Some Smaller Food Firms Thrive Despite Consolidation

ByABC News
July 24, 2000, 3:32 PM

July 25 -- The spate of mergers that has gripped the food industry recently is oflittle concern to Paul C.P. McIlhenny.

The president and chief executive officer of the McIlhenny Company, makerof Tabasco hot pepper sauce, says frequent overtures from acquisitivesuitors hasnt tempted the family-owned company to sell out.

Founded in 1868 by Edmund McIlhenny, the Avery Island, LA-based company hadestimated sales of $120 million in 1998, a growth of nine percent over theprevious year according to Hoovers Online. With the companys Tabascosauce sold in over 110 countries, McIlhenny says the company has enjoyedclose to double-digit sales growth for the past 20 years, a rarity in thenotoriously slow-growing food sector.

The fact that we are growing and growing profitably and paying moredividends to our family shareholders is the secret to staying independent,says McIlhenny.

At a time when food company mergers seem to be a weekly occurrence and evenhippie holdouts like Ben & Jerrys Homemade Inc. succumb to the overturesof multinational conglomerates, the McIlhenny Company seems to be one ofthe rare holdouts amid the consolidation trend.

Tabasco Sales Hot

General Mills Inc.s purchase of Pillsbury, Philip Morris Companies Inc.sacquisition of Nabisco Holdings Corp. and Unilevers purchases this year ofBen & Jerrys, Slim-Fast and Bestfoods have all reflected food companiesneed to consolidate in order to deal more effectively with large retailers.

With the top five supermarket chains in North America garnering almost 40percent of the industrys total sales, larger food manufacturers are oftenat an advantage when battling for precious shelf space. Large companieswith many popular brands can negotiate with retailers more effectively,while retailers prefer to stock their shelves with products that have heavypromotional spending behind them.

Although McIlhenny admits that the competitive retail environment has madeit more difficult to get some of Tabascos newer products onto storeshelves, he says consolidation among manufacturers hasnt hurt sales sincethere arent many products that rival Tabascos popularity.