From its founding in 1898 at the height of the trust era, the National Biscuit Company quickly rose to become the largest of the big branded food companies. By the 1920s the company was far larger than such well-known companies as HJ Heinz, Campbell Soup, Kellogg, Hershey, and Wrigley. Few companies did more to innovate in the modern mass marketing of groceries than “N.B.C.” with its famous logo and red triangle. But late in the twentieth century, Nabisco went through no less than seven different ownership structures. Yet, through it all, Oreos, Premium Saltines, Nilla Wafers, and Chips Ahoy not only live on, but are stronger than ever in their history. Here is their story.
Consolidating an Industry
Following in the footsteps of John D. Rockefeller’s Standard Oil Trust, the late 1890s were the heyday of industry consolidations. In virtually every industry from thread to tin cans, Wall Street financiers and lawyers worked to create new companies that would dominate, if not monopolize, their industries. The idea was to buy up enough competitors to get control over pricing and end ruinous price wars. Hundreds of such trusts were set up. Many, perhaps most, failed when some firm outside the trust realized the profits to be made by “busting” the cartel, through lower prices, better products, or other innovations. Nevertheless, the organizers sometimes made millions by floating new stock issues in the big new companies.
In this context, a group of biscuit and cracker bakers came to the Chicago law office of Adolphus W. “AW” Green in 1890. They needed help “consolidating” their industry.
Green was a most unusual fellow. Born in 1843, AW was the last of eleven children of a Boston Irish family. His father died and his mother took in boarders to make ends meet. Despite the family’s hardships, AW’s mother was able to put all her children through school. None stood out as much as AW. Like his mother, he loved books and read continually. She also inspired in AW a love of literature, the arts, and the classics. The bright, serious boy made it into the prestigious Boston Latin School, then graduated from Harvard at the age of twenty, in the top quarter of his class. Off he went to find his fame and fortune in New York City, hoping to become a lawyer. At the time, many young men became lawyers by clerking at a law firm rather than attending law school.
But first AW Green went to work at the Mercantile Library of New York City, a private library funded by the city’s wealthy business leaders as a source of knowledge for their employees. Surrounded by his beloved books, with time to visit museums and attend the theater, Green was soon made head librarian. In 1868, the contacts he made at the library led the twenty-five-year-old Green to a job as clerk for a top law firm. Green worked hard and studied hard. He learned from the top attorneys in the nation, and easily passed the bar by the time he was thirty.
Desiring to start his own law practice, AW Green followed Horace Greeley’s advice, “Go West, young man.” In 1873 he arrived in Chicago, the great American boom town of the era. Following the great fire of 1871, the city was rebuilding, open to new ideas and new faces. But it was still a rough, dirty city, and Green was at first repulsed, missing the high culture of New York that Chicago had little use for. Yet Green prospered, adding young partners to his law firm. He began to work for some of the most powerful business leaders in Chicago. His reputation as a top business lawyer spread. In 1879 he married, and over time had eight children.
It was into Green’s successful law office that the biscuit and cracker bakers came. They wanted his help in forming a trust, a combination that would bring together many bakers, allow them to get stock in the new company, and lessen competition. As he did throughout his life, AW Green studied everything he could about the biscuit and cracker industry. He soon became an expert on the business.
AW found that every city of any size had one or two cracker bakeries. Using old-fashioned, labor-intensive production methods, these local bakeries delivered wooden barrels and boxes of crackers to stores in horse-drawn wagons. The industry’s first product had been “hardtack” or “pilot biscuits.” These hard, almost indestructible, long-lasting biscuits had proven key to the sustenance of sailors and soldiers far away from the kitchens of home. Over time, the bakers added various cookies and crackers to their product lines. Most of them had well-known local brands, usually sold only within several miles of the bakeries. (Bread bakeries were – and are – a separate industry, producing a perishable product with a much shorter shelf life and therefor even smaller trading areas.)
The cracker barrel had become the symbol of the country general store. Old-timers sat around he barrels sharing the town gossip. But the person who bought the last crackers, at the bottom of the barrel, often found soggy crackers, insects, and rodent droppings there. According to legend, when one store owner was accused of having rats in his cracker barrel, he replied, “That’s impossible, because the cat sleeps there.”
Green saw that the industry was falling behind in an era of continuous new inventions. The railroads together with the rise of mass magazines led to a national market for products. Procter & Gamble had launched its first great brand, Ivory Soap, in 1879. Coca-Cola, Heinz, and other national brands were developing fast. Grocery store chains, led by the Great Atlantic and Pacific Tea Company, were rising as well. AW did not believe that the old industry structure of small bakeries around the nation could survive the changing world without consolidating.
So in 1890, the forty-seven-year-old Green helped this group of bakers incorporate the American Biscuit and Manufacturing Company. (“Biscuit,” the British term, was considered classier than crackers.) Among the forty bakeries in thirteen states included in the combine were Dozier of St. Louis, Sommer-Richardson of St. Joseph, Missouri, (with its well-known Saltines), the Loose brothers of Kansas City, and Langeles of New Orleans. The largest was Bremner of Chicago, with eight ovens. The new company was the largest cracker baker in “the West.”
Despite his newfound cracker baking expertise, Green wanted to continue to practice law, and had little interest in running a cracker trust. He helped other local cracker bakers form smaller combinations.
At the same time, the opportunities in the industry attracted the attention of another Chicago lawyer, William H. Moore, five years younger than Green. But unlike Green, Moore was more interested in building businesses and making investments than practicing law. He had become one of the top trust creators in America, over time helping create the Diamond Match Company, the American Can Company, and steel combines that ultimately formed part of US Steel.
Working with the largest cracker bakers in “the East,” Moore in that same 1890 created an even larger Biscuit trust, the New York Biscuit Company. The company was backed by top Chicago investors including Philip Armour of meatpacking fame, railway car builder George Pullman, merchant Marshall Field, and Abraham Lincoln’s son Robert. Bringing together eight companies with twenty-three bakeries in ten states from Maryland to Maine, this company with almost one-hundred-and-forty ovens was now the biggest in the nation. Soon after its founding, the biggest baker in the nation, Kennedy of Cambridgeport, Massachusetts, joined the New York Biscuit Company. The Kennedy firm also had a major plant in Chicago, in the heart of American Biscuit’s territory.
In 1897, troubles at the Diamond Match Company led William Moore to resign his leadership position with New York Biscuit.
War and Peace
These two “industry giants,” American and New York, battled each other for the next several years after their 1890 foundings. They expanded in each other’s territories, American building a large bakery in the heart of New York City. Price competition was intense and neither company was satisfied.
After unsuccessful attempts at a cease fire or merger, the two companies finally agreed to combine, creating an even larger cracker trust, the National Biscuit Company, in 1898. The National Biscuit Company, known as “N.B.C.,” incorporated yet a third cracker group, the United Baking Company. The massive new trust controlled over half of the cracker and cookie business in America, with 114 bakeries and over 400 ovens, producing 360 million pounds of crackers a year.
The promoters, including Green, received $6 million in new stock, with Moore and his brother getting about $4 million of that. But the Moore’s were out of the management picture, and the new board, made up of bakers, asked Green to be the President of N.B.C. He had no interest in running the company, preferring his law practice, and turned down the offer. Yet he agreed to chair the Board of Directors and serve as General Counsel.
Green’s N.B.C.
Nevertheless, AW Green could not keep his eyes (or his hands) off the National Biscuit Company. Soon enough, he was running the show – and that is a great understatement. At the age of fifty-five, when many men of the era might have retired, Adolphus Green began a new career, while still running his law firm.
With no hobbies outside his family, his books, and his love of high culture, the somber, tightly wound Green ran the company with an iron hand.
AW Green was hell-bent on making N.B.C. a success. Deeply understanding both the cracker industry and the changes sweeping the nation, he insisted the company develop a brand name and a product which it could ship anywhere in the nation, a product that would not go stale too soon and could be shipped long distances. Soon after the company was founded, he focused on the soda cracker, the biggest seller.
AW left no stone unturned as he sought his ideal product. The design had to be right, the recipe had to be perfect, it had to be packaged and sanitary, not sold by the barrel, and it needed a great name. Working with the nation’s first great advertising agency, N.W. Ayer of New York, he picked the name “Uneeda Biscuit.”
AW never delegated much authority, making every detailed decision himself. He told the bakeries how to make the product, he made up manuals for selling the new crackers. He approved every label, every font, every capital letter on the package. His people developed the revolutionary “In-er-Seal” package which kept the crackers fresh, inventing new machines to make and fill the packages.
Green decided to avoid the traditional method of distributing grocery products through wholesalers. He instead created agencies across America, with their own horse-drawn, highly decorated wagons, delivering the N.B.C. products directly to retailers.
Against all advice, Green kept the price of the crackers low, a nickel a package. His bakers told him he would lose money at that price, but he was immovable.
Working with ad agency Ayer, Green developed a character for his products, a boy in a yellow rain slicker, indicating that N.B.C.’s crackers stayed dry even in damp weather.
In coming up with a trademark and logo for the company, Green studied his books and discovered an old Venetian printer’s mark that he liked, an oval with a double cross above it. This became the N.B.C. symbol, on every package. (We at the American Business History Center have noted that most great business creators were perfectionists, but we have not studied anyone more obsessed with details than Adolphus W. Green).
Before the end of N.B.C.’s first year in business, Uneeda Biscuits hit the market in their new, carefully-designed packages. Green spent more money in advertising the product than had ever been seen in the cracker business — $7 million in the first ten years. He plastered cities and countryside with signs and ads.
Green tolerated no mistakes. “Uneeda Cadets” were sent out into the field to buy up any old Uneeda Biscuits that were no longer fresh. The company, led by an attorney, sued competitor after competitor to stop the use of such names as “I-Wanna” and “Uwanna” Biscuits.
By 1900, Americans were buying ten million packages of Uneeda Biscuits a month. People wrote songs and poems about the crackers, and they were seen in numerous movies as the symbol of the good American life, available to all. The company was making over $3 million in annual profits on sales of $35 million, one of the few highly successful trusts. Green drove the company harder and harder, building the biggest cracker bakery in the world on West Fifteenth Street in Manhattan. He took steps to make the bakeries better places to work, adding benefits and even stock purchase programs for his employees. He continually toured the company’s agencies and bakeries in his private railroad car.
But if an executive put their feet on their desk, wore a loud tie, or forgot to wear their suit jacket at all times, they could be fired on the spot. Perhaps no one really liked AW Green except for his family and his stockholders.
AW had few friends and lost others, but he did not seem to care. The bakers in the trust had expected to continue to run their bakeries independently, with their own brands, still sold in boxes and barrels. Seeing their independence disappear, some of the bakers left the trust to form competing companies. Most prominent among the departures were the Loose brothers of Kansas City, who in 1902 formed Loose-Wiles Biscuit Company, which became N.B.C.’s distant second-place competitor. (Loose-Wiles was renamed Sunshine Biscuit in 1946.)
In 1906, Green moved the company’s headquarters from Chicago to New York, to be near the financial markets and the company’s giant New York City bakery, which employed about 6,000 workers.
In 1912, four years after competitor Loose-Wiles had introduced the “Hydrox” sandwich cookie, N.B.C. introduced its clone, named “Oreo.” Green may have picked the name based on an ancient Greek word for hill. Despite Green’s best efforts, the company still made hundreds of different products, many still sold in bulk rather than neat packages. But when he saw a product worth packaging and promoting nationally, as he did with Oreos, Barnum’s Animal Crackers, and Fig Newtons, he pursued it.
Adolphus W. Green effectively ran N.B.C. until the day he died, in 1917, at the age of seventy-four. At the time, his company was by a substantial margin the biggest food company in America after the giant meatpackers Swift and Armour, and the largest company dedicated to branded food rather than bulk food. Dividends had been paid stockholders year-in and year-out.
Phase Two
Upon Green’s death, the top job at N.B.C. passed to one of his young lawyers, Roy Tomlinson, continuing a tradition of legal leadership. For the next twenty-eight years, until 1945, Tomlinson ran the company.
Interestingly, despite losing control early on, William H. Moore had never lost interest in the company. He and his two sons served on the Board of N.B.C., helping Tomlinson lead the company. Moore’s grandson later became a key company executive.
While easier going and more relaxed than Green, Tomlinson was still aloof. But he had inherited a great, profitable company and kept it rolling along. Despite a reputation of becoming fat, lazy, and stodgy during this era, N.B.C. made some major moves.
Continuing their emphasis on advertising, when radio came along in the 1920s, N.B.C. was among the first to sponsor national radio programs. Advertising on the dominant National Broadcasting Company, the use of “N.B.C.” became confusing. The National Biscuit Company then began to refer to itself as “Nabisco,” previously only used as a brand on sugar wafers.
Another intriguing character enters the picture here. Henry Perky was like Green an attorney, born in the same year, 1843. He became obsessed with health food, studying the breakfast cereal giants Kellogg and Post of Battle Creek, Michigan. After many various and unsuccessful jobs, in 1895 he patented a process for shredding wheat grains into a breakfast food. By 1901, his Shredded Wheat was a huge seller, and he built a $2 million showcase factory next to Niagara Falls in New York State. Over 100,000 people a year toured the immaculate, spectacularly lit Shredded Wheat factory. Perky later sold out his interest, and in 1928 Nabisco bought the Shredded Wheat Company for $35 million in Nabisco stock. Nabisco also bought the maker of Milkbone dog biscuits.
As profitable and big as Nabisco was, the 1920s saw another rush of industrial combinations and mergers. In the food industry, Post’s daughter Marjorie Post and her husband E.F. Hutton created General Foods out of Postum cereal, Maxwell House Coffee, Birdseye frozen foods, and other brands. Cincinnati’s yeast kings, the Fleischmanns, merged their yeast company with Royal Baking Powder to form Standard Brands. Standard Brands acquired Chase & Sanborn Coffee, going head-to-head with General Foods. By the 1950s, both companies were bigger than Nabisco, though Nabisco was still larger than Heinz, Kellogg, and other big names in the branded food industry.
The Great Depression hit Nabisco hard, but the dividends kept flowing and most of the 20,000 workers took pay cuts but kept their jobs.
In 1934, the company introduced the distinctive tasting “Ritz” cracker as a premium product, but a treat anyone could afford. Five million were baked in the first year. Within three years, 29 million Ritz crackers were baked each day, making it the world’s best-selling cracker.
In the 1930s, Nabisco also developed the “NAB” line of small packages for use in the newly popular vending machines. Cheese peanut butter crackers and other items were soon found in hundreds of thousands of vending machines in bars, gas stations, offices, and factories across the land.
Throughout his twenty-eight-year reign, Tomlinson kept the dividends flowing but invested little in the bakeries or new technologies. Corporate policy was to do things because “That is the way we have always done them.” Nabisco used two-story “reel” ovens, which used a Ferris-wheel like system to bake the products as the wheel rotated the goods down into an oven on the floor below. In the meanwhile, other bakers had moved to “band” ovens which moved the products in a continuous line, up to 300 feet long, and was more efficient and faster than the old reel ovens. By 1945, half of the ovens at Loose-Wiles/Sunshine were band ovens, but Nabisco had very few. They would not fit into Nabisco’s old, multi-story urban bakeries. But why change? The company still made money. And it had never borrowed a penny, making it one of the most conservatively financed big companies in the nation.
Wall Street analysts and reporters grumbled about the company being stodgy and asleep. Until Nabisco found a new leader.
Phase Three
In 1945, upon Tomlinson’s retirement, Nabisco predictably chose another lawyer, George Coppers, to be the next President. Despite having worked decades for the company, Coppers had new ideas. Over the next twelve years, Nabisco spent tens of millions building new, one-story bakeries using band ovens. The largest one was at Fair Lawn, New Jersey.
Unlike his two predecessors, Coppers listened to his colleagues and applied their suggestions. His door was always open. But he had no patience for doing things just because “They had always done them that way.” Most of Tomlinson’s management team retried or was fired, replaced by younger, more energetic leaders.
Coppers also led the company into a major international expansion, especially successful in Europe. He presided over the company until 1960. His successor, Lee Bickmore, was the first salesman to run Nabisco.
By 1965, Nabisco was generating annual profits of $38 million on revenues of $627 million. While National Dairy Products (later renamed Kraft), General Foods, Borden, Standard Brands, Ralston Purina, and Beatrice Foods were larger in revenues, Nabisco made more profit as a percent of sales than any of them. Only the phenomenally profitable Campbell Soup had a higher profit rate.
In 1966, Nabisco introduced Chips Ahoy!, which went on to great success.
When Bickmore retired in 1972, Nabisco had become a billion-dollar company.
The Merry-Go-Round
For eighty-three years, Nabisco had been a strong, independent, highly focused company with little diversification beyond its core crackers and cookies. It dominated the industry, far larger than Sunshine or the third-place company, United Biscuit, which was renamed Keebler in 1966.
But, in 1981, leadership made the big decision to merge with the slightly larger Standard Brands, now a very diversified food company, including Planter’s Peanuts and Baby Ruth candy bars. Standard Brands had a younger, more aggressive management, and generated $3 billion a year in sales. Nabisco was slightly smaller, doing $2.5 billion. Nabisco’s superior direct-to-store delivery system was paired with Standard Brands’ big product line. Nabisco shareholders owned slightly over half of the combined company, Standard Brands slightly less than 50%. Nabisco’s chief was named CEO of the combined company. Standard Brands’ CEO Ross Johnson was given the number two spot, Chief Operating Officer, of the new company, now called Nabisco Brands.
Later in 1981, the new company also bought Life Savers for $250 million.
Only four years later, in 1985, tobacco company R.J. Reynolds, looking to diversify beyond cigarettes, bought Nabisco Brands for $4.9 billion. At the time, Nabisco Brands was making profits of over $300 million a year on revenues exceeding $6 billion. The ambitious Ross Johnson was made CEO of the even bigger new combine, RJR Nabisco.
Johnson was “flashy,” wearing gold chains and building an “air force” of ten corporate aircraft. But the great brands of Nabisco kept turning out the profits. The company attracted the attention of corporate buyout experts KKR, who took the company private for $24.9 billion in 1988, in the biggest leveraged buyout in American history up through that time.
Johnson at first fought the deal but left with a $50 million severance package. Nabisco was not listed on the stock exchange for the first time in over eighty years. The battle for control of RJR Nabisco was so intense that two books, True Greed and Barbarians at the Gate, were written about it. Bestseller Barbarians at the Gate went on to be made into a tv movie starring James Garner as Ross Johnson.
But the thrill-ride of changing owners was not over for Oreos and Ritz crackers. The private company, saddled with billions of dollars of debt due to the leveraged buyout, struggled. In 1999, KKR took the company public again and got out of the deal, taking a huge loss. The tobacco business was separated and the company was again primarily a food company, keeping the brands of Nabisco and Standard Brands.
This company attracted the attention of the biggest tobacco company, Philip Morris (later renamed Altria), which also wanted to diversify away from tobacco. In 2000, Philip Morris bought Nabisco for $14.9 billion. The tobacco company had already bought giants Kraft and General Foods, making it the nation’s largest food manufacturer by a huge margin.
Yet Philip Morris, despite its legendary marketing powers demonstrated by the victory of Marlboro cigarettes over Camels and Winstons, found out that, like RJR, smoking and food did not mix. In 2006, they spun out Kraft Foods as a separate, public company. This new Kraft Foods controlled all of the Nabisco brands and bakeries.
With an enormous array of great brand names including Kraft cheese, Oscar Mayer wieners, Jell-O, and Oreos, this company proved too big and complex to prosper. Or at least Wall Street analysts thought it would be more profitable if broken up. In 2012, it was split into two public companies, Kraft Foods taking most of the traditional US brands and Mondelez International taking much of the international business and all the snack items, mainly Nabisco. Since then, Kraft Foods, controlled by the 3G Capital Group of Brazil and Warren Buffett, has struggled. Mondelez has done better.
Today, Oreos, the world’s best-selling cookies, generate over $3 billion in annual sales. Nabisco cookies and crackers, along with international brands, represent almost half of Mondelez’s $26 billion in annual sales. PepsiCo’s Frito-Lay dominates in salty snacks (e.g., Doritos and potato chips) while Nabisco rules in cookies (and still sells a lot of crackers).
And thus, in a relatively short period of 31 years, from 1981 through 2012, Oreos and Ritz have been overseen by seven successive owners and companies.
Lessons?
Without the obsessive Adolphus W. Green, we probably would have never heard of Nabisco. While Uneeda Biscuits faded away with the passage of time, Green’s focus on packaging, branding, making pure products, and advertising them live on at Mondelez International.
Too often, great brands have become mere “portfolio” components for big companies which try to do too much, try to promote too many brands. Like Nabisco, they change hands over and over. Yet, even if these brands go through the ownership roller-coaster, some are strong enough to survive and even prosper.
This helps us understand why great marketing companies keep and nurture powerful brands – for example, Coca-Cola or Procter & Gamble’s stewardship of Tide detergent.
Fig Newtons and Premium Saltines could have gone the way of Adams gum, the Gold Dust Twins, Sapolio, Ipana and Pepsodent toothpastes, or other storied brands of the past. But perhaps because of the strong foundation laid by AW Green, or perhaps just because people love the cookies, Nabisco’s heart and soul seem to have survived the turbulent seas, floating along and printing money for their owners.
Gary Hoover
Executive Director
American Business History Center
