'AO Pensacoia News Journal Sunday, September 4, 1994 2 MONEY Education fellowship awards criticized Giant business mergers no big deal in America By Chris Collins Gannett News Service WASHINGTON From the files of the federal government's own waste, fraud and abuse watchdogs: PROGRAM FAILS: The Educa- tion Department runs a variety of fellowship programs that are supposed to either help specific populations get a higher education or encourage people to train in particular professions. How well do these a which cost taxpayers about $200 million a year, work? No one really knows, 'says the de- partment's inspector general. His auditors looked at three fellowship programs one de-signed to get people working in rehabilitation services, a second to encourage minority and disad- 1AXES-X vantaged students to become lawyers and a third to enable Indian students to get college degrees. In each case, they said, Education officials did a poor job of tracking what happened to fellowship recipients, making it impossible to evaluate the programs' results. Students in the Indian Fellowship Program, for example, are supposed to submit all their grade reports and final transcripts to Education officials.
Yet auditors said grant files they reviewed "contained no evidence that fellows graduated from their designated field of study." Instead of judging the program's success on how many fellows graduate and get jobs, the auditors said, Education officials told them its success was measured by whether or not the fellowships were awarded on time. FLYING HIGH: The Department of Defense's inspector general, working under the assumption that taxpayers ought not pay any more than necessary to ship government cargo, found that the Defense Department unnecessarily spent an extra $27.1 million to airlift military cargo to overseas destinations during the 1992 budget year instead of putting it on ships. The $27.1 million was part of about $359.3 million the military services spent in 1992 to airlift cargo shipments from the United States to overseas destinations aboard government aircraft; another $35.8 million went to ship government cargo on commercial aircraft. During six years, about $100 million could be saved if Defense officials crack down on requests to airlift items and used surface transportation more frequently, auditors said. Defense officials said they doubted the savings would be that much maybe only a mere $63.2 million.
HOTLINE OF THE WEEK: To report waste, fraud or mismanagement in programs of the State Department, call its inspector general collect at 1-202-647-3320. GOVERNMENT SPEND LNG: OBottled coffee: A hot prospect or cold beans? worry less about antitrust when you have a global market and a lot more competitors." Indeed, the Justice ment's recent investigation of Microsoft Corp. drew attention partly because of fears that too stiff a penalty would weaken the overseas competitiveness of the leading computer software maker. A SETTLEMENT reached in July forced Microsoft to make relatively minor changes in business practice. In the 1960s, big business mergers were often subjected to antitrust review and sometimes public protest.
At that time, many of the mergers involved disparate businesses, a steel company buying a sporting goods maker, for instance. The era of conglomerates ended, though, with many of them breaking apart. Today, the big deals nearly always happen within an industry. Pharmaceutical makers embrace each other because of the unpredictability of health care reform. Media companies align wondering how they will be paid for delivering more product through electronic networks.
Military contractors join up to be more efficient as the government spends less on defense. ANOTHER REASON the mega-mergers get less criticism than they used to is the universal approval they receive on Wall Street. Stocks in companies that are combining almost always rise on the day a merger is announced. One of the most strident criticisms of the latest merger wave came in an unusual place a prime time presidential news conference. STOCKHOLDER ACTIVIST Evelyn Y.
Davis, who publishes a newsletter and has made a career of tripping up chief executives at annual meetings, pointedly asked President Clinton why government agen-; cies weren't more critical in their reviews of deals "not in the interest of the public." "The administration is not, lifting one finger," she said. Clinton, taken slightly aback, said, "Well you've drawn a lot of conclusions there in a short time." Associated Press NEW YORK Giant corporate marriages these days get screaming headlines in the papers and a big so-what from the public. Americans are used to big. In a change of social attitudes that began in the Reagan era, few people express fear or outrage at mega-companies or mondo mergers anymore. THE INDIFFERENCE stems partly from individuals' sense of powerlessness over the course of big business and partly because the might of a monolith is less to worry about in the face of competition.
As such, the anti-monopoly laws created nearly 100 years ago to protect Americans from the ruthless whims of the oil and rail trusts are less aggressively enforced, some social historians say. "This is where we've come since the progressives at the turn of the 20th Century," said Nancy Theriot, an associate professor at the University of Louisville. "We did have a large number of political thinkers who really were fearful of big business and from them came that first wave of legislation that tried to deal with bigness in business." IN THE PAST month, American Home Products has said it would join with American Cy-anamid and Lockheed will link with Martin Marietta. Both are $10 billion deals. On Thursday came reports that Time Warner was thinking about buying NBC and Disney may buy CBS.
There was also the merger of E.J. Brach and Brock Candy, a sweet $140 million deal in the candy world. Only one megadeal has faced a serious antitrust threat recently: the combination of Macy and Federated Department Stores. That marriage is expected to be consummated regardless. "The merger waves of the '80s and '90s are certainly helped a lot by lax antitrust policy," said Robert Vishny, finance professor at the University of Chicago Graduate School of Business.
BUT HE NOTED, "Relative to 20 years ago, the competition that a lot of U.S. companies face is higher anyway. You i r. Here is a look at government spending and debt. The govern-men't fiscal year runs Oct.
1 through Sept. 30. Total public debt Sept. 1 $4,598,564,000,000 Statutory debt limit $4,900,000,000,000 Operating balance Sept. 1 $18,824,000,000 Interest fiscal 1994 thru July $258,717,000,000 Interest same period 1993 $256,487,000,000 Projected deficit fiscal 1994 $220,108,000,000 Actual deficit fiscal 1993 $254,684,000,000 Receipts fiscal 1994 thru July $1,023,953,000,000 Receipts same period 1993 $938,985,000,000 Outlays fiscal 1994 thru July $1,207,590,000,000 Outlays same period 1993 $1,179,730,000,000 Gold assets thru July $11,052,000,000 of coffee consumed here is hot coffee.
Iced coffee is going to be a tougher sell." Goldman said the taste will be critical to success. Philip Morris General Foods USA division accounts for about two-thirds of domestic bottled coffee sales with its Cappio Iced Cappucino, according to Beverage Marketing's Hellen Berry. Cappio has been available nationally since the fall of 1992, and is sold in vanilla, mocha and coffee flavors in eight- and 24-ounce bottles. Company officials declined to discuss their view of the market or how they are approaching it. Cappio advertising appears aimed at young adults.
Cartoon beatniks in coffee houses were featured in initial advertising that pitched Cappio with the line "The thrill is the chill." A more recent commercial showed a young man trying to impress his girl friend as she lounges on the patio. He retreats to the kitchen and makes sounds like a cappucino machine just out of her sight. "Cappio. It's cappucino. Only cooler," is the theme.
Coca-Cola has been in a joint venture with Nestle SA for three years to develop tea, coffee and chocolate beverages. Earlier this week, Coca-Cola and Nestle said they were dissolving the venture and leaving coffee product development to Nestle in a looser alliance between the two companies. No coffee beverages for the U.S. are imminent, Coca-Cola said. I i 1 1 fit.
4l'T it lit ijlllfj- I Associated Press NEW YORK Soft drink makers are wistfully eyeing the coffee bean and imagining the possibilities. VI Consumers have demonstrated a thirst in recent years for Something new and tasty, an alternative to variations on colas. lJuice drinks, flavored waters, sports drinks and iced teas have all done surprisingly well when packaged ready-to-drink in bottles Cand cans. the same time, coffee bars fhave reemerged as hip social settings. The trend toward moderation in alcohol consumption has helped.
So has the inventiveness the ura-meisters at the coffee cafes. Can iced coffee in the convenience store cooler case or in the vending machine in the lunch room be far behind? Pepsi-Cola the second big-gest U.S. soft drink maker, recently announced a partnership with cafe chain operator Starbucks Coffee Co. to develop coffee beverages for sale in bottles or "cans. But some consumer researchers 'say Americans have little taste for cold coffee and doubt the beverage Iwill ever attain the popularity that iced tea and assorted New Age beverages have reached.
"There will be small pockets of people who will think it is incredible," said Doug Hall, who heads the consumer research firm Richard Saunders International. "But cold coffee tends to cause a gag jreflex in most persons." Ready-to-drink coffee has been a big hit in Japan where it is widely Associated Press Ready-to-drink coffee has been a big hit in Japan where it is widely available in vending machines that can deliver hot or cold cans. A lion this year and sports drink sales are approaching $900 million. Iced tea and sports drinks have gotten a lift via new entries from both Pepsi and soft drink industry leader Coca-Cola Co. Pepsi hopes its new drinks with Starbucks, the first expected reach the market next year, can fuel similar growth in coffee.
Industry watchers say the obstacles are formidable. "Eighty percent of the tea consumed in the U.S. is iced tea," said Emanuel Goldman, beverage analyst for PaineWebber in San Francisco. "By contrast the lion's share available in vending machines that can deliver hot or cold cans. But bottled or canned coffee has barely registered in the United States where consumers spent more than $49 billion last year on carbonated soft drinks.
Ready-to-drink coffee sold a tenth of a percent of that figure last year. Beverage Marketing Corp. estimates consumers spent about $60 million last year on ready-to-drink bottles and cans of coffee. That is about the level that Diet Cherry co*ke and Diet Squirt each achieved in 1993, publisher Jesse Meyers of Beverage Digest says. Iced tea sales, on the other hand, are expected to surpass $1.5 bil just trie right policy.
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