Kellogg's
Brian Trumbore
President/Editor, StocksandNews.com

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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