On this day in economic and financial history ...
Longtime Dow component DuPont unveiled Corfam, its synthetic leather substitute on Jan. 27, 1964. Years of development and significant research funding had gone into this new product, and DuPont confidently predicted that a quarter of the footwear market would use Corfam in two decades' time. The technical and chemical complexity that had gone into developing Corfam pushed DuPont to target the high-end footwear segment. For several years production and demand increased substantially, from an initial production run of 3 million square feet of material in 1964 to about 35 million square feet in 1968.
Sales declined considerably over the next two years, because of a combination of consumer reluctance and intense competition from vinyl footwear, which cost less than Corfam shoes while still managing to provide a superior tactile and aesthetic experience. Faced with plummeting consumer interest, DuPont canceled the project in 1971. Shortly afterwards, a New York Times post-mortem called Corfam "DuPont's $100 million Edsel." DuPont was a massive company by 1964, but $100 million still represented more than a fifth of its earnings in the final year of Corfam's development. DuPont's failure to create a product that outclassed its competition at a better price point became an object lesson in business courses for many years afterwards -- the lesson being that a new product can't be content to match what it hopes to replace; it must actually outclass it.
The end of an era
On Jan. 27, 2006, former Dow component Western Union announced the end of more than a century and a half of telegram services. The company relayed the end of the telegram through an abrupt notice on its website -- as perfect an example of one technology destroying another as you may ever see. The telegram was humanity's oldest electronic communications technology. However, its simplicity was made worthless by the instantaneous and fully interactive Internet, which worked in unison with text messaging to finish the telephone's long-standing war against Morse code.
Eighteen billion text messages were sent per month in 2006. More than 183 billion emails were sent every day that year. The telegram peaked 90 years earlier, in 1916, with a comparatively paltry 100 million messages sent for the entire year. Its death was only a matter of time.
The sweetest patent
On Jan. 27, 1970, James M. Schlatter of the G.D. Searle pharmaceutical company received a patent for aspartame, the artificial sweetener he'd discovered by accident several years earlier. It took more than a decade for aspartame to gain widespread approval for use in food and drink, but by 1983, the FDA had cleared it for use in both dry goods and carbonated beverages. Sold under the brand names NutraSweet and Equal, aspartame has become widely adopted by the food and beverage industries because it is about 200 times sweeter than sugar, which saves valuable resources in the production of various processed foods.
In 1985, Monsanto bought G.D. Searle, acquiring the rights to aspartame (sold by the NutraSweet subsidiary of the latter) in the process. In 1996, aspartame was cleared for use in all foods produced for the United States, two years after it was granted a similarly broad E.U.-wide approval. Although aspartame remains the target of occasional controversy, it has never been proven to cause the wide manner of diseases and ailments that its opponents claim. Today, NutraSweet-branded aspartame is used in more than 5,000 products around the world, and an estimated 250 million people per year consume it. Sucralose, the primary artificial-sweetener competitor to aspartame, is also used in nearly 5,000 different food and beverage products. The NutraSweet Company was taken private in 2000, when J.W. Childs Equity Partners bought the subsidiary from Monsanto.
What's in a name?
On Jan. 27, 2003, Philip Morris changed its name to Altria . The new name and accompanying logo, according to a press release issued that day, "powerfully express these enduring qualities: its drive toward excellence, its companies' focus on building brands, its passion for success, its openness to innovation, its commitment to its communities and societies, and its focus on its people." Much of the press release was marketing-speak word salad, emphasizing how great the company's financial history had been while avoiding any discussion of how that financial history had been built.
It's not surprising that Altria's PR team took this approach. At the time, the tobacco industry was just over five years removed from the Tobacco Master Settlement Agreement, the landmark $366 billion agreement made with many state attorneys general in exchange for prosecutorial lenience. In the time since the agreement had come into force, Altria had suffered one of the very few stretches of stock market underperformance in its history. As a prominent member of the Dow Jones Industrial Average , Altria had consistently been one of the index's best outperformers. Between the time of the agreement and the day of its name change, Altria had underperformed the Dow, even with dividends taken into account. Bad PR was finally taking a toll on the formerly ironclad stock.
Measured in terms of market performance, Altria's name change was an enormous unqualified success. In the 10 years following its decision, the tobacco leader has spun off both Kraft and Philip Morris International, divestitures that now claim aggregate market cap (including Kraft's own spinoff) of $225 billion. In spite of that, Altria itself grew more than 550% from 2003 to 2013, handily thrashing the Dow's roughly 70% gain over the same period -- which makes the index's decision to remove the company in 2008 look a bit poorly considered.
The Altria of 2003 looks much different from the Altria of today. Can this slimmed-down and refocused tobacco giant continue to provide investors with the outsized gains they're accustomed to? The Motley Fool's best analysts are on the case, and they've put together a set of exclusive research reports to help determine whether today's Altria can still produce yesterday's gains. If you're a shareholder or are interested in becoming one, you owe it to yourself to find out more in these comprehensive reports. Click here now to get started.
The article A Day of Failure and Transformation for Old Dow Stalwarts originally appeared on Fool.com.
Fool contributor Alex Planes owns shares of Philip Morris International. The Motley Fool recommends Western Union and owns shares of Philip Morris International. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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