Borden Inc. is an independent corporation. An article in the Washington Post Business section stated incorrectly yesterday that Borden was a subsidiary of another company.
Maryland Cup Corp. makes every cold drink cup sold at McDonald's in the United States, as well as most Big Mac and other sandwich containers. In addition, the firm supplies half the ice cream cones consumed nationwide, including all those sold at Baskin-Robbins.
Started 70 years ago by four young Russian immigrant brothers, Maryland Cup is the only publicly owned company in the country that exclusively manufactures single-service, disposable food containers.
With sales projected to reach $600 million this year, the company has a slight lead over its two primary competitors, Dixie and Lily Cup, in this highly competitive, low unit profit-margin industry. Dixie, a division of the American Can Company, and Lily, which is owned by Owens-Illinois, have access to the coffers of billion-dollar corporations.
"You know, being part of giants like they are could hurt more than help," concludes Samuel N. Shapiro, president and vice chairman of the board, who is the son of the late Nathan Shapiro, one of the founders. From his office in Wilmington, Mass., home of the Sweetheart Plastics division, he elaborates: "It creats such a bureaucracy that the top officers cannot react to events quickly enough. We've avoided that in our firm, and I think that's a major reason we're where we are today. I believe there has been some slippage in our competitors' performances since they became part of larger corporations."
Even though he expresses doubts about joining forces with another firm, Shapiro is entertaining the idea. In May, abiding by Securities and Exchange Commission requirements, Maryland Cup publicly announced that it had discussed a merger with Fort Howard Paper Company of Green Bay, Wisc. Two years ago, similar overtures were made with Kraft, Inc., whose subsidiary, Borden, has been a major customer of Maryland Cup for a long time. But the merger conversations bore no fruit.
Samuel Shapiro and other top Maryland Cup executives would not comment specifically about the Fort Howard prospects, but others did. Said Frank A. Cappiello Jr., who heads a Baltimore investment advisory firm, "I believe that the Shapiro family will sell when the price and time are right, and I think the time is getting closer."
But the longtime Maryland Cup observer adds, "I don't think Fort Howard is the right suitor." He then poses a rhetorical question: "Why would Maryland Cup want to be taken over by a firm with fewer sales than theirs? Kraft, with its size and product line, would have been a much more likely candidate."
On the other hand, Thomas Parnell, Vice president of a Washington investment management company, believes Fort Howard would be a logical partner for Maryland Cup.
"Kraft may have been too large and there might have been personality problems. And, even though Fort Howard is smaller than Maryland Cup, in terms of sales, they have a larger capitalization. And, since they make towels and other paper products for industry, they're used to dealing with the same type customers."
Above all, of course, the Shapiros, who control more than half the shares of common stock, will not sell unless they are satisfied with the financial arrangement. Nobody expects a decision soon.
Why has Maryland Cup attracted such offers? When Joseph Shapiro worked as a baker's helper in Boston early this century at $4 per week, he decided that machines could turn out ice cream cones more quickly than he and his co-workers could. In fact, young Shapiro badgered his employer to come up with such a machine, but without success. Finally, in 1912, Joseph, with his three brothers Isaac, Nathan and Samuel, started their own business. A few years later, Isaac and Joseph moved to Baltimore and eventually began making ice cream cones by machine.
Since the introduction of its Ferris Wheel cone-making machine, Maryland Cup has continually refined its equipment. With its research and development center in Massachusetts and tool and dye plant in Owings Mills, which is the largest such facility in Maryland, it is no surprise that the firm has consistently devised state-of-the-art machinery that has made other firms interested in acquiring it. Bottom-line figures, too, have been impressive.
"We're in our eighth generation of machinery," observes Merrill L. Bank, chairman of the board and son-in-law of the late founder, Joseph Shapiro. "Once we perfect a piece of equipment, we make it obsolete, because, of course, others can imitate it. However, we strive very hard to stay ahead of our competition and I believe we do a good job of it."
So do more impartial observers. Thomas Parnell, the Washington investment advisor, says: "Aside from their sales record, Maryland Cup's development of equipment would be another good reason for Fort Howard to acquire them. They're almost completely vertically integrated. They make the cups, the equipment to fill the cups, and even the machines that make this equipment. The only thing they don't do is make the final product itself."
True, Maryland Cup Corp. and its Sweetheart Plastics division do not make the myriad consumer products that fill their containers -- such well known items as McDonald's sandwiches, bulk ice cream from Haagen-Dazs and Coca-Cola in dispensers -- throughout the country. They pay such close attention to selling these products, however, that one might imagine they did make them.
"Our primary objective has always been promoting somebody else's products," says Maryland Cup's marketing vice president, Richard D. Folkoff. "We know, for example, that nobody goes into a shop and asks for our Eat-it-All ice cream cone. But the more Baskin-Robbins ice cream that's sold, naturally, the better our cones do."
And, Maryland Cup has always aggressively helped other people promote their products. "For years," says Eugene Foreman, financial vice president and company secretary, "we provided services to small businesses throughout the country which franchises now offer their outlets." Before the expansion of the vending machine business in the 1950s, Maryland Cup salesmen visited ice cream stands such as Dairy Queens, to advise their personnel about promoting their products. "We taught them a great deal," said Folkoff. "We made their promotional brochures, taught them salesmanship and showed them how to portion their ice cream and other products."
Maryland Cup's sales force of 400 still concentrates on technical assistance to firms throughout the country, but, of course, large franchise operations, like McDonald's, offer their myriad restaurants a great deal of promotional advice and materials.
"Obviously," says Folkoff, "franchises like McDonald's have not hurt us. We do 11 percent of our volume with them, so, as they do better, so do we."
Today, Maryland Cup, which maintains a 20 to 25 percent market share in disposable food containers, strives toward building the perfect machine for achieving maximum efficiency. "We're always trying to make a better machine," says board chairman Bank. "We even have a secret research facility."
Maryland Cup still pays close attention to detail, and its portion control is guaranteed by increasingly sophisticated machinery. "Our philosophy is actually a systems approach," explains Foreman. "We've never lost sight of the importance of marketing. And, as we did in the early days, we show our customers how to cost, price and merchandise their products at the point of purchase. But all this is helped a great deal by the improvements we're always making in our equipment."
Ideas for making more sophisticated equipment are now focused in the institutional health field. According to Folkoff, "Hospitals will be able to cook and preserve means months in advance for patients, staff and visitors."
Continuing its original policy, Maryland Cup supplies and maintains machinery free of charge for many ice cream packaging plants. Packagers of other products, such as yogurt, pay a royalty. If the machinery were for sale, it would cost $18,000 to $60,000, depending on which attachments were used.
Maryland Cup, which was listed on the American Stock Exchange in 1961, with subsequent movement to the Big Board in 1963, has long been the largest manufacturer of ice cream cones, drinking straws and food disposables in the world. And, regardless of whether it joins forces with another corporation, it intends to remain on top.