Nabisco

This is Sleepy History. Sleepy History is a production of Slumber Studios. To listen ad-free, get access to bonus episodes, and support the ongoing production of this show, check out our premium feed. people around the world have grown up eating cookies and crackers made by the American company called Nabisco but few know about Nabisco's fascinating history from its founding as a trust of local 19th century bakers to its modern international fame what stories lie behind the snacks we've come to love Tonight, we'll take you from the early days of shipboard rations to the business drama of the Gilded Age, and then on through a turbulent battle of the 20th century brands. Along the way, we'll learn more about the secrets and boardroom exploits behind the products beloved around the world. So just relax and let your mind drift as we explore the sleepy history of Nabisco. In the late 18th century, John Pearson of Newburyport, Massachusetts, created an innovation that no doubt earned him thanks from many a sailor and soldier world leaders. He altered the existing recipe for an unappetizing bread known as hardtack, turning it into the far more edible pilot biscuit. Hardtack had been used for centuries in various forms. It was a nearly indestructible bread that could travel long distances without spoiling. As such, it had been used in one shape or another since the days of the ancient Egyptians. Although it was barely fit for consumption, it had kept men alive under harsh travel conditions. conditions. John Pearson's recipe added more sugar and shortening to the hardtack, producing a much tastier product with a more pleasing consistency. It came in two varieties. One was called Flaky Pilot Bread and the other a Barge Biscuit. They gained popularity as a pairing for chowder as well, and were soon widely used. As a newspaper article from 1909 mused, what yacht's larder was complete without a box of Pearson's pilot bread? What pantry in a private dwelling house could be found without a supply of the crisp crackers? A person might as well think of eating clam chowder minus the clams as to have it without a goodly supply of pilot bread to crumble in the broth. Unsurprisingly, it was a sea captain who further evolved the concept of the pilot biscuit into a form we recognize more readily today. As the story goes, in 1801, a retired mariner named Josiah Bent was making a profit by hauling sacks of his own hardtack biscuits to the waterfront in Boston and selling them there. In a nod to the cracking sound they made while cooling, he called them Bent's Water Crackers. Many people don't realize that biscuits and crackers were not made side by side at a bakery that makes bread. By the late 19th century, most cities had one or two bakeries that were dedicated to crackers. But these functioned locally, delivering their products in horse-drawn carriages within a limited range. Sure, they innovated on their own. It was common for each cracker bakery to have its own products, such as cookies. But they didn't travel far. So wherever you might find yourself at that time, you'd have a choice of crackers and cookies that were made locally on a small scale. A perfect example of this was the Kennedy Biscuit Factory in Cambridge, Massachusetts. They named their cookies after surrounding communities such as Harvard and Beacon Hill. It's because of them that we have a cookie called the Fig Newton after Newton, Massachusetts. But we'll tell you more about that later. In the late 19th century, there was a period when investors were rushing to consolidate all types of industry. The goal was to be the biggest in any given category, crushing the competition. In 1890, a group of Biscuit and Cracker Bakers got together and decided to join forces with the hope that they could increase their business. To do this, they enlisted the assistance of a Chicago lawyer named Adolphus Green. Green had made a name for himself by representing some of Chicago's most powerful businessmen, but he had come from fairly humble origins. Born as the 11th and final child of a Boston Irish family in 1843, he'd been raised by his mother at a boarding house. Luckily, she was a determined woman with a great love of learning. She managed to support him right through high school at the prestigious Boston Latin School. He went on to graduate in the top quarter of his class at Harvard University by age 20. After that, he struck out to try his luck in New York City. At that time, it was normal for a young man to become a lawyer by starting as a law clerk. Although that path was eventually in his future, he at first began by working at the Mercantile Library of New York. It was a privately funded resource for the employees of affluent businessmen, and he made excellent contacts there. Green became head librarian, and in 1868, at age 25, he got his law clerkship. He passed the bar at age 30, becoming a full-fledged lawyer in his own right. In those years, after the devastating Great Fire of 1871, Chicago was a new frontier for business growth. Eager to make his mark, he moved there in 1873. Although the rough and tumble nature of the city was reportedly a bit off-putting to him initially, he soon made a name for himself. His reputation spread. He married and started a family. It was at this juncture in his life that the Cracker Bakers appeared in his office, looking for representation. This twist of fate would eventually make him a very successful man. With the thoroughness that would become his hallmark trait, Green learned everything he could about the cracker business. In 1890, he helped 40 bakers across 13 states incorporate as the American Biscuit and Manufacturing Company. His choice of the word biscuit rather than the less sophisticated cracker turned out to be an early sign of his marketing prowess. The new company was the largest of its kind in what was considered the Western United States. Despite having put so much energy into this trust, Green didn't want to be in charge of it. He went back to lawyering and helping other trusts come together. One of his contemporaries, however, had his eye on the prize. A man named W.H. Moore, who was also a lawyer, decided to create a similar trust among the cracker bakers in the eastern United States. States. He was a formidable challenger, having created other top trusts of the time, such as the Diamond Match Company and the American Can Company. The result of Moore's efforts was the formation of the New York Biscuit Company. It was even bigger than Greens Trust, and it was backed by top Chicago investors who apparently had no scruples about funding a company in the East Among them were people like Philip Danforth Armour of meatpacking fame George Pullman of the railway business, and Marshall Field, whose department store was one of America's most iconic. Even Abraham Lincoln's son Robert was involved. This new alliance of 23 bakeries covered 10 states from Maryland to Maine. At 140 ovens, the New York Biscuit Company now held the title of the largest in the country. And that was even before it was joined by the Kennedy Biscuit Factory of Cambridge, Massachusetts. benefits. Most significantly, Kennedy had a major plant in Chicago, which had become an epicenter of the biscuit business. So now the American Biscuit Company had competition again. The two cracker behemoths competed for a time, but eventually they agreed to join forces. With the help of both Green and Moore, they became the National Biscuit Company in 1898, known at first as simply NBC. After joining, they even incorporated a third group called the United Baking Company. NBC now controlled literally half of all the cracker and cookie business in the country. This amounted at the time to the production of 360 million crackers per year. It was reportedly a profitable adventure for the investors. At this point, Moore seems to have taken his money and focused on other pursuits. The Bakers asked Adolphus Green if he would be their new president. He declined that top position, but he did agree to be the chair of their board, and he also stayed on as their general counsel. But by all accounts, Green ended up interested in actually being in charge. He eventually became president of NBC, and he soon had his eagle eye on every aspect of the business. He did all this while still operating his law firm. One of the biggest innovations he pioneered for NBC was that of packaged crackers. This may sound silly to modern people, because our crackers have always come in packages. But at the turn of the century, most crackers were still being distributed in bulk. The iconic Cracker Barrel, which stood in many a general store, had long been the method of selling biscuits to the public. Certainly, the idea of the town gossip hanging out at the country store Cracker Barrel was a nostalgic one. but the reality of the barrel and the crackers closer to the bottom of it was that they weren't very fresh or sanitary. In fact, the American Business History Center shared an anecdote wherein a store owner was accused of having vermin in his cracker barrel and he responded, that's impossible because the cat sleeps there. Green made the ubiquitous soda cracker his first focus. He had a dream that the NBC soda cracker would be fresh, tightly sealed, and eaten absolutely everywhere. Working with the legendary ad firm N.W. Ayer, he developed the Unita Biscuit, which was kept fresh by a revolutionary inner seal packet. Green was determined that everything from the production to the delivery of these crackers would be consistently excellent. He gave his input and approval to every detail, from the logo to the sales manuals for the new Unita cadets who delivered NBC products and decorated horse-drawn wagons. Nowadays, we would say that he did some pretty exceptional branding. He established himself as a visionary in the cracker industry. Then, despite the arguments of colleagues and his bakers, he insisted that the biscuits retail at the low price of five cents per packet. In doing so, he made the Unita biscuit a high-quality product that was accessible to almost everyone. Even as he was marketing to the masses, Green allowed himself what we might call a nerdy indulgence. He based the Nabisco Inner Seal logo on an old Venetian printer's mark that he liked. that he liked, but his lawyerly side was also in full effect. He ruthlessly sued any company that tried to knock off the name of the Unita Biscuits, shutting down names such as Iwana or Uwana. And it worked. By the turn of the 20th century, Unita biscuits were selling at the rate of 10 million packages per month. Unita's iconic advertising image of the little boy in a yellow rain slicker, which reiterated the effectiveness of the packaging, had become familiar to everyone. So much so that in the Singing in the Rain tribute, at the end of the 1929 Hollywood Review, Buster Keaton was seen carrying a package meant to be Unita crackers while wearing his raincoat. The Biscuits were also featured a decade earlier in a plot point of the 1917 silent film Reaching for the Moon with Douglas Fairbanks. Green's pricing strategy paid off too. The company was soon making $3 million in profits per year off of sales of $35 million. According to the America Business History Center, this made NBC one of the few highly successful trusts of the era, despite the madness for consolidation. But Green was just getting started. He built the biggest cracker bakery in the world at what is now called Chelsea Market on West 15th Street in Manhattan. By 1906, he had moved the entire headquarters there from Chicago, and it appears he was no cheapskate with his many employees either. He reportedly paid attention to the workplace experience, providing his workers with surprisingly modern amenities, such as benefits and stock purchase programs. But as you might imagine, not everyone loved being part of Green's tightly controlled project. Being what we might now call a micromanager, he toured around in a railroad car, keeping his eye on the field operations. He didn't hesitate to fire employees who made mistakes, and his standards were exacting. Apparently, some of the bakers who had joined themselves in the trust had regrets, and they broke off in an attempt to run their own competing operations. One of those was the Loose Brothers from Kansas City. They left NBC in 1902 and teamed up with John Wiles to form the Loose Wiles Bakery. This new company would manage to become a second place competitor over time, owing largely to a little sandwich cookie called the Hydrox. This crunchy, dainty chocolate wafer cookie with vanilla cream fondant in the middle had taken over the ice cream parlors. Investors had begun to whisper that NBC had gone as far as it could go and that Luce Wiles was the company for growth. This must have irked Adolphus Green because in 1912, he launched a shameless knockoff of the Hydrox cookie called the Oreo. Even the imprint on the Oreo wafer imitated the intricate design on the Hydrox cookie. As food writer Stella Parks put it in her book, Grave Tart, Iconic American Desserts, whether through coincidence or spite, Nabisco unveiled the Oreo on Luce Wiles' 10th anniversary. Note that Parks uses NBC's later and more recognizable name Nabisco. There has been much speculation about where the Oreo name came from, but Parks suggests it was just another intentional dagger to the heart of Luce Wiles. Her article on the cookie battle says someone at Nabisco clearly had a thing for botany and to understand Oreo you don have to look any farther than the mountain laurel on every Hydrox Oreo Daphne It was a copycat in every way. In actuality, though, it was pretty tough for Oreo to dethrone Hydrox. For years, NBC had to push the Oreo cookie by linking it to other NBC products. This continued for decades, but NBC had the luxury of investing its time in Oreos. When Adolphus Green passed away in 1917, NBC was the biggest food company in America, with the exception of the meatpackers Swift & Armor. Further, it was the largest company dedicated to branded food rather than bulk food. And the Oreos were by far not the only item in their stable of products, which numbered in the hundreds. Some of these were still sold in bulk. However, other packaged snacks, such as Barnum's Animal Crackers and Fig Newtons, were fixtures in American life. A long-time employee named Roy Tomlinson picked up the torch from Green, bringing new life and new ideas. The company was one of the first to be an advertising sponsor on the National Broadcast Company, which then, as now, was known as NBC. And if you think that's confusing, you're not the only one. In order to more clearly separate his biscuit company from the advertising network, Tomlinson began to refer to his brand as Nabisco, an abbreviation of National Biscuit Company that had formerly been used only on one particular sugar wafer. Nabisco made some strategic purchases. They bought the breakfast cereal shredded wheat for $35 million in Nabisco stock. They also purchased the maker of milk bone dog biscuits. In fact, the 1920s were a time when mergers seemed hot again. For example, Majore Post, the daughter of breakfast cereal entrepreneur C.W. Post, created General Foods. Meanwhile, the Fleischmans of Cincinnati merged with Royal Baking Powder to create standard brands and so on. Nabisco managed to weather the Great Depression partially because 20,000 employees took pay cuts in order to keep their jobs. In 1934, they introduced a cracker we all know well, the Ritz. It's easy to imagine during such a grim time that its fancy branding and stay fresh packaging made it a popular affordable indulgence. Five million rents were made the first year, but three years later, the company was producing 29 million per day. It actually became the world's best-selling cracker. Another smart move the company made during the 1930s was to court the evolving vending machine business. Nabisco was soon distributing snack-sized packaged items that worked their way into hundreds of thousands of vending machines. But there were also some forces working slowly against Nabisco during that time. First, remember all those mergers that were going on? Those new, larger companies began to surround Nabisco with competition, increasing the pressure against the company from the outside. Further, Tomlinson was more interested in maintaining the status quo than innovating. One notable example was that Nabisco still overwhelmingly used what was known as a real oven. The way these worked was by rotating products on a wheel to toast them. But the newer band ovens, which rolled items on a conveyor belt, were faster and more efficient. In fact, Luce Wiles had a bunch of them. But Tomlinson was too conservative to borrow money for such investments and maintained conservative money management habits instead. The old multi-story factories used by Nabisco accommodated two-story real ovens, and he didn't want to go through the upheaval of changing that. However, mergers and real ovens notwithstanding, there was an unexpected ray of light. After decades of trying to beat Hydrox, it seemed that the passage of time and changing trends did the Hydrox cookie in, without the intervention of Nabisco. The Brave Tart piece explains that the use of hydrogen and oxygen in the name of a food product had once been common. Products ranging from soda to ice cream referred to them. But as time went on and the concept of chemicals became less appetizing, the name of the cookie felt generic and even off-putting. Instead of proactively renaming the cookie, Luce Wiles tried to shine up their image by changing the company name to Sunshine Biscuits in 1946. Becoming sunshine biscuits didn't help, and rather than improve the image of the Hydrox cookie, the management team delivered anti-Oreo ads that sternly reproached consumers not to accept imitations. As the Brave Tart article quips, they might as well have been telling Oreos to get off their lawn. And Hydrox had some unlucky timing related to leadership at their competitor too. In 1945, Tomlinson retired from Nabisco. He was succeeded by lawyer George Coppers, who had been working at the company for decades. But things got dynamic when Coppers took over and that may have sped up Oreo's success in the way for Cookie Wars. Perhaps smelling weakness, Nabisco went in for the kill, launching a new and improved Oreo, and a campaign full of color and excitement. Then they actually raised the price of their cookie, making Hydrox look like a bargain version. By the 1960s, the Hydrox was thought to be for dour old-timers, and Oreo had won. Under new leadership, Nabisco departed from its conservative ways. The new president was open to ideas and innovation, and he ushered in a new generation of Nabisco leaders. He finally invested in more efficient bakeries, spending a significant amount on band ovens and buildings that would house them. He also looked to international markets, expanding overseas. The year 1960 marked a first for Nabisco. Coppers passed leadership to Lee Bickmore, who was the first salesman to run the company. Business remained very good. In the middle of the decade, the legendary Chips Ahoy brand was launched. By the time Bickmore retired in the early 1970s, Nabisco was a billion-dollar company. The 1980s proved to be sort of a strange and yet memorable period in Nabisco history. In 1981, they merged with Standard Brands, which was just a bit larger than they were, and had a broader range of products. The thinking behind this merger was to combine the diversity of Standard with the strong direct-to-store delivery that Nabisco had maintained, heartening back to Green's original horse-drawn wagons. A very flashy and colorful head of standard brands, Ross Johnson, was made second in command, but he soon rose to the top position when Nabisco's own CEO retired. Not long after, the company became attractive to cigarette maker R.J. Reynolds, which was trying to move away from a dependence on tobacco as the popularity of smoking waned. The purchase went through. R.J. Reynolds bought Nabisco for $4.9 billion. Ross Johnson managed to land the job as CEO of the new RJR Nabisco. But it tough to overstate how much Johnson was a far cry from the conservative men who had been running Nabisco in the past Years later in his obituary the New York Times described Johnson's notorious embrace of a lavish lifestyle, which he led so openly that he became a symbol of corporate greed. From country club memberships to private planes, Johnson flaunted his wealth unabashedly. In their book, Barbarians at the Gates, Brian Burrow and John Hillier wrote, He did the biggest deals, had the biggest mouth, and enjoyed the biggest perks. After the 1987 stock market crash, Nabisco was languishing. Meanwhile, Johnson had observed a new 1980s phenomenon called a leveraged buyout In which a group of investors used private funds to purchase a company Potentially reselling it at a profit years later He felt that Nabisco would be doing better without the tobacco business He started buying up shares of Nabisco, attempting to keep their value up on the stock market. However, his strategy didn't really work, as shares continued to underperform. Meanwhile, his actions had attracted the attention of a buyout firm called Kohlberg, Kravis, Rogers & Company, known as KKR. When it became apparent what he was up to, they sprang into action, putting together their own takeover plan. Johnson fought the takeover, but it was futile. He lost to their $25 billion bid. It was the biggest leveraged buyout in American history at that time. The auction between Johnson and KKR was so intense that it inspired two books, one of which spawned a 1993 movie where Ross Johnson was played by James Garner. In the end, Johnson lost to KKR, even though his bid was $3 more per share. The board at Nabisco didn't trust him as much, which was a pretty big slap in the face. But he did so with a big, fat severance package known as a golden parachute. Although sources vary on the exact amount he walked away with, they generally place it between 50 and 60 million dollars, which was pretty obscene for the era. KKR didn't really end up winning in the long term sense, though. The company was buried under debt, and in 1999, they gave up and took Nabisco public again. At that time, the tobacco business was separated from the food brands. But unbelievably, in 2000, another tobacco giant called Philip Morris bought Nabisco for $18.9 billion. Just like RJR, they wanted to diversify away from tobacco. from tobacco. In fact, they'd already bought Kraft and General Foods, so they were now far and away the country's biggest food manufacturer. But even they couldn't keep tobacco and food under the same umbrella. In 2006, they separated Kraft Foods, which continued to oversee Nabisco. But even then, there just seemed to be too much going on within the Kraft portfolio. Cheese, lunch meat, Jell-O, and all manner of other products didn't play well with the biscuit equities. So in 2012, Kraft split in two, keeping most of the U.S. brands under their name, but putting snack items like Nabisco under the international Mondelez brand. That was a strategy that worked. Today, according to investment website, The Motley Fool, Mondelese holds the first place global position in cookies and crackers. Or, as some would prefer to say, biscuits. And for those of you with a soft spot for Oreos, in 2017, Mondelez claimed that Oreo was the best-selling cookie brand of the 21st century. Granted, 2017 was pretty early in the century to claim that title, because if the history of biscuits shows us anything, it's that this dog-eat-dog business will continue to have winners and losers. From the first Pilot Cracker to the nearly countless varieties we can buy today, it's pretty safe to say that the public has an insatiable love for a good, crunchy snack. Thank you. 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