CEREAL OLD-TIMER HARD TO KEEP SOLD

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, March 20, 1993                   TAG: 9303200015
SECTION: BUSINESS                    PAGE: A-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: NIAGARA FALLS, N.Y.                                LENGTH: Medium
CEREAL OLD-TIMER HARD TO KEEP SOLD
A year ago, RJR Nabisco Inc. officials poured a lot of money and effort into a breakfast bash to celebrate the 100th anniversary of Shredded Wheat. Since then, the company has spent a good deal of effort trying to get rid of the cereal.
But it keeps trying to come back.
First, Nabisco agreed to sell its Shredded Wheat business to General Mills Inc., the nation's second-largest cereal maker. That deal fell through and Kraft General Foods Inc., the third-largest cereal producer, bought Shredded Wheat for $450 million in January.
A month later, New York Attorney General Robert Abrams filed an antitrust suit in U.S. District Court in New York City, seeking to reverse the deal. Abrams said there's already too little competition in the cereal business and the sale could result in price collusion by cereal manufacturers.
A court hearing date has not been set, but Abrams thinks he can stop the deal. At Nabisco and Kraft, "as far as we're concerned, the sale went through," said Nabisco spokeswoman Ann Smith.
The sale took Nabisco, the seventh-largest cereal maker, out of that business altogether. Kraft took over Nabisco's Shredded Wheat factories in Naperville, Ill., and Niagara Falls, Ontario. Nabisco kept its Shredded Wheat factory in Niagara Falls, N.Y., but discontinued cereal production - ending an era at the plant.
Henry Perky, who invented Shredded Wheat in 1892, moved his operations from Massachusetts to Niagara Falls in 1901 to take advantage of cheap water power. Until last year, boxes of Shredded Wheat included the slogan, "The original Niagara Falls cereal." In June, 12,000 people attended a breakfast near the brink of the falls to celebrate the 100th anniversary of Shredded Wheat.
But in September, General Mills, maker of Wheaties and Cheerios, agreed to buy Shredded Wheat, only to back out two months later, fearing a lengthy review by federal regulators.
Kraft - maker of Post Grapenuts and Raisin Bran - stepped in two weeks later, and the Federal Trade Commission spent only a month studying the deal before approving it.
"I was a little bit surprised that the deal was completed without an antitrust review," said John McMillin, an analyst who follows the cereal market for Prudential Securities Inc. "The government didn't say a word."
Abrams' antitrust lawsuit probably came too late to reverse the sale, McMillin said.
Abrams said the sale reinforced the domination of the industry by the top three cereal makers, Kellogg Co., General Mills and Kraft.
Kraft spokeswoman Nan Redmond said the cereal market is one of the most competitive in the grocery business. The major producers engage in heavy marketing and coupon wars, she said, and the Nabisco acquisition will not diminish competition.
Kraft, a subsidiary of Philip Morris Cos., plans to sell Shredded Wheat under the Nabisco brand name for four years, then probably will incorporate it under the Post brand, Redmond said.
With its small 2.8 percent share of the cold-cereal market, Nabisco was reluctant to spend much money on marketing Shredded Wheat, said Terry Bivens, an analyst with Argus Research Corp.
"It's a good deal for both companies," Bivens said. "It allows Nabisco to focus on the business they really want to. Kraft has plenty of money to spend on marketing and promotion, and Shredded Wheat is a good brand for them. The baby-boom generation is coming into its late 40s and 50s, and cereal consumption is expected to go up."

by Archana Subramaniam by CNB