Morgan Mergers

When, last fortnight, J. P. Morgan & Co. announced a merger of three potent New York State power companies (TIME, June 24), only New York Staters were deeply interested. When, last week, final approval of the long-pending merger of Continental Oil and Marland Oil companies was interpreted as first step in a national Morgan oil corporation, public interest was wider but still quiescent. But also announced last week was a Morgan-managed merger of Fleischmann Co., Royal Baking Powder Co., and E. W. Gillett, Ltd.* At that the country sat up and took sharp notice.

Everyone knows Fleischmann's yeast, everyone knows Royal baking powder, everyone knows Chase & Sanborn coffee. The coffee company was indirectly included in the merger because Royal Baking Powder has large holdings of its stocks. The holding company which will control Fleischmann and Royal is expected to purchase Chase & Sanborn control. Many another food company was mentioned as likely to join the Fleischmann-Royal combination, especially Campbell Soup, Gold Dust, Postum Co., Inc., Kraft-Phoenix Cheese Corp. Securities of the three companies already merged had last week a market value of about $430,000,000.

The merger was arranged by a committee consisting of Morgan-Partner Thomas Cochran, Fleischmann President Joseph C. Wilshire, Board Chairman Max C. Fleischmann, Royal President William Ziegler Jr. Mr. Wilshire will be president of the new company. The directorate will include Morgan-Men William Ewing and Henry P. Davison. The Morgan interest in the merger was accented by the personal friendship long existing between Morgan-Partner Cochran and Major Fleischmann, and by the Morgan ownership of a considerable portion of Fleischmann stock (estimated at 400,000 shares) purchased in 1926.

When Morgan-Men first discussed the food merger, the Fleischmann distributing system was an important consideration. The only rival for speed and regularity admitted by Fleischmann in daily national distribution is the U. S. Post-Office. The only foodstuff rivals are the various milk companies, none of which are nationwide in scope. Fleischmann's yeast is delivered fresh every day to more than 30,000 bakeries and to 250,000 groceries, delicatessens, hotels and other retail outlets. No jobbers are used--delivery is direct from 900 Fleischmann agencies. Fleischmann's operates a transportation subsidiary which has 200 railroad cars, 2,000 trucks, 5,000 employes. Every Fleischmann retailer knows that his scheduled quota of yeast will arrive as certainly as his morning paper, his morning milk, his day's mail.

Justly proud of its distribution system is the Fleischmann company. "The Yeast Must Go Through" is the watchword in every Fleischmann office. During the New England floods of November 1927, Fleischmann chartered all the airplanes at the Boston Airport, even newsmen and news services could get planes only through the Fleischmann Traffic Department. First arrivals from afar in the flooded districts were airmen carrying Fleischmann yeast. Nor is Fleischmann service limited only to yeast deliveries. When a Fleischmann baker died suddenly, leaving a distracted widow with several small children, one Fleischmann man took charge of the funeral, another Fleischmann man ran the bakery until the widow was able to operate it again.

The Fleischmann distribution system is not the "invention" of any one man. It was developed along with the growth of the company. No transportation problem existed in 1868 when Charles and Maximilian Fleischmann, immigrants from Austria-Hungary, and James Gaff of Cincinnati, founded Gaff, Fleischmann & Co. at Riverside, Ohio. Their first great forward step was made in 1876 when they exhibited a Model Vienna Bakery at the Centennial Exposition in Philadelphia. From the fame of this exhibit came an increased demand for Fleischmann's yeast. Soon there was a Fleischmann plant on Long Island, then another at Peekskill, N. Y, Guiding spirit of the early Fleischmann company was Charles Fleischmann, who died in 1897. It was under the leadership (1897-1925) of the late Julius Fleischmann that the company went through its major expansion period. Following his death, his brother, Major Max C. Fleischmann, stepped to the front.

Fleischmann Co. makes nearly all the compressed yeast sold in the U. S. Its eleven factories have a capacity of some 500.000 lbs. of yeast per day. In 1928, net sales were $64,004,366; net income $19,820,668. Fleischmann Co. is also one of the world's largest vinegar producers. ships in its own tank cars 15,000,000 gals. of vinegar per annum. The company has consistently promoted Baker's Bread v. Home Made Bread; cheerfully notes that in 1919, 60% of U. S. bread was sold by bakers, in 1928 the baker's share had risen to 94%.

A recent new yeast market, "discovered"' in 1919, has been the health-seeking public. Yeast eaten raw is a laxative, and as such is widely advertised as a cure-all for indigestion, bad breath, skin disorders.

*Royal Baking Powder already owned two-thirds of the capital stock of E. W. Gillett, Ltd., which is largest Canadian baking-powder maker.