxwell, planned to turn around General Foods and, at the same time, decrease Philip Morris's reliance on the shrinking tobacco market. Smith began a massive reorganization of the company in , splitting its three core product lines--coffees, meats, and assorted groceries--into separate units.
The following year, General Foods' Oscar Mayer division introduced Lunchables, a line of convenient meals that featured meat, cheese, and crackers. Meantime, Philip Morris acquired Kraft, Inc. One of Kraft, Inc. Kraft, the son of a Canadian farmer. In Kraft started a wholesale cheese distribution business in Chicago. Kraft hoped to relieve grocers of the need to travel daily to the cheese market by delivering cheese to their doors. But the business eventually took hold and James was joined by his four brothers, Fred, Charles, Norman, and John.
In the business was incorporated as J. New product development and innovative advertising fueled the company's growth. As early as , Kraft mailed circulars to retail grocers and advertised on elevated trains and billboards. Later, he was among the first to use color advertisements in national magazines. In Kraft opened a New York office to develop an international business.
By the company sold 31 varieties of cheese throughout the country, and that year it opened its own cheese factory in Stockton, Illinois. Before the advent of refrigeration, cheese was sold in large wheels which spoiled quickly after being cut open. Kraft developed a blended, pasteurized cheese that did not spoil and could be packaged in small tins.
Kraft began producing what it called process cheese in and received a patent in Six million pounds of this cheese were sold to the U. Army during World War I. In Kraft placed its first advertisements in national magazines. The next year, Kraft acquired a Canadian cheese company. In Kraft's name was changed to Kraft Cheese Company and the company offered its shares to the public. That year Kraft also opened its first overseas sales office, in London, which led to the establishment of Kraft Cheese Company Ltd.
The same year Kraft moved into Germany by opening a sales office in Hamburg. The newly formed Kraft-Phenix Cheese Corporation had captured 40 percent of the nation's cheese market by and boasted operations in Canada, Australia, Britain, and Germany. The s spawned another growing dairy concern, the National Dairy Products Corporation, whose fortunes were soon to be linked with Kraft-Phenix.
National Dairy was the product of a merger between the Hydrox Corporation of Chicago, an ice cream company established in and purchased in by pharmacist Thomas McInnerney, and the Rieck-McJunkin Dairy Company of Pittsburgh. In National Dairy set out to acquire Kraft-Phenix. The merger was completed on May 12, The merger did not radically affect the way in which the two companies operated.
McInnerney's strategy had always been to provide essentially autonomous subsidiaries with the resources needed for growth. Consequently, Kraft functioned independently from New York-based National Dairy, which acted primarily as a holding company.
After the merger, Kraft settled down to introduce many of the brands that later formed the heart of its consumer product line; Velveeta pasteurized process cheese spread had been introduced in ; Miracle Whip salad dressing and Kraft caramels came in ; the famous macaroni and cheese dinner in ; and Parkay margarine in Again, innovative advertising--this time on radio--encouraged quick public acceptance of the new products. In the company sponsored the "Kraft Musical Revue," a two-hour musical variety show.
Later the program was shortened to one hour and was broadcast weekly as the "Kraft Music Hall," hosted by Bing Crosby. Overseas operations expanded, guided by a policy that mandated local control and products tailored to meet the needs and tastes of foreign consumers. Meanwhile, in , National Dairy introduced Sealtest ice cream, named after a quality-control system for its dairy products. Kraft was a major food supplier during World War II. By the end of , four million pounds of cheese were shipped to Britain weekly.
Many Kraft products, including field rations of cheese, were produced for the U. Kraft's labs researched better methods of food production while home economists at Kraft Kitchens, a division established in the home economics department in , developed recipes to ease wartime shortages.
In the postwar years, Kraft resumed the formula of new product development and advertising that had helped build the company. In Kraft created and sponsored the first commercial network program on television, the Kraft Television Theatre. Along with the new advertising vehicle new products, such as sliced process cheese in and Cheez Whiz pasteurized process cheese spread in , were introduced.
Thomas McInnerney died in and J. Kraft died the following year. Kraft's death marked the end of the Kraft family's leadership of the business. National Dairy began to reorganize along more centralized lines soon after its founders died.
The autonomous subsidiaries became divisions of a single operating company in and Meanwhile, the company took its first cautious steps toward diversification with the acquisition of Metro Glass, a maker of glass packaging, in During the late s and the s, Kraft continued to expand its product line, adding new products such as jellies and preserves in , "jet-puffed" marshmallows in , barbecue sauce in , and individually wrapped cheese slices in During the s, Kraft also introduced many of its products in foreign markets.
The company name changed in to Kraft Inc. Reorganization accompanied the name change; the movement toward a more centralized structure--begun in the s--was accomplished by partitioning the company into divisions according to specific markets or products. Kraft manifested a decidedly conservative business strategy during the s. Unlike other major food companies, Kraft did not seek acquisitions to shore up sagging profits. New product introductions also slowed somewhat; after the introduction of Light n' Lively yogurt and ice milk in , squeezable Parkay margarine came in and Breyers yogurt in The difficult business climate of the s may have encouraged a defensive posture as inflation increased costs and cut into profits.
John M. Richman planned to strengthen the company's position in its traditional markets while diversifying into higher-growth industries. His first move--a truly bold stroke--was a merger with Dart Industries Inc. Dart Industries was established in as United Drug Company. Justin Dart began his career in the retail drug business and built Rexall Drugs into one of the largest chains of drugstores in the country. With Rexall as his base, Dart began an aggressive acquisition campaign, diversifying into chemicals, plastics, glass, cosmetics, electric appliances, and land development.
In the company name was changed to Dart Industries to reflect this diversity. At the time of the merger, the flagship of Dart Industries was its successful Tupperware subsidiary that sold plastic food containers through direct sales by independent dealers using a "home party" plan. The aggressive, innovative, and rapidly growing Dart Industries fit perfectly into Richman's plan; it offered Kraft instant diversification.
The merger also offered advantages for Dart and his company. Richman's boldness appealed to Dart, who thought that Kraft would give Dart Industries some stability. Kraft and the subsidiaries of Dart--Tupperware, West Bend appliances, Duracell batteries, Wilsonart plastics, and Thatcher glass--continued to operate independently. Some analysts, however, doubted that such a diverse company would succeed.
As in many restructurings, there were some early rough spots, but major changes in operating procedure were confined to top managers. Middle managers were left in their familiar roles to ease the transition. Altogether, management apparently succeeded in unifying two very different firms with a minimum of friction. Industry analysts, nonetheless, felt compelled to ask which partner would dominate the merger. Although Kraft was the larger of the two companies, the consensus was that the more aggressive and growth-oriented Dart would be the dominant party.
The reasoning was that Dart had been given preference in the new company's name and it was Kraft's desire to become more like Dart that initially led to the merger. On the first anniversary of the merger, Richman himself commented that "in terms of organization and outlook, we're more a Dart than a Kraft. The deal was completed in April Although several smaller acquisitions followed in the next two years, diversification slowed because several subsidiaries experienced managerial problems or proved vulnerable to the recession of the early s.
Poor performers included Kraft's European operations and its foodservice business, and Dart's plastics unit and its West Bend appliances. Even Hobart was troubled by sagging profits and declining market share in its Kitchen Aid division, which produced top-of-the-line kitchen appliances. Company efforts to get these businesses back on track were beginning to show results when trouble struck Tupperware.
Tupperware had been a phenomenal success; it doubled sales and earnings every five years prior to But in sales slipped 7 percent and profits were down 15 percent. Tupperware's slide was attributed to attrition among its dealers--as more women took jobs outside the home, there were fewer people to sell and buy Tupperware. In the company planned to increase returns from This ambitious goal was to be attained by adding new products, extending existing lines, and using aggressive marketing and advertising.
Michael A. Miles, the man who had revived Kentucky Fried Chicken, was brought in to direct the new effort. Miles first cut costs by overhauling the European division. Many of Kraft's brands competed in mature markets. Additions to these lines--for example, bacon and cream cheese-flavored salad dressings--boosted sales.
The company also acquired promising new brands that appealed to the upscale consumer. Among these were the import-style cheeses of Churny Company, Inc. Kraft, Inc. Kraft followed through on its plan to expand its product lines and market them aggressively, a strategy that won visible gains.
The company's management seemed to have rediscovered J. Kraft's approach that combined the stability of well-known brand names with creative marketing and the continuous development of new products aimed at changing American tastes.
In Kraft also became a pure food company once again when it sold off Duracell. Quantalytics is not a registered investment adviser, brokerage firm, or investment company.
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