Canadian Film Weekly (Nov 23, 1966)

Commercial Comment By ANNA LISZT HE Senate-Commons committee on prices and credit has got around to the breakfast cereal business and, naturally, to Kelloggs, they being far the biggest. One wonder how much such hearings really find out and how significant and comparable their findings are. For example, Kelloggs was criticized because their profits were 11.8 per cent of gross sales of $26 million in 1965 — about $3.5 million. General Foods, on the other hand, was, by implication, lauded because their Post’s cereal division profits were only 3.6 per cent of sales. Their overall company profits were 4.9 per cent of sales—a total of $4.8 million. Chain food stores were, again by implication, even more loudly praised because their profits were about 2 per cent of sales. The inference is that the less — profit they make, the better little boys they are. On the other hand, if one is a stockholder, the viewpoint changes. And far more people are becoming stockholders these days. We wonder how many of the committee have funds invested in food companies and how they react when dividends are cut. From whatever viewpoint one looks, the comparison of Kelloggs and General Foods with food chains is quite absurd. Kelloggs is far the biggest in the cereal business. They have kept their business simple by never getting into anything but cereals. Compared with most big companies this gives therm an extremely streamlined operation and much higher profit efficiency. The Post’s division of General Foods, on the other hand, is one smallish segment of a much more complex and diversified whole which numbers well over 50 products, including coffee, tea, packaged desserts, pet foods, flavorings and toppings, fruit pectins and goodness knows what else. The administration of a mixed bag like this is far more difficult and far less capable of profitmaking efficiency. If it were not so then the two cereal companies, selling the same product, with much the same selling income and factory and administration costs would have the same percentage profit. If Kelloggs cereals cost more to produce the higher profit, Mrs. Housewife can buy Post’s or Nabisco or General Mills or Ralston/Purina. But she still buys more Kelloggs and Grace MacInnis (NDP Vancouver—wouldn’t you know it?) may scream “blackmail” because of the kid premiums in the box, but all she is really saying is that women November 23, 1966 buy them because they are too gutless to resist the little bullying dear’s demand for this or that gimcrack toy. Ten years ago, Shredded Wheat sold at about 33% per cent less per ounce than any other cereal. And it was far the most nutritious of all. They spent less on advertising and had fewer kid premiums. But its share of the market had been declining. They began to spend more on ads, had more kid premiums, slicked up the package AND RAISED THE PRICE. And it began to increase its market share almost immediately. One obvious truth is basic but seldom really understood by such committees. Companies are in business to make a profit. If the directors and management don’t do so they get fired. In the committee’s deliberations people talk about everything else, but. We recall the price spreads investigation by a royal commission in the early fifties. As usual, the members of the companies testifying got their marbles firmly in their mouths and talked about their responsibility to the consumer, to their employees, public service, corporate citizenship and all the meaningless blabs that companies use in public but never, never mention in their own operations meetings. Until the late J. S. McLean, founder of Canada Packers, was called to testify: Quite soon, an investigator asked him about his philosophy of business. Quietly but firmly he said, “I buy meat as cheaply as I can and sell it for the highest price I can get.” It was like a breath of fresh air in all the weasel-wording which had preceded it. The healthiest discipline for business lies in the sort of action the housewives engaged in recently to bring down the price of bacon. If they would organize in a continuing association — even if they only numbered a quarter of the female population as members — they could swing a buying club so powerful that no company would dare oppose them. Women are always saying — this one too — that they could run things much better than men. Yet here, right within their grasp, is a weapon which has worked every single time they have used it. They could do so and should do so, not just when they get mad about the price of this or that, but on a continuing basis. They could soon dictate exactly what products they wanted, how packaged, how priced and whether with or without green or blue or brown trading stamps. for the return of TELEVISION EWARD! (No Questions Asked) (HIT OF SHOW) COLOR TRANSPARENCIES on “MURDERERS’ ROW" which were actually STOLEN from the Showarama ’66 Trade Show booth of COLUMBIA PICTURES at the Inn on the Park the evening of Nov. 9th... COLUMBIA PICTURES is offering a reward for any information leading to recovery... DO YOU NEED THEM MORE THAN WE DO? COLUMBIA PICTURES CANADIAN FILM: TV BI-WEEKLY Page 7