Pennies from Leaven

Last week pretty Mrs. Jay ("Dolly") O'Brien, one of the holders of the women's hoard that is a 20% slice of outstanding U. S. corporation stocks, was in Palm Beach dancing with her socialite husband at the swanky Patio, walking with her bulge-clipped English poodle on her South Ocean Boulevard estate. Her amiable, globe-trotting son, Julius ("Junky") Fleischmann, whose father, Julius Fleischmann Sr., died (heart attack) on the polo field, was ailing in his moated castle in Cincinnati. And her onetime brother-in-law, husky Major (in the A. E. F.) Max C. Fleischmann was on his "Edgewood Ranch" in Santa Barbara, Calif., talking about big-game hunting and the Save-the-Redwoods League of which he is trustee.

But in spite of interests that have ranged from racing horses to backing ballets, the outdoorsy Fleischmann clan had something to worry about last week. For the descendants and in-laws of old Charles Fleischmann, who started a great industry in 1868 by peddling yeast in Cincinnati, are now the holders of close to 10% of the 12,648,108 outstanding common shares of huge Standard Brands Inc. And this No. 2 U. S. packaged food company (No. 1, General Foods) is not doing anything like as handsomely as the House of Morgan thought it would when it put it together around the Fleischmann Co. back in 1929.

Sign for all to see was the price of Standard Brands common, which hit 37 3/8 in depression 1933, thumped down to its record low, 5 3/8, last December and this week was hovering around 7. Broad explanation was that while Standard Brands net sales were holding up fairly well, the profit margin was growing narrower and narrower. In 1937, beating the bushes with such radio headliners as Rudy Vallee (for Fleischmann's Yeast and Royal Gelatin Desserts), wooden Charlie McCarthy (for Chase & Sanborn Dated Coffee), "One Man's Family" (for Tender Leaf Tea), Standard Brands ran up record net sales of $122,517,121. But even in briefly booming 1937, Standard Brands' net profit was only 73-c- a share compared with 1930's $1.22. And Mrs. O'Brien's dividend income (from 300,000 shares of common) had come down from $450,000 to $240,000.

For the likable O'Briens this was far from grinding penury but worse days lay ahead. Last year, with sales up 5% over 1938, net profits continued downward, wound up at 51-c- per share. Mrs. O'Brien's dividends were down to $135,000, 70% less than 1930, 55% less than 1933. For this Standard Brands could chiefly blame the fact that few U. S. citizens like the taste of yeast, no matter how many vitamins the Fleischmann brand contains. More than a decade ago, when the U. S. housewife had quit baking bread at home, Fleischmann's swank advertising agency, J. Walter Thompson, had an answer: yeast for health. By testimonials, by quotes from scientists, Standard Brands plugged yeast (three cakes a day) for pimples, constipation, that tired feeling. In rolled the money, for there is more profit percentage in a yeast-pat for an adolescent, than in a big yeast cake for a canny bakery man.

But the yeast fad could not last forever. Many a yeast-eater turned to vitamin pills, easier to take and just as reassuring. Many another just quit. And Standard Brands' profits began to depend more and more on coffee, tea, gelatin, other items in its varied line, all with narrower profit margins than yeast.

No group to twiddle their thumbs in such a state of affairs is Standard Brands' board of directors, in which the Morgans swing a lot of weight. To bring yeast back Standard scientists were put to work on fruit flavors for yeast, are still at it. Vice President Daniel P. Woolley, who had freely exhibited himself with Bergen's imp on his well-tailored knee, resigned. Charlie's hour was cut to 30 minutes, shorn of his sarongster stooge Dorothy Lamour. The advertising business buzzed with Standard Brands' changes: J. Walter Thompson kept coffee, tea and yeast; Royal Baking Powder went to McCann-Erickson; Royal Gelatin Dessert to Sherman K. Ellis. The advertising budget, about $5,500,000 in 1939, came in for some pruning in 1940.

Meanwhile things were happening on the board. To it went a trouble-shooter of experience, William Grey Dunnington, who had helped push Cap Rieber to the top of Texas Corp., has for some years been attorney for Mrs. O'Brien. Promptly Mr. Dunnington was elected a member of a trouble-shooting executive committee of seven, including Morgan-Partner Harry P. Davison, onetime Morgan-Partner William Ewing, Donald Kirk David (representing the Ziegler interests) and Paul Fleischmann. Last week Standard Brands had other changes to announce. To President Thomas L. Smith, onetime Standard Brands wagon man, had gone the duties of chief executive officer, taken from Board Chairman (and fellow wagon man) Joseph Wilshire. To vice-presidencies had gone two other veterans: Productionman John W. Luce, and Cousin (also Chicago manager) Albert R. Fleischmann.

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