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Two Big Companies Show Two Faces

May 23, 1995

For two giant food companies, sugar prices are a sticky issue.

Kraft Foods Inc. and Nabisco Holdings Corp. are lobbying hard to repeal price supports on sugar, which help U.S. farmers but make products from Jell-O to Oreo cookies costlier. The companies helped sponsor a recent ad in Roll Call, a newspaper aimed at members of Congress, calling the government’s sugar program ``unworkable.″

Meanwhile, their corporate parents _ Philip Morris Cos. and RJR Nabisco Holdings Corp. _ sit on the opposite side of the fence when it comes to another farm commodity: tobacco. Their cigarette units back price supports for tobacco even though that stance means they must pay the growers more. In return, however, the companies have won vital political support: Legislators from tobacco-growing states are among the cigarette companies’ staunchest supporters in Congress.

Sugar farmers have seized on this perceived double standard to bolster their own lobbying campaign to retain price supports, which are part of a five-year farm bill up for renewal this year. On Tuesday, Republican Rep. Dan Miller of Florida was expected to introduce a bill that would eliminate price supports for sugar. On Wednesday, a House agriculture subcommittee was to hold a hearing on the sugar program.

Sandy Stitt, who owns an 800-acre sugar-cane farm in Clewiston, Fla., was the first to draw public attention to the corporate inconsistency. The 52-year-old farmer recently berated Philip Morris’s chief executive officer, Geoffrey Bible, at a congressional field hearing in Florida. ``Mr. Bible is quite a study,″ scoffed Ms. Stitt, addressing some 400 attendees. ``His food division, Kraft, leads the charge against sugar ... while he comes on bended knee pleading for tobacco.″

Robert Buker, vice president of U.S. Sugar Corp., a Florida cane producer calls the two food companies ``hypocritical″ and says they ``will support a farm program if they benefit, and they will attack another if they don’t.″

Philip Morris declines to respond, while RJR officials dismiss the flap as small potatoes. ``I don’t think we spend 10 seconds worrying about it,″ says a company spokesman.

The controversy is another example of how the volatile politics of tobacco are spilling over to unrelated businesses. Indeed, some angry Philip Morris shareholders have long demanded that the company spin off the Kraft food unit, which it acquired in 1988, so that the food company won’t be tainted by the escalating legal and regulatory attacks against tobacco. Under similar pressure, RJR in January sold 19.5 percent of Nabisco in an initial public offering. And earlier this month, Kimberly-Clark Corp., the maker of Kleenex and Huggies diapers, yielded to shareholder criticism and announced it would spin off its cigarette-paper and reconstituted-tobacco operations.

For Kraft and Nabisco, it’s an auspicious time to try to repeal the sugar program, which has existed in its current form since 1981. The Republican-dominated Congress, fixated on budget cuts, is expected to scrutinize the program, which limits imports and keeps the domestic sugar price about twice that on world markets. The protectionist policy costs manufacturers and consumers about $1.4 billion a year, according to the General Accounting Office.

Kraft and Nabisco’s lobbying effort against the sugar program has been joined by dozens of other food companies, including Hershey Foods Corp., Mars Inc. and Kellogg Co. Arrayed against them are the nation’s estimated 68,800 sugar growers and refiners, who produce an estimated $4 billion of sugar annually. They contend the loss of price supports would raise the world market price of sugar by decreasing domestic production and forcing U.S. companies to import more sugar.

Neither Kraft nor Nabisco will comment on their lobbying effort; nor will they say how much sugar they buy. But for Kraft, the nation’s biggest food company with annual North American sales of $17 billion, sugar is a crucial ingredient in everything from Kool-Aid and Cool Whip to Post cereals and Entenmann’s cakes and cookies. Sugar is also abundant in scores of Nabisco’s products, including Life Savers candy, Chips Ahoy! cookies and even SnackWell’s Fat-Free Double Fudge Cookie Cakes. Nabisco’s U.S. sales reached $5.7 billion last year.

Nabisco, which owns the Planters peanut business, is also supporting a campaign to phase out the government’s peanut program, which keeps U.S. peanut prices at about double the world level. (While peanut growers mutter privately about Nabisco’s ``double standard,″ they haven’t raised the issue publicly.)

At the cigarette units of Philip Morris and RJR, keeping tobacco prices high is seen as a strategic necessity. Under siege in courts and legislatures, cigarette makers depend on the political support of tobacco farmers, who have protested higher cigarette taxes and deluged members of Congress with letters on regulatory and health issues.

``Frankly, the tobacco farmers are some of our biggest political allies,″ says a spokeswoman for the R.J. Reynolds tobacco unit in Winston-Salem, N.C. ``We do whatever we can to try to promote harmony in the growing community.″

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