Barbarians at the Gate (6 page)

Schaedler, a rival of Emmett’s, quietly took the matter to Howard Pines, the company’s personnel chief, and Les Applegate. Applegate, who had fallen from Johnson’s favor, was about to step down from the presidency to make way for none other than Emmett himself. The trio agreed the matter couldn’t be taken to Johnson, who would probably bury it—and maybe them as well—to protect his best friend. They decided to go directly to the board.

Johnson was in fine spirits as the board’s audit committee convened a day before the July directors meeting. Emmett’s promotion to president was to be approved the next day, and Mike Masterpool had already leaked it to
Business Week
to make the magazine’s early deadline. A pair of directors, Pat Patterson of Morgan Guaranty and Paul Kolton, came in late, grim faced. They had just met with Schaedler, who had shown them a suitcase full of the Emmett receipts. They turned to Johnson. Could he explain it?

Johnson appeared shocked. He didn’t know what had happened, he told the directors, but he damn sure intended to find out. The next day he reported the beginnings of an answer. For one thing, Emmett’s chauffeur wasn’t a typical chauffeur, but a former Central Intelligence Agency operative who had set himself up in business, with Standard Brands International as his only customer. He bought things at Emmett’s behest, Johnson explained, but Emmett, when confronted, insisted everything was aboveboard. Johnson went to bat for his buddy: Investigate it thoroughly, he said, but allow Emmett to become president now.

Emmett’s elevation to the presidency was announced, but not a subsequent internal probe by the company’s longtime law firm. As the months wore on and the investigation continued, there was rampant speculation inside the company that both Johnson and Emmett would lose their jobs. In September, the final verdict was reached: bad judgment, perhaps, but no bad deed. Emmett got off with a slap on the wrist. Instead it was his three accusers—Schaedler, Pines, and an executive named Ed Downs—that Johnson fired. Applegate was banished to being a consultant.

“I’m sending you people out on the boat,” Johnson told the trio, “and you’re not coming back.” The episode was to be forever known among
Johnson’s entourage as the “boat people incident.” For Johnson, it provided one of the few moments of jeopardy and strain he would ever know with a board.

Afterward, he seemed restless. After four years Standard Brands was still an erratic performer. Its profits were growing again, but no faster than the rate of inflation. Its rate of return was well below the industry norm. Carbonell was working on all sorts of projects out at the R&D center—a fat-free peanut and improved fermentation for corn syrup, yeast, and vinegar. But new products took time, and Johnson was growing fidgety. For a while he kept busy by selling the yeast business and buying some liquor companies. But it was as if Standard Brands was a toy he had gotten for Christmas, and Johnson, having played with it for five years, was getting bored.

Part of his disaffection was due to the fact that Johnson, now moving into his late forties, was no longer the boy wonder of the mid-seventies. The idea of becoming a sedate corporate elder made him shiver. He wasn’t interested in growing older; he longed to be the enfant terrible, the eternal shit-stirring youth. Everything about him, from the still-shaggy hair to his twenty-six-year-old second wife, suggested a corporate Peter Pan. What was needed, it was clear, was a new adventure.

The opportunity came in a curious phone call from a fellow chief executive in March 1981. Bob Schaeberle, chairman of the food giant Nabisco, told Johnson his people had gotten a call from that fellow in Connecticut working for Standard Brands. Johnson didn’t know what Schaeberle was talking about. You know, the Nabisco chief said, the fellow who had the idea of merging Standard Brands and Nabisco. Johnson didn’t know. “Maybe there’s something there, and maybe there isn’t,” Schaeberle said, “but I think we should talk about it,” Um, sure, Johnson replied.

But first Johnson wanted to discover the identity of the agent provocateur putting his company in play. “Who the fuck is this guy?” he exploded at a Monday morning meeting of his top lieutenants. Jake Powell, the chief financial officer, and Dean Posvar, the top planner, fessed up. The man was a Greenwich-based business broker they sometimes used to come up with minor acquisition ideas. Apparently he had gone overboard. “Well, if there is anything to this idea, Bob will sure as shit never want to do it now,” Johnson said. “Shit, he’ll think I don’t know what the hell
is going on in my own company. And you know what? He’s right. I don’t know what the hell is going on.”

Nevertheless, Johnson was intrigued. He got together with Schaeberle and liked the man. In a matter of weeks the two executives agreed to merge their companies. Nabisco Brands, as the new company would be called, was formed in a $1.9 billion stock swap in 1981, at the time one of the larger mergers of consumer-product companies. Technically, it was a marriage of equals. But that was considered so much chin music. Everyone knew Nabisco, with dominant brands such as Ritz and Oreo, was the more powerful company. Everyone knew who would be in charge.

The man who created Nabisco was a Chicago lawyer, Adolphus Green. Green, the company’s first chairman, took a personal hand in inventing the octagonal soda cracker that was the company’s first national product. Uneeda Biscuit, he called it. He selected a company trademark still used today, a medieval Italian printers’ symbol consisting of a cross with two bars and an oval, representing the triumph of the moral and spiritual over the evil and the material. He designed the packaging and drafted the wording on the box: “Uneeda Biscuit. Served with every meal; take a box with you on your travels; splendid for sandwiches; perfect for picnics; unequalled for general use; do not contain sugar. This is a perfect food for everybody, and the price places them within the reach of all.”

N. W. Ayer, Nabisco’s advertising agency, took it from there. In early 1899, it placed a one-word ad in newspapers and on billboards: “Uneeda.” Then the next step: “Uneeda Biscuit.” Then, “Do you know Uneeda Biscuit?” After that: “Of course Uneeda Biscuit!” Ayer went on to present an ad campaign that showed a little boy in a slicker with a box of
Uneeda Biscuits, a simple, powerful image in an age before Madison Avenue had come to full flower. At the time it was the biggest ad campaign ever, and the first to feature a packaged ready-to-eat food.

Uneeda Biscuit was a smashing success, and set the stage for a torrent of new Nabisco products: the Fig Newton, made by a Boston baker, named in honor of that city’s suburb of Newton; the Saltine cracker, from a St. Joseph, Missouri, baker; Animal Crackers, by two of the company’s New York City bakers. Nabisco was the first company to figure a way to mass-produce shortbread, and the result was Lorna Doone, an immediate hit. It concocted a combination of marshmallow and jelly, covered with chocolate icing, and named it Mallomar. Even its flops had a silver lining. In 1913, Green came out with a package of three new products known collectively as “Trio.” He had high hopes for two of them in particular: the Mother Goose Biscuit, which would depict scenes from nursery rhymes, and the Veronese Biscuit, an upscale hard cookie. But it was the third cookie in the trio, which featured vanilla frosting between two round chocolate wafers, that caught on. It would become the bestselling cookie in the world: the Oreo.

Green pioneered the idea of using a direct sales force in the food business rather than a middleman, dispatching salesmen to push Nabisco products across the country. Beginning with the Uneeda Cadets, Nabisco mustered a huge, hardworking army of salesmen who made their appointed rounds in horse-drawn wagons with freshly painted Nabisco logos six days a week, twelve hours a day.

A man who referred to his workers as “a great family,” Green made Nabisco a benevolent employer. Within three years of its founding, he installed a system for the company’s employees to buy stock on cut-rate terms, making them what he called “associate proprietors.” He refused to employ child labor in an era when it was common. And although he expected his workers to churn out America’s snacks from dawn to dusk, in brutally hot and often hazardous bakeries, he also felt responsible for providing them nutritious meals. “In our New York plant,” he wrote in a report to shareholders, “an employee can obtain a dinner consisting of hot meat, potatoes, bread and butter, and coffee or tea for 11 cents.”

Green died in 1917, and with him went much of Nabisco’s innovative spirit. His successor, a lawyer named Roy Tomlinson, was less interested in biscuits than the bottom line. Profits quadrupled through the 1920s, but Nabisco was coasting on the enormous success of its early products
and on its sales force. When it needed new products, it bought them, including Shredded Wheat in 1928 and Milk Bone dog biscuits in 1931.

Then, in the midst of the Depression, Nabisco’s bakers came up with something novel. For years they had been trying to develop buttery crackers like those of some of their competitors. The result, covered with a thin coating of coconut oil and sprinkled with salt, was a completely new kind of cracker. They called it Ritz, and it became America’s most popular cracker almost overnight. Within a year, Nabisco had baked 5 million of them. Within three years, it was baking 29 million of them a
day,
and Ritz became the bestselling cracker in the world.

But again the company rested on its laurels. For the next decade Nabisco drifted, paying its dividends, keeping out of debt, and baking the same cookies and crackers it had for years. Eventually profits dropped, its bakeries aged, and so did its management. By the mid-1940s, the average age of Nabisco’s top executives was sixty-three; they were known as “the nine old men.” Only when Tomlinson retired, after twenty-eight years, did the company stir again.

Yet another lawyer, general counsel George Coppers, was installed by the board as chief executive in 1945. Coppers had taken weekend management courses at the Harvard Business School and set about reshaping Nabisco with what he had learned. He cleared out the nine old men and brought in a wave of new young ones. Over a twelve-year period he spent $200 million to modernize the bakeries, real money in those days. All the funds came from profits: Perish the thought of debt at good, conservative Nabisco. Coppers allotted huge budgets to research and advertising, dragging down profits but creating a foundation for the future. By the time it built its last new cookie and cracker plant, in Fair Lawn, New Jersey, in 1958, Nabisco had cut its costs, improved its quality, and heaved its way into the latter part of the twentieth century. By 1960, the year Coppers died,
Dun’s Review
recognized Nabisco as one of the twenty best-managed companies in the country.

One of Coppers’s bright young men, an Idaho Mormon named Lee Bickmore, now took the helm. Bickmore began his Nabisco career as a shipping clerk in Pocatello and went on to become a salesman, pushing Ritz and Oreos in obscure corners of Utah, Wyoming, and Idaho. It was only when he wrote an earnest letter to New York headquarters, full of suggestions about training and techniques for salesmen, that he gained notice.

As president, Bickmore expanded Nabisco into foreign markets: Australia in 1960, England and New Zealand in 1962, Germany in 1964, and Italy, Spain, and Central America in 1965. He spent so much time on overseas travel he became known as “The Flying President.” Bickmore also diversified, moving into frozen foods and making Nabisco the largest shower-curtain maker in the world. He took on a carpeting business and a toy business. He bought a company called J. B. Williams, which made personal-care products such as Aqua Velva shaving lotion and Geritol.

It all bombed—the foreign operations, the shower curtains, the toys, everything. To make up for the losses, Bickmore squeezed Nabisco’s cookie and cracker divisions for every penny of profit. He squeezed so hard, in fact, that they began to crumble. The Coppers-era bakeries were deteriorating, and Nabisco no longer had the profits to modernize or replace them. Even after Bickmore retired in 1973, little changed. In the seventies Nabisco was run by decent, slow-moving executives who fostered a culture that venerated past glories. Good men all, but change agents they weren’t. As one of its ad agency executives put it, “How could somebody who makes Oreos be mean?”