Cultivating a Taste for Mergers

By Jeffrey H. Birnbaum
Monday, November 14, 2005

Few things are more fundamental than food. That's why the $500 billion-a-year food production industry is so thoroughly represented in Washington.

Too thoroughly, it turns out.

Two of the capital's oldest and most deeply rooted trade associations -- both advocates for food -- may be about to merge. The Grocery Manufacturers Association and the Food Products Association could soon agree to become a single group.

K Street will mourn the change. Many of its most prominent players once worked for or closely with these venerable organizations.

Besides, a bunch of people, lobbyists in particular, almost invariably would lose their jobs. That's one of the main reasons for a merger to begin with -- to find cost savings for the big companies that pay the bills.

But truth be told, the disappearance of trade associations is a longtime and probably accelerating trend that experts say will inevitably lead to fewer industry lobbying groups in the nation's capital.

So watch the fate of the foods. There you will see the future of trade associations on K Street.

Officially, the organizations have acknowledged that they are engaged in "a serious dialogue" about a possible merger. They have hired McKinsey and Co., the management consulting firm, to study the feasibility of a merger or some other alternative structure.

Unofficially, insiders say McKinsey sees wisdom in making the two groups into one, and the boards of both will meet as early as this week to approve a plan to unite.

Both are multimillion-dollar organizations, nearly 100 years old, with many employees, not all of whom would have jobs if a merger is completed. The two also have as members in common about 40 major food-making companies. These include Procter & Gamble Co., ConAgra Foods Inc., Archer Daniels Midland Co., H.J. Heinz Co., General Mills Inc. and Campbell Soup Co., according to their Web sites.

Neither group will say how much their members pay in dues, but it would be a surprise if the largest among their members didn't fork over hundreds of thousands of dollars a year. Even for a conglomerate, the elimination of one such membership would be a savings worth making -- as long as not much was lost in the bargain. Thus the urge to merge.

FPA has a greater number of small food producers in its membership than does GMA, which tends to represent more of the Big Boys of the industry. FPA, which had until recently been called the National Food Processors Association, started out as the National Canners Association and still has a lot of canning firms in its ranks.

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