The Mystery of Groceries: Do All Brands Come From the Same Place?

Ruffles, or Lays? Life Cereal, or Cap'n Crunch? SoBe Lifewater, or Aquafina?

When you visit the grocery store with those choices on your mind, you may think you're choosing among different brands, but in fact, you're just choosing between various flavors of gigantic snacks and drinks maker PepsiCo  (NYSE: PEP  ) .

Pepsi, you see, owns all these brands. Just like Kraft  (NASDAQ: KRFT  )  owns both Oscar Mayer and Polly O. Like Johnson & Johnson  (NYSE: JNJ  )  owns Lubriderm and Aveeno, Coca-Cola  (NYSE: KO  )  owns Coke and Dasani, and Procter & Gamble  (NYSE: PG  )  owns Dawn, Downy ... and Iams dog food.

Fact is, out of the dozens -- scores, hundreds -- of brands you browse every day in the grocery store, the vast majority of them are owned by just 10 multinational megaconglomerates, as laid out in this graphic from the folks at NaturalNewsBuzz:

Source: imgur.com.

These include the five companies I named, plus Nestle, General Mills, Kellogg, Mars, and Unilever besides.

If you can't beat 'em, buy 'em
How is it that these 10 companies control so much of what we eat, drink, and wash up with after eating and drinking? In some cases, they did it through sheer, unadulterated, purely American genius -- inventing great products to improve people's lives, marketing them brilliantly, and reaping the rewards.

Johnson & Johnson, for example, invented the Band-Aid bandage back in 1920 and has been patching up boo-boos and ouchies with it ever since. Coca-Cola, whose history dates to a Confederate Army officer and amateur confectioner back in the mid-1800s, was a company literally built up around the name of its signature product.

More frequently, though, as time has gone by, these companies have acquired their brands by buying up the companies built by more creative people -- such as when bleach behemoth Clorox (NYSE: CLX  ) spent $925 million to acquire up-and-comer natural-lip-balm maker Burt's Bees in 2007. Or when ConAgra shelled out nearly $5 billion to acquire private-label foodmaker Ralcorp earlier this year.

Necessity is the mother of acquisition
Why do these companies buy competing brands rather than just building a better mousetrap of their own? Here's why.

When you're already a big business, like Coke, which sells $48 billion worth of carbonated sugar water (and corollary brands) annually, it's awful hard to get customers to drink more of your product, year after year, and thus keep those profits growing at the 9% annually or so that Wall Street demands. (If you're PepsiCo, already at $65.5 billion in annual sales, it's even harder.)

Sure, you can try to grow sales by inventing other, newer, and better products to improve customers' lives -- but that's hard work, and no sure thing at all. (Cough, "New Coke," cough-cough, "Crystal Pepsi.")

Often, if you want to keep sales and profits growing, the better and surer bet is to just go out and buy a known, good thing, rather than sink millions of dollars into trying to invent a better thing.

That's what these companies have done, therefore. That's what they're still doing. And that's why. the next time you head to the grocery store, no matter how much you buy, chances are good that your shopping dollars will all wind up in the bank accounts of only 10 companies.

Is having only 10 companies to choose from actually such a bad thing? For investors, it may not be, because it means pofiting from our increasingly global economy can be as easy as investing in your own backyard. The Motley Fool's free report "3 American Companies Set to Dominate the World" shows you how. Click here to get your free copy before it's gone.


Read/Post Comments (9) | Recommend This Article (18)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 21, 2013, at 5:49 PM, Dadw5boys wrote:

    My dad sold for General Foods for years he serviced over 600 grocery stores in 3 states. He actually dragged several small time Store Owners into the big time by selling them railroad car loads of grocerys cheap to expand their store. One place was giving away peanut butter for over 2 years with a $10 order. He got many National Sales awards too for moving product. I miss him.

  • Report this Comment On April 21, 2013, at 6:20 PM, bobthegoodone wrote:

    I worked at a cannery where we put 45 different labels on the same thing

  • Report this Comment On April 21, 2013, at 6:20 PM, vespajet wrote:

    Let's not forget that many of the private label products you find on store shelves are made by some of these same companies. The average consumer is not aware that the major brands also are in the private label business as well. Years ago I worked at a grocery store and while working as a stock clerk, I noticed how many of the cases that the store brand products came in had coding on the boxes that were in the same font as the national brands. Our bread was made by one of the major bakery companies whose drivers delivered said bread to our store. So even if you're buying a private label product, chances are that one of the major food companies mentioned in the article made it.

  • Report this Comment On April 21, 2013, at 7:17 PM, LiviaValentini wrote:

    The article title gave me the impression this was an article that would tell me whether Duke's mayo is actually Hellman's mayo. (And, other things like it.)

    I didn't think it would be a generic article about the limited number of business 'families'.

    Oh well. I guess I'll always be left wondering about Duke's.

    Livia

  • Report this Comment On April 21, 2013, at 8:53 PM, mitstrebor wrote:

    Most all come from the same food manufactures, Same food just different labels,Only difference being is where they were imported from, Pineapples are generally coming from Thailand, Not Hawaii like you thought, Read your labels! Another thing, Best by dates are vanishing, Del Monte pineapple now has no best by date!

  • Report this Comment On April 21, 2013, at 9:05 PM, Bekkijay wrote:

    If you Google Duke's you will see that it is a S.C. company that also produces Bama and Sauer's mayonnaise.

  • Report this Comment On April 21, 2013, at 9:24 PM, fpl1953 wrote:

    Mega corporations that grow profits by buying small brands and slashing safety and quality really don't help anyone but the stock holders. The corporation itself becomes unwieldly, the employees suffer, consumers eat more rat hair because these companies can afford multiple senators, really NOBODY wins, but the forces of stock market driven capitalism gives them little choice, they cannot focus on quality because too many people only look at price. It's a problem that can only be solved if consumers get smarter and abandon mega-corps or we pass laws limiting their size. I favor limiting the size of corporations as the Founding Fathers did. They had a good reason, despite good intentions, dollars drive business, so the only way to maintain quality is limit size. Besides, small businesses are better in every way except stock market return. I'd happily sell my portfolio and buy bonds from small quality oriented, hopefully employee owned companies that help the country instead of looking for more ways to export profits.

  • Report this Comment On April 21, 2013, at 11:15 PM, humper12 wrote:

    I worked at a dairy in Calif where we made butter for just about every store on the west coast and the midwest and it was all the same even the cheap stuff . The USDA has a standard to go by no matter what brand it is . I tell people that when I see them buying higher priced and they say it taste better but it is all the same just different paper and box

  • Report this Comment On April 21, 2013, at 11:18 PM, showbedo wrote:

    FYI, Dukes - Greenville SC is owned by the CF Sauer Co in Richmond. They own Bama mayo as well. CF Sauer is not part of the big 10 they are talking about. This article is covering the big national brands. Buy regional or local company products to get original products outside of the national brands if you prefer. There are multi thousands of food and consumer product goods that are not part of the big guys. Many of them are better quality than the streamlined, marketed, and sped up processed items produced by major national brands.

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