BURNETT

Southborough Historical Society

Southborough, MA

BURNETT'S FOOD PRODUCTS

(American Home Products Acquisition of Joseph Burnett Company)

From Alfred D. Chandler Jar’s book, Shaping the Industrial Century: The Remarkable Story of the Evolution of the Modern Chemical and Pharmaceutical Industries, Chapter, “New Learning at American Home Products”, published by the Harvard University Press, Cambridge, Ma., Copyright 2005.” No mention is made, however, of the acquisition of the Joseph Burnett Company. We have requested information from the author and we will post updates.

[With the] “New history of the modern chemical and pharmaceutical industries, American Home Products follows a singular path to success. An excerpt from "Shaping the Industrial Century".

“As the historian Williams Haynes noted, by the end of the 1930s, American Home Products had acquired firms in six major businesses: "ethical drug preparations; publicly advertised medicinal, pharmaceutical and dentifrice preparations; food products; household products; cosmetics and toilet preparations; and chemicals, organic colors and pigments, dye stuffs and intermediates." Each of these product lines was administered through a separate division integrating product development and marketing, but without significant research capability. For all but chemicals and prescription drugs, the corporate focus was on marketing, especially advertising.

In 1979 the remaining 61 percent of sales from its other divisions was fairly evenly divided. Over-the-counter drugs represented 14 percent and included Anacin (second in sales to Johnson & Johnson's Tylenol); Dristan and other cold and allergy-relief medicines; and drugs for asthma, hemorrhoids, and other ills. Canned and packaged goods brought in 11 percent, including such brands as Chef Boyardee spaghetti, Mama Leone's pasta, Gulden's mustard, and others. Confectionery, including Wrigley's chewing gum and Brach's candies, provided another 11 percent. Household products, including Ecko hardware, Woolite (a cold-water wash), Black Flag insecticides, and Old English furniture polish, added 14 percent. And finally, house wares, including PAM cooking spray, accounted for 13 percent.

The evolution of American Home Products (since 2002, the Wyeth Corporation) is an example of a still greater barrier to entry—that resulting from the creation of a new industry based on a new science, molecular genetics, and a new technology, rDNA. American Home Products' financial success since its beginnings in the 1920s rested on the abilities of its managers to perfect functional capabilities as they moved successfully out of old industries into new ones, beginning with chemicals, food stuffs, household products, cosmetics, healthcare, and OTC prescription drugs. After World War II, it concentrated increasingly on the pharmaceuticals, both prescription and OTC products. Here it relied almost wholly on licensing new product lines, which was the reason for a unique record. Of the top thirty U.S. pharmaceutical companies, American Home Products was first in sales and twenty-eighth in expenditures for R&D.

Licensing strategy had been successful because the company could count on the existing nexus of different industries in which they operated to provide the necessary ingredients, supplies, and services required to commercialize these products. This was not the case, however, with the coming of biotechnology. Although the fundamental new learning came in the 1960s, the basic nexus only began to appear in the 1970s and the very first new products in the 1980s. In this sense, American Home Products, the most successful company in terms of financial return, paid $10 billion in cash as an entry fee in order to become a player in a scientific revolution whose infrastructure was just being constructed.

This episode dramatizes the striking difference in the evolution of the chemicals and pharmaceutical industries since the 1970s. Without new learning from chemical science and engineering, the chemical companies have defined their strategic boundaries in a number of specialty chemicals whose basic technologies were commercialized in the 1920s and again in the 1940s and 1950s. In pharmaceuticals, new learning in biology culminating in the coming of a new science has created a medical revolution that should continue well into the twenty-first century.”

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LAST UPDATE: Dec 27, 2006