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Wall Street History
https://www.gofundme.com/s3h2w8
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07/21/2006
Kellogg's
Last time we explored the life of Sylvester Graham, the creator
of the Graham cracker and America’s first nutritionist. We also
saw how in some respects Graham was a quack, though he did
stumble on a few theories that hold true today, such as wheat
bread being better for you than white bread.
When Graham died in 1851 at the age of 56, little did he know
that one John Harvey Kellogg would take Graham’s theories to
the next level. Actually, he couldn’t have possibly known,
regardless, because Kellogg wasn’t born until 1852.
In the book “1,000 Years, 1,000 People: Ranking the Men and
Women Who Shaped the Millennium,” the authors have an
interesting top ten, which while this is a regression from the topic
at hand, I just thought I’d pass it along.
1. Johannes Gutenberg
2. Christopher Columbus
3. Martin Luther
4. Galileo Galilei
5. William Shakespeare
6. Isaac Newton
7. Charles Darwin
8. Thomas Aquinas
9. Leonardo da Vinci
10. Ludwig van Beethoven
No. 1,000, incidentally, is Andy Warhol, and part of the blurb on
him reads:
“That’s it, reader. You may not have made our list, and in all
likelihood you’re not going to be included in a ‘Who’s Who’ of
the one thousand most important people of the century either, but
don’t despair. There’s an easy solution. Under pop artist
Warhol’s scenario, everyone is in for a fleeting moment of fame.
Remember Barney Clark? Donna Rice?”
Anyway, while Sylvester Graham didn’t make the book’s list,
John Harvey Kellogg (1852-1943) checks in at no. 430.
“How do you spell breakfast? For millions of Americans who
grew up on television, it’s ‘K-E-double L-O-double good,
Kellogg’s best to you.’ Dr. Kellogg’s vegetarian regimen at his
health sanitarium in Battle Creek, Michigan, couldn’t
accommodate eggs over easy, bacon, and sausage. He started
serving little flakes of corn for breakfast. They were an instant
success, even though his flaked wheat – Granose – didn’t make it
as the breakfast of champions. Will Keith (W.K.) Kellogg toiled
under his brother’s thumb at the clinic for years, then formed his
own company in 1906 to market John Harvey’s cornflakes. Back
at the sanitarium, patient C.W. Post was so taken with the
breakfasts that he formed a competing cereal company. But it
was John Harvey’s healthier idea that put the snap, crackle, and
pop into breakfast.”
Well, I just jumped ahead a little there, so back to Sylvester
Graham. He always thought he’d be remembered forever as one
of our nation’s true pioneers, telling friends, in the words of
historian John Steele Gordon, “a granite shaft would be erected
on his grave and his house would become a place of pilgrimage.”
Alas, as Gordon notes, Graham’s home became a tavern.
Harvey Levenstein, writing in “The Oxford Companion to
United States History,” discusses the changing diet and tastes in
the 19th- and 20th-centuries.
“After mid-century, the expanding railroads transported
affordable supplies of wheat, pork, and beef to the growing
cities; market gardening and dairy farms proliferated around
them; and steamships brought exotic foods from abroad. By
1900, skilled chefs were turning out elaborate multi-course meals
in the style of French haute cuisine for the wealthy. The growing
middle and upper-middle classes could readily purchase the
abundant foods but could not afford the servants to prepare and
serve them in this fashion and were thus amenable to calls by a
new generation of food reformers for dietary restraint.
“The scientific basis for the reformers’ crusade was the so-called
New Nutrition: the discovery by chemists of proteins,
carbohydrates, and fats, each with its unique physiological
function. Proper nutrition now meant consuming as much of
these as necessary – any less was unhealthful; any more,
wasteful. Urging immigrant workers to economize, the
reformers insisted that the proteins in beans were fully as
nutritious as those in beefsteak.”
And so along came John Harvey Kellogg, who picked up on
Sylvester Graham’s theories with “purgative nostrums based on
recent scientific discoveries that the colon harbored large
amounts of bacteria.” [Fannie Farmer was another adherent, by
the way.]
John Harvey was a Seventh Day Adventist who, like Graham,
believed his grain-based foods calmed sexual urges. He also
founded a medical school and established a number of
sanitariums devoted to the gospel of healthful living, the largest
of which was in Battle Creek, Michigan.
Aside from inventing flaked cereals, Kellogg popularized “nut
butters,” including peanut butter. And he also came up with
America’s first meat substitute, from flour, water and steamed
peanuts; a sort of tofu. But of course the Kellogg brothers are
best known for Cornflakes.
From an article on the company by James M. Pethokoukis of
U.S. News & World Report:
“Back in 1894, Will Keith Kellogg was working at (his
brother’s) Battle Creek sanitarium. Searching for a bread
substitute by boiling wheat, the brothers accidentally discovered
the process for making cereal flakes.”
This year, in fact, marks the 100th anniversary of the production
of toasted cornflakes at W.K. Kellogg’s newly formed Battle
Creek Toasted Corn Flakes Co.
“But Kellogg failed to successfully patent the flake-toasting
process or trademark the name ‘Toasted Corn Flakes.’ Battle
Creek quickly became home to dozens of toasted-flake
purveyors, and the original cereal company changed its name to
Kellogg Co.”
Kellogg today has revenues in excess of $10 billion, but it was
the current U.S. Commerce Secretary, Carlos Gutierrez, who
spearheaded a comeback when the company was sliding
seriously in the late 1990s by focusing on innovation; including
new brands such as Special K Red Berries, or adding a new color
loop to Froot Loops. [You know, I have to admit didn’t realize
it was spelled this way. I wasn’t allowed to eat this growing up.
We were a Special K family, in fact.]
But here’s a quick tidbit on marketing and the product cycle in
the cereal business. Ordinarily, as James Jenness, CEO of
Kellogg’s, told James Pethokoukis, “In the world of marketing,
you hear a lot about product life cycles, where you introduce a
product or brand, it goes for a while, lives, and then dies off. But
in our business, life cycles do not exist.”
For example, Kellogg’s All-Bran was first introduced in 1916
and yet in 2005, it was the company’s fastest-growing global
brand. But while Baby Boomers are seeking “digestive health,”
as Jenness likes to say, they also demand great taste, so Kellogg
offers All-Bran Yogurt Bites.
But one last note on the topic of the pioneers of breakfast, in the
1970s, particularly during the Carter administration, the Federal
Trade Commission and Justice Department were increasingly
looking into anti-trust activity and began to charge companies for
operating “shared monopolies.”
As Wall Street historian Charles Geisst writes in “Monopolies in
America,” this was most visible with the cereal makers.
Specifically, General Mills, Kellogg and General Foods
controlled 80% of the market between them and through
collusion were alleged to be charging 15% more than was
otherwise warranted. Kellogg was the prime mover and the other
two followed suit. Actually, it was Ralph Nader’s consumer
group that put a lot of pressure on the Big Three, charging that
they intimidated competitors by spending humongous amounts
on advertising; as much as 20% of sales.
Sources:
Charles R. Geisst, “Monopolies in America”
John Steele Gordon, “The Business of America”
Agnes Hooper Gottlieb, Henry Gottlieb, Barbara Bowers, Brent
Bowers, “1,000 Years, 1,000 People”
“The Oxford Companion to United States History,” edited by
Paul S. Boyer”
U.S. News & World Report / James M. Pethokoukis
Wall Street History will return next week.
Brian Trumbore
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