ST. LOUIS -- The spinoff of Ralston Purina Co.'s breakfast cereal and baby food businesses into a new company should bode well for retailers by increasing market competition, said security analysts contacted by SN.
Ralston Purina here spun off its branded and private-label cereal business and Beech-Nut baby food business on March 31, forming a new company called Ralcorp Holdings. Ralcorp will also encompass Ralston Purina's Bremner crackers, Keystone and Breckenridge ski resorts and its coupon redemption business.
Securities analysts who track Ralston said the spinoff should make Ralcorp a more formidable competitor.
"Ralcorp is the leader in the production of store brand cereals. It is an area where they will likely focus a lot of their energies. They will also likely become more competitive as they improve their cost structure. I think it will be a benefit for everybody all the way around," said Michael Mouboussin, an analyst with First Boston, New York.
"One of the big areas they will focus attention on will be logistics. So retailers may observe a focus that will be a little leaner and quicker, while still trying to meet their needs. Ralcorp may be a little bit of a more focused organization and a little sharper than they were in the past," he said.
Naomi Getz, an analyst with Goldman Sachs, New York, told SN that Ralcorp may become somewhat more aggressive to shore up market share.
"Ralcorp is not a market leader in the branded cereal area. They have a small and rapidly declining market share. They may push harder on private label because it has been growing faster than branded," she noted.
"Baby food is a relatively small area for them because they are second after Gerber. There are indications that they will be more aggressive, promote more heavily and compete more with Gerber," she said.
In the move, shareholders of Ralston Purina Group common stock received one share of Ralcorp common stock for every three shares of Ralston stock owned. The spinoff was announced last August and voted on by Ralston's board on Sept. 23, 1993.
Ralcorp, with combined sales of approximately $1 billion, will continue to be headquartered here.
Richard A. Pearce was named co-chief executive officer and president. He was formerly vice president and chief operating officer for human foods at Ralston.
