CPC International Inc.
CPC International Inc.
Englewood Cliffs, New Jersey 07632
Incorporated: 1906 as Corn Products Refining Company
Sales: $5.1 billion
Stock Index: New York Midwest Pacific Basel Geneva Lausanne London Paris Zurich Frankfurt
CPC International Inc., one of America’s largest food companies, is a leading corn refiner as well as the producer of many of America’s best-known and top-selling brands: Mazola corn oil, Argo corn starch, Hellmann’s and Best Foods mayonnaise, Mueller’s pasta, Knorr soup, Skippy peanut butter, and Thomas’ English muffins are all CPC products. But as its name implies, CPC International is also a distinctly international company, producing more than 2,000 food products and several dozen wet-milled corn products at over 100 manufacturing plants located in 47 countries. In 1988 57% of the company’s food revenues came from outside the United States, more than any other major American food company. Today CPC traces its roots back to two main predecessors: the Corn Products Refining Company and Best Foods, which merged in 1958 to become the Corn Products Company.
CPC has transformed itself from a grain producer and processor into a major international consumer grocery producer. Consumer foods are now about 80% of total sales, while corn refining has been reduced to 20%. Today the company has five major consumer foods groups—mayonnaise and corn oil; Knorr products; bread spreads and cheese; bakery and pasta; and starches, syrups, and desserts.
But the company’s corn-refining division’s oils, starches, syrups, sugars, and agricultural feeds are no less familiar to producers of finished goods in more than 60 industries than its consumer products are to shoppers. The most plentiful of the corn-refining products is corn starch. CPC makes it in over 200 varieties for use in the production of goods such as paper products, foods, pharmaceuticals, textiles, chemicals, and adhesive materials.
CPC 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% 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 and Bedford became president of the new group.
The new company, headquartered in New York City, continued to manufacture products like 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 Corn Products opened sales offices in Germany and the United Kingdom.
By 1916 Corn Products Refining Company (CP) manufactured more than 75% of all American-made glucose, selling roughly 30% of this to the confectionery industry. For some refined corn products it was said to have 90% 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% of its sales, the company introduced Mazloa 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 Refining Company 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.
The Best Foods, Inc. traces it 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.
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; Corn Products’ were about twice that amount.
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.
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.
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% interest in the Best Foods-Hellmann shipping operation. The following month Hecker changed its name to The Best Foods, Inc.
Meanwhile, amid continuing prosperity in the 1940s, Corn Products shut down its most visible public symbol: its large Edgewater, New Jersey corn refinery, which was visible 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 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.
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.
Following complicated preparations begun in September, 1958, Corn Products Refining Company and The Best Foods, Inc. formally merged in May, 1959. 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 CP established new businesses in the Philippines, France, Sweden, and Venezuela. The company continued growing throughout the decade, introducing Mazola 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. 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 is still 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% 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.
Freed of Perelman, the company moved ahead with its takeover-prompted restructuring plans, completing the buyback of 20% 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%. 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% interest in a Japanese food business and 50% 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, today generates about 10% of the company’s grocery-product sales.
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 has continued to maximize CPC’s international exposure, brand-name products, and healthy financial picture to allow the company to continue to grow world-wide. Today products made under the Knorr brand (a German subsidiary) account for almost a quarter of the company’s grocery-product earnings worldwide.
CPC has spent the better part of the 20th century expanding globally and entering new markets, but the company is now trying to strengthen its U.S. growth as well. Although it is still interested in reentering the Japanese market, which it abandoned after the Perelman raid, CPC has begun to focus on U.S. operations in an attempt to increase its size and scope.
Although CPC has had mixed results with new products—light and cholesterol-free mayonnaises have been wildly successful, while Mueller pastas with sauces were less than profitable—new products and some acquisitions are now important elements of CPC’s strategy for growth in the U.S. market.
CPC’s unorthodox growth should continue for the foreseeable future; it has been, and will continue to be the secret to the company’s success. CPC has been well established in the global marketplace for decades with popular brands bought from and run by local people. Its U.S. products are equally popular. CPC looks to accomplish further domestic growth using those same tactics.
CPC Europe (Group) Ltd.; Best Foods-Caribbean, Inc.; S.B. Thomas, Inc.; C.F. Mueller Company; Arnold Foods Company; Canada Starch Company Inc.; Knorr Holding Gesellschaft mbH, Wels (Austria); Mais-Monda N.V./S.A. (Belgium); CPC Foods A/S (Denmark); OY Suomen CPC (Finland); Societe des Produits du Mais, S.A. (France); Maizena Gesellschaft mbH (West Germany); Knorr (Hellas) A.B.E.E. (Greece); CPC Benelux B.V. (the Netherlands); CPC (Ireland) Ltd.; CPC Italia S.R.L. (90.19%); CPC Norge A/S (Norway); Knorr Portuguesa Productos Alimentares S.A.R.L. (Portugal); CPC Espana, S.A. (Spain); CPC Foods AB (Sweden); Knorr Zurich AG (Switzerland); CPC (United Kingdom) Ltd.; CPC Kenya Ltd. (95.30%); CPC Maghreb, S.A. (Morocco); Refinerias de Maiz S.A.I.C. (Argentina); Refinacoes de Milho, Brasil Ltda.; Industrias de Maiz y Alimentos S.A. (chile); Masizena, S.A. (Columbia); Productos de Maiz y Alimentos S.A. (Guatemala); Almidones del Istmo, S.A. de C.V. (Honduras); Productos de Maiz, S.A. (Mexico); Alimentos y Productos de Maiz, S.A. (Peru); Industrializadorade Maiz, S.A. (Uruguay); Aliven S.A. (Venezuela); Rafhan Maize Products Company Ltd. (Pakistan) (51%).