Borden, Inc.

180 East Broad Street
Columbus, Ohio 43215
U.S.A.
(614) 225-4000

Public Company
Incorporated: 1899 as Borden Condensed Milk Company
Employees: 45,400
Sales: $7.24 billion
Stock Index: New York Tokyo Basel Geneva Lausanne Zurich

Although Borden is America’s largest dairy business and it is still best know among consumers as a milk company, Borden’s dairy division today generates the least income of all its divisions. During the 1980s Borden emerged as one of the fiercest buyers and sellers of branded regional food companies, drawing attention to itself once again after several decades of nondescript efforts in industrial chemicals and leaner-margin dairy products. Borden now looks for the largest growth in snacks and pasta, two new areas for the company in which it holds top positions in the market. A parent company to many smaller regional labels for 30 years, Borden combines a low marketing profile with enormous sales volume.

Gail Borden Jr., the company’s founder, was born in 1801 in Norwich, New York. When his family migrated west, they stopped in Kentucky and Indiana Territory. Borden then moved to Mississippi before settling in Galveston, Texas. Along the way he worked as a surveyor, school teacher, farmer, and government official. He edited the first permanent newspaper in Texas, the Telegraph & Texas Register, and is said to have written the famous headline “Remember the Alamo.”

Borden made a hobby of inventing things. Among his creations was the prairie schooner, an awkward, sail-powered wagon. Another Borden device, the lazy Susan, can now be found in households everywhere. He also concocted the unsavory, yet serviceable, “meat biscuit,” a lightweight, nonperishable food suited to travelers. Although the meat biscuit was a commercial failure, it was hailed as a scientific breakthrough and in 1851 Borden was invited to London to receive the Great Council Medal from Queen Victoria.

During his passage back from London, Borden saw several children on board ship die after drinking contaminated milk. Because no one yet knew how to keep milk fresh, spoiled and even poisonous milk was not uncommon. Borden knew that the Shakers used vacuum pans to preserve fruit, and he began experimenting with a similar apparatus in search of a way to preserve milk. After much tinkering, he discovered he could prevent milk from souring by evaporating it over a slow heat in the vacuum. Believing that it resisted spoilage because its water content had been removed, he called his revolutionary product “condensed milk.” As Louis Pasteur later demonstrated, however, it was the heat Borden used in his evaporation process that kept the milk from spoiling because it killed the bacteria in fresh milk.

Despite the apparent usefulness of condensed milk, the U.S. Patent Office rejected Borden’s patent application three times. It was finally accepted on August 19, 1856 after Robert McFarlane, the editor of Scientific American, and John H. Currie, head of a research laboratory, convinced the commissioner of patents of the value of condensed milk. Soon afterward, Borden started a small processing operation near a dairy farm in Wolcottville, Connecticut and opened a sales office in New York City. Consumers, however, took little notice of canned milk, and, after only a few months in business, sluggish sales forced Borden to return to Texas in need of more capital. Undaunted, he resumed production in 1857 in Burrville, Connecticut under the name Gail Borden, Jr., and Company.

The second enterprise also struggled financially until Borden met Jeremiah Milbank, a wholesale grocer, banker, and railroad financier. With Milbank’s funding they formed a partnership in 1858 known as the New York Condensed Milk Company. Another stroke of fortune came when Borden decided to advertise in an issue of Leslie’s Illustrated Weekly, which coincidentally contained an article condemning the unsanitary conditions at city dairies and the practice by many unscrupulous dairymen of adding chalk and eggs to enhance their “swill milk,” as it was called. Soon after the magazine appeared, the New York Condensed Milk Company was delivering condensed milk throughout lower Manhattan and in Jersey City, New Jersey.

In 1861 the United States government ordered 500 pounds of condensed milk for troops fighting in the Civil War. As the conflict grew, government orders increased, until Borden had to license other manufacturers to keep up with demand. After the war, the New York Condensed Milk Company had a ready-made customer base in both Union and Confederate veterans. To distinguish this product from its new competitors, Borden adopted the American bald eagle as his trademark.

Gail Borden Jr. died in 1874, leaving management of the thriving company to his sons, John Gail and Henry Lee, who presided from 1874 to 1884 and 1884 to 1902, respectively. In 1875 the company diversified by offering delivery of fluid milk in New York and New Jersey. Ten years later, it pioneered the use of glass bottles for milk distribution. In 1892 Borden’s fluid-milk business was expanded to Chicago and the company began to manufacture evaporated milk. Seven years later, Henry Lee Borden opened the first foreign branch, in Ontario, Canada, bringing to 18 the number of towns in which the company had facilities. In 1899, as fresh and condensed milk sales generated profits of $2 million, the company was incorporated as the Borden Condensed Milk Company.

William J. Rogers, the company’s first president from outside the Borden family, took over in 1902. He was succeeded in 1910 by S. Frederick Taylor. Concentrating on its strongholds in New York, New Jersey, and Illinois, Borden built new evaporation facilities and tin-can factories, as well as pasteurizing and bottling stations. Local dairy farmers often helped finance the construction, and in return Borden brought stability to milk markets, which at that time were subject to sudden fluctuations, by setting prices for six-month periods. Relations with milk suppliers remained generally friendly until the 1930s, when the market was glutted and farmers charged Borden and other distributors with conspiring to depress prices.

Toward the close of World War I, Borden strengthened its board of directors. Albert G. Milbank, a descendant of Jeremiah Milbank and a founding partner in the New York law firm of Milbank, Tweed, Hope & Webb, was named Borden’s first chairman of the board in 1917. The following year, directors from outside the dairy industry were appointed for the first time. These changes reflected Borden’s expanded business and helped to make possible its explosive growth in the next decade.

Under Arthur W. Milburn, the Borden Company, as it was renamed in 1919, embarked on a buying spree that transformed it into a multinational conglomerate. Between 1927 and 1930, it bought more than 200 companies around the country and became the nation’s largest distributor of fluid milk. In the process, it entered five new fields: ice cream, cheese, powdered milk, mincemeat, and adhesives. The J.M. Horton Ice Cream Company and the Reid Ice Cream Corporation, which Borden bought in 1928, were both well established on the East Coast. Ice cream fit logically into Borden’s fluid-milk operations, as did cheese, which was added in 1929 when Borden acquired the Monroe Cheese Company, Chateau Cheese Company, Ltd., and several other leading producers. Two slightly more adventurous acquisitions proved instrumental in Borden’s subsequent development. In 1927, it acquired the Merrell-Soule Company, whose None Such mincemeat and Klim powdered milk were sold throughout the world. Borden relied on the technology behind Klim when it developed instant coffee, coffee creamer, and other powdered foods during World War II.

In 1929, Borden acquired the Casein Company of America in Bainbridge, New York. This small company, which manufactured a cold-water-soluble, water-resistant adhesive from casein, a byproduct of skim milk, became the foundation of Borden’s vast chemical operations.

In 1929 Borden became the holding company for four separate companies: Borden’s Food Products Company, Inc.; Borden’s Dairy Products Company, Inc.; Borden’s Ice Cream and Milk Company, Inc.; and Borden’s Cheese & Produce Company, Inc. This structure was discontinued in 1936 and the subsidiaries became divisions.

Earnings plunged when the national economy stalled in the 1930s, but, more significantly, new price regulations on fluid milk irreversibly eroded profit margins. With the approval of the United States Department of Agriculture, many dairy farmers formed cooperatives to establish prices. Some states established milk-control boards to administer price supports to ensure adequate supplies and low cost to the consumer. Distributors like Borden were forced to pay more for milk, but were prevented from passing the increased cost on to the consumer. When distributors tried to compensate for thinning margins by manipulating prices in unregulated regions, vehement, sometimes violent protests from farmers and consumers alike followed. In 1938 a federal grand jury in Chicago indicted Borden and several other competitors for antitrust violations. Although the charges were dropped two years later in a consent decree, price regulations continued and profit margins did not improve. Tax hikes and escalating wages in unionized cities such as Chicago also hurt profits.

Also in the 1930s, a line of “perscription products” was introduced. This line, marketed primarily to doctors, included products like Biolac, an evaporated infant food, and a modified milk sugar called Beta Lactose. Eventually these products led to the establishment of a special products division.

Theodore G. Montague, a former dairy owner and operator from Wisconsin, succeeded Milburn as head of Borden in 1937. In an effort to deal with regulatory policies and employee relations, which varied from one state to the next, Montague decentralized management under a system of checks and balances. He promoted low-volume, high-margin manufactured goods like cheese, mincemeat, condensed milk, and especially ice cream—Borden’s most popular product and a leading source of income from the late 1930s through World War II.

As it turned out, Montague’s most important decision was to cultivate Borden’s small adhesives business. By far the largest buyer of the company’s glues was the forest products industry, where casein adhesives were used to coat paper and strengthen plywood. This swelling market prompted Borden to build its second glue plant in Seattle in the 1930s. But no sooner had the Seattle factory come on line than stronger, less expensive synthetics threatened to make casein compounds obsolete. Although adhesives accounted for less than 1% of its gross revenues, Montague embraced this new technology, and Borden developed its own urea and formaldehyde glues. These were followed in the early 1940s by even stronger phenol formaldehyde resins. By the 1950s, Borden had become a leading supplier of bonding agents to the lumber industry.

Borden’s entry into the raw-chemical business followed naturally from its success in synthetic glues. It built a formaldehyde plant in Springfield, Oregon to satisfy its own growing demand for this primary ingredient, but soon found that selling formaldehyde to competitors was very profitable. Four additional units were constructed, three in the United States and one in Curitiba, Brazil in collaboration with Incola, S.A. Today, Borden is one of the largest formaldehyde producers in the country.

The man responsible for the expansion of Borden’s chemical business was Augustine R. Marusi. Marusi, whose background was in chemical engineering, joined Borden in the early 1950s as a salesman. He was sent to Brazil to oversee the completion of the Curitiba facility, but brought back in 1954 to be made head of the chemical division. He quickly overcame the resistance of the dairymen on the board of directors and steered Borden into printing inks, fertilizers, and the burgeoning new filed of polyvinyl chloride (PVC), which became a mainstay of the chemical division along with adhesives. In 1954 Borden acquired three small thermoplastics firms that produced PVC resins for use in paper packaging and paint. Then, in 1957, the company began making raw PVC at plants in Illinois and Massachusetts for sale mainly to the phonograph-record and floor-covering industries. Within four years, Borden was manufacturing 7% of all domestically produced PVC. Borden also developed acetate packaging films commonly used in supermarkets and acquired companies that made vinyl-coated fabrics and wall coverings.

In 1961, Borden and Uniroyal joined forced to build a huge petrochemical complex in Geismar, Louisiana known as Monochem. Three-quarters of Monochem’s output goes to other Borden operations; it supplies methanol for Borden’s formaldehyde production, vinyl-chloride monomer for its PVC production, and acetylene for its vinyl-acetate production. Over the years, as Borden has enlarged Monochem’s capacities and added new processes, the company has become one of the largest and most integrated chemical companies in the world.

Harold W. Comfort, who became president in 1955 when Montague was made chairman of the board, supported Marusi’s activities as a way of freeing the company from dependence on its increasingly less profitable dairy business. Comfort took other measures, too. He made many food acquisitions abroad and promoted foreign sales, especially in South and Central America, where the company faced fewer regulations and competitors than in Europe. While the national supermarket chains that emerged in the 1950s squeezed profits on fluid milk, they created market openings for processed, specialty groceries. Borden developed unique dairy products such as protein-enriched milk, premium-quality ice cream, and, later, diet cheeses, in order to establish supermarket niches. It also began a program of acquiring food manufacturers with well-known or one-of-a-kind items that were successful in the intense competition for supermarket shelf space. Among the companies it took over between 1959 and 1965 were the makers of Snow’s seafood chowders (1959); Wyler’s bouillon and powdered soft drinks (1961); ReaLemon lemon juice (1962); Cracker Jack candied popcorn and Campfire marshmallows (1964); Wise potato chips (1964); and Bama preserves (1965). In chemicals, too, Borden put new emphasis on its consumer products like Elmer’s Glue-All and Krylon spray paints.

Marusi’s success with the chemical division earned him a promotion to president in 1967 and the distinction of being Borden’s first non-dairy CEO. But disappointing performances in Borden’s three major divisions—dairy, food, and chemicals—marked the early years of his reign. In response, Marusi announced a number of painful austerity measures. Borden sold its office building in Manhattan, moved its headquarters to Columbus, Ohio, and closed scores of unprofitable dairy facilities. In 1969 alone it took write-offs totalling $70 million. Marusi also tightened the corporate office’s control and greatly improved financial planning. He also doubled the budget for marketing, which had not kept pace with Borden’s diversification—although Elsie the Cow had become one of the most widely recognized trademarks in the world since her introduction in 1936, she was of little use in selling PVC. Marusi further enhanced Borden’s public relations with a program to contract with minority-owned businesses, an initiative that inspired the National Minority Purchasing Council, which Marusi helped establish.

Throughout this period, Borden’s international operations also continued to grow apace. By 1968, the company had acquired or organized chemical interests in Argentina, Mexico, Canada, the Philippines, Colombia, France, Norway, and Nicaragua. Its food interests included companies in Canada, Puerto Rico, Bermuda, Mexico, Venezuela, Ireland, Spain, West Germany, and Sweden. In 1968, Borden organized Borden Inc. International, a division responsible for all international manufacturing and export operations.

The 1970s were a period of slow growth and cost reductions at Borden. In accordance with company policy, Marusi retired at age 65 in 1979. His impatience with product development had evolved into a management philosophy that Borden maintains today. Unlike other food companies that acquire smaller regional brands, Borden keeps its regional brands regional, offering its new subsidiaries steady, cheaper supplies while the subsidiaries provide expertise in penetrating their particular markets. As a result, Borden spends little on national advertising and distribution and has a reduced vulnerability to product failure. Because of this low-profile yet aggressive approach, Marusi’s successor, Eugene J. Sullivan, inherited a more efficient company.

Nonetheless, in 1980 Sullivan began a five-year, $1.5 billion restructuring. Intent on increasing shareholders’ return on investment, Sullivan consolidated operations by cutting 5,000 employees and selling 48 companies in his six-year tenure.

Yet Borden grew during this period too. Sullivan purchased 33 companies—mostly in the packaged consumer products and specialty chemicals areas, two growth fields for Borden—and redirected the company toward consumer foods. Most of Sullivan’s purchases were food businesses, and he built for Borden the second-largest market share for pasta and snack foods, two areas Borden emphasizes heavily because of their potential for growth.

As the second in a line of three CEOs who ascended through the chemical industry, Sullivan still found it difficult to abandon the chemical market altogether. Marusi had kept Borden’s chemical businesses but had found it increasingly difficult to keep a giant food company on top of dramatic changes in the chemical industry. Chemical manufacturing has significantly higher margins than food, but a depressed petrochemical market in the mid-1980s forced Sullivan to reevaluate Borden’s ability to maintain long-term growth in the industry. As a result, Sullivan strengthened Borden’s specialty chemicals and integrated international operations with domestic (both in food and chemicals), hoping to make production and marketing more efficient.

Compared to its competitors, Borden was considered a conservative, even unimaginative, company by analysts when R.J. Ventres took over as CEO in 1986. Its success in managing regional food companies was overlooked because it didn’t create national brands. Ventres soon changed Borden’s image with a feverish spate of acquisitions, purchasing 62 companies, for a total $1.4 billion, between 1986 and 1989. These were mostly companies like Meadow Gold Dairies, Inc., that dovetailed nicely with existing operations. In 1987 Borden’s 18 purchase made it the nation’s most active acquirer according to Mergers & Acquisitions. Its $180 million purchase of the Prince Company that year made Borden the undisputed leader in U.S. pasta sales, as the owner of nine companies nationwide, representing nearly a third of the market.

Ventres also rediscovered the value of the company’s dairy operations, which generate high-volume cash flow with little inventory expense because of rapid turnover. And Borden succeeded in doubling its snack food sales by 1989 through its growing national network of regional brands and its penetration of international markets in snack foods through acquisition.

At the same time, Ventres continued to consolidate. In 1987 the company’s stock buy-back program left only 73.7 million shares outstanding, a 22% reduction since Marusi’s retirement eight years earlier, while petrochemical and PVC producers were sold to the public, further distancing the company from raw-chemical manufacturing.

Borden’s renaissance in food production has rekindled interest in the company, as the magnitude of Ventres’s acquisitions and the company’s market shares in pasta and snacks have given the company a renewed national prominence. Borden remains a tightly focused company that pays attention to regional market share and return on shareholder investment rather than popular opinion.

Principal Subsidiaries:

Anthony Macaroni Co., Inc.; Bayamon Can Corp, Inc. (80%); Borden Inks of Puerto Rico, Inc.; Borden, Interamerica, Inc.; Borden International, Inc.; Borden International (Europe) Ltd.; Borden World Trade, Inc.; Buckeye Potato Chip Co., Inc.; Caribbean Snacks, Inc.; Cheese-Tek Corp.; Coco Lopez Manufacturing Corp. (80%); Fabric Leather Corporation; Guy’s Foods, Inc.; Imperial Flavors, Inc.; Industrias La Famosa, Inc.; Marshall Energy, Inc.; Monochem, Inc.; National Food Products, Inc.; Productos Borden, Inc.; Ragsdale Bros., Inc.; Seyfert Foods, Inc.; Sterling Plastics Co.; Superior Dairies, Inc.; T.H.E. Tool Co., Inc.; Viking Engraving Corp., Inc. (77%); Borden S.A. (Panama); Crown Wallcovering Ltd. (U.K.); Demer, S.A. (50%) (Spain); Este, S.A. (50%) (Spain); Naturin, S.A. (50%) (Spain); Productos Quimicas y Alimenticious Borden Chile Ltd. (50%); Wilhelm Weber GmbH (West Germany); H&H Hobby-Und Modellbauprodukte GmbH (West Germany); Klemme GmbH & Co., K.G. (50%) (West Germany); Borden U.K. Holdings, Ltd.; Borden (Bray) Ltd. (Ireland); Borden Australia Pty. Ltd.; Hong Kong Snack Foods Ltd. (50%); Borden Chemical Co. (France) S.A.; Societe d’Application du Flockage (France); Societe Nouvelle Cellonite (France); Borden Company A/S (Denmark); Borden Company, Limited (Ireland); Borden Company Limited (Canada); Borden Company, S.A. (Panama); Borden Far East Trading Ltd. (Hong Kong); Borden International Philippines, Inc. (98%); Borden Kjemi Norge A/S (Norway); Borden (Pty.) Limited (South Africa); Borden Overseas Capital Corporation, N.V. (Netherlands Antilles); Borden Nederland, B.V. (50%) (Netherlands); Thompack B.V. (70%) (Netherlands); C.O. Mason, Inc. (Puerto Rico); Compania Casco S.A.I.C. (Puerto Rico); Compania Internacional de Ventas, S.A. (Panama); Mason Wholesale, Inc. (Puerto Rico); Cia. Internacional De Ventas, S.A. (Panama); Borden Chemical (M) Sdn. Bhd. (66%) (Malaysia); Fabrica de Productos Borden, S.A. (Panama); Helados Borden S.A. (Panama); Hitachi-Borden Chemical Products, Inc. (50%) (Japan); Meiji-Borden, Inc. (50%) (Japan); Quimica Borden Ecuatoria, S.A. (75%) (Ecuador); Suzy International N.V. (Belgium); Broex, S.A. (Belgium).