FAMOUS AMOS GETS A CHINESE ACCENT
Chinese noodles for dinner and Famous Amos cookies for dessert? It may seem like a strange combination, but not to President Enterprises Corp. On Sept. 15, the Taiwanese food giant bought the Famous Amos brand of chocolate chip cookies from a San Francisco LBO group for $60.6 million. Says George K. Liu, chief executive of President's U.S. division: "Finally, we have a recognizable national brand."
To hear Liu's bosses in Taiwan, it's only the first of many. Founded in 1967, President Enterprises started out selling animal feed and flour. It is now the largest food company in Taiwan and one of the country's biggest public corporations. Last year, it earned $81 million, 90% more than the year before, on $800 million in sales. In Taiwan, it markets everything from noodles and frozen foods to Kentucky Fried Chicken and Pepsi-Cola. Now nearing market saturation at home, it is going abroad in a big way. "In 25 years, we will be one of the biggest food companies in the world," proclaims Chief Executive C. Y. Kao.
President first came to America two years ago, when it paid $335 million for Wyndham Baking Co. in Augusta, Ga. Renamed President Baking, it's one of two U.S. bakeries with contracts to make Girl Scout Cookies. It also produces low-priced regional brands of cookies, crackers, and other snacks. With the addition of Famous Amos, President's U.S. sales should jump to $430 million for 1992.
But some think President may be in for a rude shock on U.S. shores. It's not that analysts don't like Famous Amos. Under the Shansby Group, which had owned it since 1989, the brand's sales went from $6 million to $75 million, according to Shansby. But President chose a risky moment to buy. "They're moving in at the worst time," says Lee D. Wilder of Robinson-Humphrey Co., an Atlanta brokerage. U.S. cookie and cracker sales declined slightly in the first quarter, and the second quarter doesn't look much better. Meanwhile, consumers are opting for snacks they see as healthier than cookies, brownies, and other treats. To this end, Nabisco Inc. recently introduced a new line of fat-free snacks called SnackWell's.
THICK SPREAD. From President's perspective, though, risky is a relative term. As part of its expansion into China, the company has set up six joint ventures. Plants are up and running in Shanghai, Beijing, and other cities, making flour, tomato paste, noodles, and animal feed. "In China, we have the possibility of phenomenal growth but with plenty of risk," says Liu. "The U.S. provides the stable fuel for the Chinese engine."
President brought Liu on board just after the Wyndham deal, with the mandate to build the business quickly. The 59-year-old Taiwan native, who has an MBA from the University of Chicago and 25 years of experience at United Fruit Co. and General Foods Corp., hasn't wasted any time. He immediately retired $50 million worth of Wyndham's junk bonds, accumulated when the company changed hands a half-dozen times during the 1980s. The move helped reduce debt from 90% of capital to less than 50%, he says. Liu then poured $10 million into new equipment and hired a cadre of managers from such big-name marketers as Nabisco, Sunshine Biscuits, Coca-Cola, and Frito-Lay. The new team helped consolidate sales and marketing at the relocated Atlanta headquarters.
At the time of the Wyndham acquisition, Taiwanese analysts roundly criticized President for overpaying. In fact, one claimed that President had bid 50% more than the runner-up. Liu counters that revenues have jumped 17%, to $350 million, since the deal, and he says profits are climbing, although he won't disclose a figure. Analysts are much more upbeat about the deal these days.
Liu counts on line extensions and widened U.S. distribution to boost the Famous Amos brand. Next, he would like to increase President's presence in the cracker market, which is growing faster than cookies, and to buy bakeries in the Northeast and West, where its brands are little-known. For now, it has no plans to offer Asian specialties, such as frozen pork buns, in the U.S. But if President sticks to Kao's 25-year plan, Americans will surely be munching on a lot more of the Taiwanese company's snacks.PRESIDENT'S KITCHEN CABINET
U.S. (Estimated 1992 sales: $430 million)
-- President Baking, makers of Girl Scout Cookies and discount regional brands
such as Jack's and Murray
-- Famous Amos Chocolate Chip Cookies
TAIWAN (Estimated sales: $800 million)
-- Pepsi-Cola, KFC, and 7-Eleven franchises
-- Instant noodles, frozen foods, cooking oil, and dairy products sold under
-- President Lions pro baseball team
DATA: COMPANY REPORTS
Walecia Konrad in Atlanta, with Bruce Einhorn in Taipei