In the supermarket, everyday products like Velveeta and Oreos sell
for a few dollars or less.
In the frantic market where companies are bought and sold, those
products are worth billions.
The high-priced bidding now under way for some of the nation's
largest consumer products companies illustrates the value of such
well-known brand names and the gamble that many investors are
willing to make to control them.
While established products are by no means invulnerable,
companies increasingly think that names like Kraft in cheeses or
Parkay in margarine are their most valuable assets, more so than
factories, real estate or even employees, according to analysts,
executives and other experts.
Once a brand-name product - especially a market leader - has
become familiar to the consumer through advertising and repeated
use, its sales tend to remain healthy even during economic slumps or
periods of corporate mismanagement.
A study of 30 product categories by the Boston Consulting Group
found that of the brands that were No. 1 in their category in 1930,
27 are still No.1. Among them are Ivory Soap, Campbell's Soup and
Gold Medal flour.
``With an established brand name, the product keeps selling
through thick and thin,'' said Emanuel Goldman, an analyst at Paine
Because they are confident that their targets' brands will
generate a steady flow of cash that can be used to repay debt, the
companies, managers and investors bidding for three huge food
companies - RJR Nabisco, Kraft. and the Pillsbury Co. - think they
can safely borrow huge sums to finance the deals, analysts said.
They are also confident because those companies have mastered
the complicated art of exploiting household names.
The allure of established consumer products is proving strong to
some of the nation's most astute investors and executives.
RJR Nabisco, in addition to Oreos and Del Monte fruits and
vegetables, sells Ritz crckers, Planters peanuts, Milk Bone dog
biscuits and A-1 Steak Sauce, as well as Salem and Winston
RJR Nabisco said last week that some of its top managers, along
with Shearson Lehman Hutton Inc., were considering offering $17.6
billion to buy out the company's public stockholders. This week,
the investment firm Kohlberg, Kravis, Roberts & Co. entered the
bidding with an offer of $20.6 billion.
Kraft, in addition to its cheeses, sells Parkay margarine,
Philadelphia Brand cream cheese, Miracle Whip toppings and Velveeta
Philip Morris, which owns General Foods as well as the world's
largest tobacco operations, reached an agreement Sunday to buy Kraft
for $13.1 billion.
Grand Metropolitan P.L.C., a British conglomerate, bid $5.2
billion for Pillsbury. Pillsbury sells ``Poppin' Fresh'' dough
products, Green Giant vegetables, Haagen-Dazs ice cream and Van de
Kamp's frozen foods, in addition to owning the Burger King
But brand-name goods still do not sell themselves. …