Workers at Nabisco and Kraft Wait for What Future Holds

Times Staff Writer

There may be some fraying nerves at the RJR Nabisco bakery in Buena Park these days, but at the various Orange County operations of Kraft Inc., employees have been assured they have no reason to worry.

Philip Morris Cos. has just completed a $13.1-billion acquisition of Kraft, but the official word is that the tobacco company--which already has brewing, real estate and food product arms--has no intention of dismantling Kraft. In Orange County, Kraft employs about 1,100 workers.

At the Nabisco bakery, however, the 489 workers may be at least a little worried.

The investment banking firm of Kohlberg Kravis Roberts & Co. has bid a staggering $20.3 billion for RJR Nabisco, and Kohlberg Kravis is well-known for selling off the assets of its acquisitions in order to help pay the bills.


“They have said they could handle it,” said Richard Elam, a food industry analyst with Blunt Ellis & Loewi in Chicago, “but I would guess that there will be some selling off.”

It was KKR, for example, that helped former Beatrice Cos. Chairman Donald Kelly buy that huge conglomerate in 1986 for $6.1 billion and then engineered the sale of several large divisions to cover the costs.

Workers at Hunt-Wesson in Fullerton remember the experience--the company had been part of Beatrice for less than 2 years when Kelly announced that he intended to sell the Fullerton processing plant. That sale never went through, and Kelly later said Beatrice would keep Hunt-Wesson, but it made for an unsettled climate for more than a year.

The food-processing plants in Orange County are a reminder of the county’s agricultural past and serve as a keen symbol of the acquisitions and consolidation that have been wracking the processed food industry for several years.


At Hunt Wesson, for example, employees went through four corporate owners in 4 years.

Nabisco bakery workers got a new boss in R.J. Reynolds when it bought Nabisco for $4.9 billion in 1985 and now may well see at least one more change in ownership in KKR before the dust settles.

At Kraft, one of its three county facilities experienced a recent change in ownership before the Philip Morris acquisition: All American Gourmet, maker of the Budget Gourmet line of frozen foods, had been a division of General Host until last July, when it was sold to Kraft.

Other Kraft units in the county are Kraft/Keeler Food Service in Santa Ana, a food and supplies distribution center for restaurants and institutions, and an Operations and Technology Group division in Buena Park that makes Kraft and Seven Seas salad dressings, Kraft Real Mayonnaise, Miracle Whip Salad Dressing, Kraft and Bullseye barbecue sauces, Parkay margarine and Kraft marshmallows.

With the KKR bid for RJR Nabisco still in the negotiating stage and the ink not yet dry on the Philip Morris-Kraft deal, local employees of the firms were reluctant to talk about their situations.

Even the labor unions that represent workers at the Kraft and Nabisco plants are keeping a low profile. Neither Teamsters Local 952 in Orange, which represents some Kraft employees, nor Bakery and Confectionary and Tobacco Workers Local 83, which represents workers at Nabisco, had any comment Monday on the impending changes in ownership.

An employee at one Kraft unit said the company had taken pains to keep workers acquainted with developments and, once the Philip Morris offer was accepted, to let employees know that there are no plans for layoffs or other major changes.

“We even got a videotape made by (Kraft Chairman) John Richman,” the employee said. The videotape explained the acquisition and assured workers that Kraft units will continue to be run by Kraft managers and that no Kraft assets will be sold.


That is what was expected, said John McMillin, a food industry analyst for Prudential Bache Research in New York.

“You are looking at two separate and distinct events here,” he said. “Philip Morris intends to keep all of Kraft, as it kept all of General Foods (which it acquired in 1985). So that deal is simply consolidation in the industry.

“But in RJR Nabisco, you have an asset that is going to be shopped around (by Kohlberg Kravis), and different parts are going to be spun off, divested and ripped apart. That company, clearly, will be dismembered.

“You have two tobacco companies moving in different directions,” McMillin continued. “The motivating force in acquiring RJR is the stock price, while clearly, the man that runs Philip Morris smokes a different brand and is more long-term performance oriented.”

FOOD COMPANY MEGA-DEALS: THE ORANGE COUNTY CONNECTION Kraft Inc., which has been acquired by Philip Morris Cos., has about 1,100 employees at its three operations in Orange County. RJR Nabisco Inc., which has received a $20.3-billion bid from Kohlberg Kravis Roberts & Co., employs 489 at its bakery in Buena Park. KKR helped engineer a 1986 leveraged buyout of Beatrice Cos., whose Beatrice/Hunt Wesson division employs 2,600 in Fullerton. KRAFT INC. Kraft/Keeler Food Service 601 W. Dyer Road, Santa Ana General Manager: Mike Duggan Employees: 320 Business: A food service distribution center serving restaurants and institutions. The division distributes groceries, frozen foods, fresh meat, restaurant equipment and paper and janitorial supplies. Kraft Operations and Technology Group Division 6950 Artesia Blvd., Buena Park General Manager: James Diehl Employees: 700 Business: A food processing plant and distribution center. Products include Kraft and Seven Seas salad dressings, Kraft Real Mayonnaise, Miracle Whip Salad Dressing, Kraft and Bullseye barbecue sauces, Parkay margarine and Kraft marshmallows. All American Gourmet, a division of Kraft Frozen Foods Group 1100 Town and Country Road, Suite 1100, Orange President: Steve Pokress Employees: 70 Business: This is the company’s administrative headquarters and marketing center. Food production plants are located in Utah, Georgia and Pennsylvania. Products include Budget Gourmet frozen dinners, entrees and side dishes. RJR NABISCO INC. Nabisco Brands Inc., Biscuit Division 7301 Artesia Blvd., Buena Park General Manager: John Bryant Employees: 489 Business: A bakery. Products include Premium Saltines, Chips Ahoy cookies, Ritz Crackers, Honey Graham Crackers, Wheat Thins, Nilla Wafers cookies. BEATRICE COS. Beatrice/ Hunt-Wesson Inc. 1645 W. Valencia Drive, Fullerton President: Albert Crosson Employees: 2,600 Business: A food processing plant. Products include Hunt’s tomato products, Peter Pan peanut butter, Wesson cooking oils and Orville Redenbacher popcorn.