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NEW STUDY SAYS RUNNING BRAND AND COMMODITY/PRIVATE LABEL OPERATIONS IN SAME BUSINESS KILLS PROFITABILITY; CONSULTING FIRM TRACKS PERFORMANCE

NEW STUDY SAYS RUNNING BRAND AND COMMODITY/PRIVATE LABEL OPERATIONS IN SAME BUSINESS KILLS PROFITABILITY; CONSULTING FIRM TRACKS PERFORMANCE
 SAN FRANCISCO, May 11 /PRNewswire/ -- Could some of the best- known names in the U.S. food industry be headed for a fall? Many companies in the $250 billion industry are now managing brands alongside existing commodity or private label operations in a never- ending quest for growth. But according to a study by management consultants Swander, Pace & Co., these "quasi-branded" companies are worshipping a false god.
 "Running fundamentally different businesses side by side ultimately erodes profitability," said Swander, Pace & Co. Director Dan Swander.
 The food, beverage and consumer product consultancy analyzed the financial performance of 64 food companies (annual sales between $85 million and $24 billion) from 1986-1991, comparing those that either primarily sell branded goods or commodities with those that, through product development or acquisition, try to sell both (see following list).
 The primary conclusion of the study was that quasi-branded companies -- companies that sell both branded and commodity goods -- are especially vulnerable. Often undervalued when whole, they may be worth much more to shareholders when unbundled into separate commodity and brand business units.
 Swander, Pace & Co. warned that quasi-branded companies can only improve performance by selling off unrelated businesses and returning to their original, core business; at the very least, they must separate their branded and commodity operations as much as possible.
 Among the study's other conclusions:
 QUASI-BRANDED COMPANIES
 -- Quasi-branded companies showed much lower returns on both
 assets and sales than pure commodity companies or pure branded
 companies.
 -- Large (over $2 billion) quasi-branded companies can "coast" in
 the short term because of their size, but their return on
 assets decreased over time.
 BRANDED COMPANIES
 -- Among companies that sell only branded goods, the best-
 performing are those that lead the market in just a few
 categories.
 COMMODITY COMPANIES
 -- The best-performing commodity companies add value by providing
 retailers with distinctive services such as packaging, pre-
 pricing and just-in-time delivery.
 Why is the outlook for quasi-branded companies so bleak? Because of fundamental differences in the economics of brands and commodities when it comes to their gross margins, marketing spending, sales force requirements and effectiveness, and retail support. According to Swander, Pace & Co. Director Dan Swander, these quasi-branded companies may have forgotten these differences in their quest for growth.
 "Our data clearly shows that managing brands and commodities together, under the same roof, severely compromises the performance of each over the long term," said Swander. "These companies are spinning their wheels; they are striving for revenue growth at the expense of their bottom line."
 With offices in San Francisco and Ann Arbor, Mich., Swander, Pace & Co. is a leading management consulting firm serving the food, beverage and other consumer industries. The firm, which counts among its clients both Fortune 500 companies and start-up ventures, consults to top management on strategy development, mergers and acquisitions, market assessments and marketing planning, sales force effectiveness and customer service, operations improvement, and organization effectiveness.
 FOOD COMPANIES
 (By Size)
 LARGE (MORE THAN $2 BILLION)
 Kraft/GF Kellogg
 ConAgra Quaker
 Archer-Daniels-Midland Tyson Foods
 Campbell Soup Dole Food Co.
 Heinz Hershey
 CPC
 MEDIUM ($1 BILLION - $2 BILLION)
 Dean Foods Gold Kist Inc.
 Norton Simon Gerber
 Del Monte Wrigley
 McCormick and Co. Interstate Bakeries
 Savannah Foods Smithfields Foods
 SMALL (LESS THAN $1 BILLION)
 Curtice Burns Rymer Foods
 Keebler Empire of Carolina
 Universal Foods Corp. American Fructose Co.
 Flowers Industries Tootsie Roll
 Pilgrim's Pride Cagle's Inc.
 Imperial Holly Corp. Country Lake Foods
 Farmland Foods Inc. Sanderson Farms
 Morningstar Group United Foods
 Thorn Apple Valley Inc. Stoneridge
 Hudson Foods Granada Foods
 Seaboard Corp. Midwest Grain Prod.
 American Maize Products Goodmark Foods
 WLR Foods Maui Land & Pineapple
 Smucker J&J Snack
 Lance Inc. Penwest
 Spreckles Industries Zapata
 American Crystal Sugar Bridgeford Foods
 National Grape Coop Kaplan Industries
 Doskocil Cos. Ben & Jerry's
 Erly Industries
 Seneca Foods
 Dreyers
 Tasty Baking Co.
 Stokley
 -0- 5/11/92
 NOTE: Additional data and artwork are available from Fineman Associates.
 /CONTACT: Michael Fineman or Barbara Feder, both of Fineman Associates for Swander, Pace & Co., 415-391-4744/ CO: Swander, Pace &Co. ST: California, Michigan IN: FOD SU:


MC-MM -- SF004 -- 8552 05/11/92 11:01 EDT
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Date:May 11, 1992
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