Context:
I am writing a book on 1980s/1990s "gross" toys, and I am currently mapping out a chapter on the history of the toy business leading up to the 1980s. One thing that sticks out to me as fascinating is that food companies purchased some toy companies in the late 1960s and 1970s (Nabisco acquired Aurora Plastics; General Mills acquired Donruss and Kenner; General Foods acquired Kohner; Quaker Oats acquired Fisher Price; etc.).
One of my sources for toy history (Toyland, Stern & Schoenhaus, 1990) mentions a diversification trend at this time, but doesn't say much more than "it was happening then". I would love to know more about why it was happening then, as well as why, by the early 1980s, these food companies were divesting themselves of toymakers.
I sense also an aspect of conservatism vs innovation at play in these decades. At least with toys, I think the general trend in the 70s was towards more conservative play patterns and toy categories. In the 80s I see a trend of ground-up toy design, where the model of letting toy designers pitch and develop new ideas (for entirely new products as well as extensions for existing brands). And by the mid-90s, that model was ditched; I suspect this is because, after Hasbro and Mattel bought up all the other companies, there was less need for competition/innovation.
So I'm also interested in knowing whether 1) this matches other trends in industries, in general or at that time and 2) whether I'm at all on the right track for framing all of this.
All that's for context, and it's a lot of questions, but my main hope is still the question in the title. If there's a more appropriate subreddit, please let me know. Thank you!
Your book sounds interesting. I’d love to read it whenever you finish.
To your question, I cannot specifically say why these companies chose to divest specifically into toys. Still, I can speak a bit on the popularity of corporate conglomerates that emerged in the US during the 1970s and 1980s.
The 1970s was reality-shattering for a lot of businesses. The massive economic growth that the US experienced post-WWII had begun to taper off. The dreaded combination of inflation and stagnant wages-- aptly called “stagflation”-- forced businesses to consider new ways of achieving growth when central banks seemed clueless about how to address this problem. For many companies, the answer seemed clear: divest into unrelated industries so that if one sector entered a slump, you would have alternate channels of revenue to keep your business afloat. This practice first gained notoriety with Royal Little (yes, that’s actually his name), founder of the textile company Textron. Little realized that the textile industry was volatile in a global market. Thus, he divested into unrelated sectors, such as plastic, plywood, leather, helicopters, and many other businesses that had nothing to do with textiles.
Other companies followed suit, including Nabisco, General Mills, and Quaker Oats. In general, these businesses responded to shareholder pressures to sustain growth and profits consistently. This may have been possible in the previous decades, but for a variety of reasons that I won’t get into here, that was no longer the case. Thus, they felt forced into divesting into unrelated industries, allowing them to maintain enthusiasm in quarterly reports and play with numbers demonstrating that they were indeed profitable, even if that wasn’t always the case. This system became self-sustaining, as elite business schools prepped graduates for a world that was less about managing optimal production methods but rather ways to broker deals, conduct mergers, and swallow up smaller companies. Thus, the manager became less critical, and the lawyer and business consultant drove the company’s direction.
So yes, these food companies divesting into unrelated industries like toymaking was the norm during the 1980s and 1990s.
Here are some books I’d recommend.
Marc Levinson, An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy. 2016.
Benjamin Waterhouse, The Land of Enterprise: A Business History of the United States, 2018.
I am unaware of a concise history that deals specifically with conglomerates; I’m sure other uses could chime in with some recommendations. I hope some of this helped.
My first book is tangentially related (First Taste of Freedom). I talk about “tie-ins” between toys, bicycles in particular, and cereal, candy bars, etc. it won’t answer your question posed above however and my research on toys is a little dated at this point, using Chudacoff, Lisa Jacobson, and a few others you’ve probably read already. Anyway, interesting question and I look forward to reading your conclusions.