In the middle of a round of golf one day last spring, Capitalist John Hay Whitney and Crooner Bing Crosby began to talk aboutof all thingsfrozen orange juice concentrate. "Jock" Whitney thought he had hold of a good business proposition, and by the time they had got to the 19th Bing was all ears. Last week the Whitney-dominated Vacuum Foods Corp. (Minute Maid frozen orange juice concentrate) announced the deal they made.
Through a Loophole. Crosby, no mean businessman himself, became a director of Vacuum Foods, in which he recently bought 20,000 shares of stock at lof a share. He has agreed, at an undisclosed salary, to plug the juice on a transcribed song & chatter program five days a week. (Philco Corp., which has Crosby under exclusive contract, has agreed to let him be Minute Maid's man for a daily kind word for Philco products.)
It looked as if Crosby and Vacuum Foods might have found a tax loophole which permitted 1) small companies to get big-time radio stars at comparatively small cost, and 2) big-time stars to keep much more of their income by making it in stock profits, taxable as a long-term capital gain (maximum 25%) instead of income (maximum 77%). In effect, if the stock should rise in valuethanks to Crosby's radio pluggingand Crosby should sell his shares, the profits were expected to be taxed as capital gain. (Outsiders were already offering $7 a share for the stock.)
The immediate paper profit for Crosby was around $138,000. The chances for long-range profit looked even better, for Jock Whitney has shown a sharp eye for picking and financing winners.* Whitney got into the frozen juice business through National Research Corp., a war-boomed company that licenses the process by which Vacuum Foods concentrates and freezes the juice. When mixed with three parts of water, the frozen juice is the closest thing yet to fresh-squeezed juice.
Around the Corner. Minute Maid (retail price: 29¢ a pint and a half) got into the field first in 1945, at a new $2,300,000 plant in Plymouth, Fla. With little cash to advertise, it lost $450,262 the first two years.
Last year it finally turned the corner. Says Vacuum's President John M. Fox: "Why, this orange juice thing is the wonder of the grocery world. Ask anybody." Anybody in the frozen food industry agreedand Birds Eye, Snow Crop and others began to put out their own concentrate. Nevertheless, Vacuum's sales increased so much that President Fox announced last week that the net profit for its last fiscal year was $179,865.
Demand is so great, said Fox, that Vacuum has had to allocate shipments and is thinking of setting up a California plant. The shortage temporarily takes some of the bloom off the Crosby deal. But Vacuum hopes to step up output enough to fill the new orders Crosby will bring in. And in the scramble for the new market, Vacuum figures that Crosby is just the Pied Piper needed to lure customers away from the old brand names.
* Among them: Pan American Airways, Technicolor, Inc., Freeport Sulphur Co., Gone With the Wind, Life with Father.