Incorporated: 1906 as Corn Products Refining Company
Sales: $9.84 billion (1996)
Stock Exchanges: New York Midwest Pacific Cincinnati Basel Frankfurt Geneva London Paris Zurich Lausanne
SICs: 2033 Canned Fruits, Vegetables, Preserves, Jams & Jellies; 2034 Dried & Dehydrated Fruits, Vegetables & Soup Mixes; 2035 Pickled Fruits & Vegetables, Salad Dressings, Vegetable Sauces & Seasonings; 2041 Flour & Other Grain Mill Products; 2051 Bread & Bakery Products, Except Cookies & Crackers; 2052 Cookies & Crackers; 2079 Shortening, Margarine, Fats & Oils, Not Elsewhere Classified; 2087 Flavoring Extracts & Flavoring Syrups, Not Elsewhere Classified; 2098 Macaroni, Spaghetti, Vermicelli & Noodles; 2099 Food Preparations, Not Elsewhere Classified
Bestfoods is one of the largest food companies in the United States, with two main businesses: consumer foods and baking. It is also one of the most international of U.S. food companies, with 75 percent of its consumer foods revenues coming from outside the U.S. The consumer foods business generated $6.91 billion in revenues in 1996, 45 percent of which came from Knorr soups, sauces, bouillons, and related products (including Mueller’s pasta); 28 percent from dressings (Hellman’s, Best Foods) and corn oil (Mazόla); nine percent from corn starches (Argo, Maizena) and corn syrups (Karo); five percent from bread spreads (Skippy peanut butter); 4.5 percent from desserts (Alsa, Ambrosia); and 8.5 percent from other products. Also included within the consumer foods sector is the company’s worldwide food-service business, which is known as Caterplan in most areas outside the United States, and which services restaurants, cafeterias, and other customers in 57 countries. Bestfoods’ baking business—a predominantly North American operation—generated $1.57 billion in revenues in 1996 and is the largest fresh premium baker in the United States, with such brands as Entenmann’s sweet baked goods; Thomas’ English muffins; Oroweat, Arnold, Freihofer’s, and Brownberry breads; Boboli Italian pizza crusts; and Sahara pita breads.
The company traces its roots to two main predecessors: Corn Products Refining Company (corn refining) and The Best Foods, Inc. (consumer food products), which merged in 1959 to become the Corn Products Company. This successor company changed its name to CPC International Inc. in 1969 in a move aiming at deemphasizing its corn-refining operations, which became increasingly less important over the decades— culminating in its December 31, 1997, spinoff to the public as Corn Products International, Inc. On January 1, 1998, CPC International changed its name to Bestfoods. The company’s baking division was formed in October 1995 following the acquisition of the baking business of Kraft Foods, Inc.
History of Corn Products Refining Company
Bestfoods traces its corn-refining ancestry to the development in 1842 of the first workable method for extracting starch from corn. By the turn of the century, a number of corn refineries were processing corn to obtain its starch and sugar, including the Corn Products Company, a predecessor of Corn Products Refining and the producer of Karo corn syrup.
In 1900 the National Starch Manufacturing Company reached an agreement to cooperate with the United States Glucose Company, which was also a major stockholder in the United States Sugar Refining Company. By 1902, when the three companies officially merged to form the Corn Products Company with C. H. Matthiessen as president, they produced about 84 percent of all American corn starch.
In 1901 Thomas Edward Bedford, an executive of Standard Oil of New Jersey, organized the New York Glucose Company to compete with the Corn Products Company. In January 1906, the two companies, together with Warner Sugar Refining Company, merged to form the Corn Products Refining Company (CP) and Bedford became president of the new group.
The new company, headquartered in New York City, continued to manufacture such products as corn starch, corn syrup, and corn oil. It acquired several other major corn wet milling businesses in subsequent years and soon became the undisputed giant of the industry. In 1906 CP opened sales offices in Germany and the United Kingdom.
By 1916 Corn Products manufactured more than 75 percent of all American-made glucose, selling roughly 30 percent of this to the confectionery industry. For some refined corn products it was said to have 90 percent of the U.S. market.
In the early 1900s the company responded to mounting competition by eliminating obsolete refining plants and replacing them with modern facilities to lower manufacturing costs. One of these plants, the world’s largest corn-products manufacturing plant, was begun in 1908 near Summit, Illinois, and, when it was completed, processed about one-third of CP’s total output at that time.
Corn Products continued to broaden its product line during its early years. Although by 1912 Karo corn syrup accounted for 80 percent of its sales, the company introduced Mazóla corn oil in 1911, and at that time was also packaging syrups, jams, and both edible and laundry starches. Much of this production was sold to wholesalers for sale under private labels.
In 1913 the federal government brought suit against Corn Products and its related companies for violations of the Sherman Antitrust Act. The government charged CP with conspiracy to restrain trade in the corn-refining business by attempting to regulate the production and sale of many corn products, and asked the court to declare CP a combination in restraint of free trade, and therefore, to dissolve it. In 1919, following protracted litigation, the Supreme Court ordered CP to divest itself of several properties, but did not require that the company be dissolved.
The company continued to grow, purchasing its first overseas plant, in Germany, in 1919. In January 1921 the company purchased several more German production facilities. By the beginning of the 1930s Corn Products owned or licensed operations in Canada, Mexico, Czechoslovakia, England, France, Italy, the Netherlands, Switzerland, Yugoslavia, Argentina, Brazil, the Dominican Republic, and Japan. In 1930 CP’s assets were about $80 million.
During the Great Depression the food industry was a relatively stable one. In 1931 Edward T. Bedford died. His successor at CP was George M. Moffett.
Amid continuing prosperity in the 1940s, Corn Products shut down its most visible public symbol: its large Edge water, New Jersey, corn refinery, which could be seen from Manhattan across the Hudson River. The plant’s mounting obsolescence, together with rising tariffs on Argentine corn, forced CP to ship Midwestern corn overland to the plant; the natural solution was to transfer its work to the Midwest.
During World War II the United States mounted an enormous lend-lease assistance program to aid the Allies while struggling to keep its own troops supplied. These wartime demands were felt nowhere more than in the agricultural-products industry. Corn supplies were restricted because of heavy demand and pricing structure. By April 1944, CP’s Kansas City, Missouri, and Pekin, Illinois, refineries had been closed for lack of corn and the same kind of stoppage threatened its big Argo, Illinois, plant. It was not just a simple problem of shortage, however. The government-mandated price for corn was so low that farmers, with a limited amount of the grain, found it more profitable to feed the corn to their hogs than to sell it to refiners. Nonetheless, CP survived the war and soon was expanding again.
In April 1958 CP president William Brady announced that the company would acquire C. H. Knorr Company of West Germany, a maker of bouillon, dehydrated soups, and other convenience foods. This acquisition was the last in a long string of postwar acquisitions for the company. By 1958 CP was involved in the producing and processing of feed and grain, corn and chemical refining, banking, construction, and the running of a railroad and a shipping line.
History of The Best Foods, Inc.
The Best Foods, Inc. traced its beginnings to a number of 19th-century flaxseed, cottonseed, and flour-milling businesses. In December 1898 the company’s oldest component, the American Linseed Company, was incorporated in New Jersey. American Linseed began to diversify in 1917, acquiring the Nucoa Butter Company, whose largest subsidiary, The Best Foods, Inc., produced margarine, mayonnaise, and other edible-oil products.
CPC International is an international company comprising locally-managed operations in 62 countries. Each business has significant freedom to make decisions and act independently to further local and corporate business objectives.
All of our local businesses are also integral to a corporate organization that provides strategic guidelines and oversight, as well as constant reinforcement of CPC’s shared values. These values call for the highest standards of moral and ethical behavior in all business dealings regardless of situation or geographic location. They express commitment to CPC’s people and their career and personal development; to providing high-quality products that deliver value to our consumers and customers; to being good citizens in our communities; to ensuring safe workplaces and a clean environment; and to encouraging and rewarding qualities in our people that help achieve our business objectives, such as courage, candor, and conviction.
A second antecedent of Best Foods, American Cotton Oil Company, also moved from a basic commodity business to packaged-good marketing around 1920. In June 1922 American Cotton Oil sold its cottonseed-crushing mills in the South and began to concentrate on its soap-making subsidiary, the N.K. Fairbank Company. Among the subsidiary’s products was Gold Dust, a popular brand of soap. The Gold Dust name was applied to the surviving consumer-products company, and the Gold Dust Corporation was incorporated in September 1923 in New Jersey. Gold Dust then acquired the F.F. Dalley Company’s shoe polish lines, including the popular Shinola brand.
The union of American Linseed and Gold Dust occurred in 1928, when Gold Dust bought blocks of American Linseed stock, acquired American Linseed’s packaged-goods division, and, in July 1928, finally bought the rest of the business, selling its flaxseed operations. In January 1929 the enlarged Gold Dust Corporation bought the Standard Milling Company, the oldest and second-largest American milling company. In 1930 Gold Dust’s assets totaled about $41 million.
Less than two years after Gold Dust outbid the Postum Company for American Linseed, Gold Dust and Postum (which later became General Foods) entered a joint venture. The Best Foods division of Gold Dust and Postum’s Richard Hellmann Company linked up to distribute the margarine, dressings, and spreads they both manufactured.
In November 1936 Gold Dust combined its three operating subsidiaries, 2-in-l Shinola Bixby Corporation, Preserves and Honey, Inc., and Hecker-H-O Company, Inc. into a single corporation, taking the Hecker name for the whole. And in 1939 Hecker President George Morrow sold the Gold Dust soap business to Lever Brothers Company for $2.5 million.
In November 1942 Hecker paid General Foods $5.5 million for General Foods’ 29 percent interest in the Best Foods-Hellmann shipping operation. The following month Hecker changed its name to The Best Foods, Inc.
In 1955 Best Foods made several important acquisitions. It first bought the Rit Dye Company after a series of transactions begun a decade earlier. Best Foods then acquired the Rosefield Packing Company, of Alameda, California, and Good Foods, Inc., of Minneapolis, Minnesota. The purchase of these two companies gave Best Foods ownership of the Skippy peanut butter brand. Best Foods also sold Standard Milling Company that year.
1959 Merger of CP and Best Foods
Following complicated preparations begun in September 1958, Corn Products Refining Company and The Best Foods, Inc. formally merged in May 1959 as Corn Products Company. The merger was the result of the recognition that CP’s future relied on its ability to develop a successful grocery products business in order to maintain growth.
In 1959 and 1960 Corn Products Company established new businesses in the Philippines, France, Sweden, and Venezuela. The company continued growing throughout the decade, introducing Mazóla margarine in the United States in 1961. In 1963 the company established a Knorr plant in Japan and began manufacturing starch in Pakistan. This growth enabled the company to surpass $1 billion in sales for the first time in 1966.
In April 1969 the company changed its name to CPC International Inc. Although it continued to add units in its chemicals and packaging divisions and also made a foray into restaurants with the purchase of the Dutch Pantry chain in 1969, CPC had clearly decided to emphasize packaged foods—the name change was intended to play down the company’s corn refining operation. In 1969 sales of the company’s consumer grocery products surpassed those of its wet-milled corn products for the first time.
S. B. Thomas, a baker of English muffins and other specialty breads, was bought in 1970. Ten years later the S. B. Thomas subsidiary bought Sahara brand pita bread. And, in 1983, CPC acquired the C. F. Mueller Company, one of the largest U.S. pasta makers, for $122 million.
During the 1970s Best Foods, as the consumer-foods division was then known, also started its first facility outside the United States, a vegetable oil manufacturing and packaging facility in Puerto Rico. In 1974 CPC’s sales topped $2.5 billion, only four years later they surpassed $3 billion, and in 1980 sales were over $4 billion.
In 1981 and 1982 the company opened five new U.S. corn wet milling plants as CPC began a program to reduce costs and improve the productivity and capacity of its corn wet milling operations. Between 1983 and 1985 the company spent more than $400 million in “Investment for Growth” projects. The largest of these was the rebuilding of the company’s huge Argo, Illinois, factory.
In 1986 CPC successfully fought off a takeover attempt by Ronald O. Perelman, chairman of the Revlon Group. The CPC board authorized a repurchase of over 20 percent of the company’s stock, to be financed by borrowing and then repaying the debt by asset sale. CPC eventually bought back Perelman’s 3.68 million shares for $88.5 million.
Restructuring and Acquisitions During Late 1980s and Early 1990s
Freed of Perelman, the company moved ahead with its takeover-prompted restructuring plans, completing the buyback of 20 percent of its stock in 1988 at a total cost of $836.9 million. Under this restructuring plan the company acquired several new companies and stripped away some of its poor performers. CPC also reduced its workforce by some 17 percent. In 1988 CPC consolidated its worldwide food operations into one group, a move away from the company’s longtime practice of granting autonomy to its international operations.
The first of the company’s new acquisitions was Arnold Foods Company, in November 1986. CPC paid $145 million for the bread company, whose sales were $230 million. Also in 1986 CPC bought the Old London melba toast baking business from Borden, Inc. for about $25 million and combined Old London, Arnold, and S. B. Thomas to form the Best Foods Baking Group. Several other smaller acquisitions brought the total cost of 1986 acquisitions to nearly $193 million. In 1987 and 1988 CPC spent about $200 million on packaged-food companies in Latin America, Brazil, Italy, France, Germany, and Great Britain.
During the same period CPC sold many holdings, including its $600 million European corn-milling operations and its South African unit. The company also sold its 50 percent interest in a Japanese food business and 50 percent of its food companies in Hong Kong, Malaysia, the Philippines, Singapore, Taiwan, and Thailand to Ajinomoto, its partner in a Japanese joint venture.
CPC also strengthened its successful food-service operation, which serves institutional customers. This fast-growth business, known as CPC Foodservice in the United States and Caterplan in Europe, Latin America, and Asia, generated about 10 percent of the company’s grocery-product sales by the early 1990s.
After steering CPC through the takeover attempt and restructuring, CEO James R. Eiszner was named chairman in 1987, succeeding chairman James W. McKee, Jr. Eiszner continued to maximize CPC’s international exposure, brand-name products, and healthy financial picture to allow the company to continue to grow worldwide. Overall, from 1986 through early 1990, CPC acquired 17 consumer food businesses—seven in Europe, four in Latin America, and three each in Canada and the United States. Most of these were small to medium companies and product lines. Another example of this measured growth strategy came in April 1990 when CPC paid SmithKline Beecham PLC $255 million for three food lines: Ambrosia desserts, Bovril beef extracts, and Marmite spread. In August of that same year Charles R. Shoemate became company CEO; the following month, following Eiszner’s death, he became chairman as well. Shoemate had joined the company in 1962, working his way up to the presidency in October 1988.
Shoemate continued to expand CPC’s operations into new countries in the early 1990s, including Hungary, the Czech Republic, Poland, Israel, and Indonesia. The overseas focus remained on growing through the acquisition of local brands; but once a local brand was purchased in a new market, CPC then leveraged its newfound distribution channel by introducing overseas brands in that market. By 1994, nearly two-thirds of sales and profits were generated outside the United States. That year, CPC recorded a pretax restructuring charge of $227 million to consolidate its food plants in Europe and the United States. During the following year, another plant-related restructuring led to a $75 million charge.
Mid-1990s: Baking In, Corn Refining Out
In the mid-1990s CPC continued to build its food products operations through acquisitions. In July 1995 the company paid U.K.-based Dalgety PLC about $280 million for its Golden Wonder Pot Noodle instant hot snacks business. Also in 1995 CPC purchased the France-based Lesieur mayonnaise and salad dressings business for about $50 million. The company’s largest purchase that year—in fact the largest acquisition in company history—came through the October purchase of the baking business of Kraft Foods, Inc. for $865 million in cash. The purchase added to CPC’s existing baking operations—Thomas’ English muffins, Arnold and Brownberry bread, and Sahara pita bread—some of the top brands in the baking sector: Enten-mann’s and Freihofer’s sweet baked products, Oroweat and Freihofer’s breads, and Boboli Italian pizza crusts. Upon completion of the acquisition, all of these products were grouped within a newly formed CPC Baking Business unit, which by 1996 already surpassed CPC’s corn refining business in size, generating $1.57 billion in revenues to the $1.37 billion for corn refining.
In 1996 the company agreed to pay a fine of $7 million to settle a civil antitrust lawsuit brought against CPC, Archer-Daniels-Midland Co., Cargill Inc., and other corn-refining companies alleging collusion and price-fixing. In February 1997 CPC announced that it planned to spin off its corn-refining business so that it could concentrate on building its packaged food and baking businesses. The spinoff to CPC shareholders was subsequently completed on December 31, 1997, thereby creating a new public company called Corn Products International, Inc. Since CPC had now divested itself of its corn refining roots, the company’s management decided a new name was needed and settled on Bestfoods, in homage to the predecessor company known as The Best Foods, Inc.; to the company’s North American business known as Best Foods; and to the Best Foods brand name used on the company’s dressings sold in the western United States and in parts of Asia.
CPC took $83.2 million in after-tax charges relating to the spinoff in the second and third quarters of 1997. Meanwhile, yet another restructuring in its food operations led to a $155 million after-tax charge during the second quarter. In June 1997 CPC acquired the Spain-based Starlux food products business from Groupe Danone and Findim Investments S.A. The $160 million in revenues Starlux portfolio featured two leading Spanish brands: Starlux bouillons and Nocilla chocolate hazelnut spreads.
Freed to concentrate on its impressive and growing collection of packaged foods and baked goods brands, Bestfoods was likely to seek other strategic acquisitions similar to that of Starlux. But new product development efforts had been bolstered in the mid-1990s and were likely to play an equal—if not more important—role. For example, the company had in 1996 launched Hellmann’s and Best Foods pourable salad dressings in the United States and in Latin America. Bestfoods’ continued—and successful—overseas expansion also boded well for the future, as operations in eastern and central Europe and in China were already paying off handsomely.
Arnold Foods Company, Inc.; Best Foods-Caribbean, Inc.; CPC Europe (Group) Ltd.; CPC Baking Co., Inc.; Entenmann’s Inc.; Henri’s Food Products Co. Inc.; S.B. Thomas, Inc.; Canada Starch Company Inc.; C.H. Knorr Nahrungsmittelfabrik Ges.mbH (Austria); CPC Monda N.V./S.A. (Belgium; 99.9%); CPC Foods A.S. (Czech Republic; 95.4%); CPC Foods A/S (Denmark); CPC Foods OY (Finland); CPC France S.A. (99.85%); CPC Maizena GmbH (Germany); CPC (Hellas) A.B.E.E. (Greece); CPC Benelux B.V. (the Netherlands); CPC Hungary RT; CPC Foods (Ireland) Ltd.; CPC Italia S.P.A. (99.98%); CPC Foods A/S (Norway); CPC Amino S.A. (Poland; 99.98%); Knorr Portuguesa-Productos Alimentares S.A. (Portugal); CPC España, S.A. (Spain); CPC Foods AB (Sweden); CPC Knorr Holdings AG (Switzerland); CPC (United Kingdom) Ltd.; Israel Edible Products Ltd. “TAMI” (51%); CPC Kenya Ltd.; CPC Maghreb, S.A. (Morocco); CPC Tongaat Foods (Pty) Ltd. (South Africa; 50%); Refinerías de Maiz S.A.I.C. (Argentina); Refinacoes de Milho, Brasil Ltda. (Brazil); Industrias de Maiz y Alimentos S.A. (Chile); Industrias del Maiz S.A. (Colombia); Maizena de Costa Rica S.A.; Productos de Maiz y Alimentos S.A. (Guatemala); Productos de Maiz, S.A. de C.V. (Mexico); Alimentos y Productos de Maiz, S.A. (Perú; 99.9%); Industrializado™ de Maiz, S.A. (Uruguay); Aliven S.A. (Venezuela); CPC (Guangzhou) Foods Ltd. (China; 80%); CPC/AJI (Hong Kong) Ltd. (Hong Kong); P.T. Knorr Indonesia; CPC/AJI (Malaysia) Sdn. Berhad (50%); CPC Rafham Limited (Pakistán; 51%); California Manufacturing Co., Inc. (Philippines; 50%); CPC/AJI (Singapore) Pte. Ltd. (50%); CPC/AJI (Taiwan) Ltd. (50%); CPC/AJI (Thailand) Ltd. (50%).
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—updated by David E. Salamie