Passing the Sweets

The American Tobacco Co.'s querulous George Washington Hill made his company famous with a classic slogan that urged women to "reach for a Lucky instead of a sweet." Whichever way they reach from now on, American Tobacco stands to benefit. Last week the nation's second largest cigarette maker (after R.J. Reynolds) moved to acquire Chicago's Consolidated Foods Corp. Consolidated is a vast (1964 sales: $634 million) packer, distributor and retailer of foods whose sweets range from Sara Lee bakery products to Union Sugar and Shasta beverages.

American Tobacco has had a keen taste for just such a company. Earlier last week President Robert Barney Walker announced record American sales ($1.2 billion) and earnings ($73 million). Such income swelled an already bulging cash drawer. At the same time, with cigarettes under medical fire and new brands proliferating, the major tobacco companies have been anxiously diversifying. Two weeks ago Reynolds announced that it would spend $100 million to buy Penick & Ford Ltd., Inc., a corn-oil refiner whose products include My-T-Fine desserts, Vermont Maid syrup and Cocomalt. Liggett & Myers last year paid $15 million for Alpo dog food. American's move was last, but by far the most spectacular.

Why did Consolidated, which earned $13.5 million last fiscal year and so far is doing 23% better this year, want to merge? In 20 years, Canadian-born Chairman Nathan Cummings, 68, formed Consolidated into an efficiently linked empire, from packing plants and factories to 421 stores. Vacationing last week in Gstaad, Switzerland, Cummings observed that the merger would increase stock values for Consolidated shareholders (including himself), provide even better marketing skills for the food company. He insists that he will never retire. But acquaintances, pointing to his age (68), believe that he will welcome turning his creation over to another hard-gunning executive like American's Walker.

Another party is yet to be heard from. Both the Justice Department and Presidential Economic Adviser Gardner Ackley are eager to test the legality of "conglomerate mergers," in which large corporations with different product lines join to the possible disadvantage of small competitors. The American-Consolidated agreement seems large enough and important enough to be one that Washington might examine.

This file is automatically generated by a robot program, so reader's discretion is required.