Cumberland Packing Corporation

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Cumberland Packing Corporation

2 Cumberland Street
Brooklyn, New York 11205
U.S.A.
(718) 858-4200
(800) 221-1763
Web site: http://www.sweetnlow.com

Private Company
Incorporated: 1947
Employees: 400
Sales: $100 million (1997 est.)
SICs: 2099 Food Preparations, Not Elsewhere Classified

Cumberland Packing Corporation is a relatively small, family-run business, yet it has been a major player in the artificial sweetener market for more than 50 years. Cumberland makes Sweet ’n Low, a saccharin-based sugar substitute. The brand was the first granular sugar substitute to be marketed nationally, and it controls about 30 percent of the table-top sugar substitute market. Over 30 million people use Sweet ’n Low each day, and the brand has wide recognition and customer loyalty, even as the sugar substitute market opened in the late 1990s to a slew of new products.

Early History

Cumberland Packing was founded by Benjamin Eisenstadt, a native of Brooklyn. He was from a poor family, but he nevertheless made it to St. John’s University Law School, where he graduated at the top of his class in 1929. Despite his degree, Eisenstadt was unable to find employment as a lawyer during the Depression, and he worked instead at his father-in-law’s food store. The thrifty Eisenstadt saved up enough money from his salary to buy a cafeteria in 1940, located just across from the Brooklyn Navy Yard. The cafeteria was called the Cumberland, and during the war years it did a thriving business. Sailors and shipyard workers packed the place around the clock. As soon as World War II ended, however, the ready supply of customers diminished and Eisenstadt decided to sell the Cumberland. Then, as fortune would have it, he changed his mind about selling the place and instead got the idea to buy a tea bag machine and pack tea. Apparently he had worked in that industry as a child, and he thought it might be profitable. Eisenstadt’s wife, Betty, came up with the inspiration that would change the course of Cumberland Packing. Noticing a dirty sugar bowl in a restaurant, Mrs. Eisenstadt suggested to her husband that he begin packaging sugar. Thus, in 1947 Eisenstadt incorporated Cumberland Packing, and the company worked on contract to sugar distributors making single-serving sugar packets.

Benjamin’s son Marvin, a chemist, joined the company in 1956. He induced the company to begin packaging soy sauce and catsup as well as sugar. In 1957 a local drug manufacturer approached Cumberland Packing, looking for someone to develop a granular sugar substitute. Because of Marvin’s educational background, this was a project he could tackle. Up to that time, the sugar substitute saccharin had been available only as a pill or a liquid, and there was no sugar equivalent that dieters could pour into their coffee or sprinkle on their breakfast cereal. The Eisenstadts developed a granular powder using saccharin and cyclamates, and named it Sweet ’n Low, after Benjamin Eisenstadt’s favorite Tennyson poem. With distinctive pink packaging and a claim of fewer than three calories per serving, Cumberland launched Sweet ’n Low in 1957.

The timing of Cumberland’s introduction proved very lucky. Dieting soon became a craze, and the sugar substitute market picked up with the debut of diet sodas in 1962. Demand for Sweet ’n Low rose accordingly. A&P, one of the nation’s leading grocery chains, contacted Cumberland and asked if it could distribute Sweet ’n Low nationally. Very quickly Cumberland’s sugar substitute became the most popular brand of its type on the market.

Problems with Regulations in the 1960s and 1970s

Sweet ’n Low was a hit, a successful new product that swept to the top of a booming niche in the 1960s. However, the chemicals in Sweet ’n Low had not been thoroughly studied. Some testing had indicated that cyclamates might cause cancer or birth defects in chickens and rats, and in 1969 the Food and Drug Administration decided to run some more definitive tests on the chemical. After just three weeks of testing, the Health, Education and Welfare Secretary abruptly declared a ban on cyclamate sweeteners. Preliminary results had shown the growth of cancerous tumors in rats, and consequently, cyclamates were deemed unsafe for humans. The ban was announced in late October, and all cyclamates were to be off the shelf by February 1.

This might well have been the end of Cumberland Packing and Sweet ’n Low. But Marvin Eisenstadt was able to use his chemical expertise and devise a new formula for Sweet ’n Low, made with saccharin but without the addition of cyclamates. As the ban loomed, the Eisenstadts went to their bank and borrowed $1 million. The company took all its old stock off shelves across the country and buried it in landfills. Then Cumberland supplied its distributors with its reformulated product. This quick action saved the company, and sales soon took off. High sugar prices in 1974 led to a sudden increase in sales that year. Over the next two years sales doubled, so that by 1976, Cumberland was bringing in around $40 million.

History almost repeated itself in 1977, when a study preliminarily linked saccharin with cancer in laboratory rats. The Food and Drug Administration acted quickly, and in March 1977 announced a ban on saccharin, due to take effect in three months. Faced with this new disaster, Marvin Eisenstadt figured the company would sell out its remaining stock and close. With a three-month supply on hand, the company should have lasted up until the ban kicked in. But consumers were apparently outraged at the coming loss of their diet product, and began hoarding Sweet ’n Low. Cumberland’s three-month inventory sold out in just two days. The run on Sweet ’n Low was indicative of public sentiment, and Eisenstadt encouraged the public’s outrage by taking to television commercials to inveigh against the FDA’s tests. Eisenstadt used the airwaves to complain that researchers had fed laboratory rats the equivalent of 1,200 cans of soda a day. In an interview in Forbes in July 1977 he complained “Those rats weren’t fed saccharin; they were embryos in their mother’s wombs, so they were literally bathed in it.” Meanwhile, the company gloomily looked around for some other product to sell when the ban went through.

Congress was apparently impressed by the level of public support for saccharin, and it moved to block the FDA’s ban from taking effect. The compromise solution was to require packagers to print a warning label on products containing saccharin, which advised that saccharin had caused cancer in animals and may cause cancer in humans. Eisenstadt continued to lobby against the saccharin warning, but Sweet ’n Low sold well even with the somber reminder printed on it.

Market Share in the 1980s

The warning label did not slow Sweet ’n Low’s sales, and by 1980 the pink packets had an estimated 80 percent share of the nation’s artificial sweetener market. As insurance, Cumberland diversified into other products around this time, introducing a salt substitute called Nu Salt, and Butter Buds, a powdered butter and margarine substitute made of corn syrup and restructured butterfat. By the early 1980s, the artificial sweetener market had grown to something close to $450 million a year, and Sweet ’n Low was firmly entrenched as a top player.

But Sweet ’n Low’s market share began to fall in 1982, even as sales volume continued to rise by about five percent annually. The reason was the introduction of a formidable competitor, Nutra-Sweet. NutraSweet was made from a different chemical, aspartame, and it was manufactured under patent by the G.D. Searle Company. Searle had actually approached Cumberland in 1972 with an offer to buy out the business. Searle wanted to use Cumberland to develop its aspartame product. The Eisenstadts refused to sell, and it took another ten years before Searle got NutraSweet to market. However, NutraSweet’s debut was heralded with the aid of tens of millions in advertising dollars. Though aspartame was more expensive than saccharin, it was several hundred times sweeter, and soon it found its way into almost every diet soft drink recipe. With the introduction of NutraSweet and its sister, Equal, the whole artificial sweetener market expanded rapidly. Conversely, Sweet ’n Low’s share of it began to shrink. From around 80 percent in 1980, Sweet ’n Low’s market share fell to around 73 percent in 1983, and down to just over 66 percent in 1984.

Cumberland was not in peril, since its sales volume still grew, but it struggled to maintain its name recognition by licensing a Sweet ’n Low soda in 1984. Its butter substitute also sold well, first marketed directly to hospitals and dieticians, and later selling in supermarkets.

Changes in the 1990s

When NutraSweet hit the market in 1982, it was manufactured under an exclusive patent for its key ingredient, aspartame, and no other brands could use that chemical. The brand was bought by giant chemical company Monsanto, and Monsanto spent enormous sums backing its product. By the early 1990s, aspartame was an ingredient in more than 4,000 food and beverage products in the United States. In Europe, the aspartame patent expired in the late 1980s, and European competitors had been quick to put out lower-priced aspartame products. Monsanto protected its turf, and was said to have used price-gouging to convince European manufacturers to continue using its brand. The U.S. patent on NutraSweet was due to expire in 1992. In anticipation of this, Cumberland Packing began preparing to compete with its own new sweeteners.

Company Perspectives:

We’re still based in Brooklyn on the site of Ben’s original diner. But we’re also sweetening the rest of the world.

Cumberland formed a partnership with the German chemical company Hoechst Celanese Corp., and marketed a new sweetener, called Sweet One. This was made with a new chemical, acesulfame-K. Sweet One sold in Europe as Sunette, and it had some key qualities that NutraSweet lacked: it was stable at high temperatures so could be used in baking and candy manufacturing. It also maintained its sweetness in sodas even over a long period of time. And unlike Sweet ’n Low, Sunette and Sweet One were not required to carry a warning label.

An interesting sidelight to Sweet One’s marketing was that both Cumberland and another U.S. distributor, Stadt Corporation, were sued by NutraSweet’s maker Monsanto for trademark violation. The issue was the color of the packaging. Sweet One came in pastel blue packets, very similar to the well-known color of NutraSweet’s packaging. The U.S. Circuit Court of Appeals threw out Monsanto’s case in November 1990, ruling that competitors were free to use similar packaging colors. Monsanto got the case into the Supreme Court the next year. Nonetheless, the highest court let stand the earlier ruling, and the copycat packaging was vindicated.

Nevertheless, Cumberland did not have the advertising dollars to back Sweet One in the United States. It turned to a new product in 1993, the year after the aspartame patent expired. Called Sweet ’n Low 2, Cumberland unveiled a new mixture of saccharin, aspartame, and Sunette, or acesulfame-K. Cumberland upped its advertising budget to boost the new product, which was to appeal to consumers who preferred the taste of aspartame. Oddly enough, NutraSweet also introduced a new product that year, an aspartame-saccharin blend aimed to draw in consumers who preferred the taste of saccharin. In other words, both companies launched brands that were meant to resemble the other’s product, with echoes of the New Coke mentality. By late 1993, Cumberland had also introduced NatraTaste, a 100 percent aspartame sweetener. Sales for that year stood at $69.5 million, and the company’s total market share fell to just under 30 percent.

Despite indications that many Americans were returning to that old standby sweetener, sugar, Sweet ’n Low continued to hold its own in the fracturing artificial sweetener market. Market share in the 1990s evidently stayed at between 25 and 30 percent, while sales dollars still increased. The company was dealt a blow from within in 1995, though, when a former vice-president of Cumberland pleaded guilty to funneling illegal campaign contributions to a variety of prominent politicians. The executive, Joseph Asaro, was well-connected politically. He had introduced Cumberland’s president, Marvin Eisenstadt, to President Reagan and to former New York senator Alfonse D’Amato, and Asaro was apparently even on personal terms with the Pope. Asaro had masterminded a complex scheme of bundling money siphoned from Cumberland’s contractors, and delivering huge sums to the campaigns of D’Amato, former senator Bob Dole, the Bush-Quayle presidential initiative, and others. These contributions violated federal election laws, and by fudging the books, Asaro also defrauded the Internal Revenue Service. Cumberland’s president Eisenstadt claimed he had no knowledge of the scheme, and had been taken in by his slick vice-president. But Eisenstadt too pleaded guilty to signing a false tax return and to related charges. The company paid a $2 million fine. The purpose of the campaign donations had allegedly been to buy influence for the cause of saccharin, which was still under threat of an FDA ban. Mr. D’Amato had been strong in his opposition to the saccharin ban in the 1980s. In the aftermath of the guilty pleas, Cumberland instituted stricter financial controls and updated its computers to prevent anything similar from happening again.

By the late 1990s, Cumberland Packing Corporation was still holding its own in a market dominated by much bigger companies. Its market share was significant, though its advertising budget was much smaller than its competitors’. For example, Cumberland spent $2.4 million in 1996 to back Sweet ’n Low, whereas Monsanto poured over $16 million into advertising for its Equal brand that year. In addition, new sweeteners came on the market, the latest being Johnson & Johnson’s sucralose. But Cumberland did not seem like it was ready to be knocked out of its niche. Despite its prominence in a market dominated by large chemical conglomerates, Cumberland remained a family-run business. Its employees made well above the average for unskilled labor in the New York area and received generous pensions, sick pay, and vacations. Still located in the Brooklyn neighborhood where the old Cumberland diner had been, the company consciously declined to modernize equipment if it meant sacrificing jobs for its workers. This rare spirit seemed to keep the company going despite many obstacles. Plans were to keep Cumberland in the family for a third generation, even after Marvin Eisenstadt retired.