Greyhound's marketing map adds some household products
Greyhound Corporation is best known for its nationwide network of bus routes -- routes that, in an era of relatively cheap air fares, are carrying declining numbers of travelers. But buses are not all there is to Greyhound. The Phoenix-based company is actually a widely diversified operation, and its most recent diversification is in the area of bleach and soap pads.
Greyhound last week announced its intent to pay $264 million for the consumer products division of Purex Industries, based in Lakewood, Calif.
The purchase, Greyhound's first since John W. Teets became chairman in 1981, will bring into the corporate family such household names as Purex bleach and Brillo soap pads. The division's annual sales have run about half a billion dollars lately and should bring Greyhound revenues to approximately $3 billion annually.
Although closely identified with its bus lines, Greyhound is involved in food service, reinsurance, consumer-products manufacturing, and other enterprises.
One Wall Street analyst sees Purex as fitting well with Greyhound's consumer products division, which includes Parson's ammonia and Dial soap and antiperspirant. The acquisition ``will go a long way'' towards providing the company with a new direction, this Greyhound-watcher says. The two divisions ``are both doing the same thing -- their products are right next to each other on the shelf; they'll be able to combine their distribution systems. One plus one will make three eventually.''
Purex's ``consumer products will fit hand in glove with ours,'' Mr. Teets said in an interview with the Monitor. ``The announcement shouldn't have been a surprise to anyone who's been listening to me.''
Greyhound's recent history, however, has not been one of racing to acquire properties. Quite the opposite: The Purex products acquisition comes after Mr. Teets has shed 20-odd low-profit branches.
``There has to be a two-pronged strategy,'' says industry analyst Katherine Stults, a vice-president at the Dean Witter Reynolds brokerage. Commenting on Greyhound just before the Purex announcement, she noted that the company's strategy is to make things work and get rid of what it can't make work, ``but you also need a long-term strategic acquisition.''
Perhaps the most notable Greyhound branch to be pruned has been Armour Food, a unionized meatpacker that had become what one publication called ``a money-draining dinosaur.'' Armour was sold to ConAgra Inc., the food congomerate, which reopened its plants as nonunion operations and returned the enterprise to profitability. Since Greyhound sold Armour Food for ConAgra stock, Greyhound retains an indirect but profitable interest in Armour Food.
Mr. Teets's other big confrontation with a union came in November 1983, when union bus drivers launched a strike that lasted 47 days.
Teets toughed it out, though, and in the end won a settlement involving a cut in wages and fringes averaging some 15 percent for current employees, with deeper cuts for new hires. The concessions went part of the way toward making Greyhound more competitive with other carriers that sprouted up in the wake of bus deregulation in 1980 and '81.
Teets speaks eagerly of a plan to franchise the Greyhound name to independent bus operators. This would extend services into areas that Greyhound itself, with its high cost structure, cannot reach.
Greyhound will hold a meeting of would-be franchisees April 17; nearly 500 have expressed interest in the plan. Details are still being hammered out, but franchisees should get the benefit of Greyhound advertising and telephone centers. Greyhound, in turn, should be able to generate revenues through fees for servicing franchisees' buses at the maintenance facilities Greyhound already operates.
At the moment, Greyhound's basic bus business is generating lackluster profits. Mr. Teets describes the business as being ``in a revolution.'' Passengers have fallen from 64 million annually to around 40 million in the past nine years, he notes. Long-distance bus service does not appear to have a bright future, even if Washington budget-cutters were to pull the subsidy from Amtrak, which competes for riders.
But where the bus business can prosper, Teets says, is on trips of under 500 miles, especially those to and from airports to outlying communities. ``Take somebody flying into O'Hare in Chicago and then going out to Rockford, Ill., to use my own hometown as an example. They could pick up a bus right at the airport and it would take them out there to Rockford.''
Greyhound is now offering direct service from 79 cities to the People Express terminals at 18 airports -- although there is nothing to keep a passenger from taking the bus to People's terminal and then strolling over to United or some other carrier's counter.
Ms. Stults sees the airport service as an indication that Greyhound is finally doing research to find out where its customers are coming from and how to serve them better. Like the telephone companies and the airlines, bus lines are having to learn how to run a business in a competitive environment.
Ms. Stults says Mr. Teets ``has done an awful lot of good,'' although she also notes, ``It isn't going to be a straight line up -- there're going to be some slippages.''
She praises him for his moves to sell downtown bus terminals, often on very valuable bits of real estate, and relocate them in suburban locations, typically near Interstate highways, that are more suited to the bus line's own needs. The terminal sales are allowing the company to redeploy its assets rather than keep them tied up in bricks and mortar. The Greyhound terminal in Boston, she notes, has just been sold, with a three-year leaseback while the facility is relocated.
Earlier this month, Greyhound announced that 1984 was its second strongest year ever in earnings. And although a tax-reform cloud hangs over its equipment-leasing operations, its financial group continues strong.
But the company has been troubled for some time by a low return on equity. Last year, Teets announced a three-year program to raise that figure to 15 percent. ``It's going to be a real stretch goal for us, because we're coming off an 11.9 percent return last year,'' he says. And though he doesn't insist flatly the goal will be achieved, he says, ``I think we're going to get close.''