EXHIBITS AND

AND APPENDIX

[From the Washington (D.C.) Evening Star, Mar. 5, 1963]

THE ORIGINAL COMPUTER

Somewhere in that head, among the bobbypins, the hairdo, the perfume, and the problems, there is a thing that makes calculations and decisions. This tricky little thinking center is the oldest instrument of progress in the human race; it is never satisfied with today's cut of meat or cut of skirt. Day in and day out, moment by moment over the years, this feminine computer is concerned with one thing above all others: Value.

And the value of many brands is often hard to find in today's supermarket. Watch our heroine, the American housewife, as she enters.

The modern grocery outlet is a thing of modernistic splendor. Broad aisles invite her, departmentalized shelves beckon. In the surgery-white glare of fluorescents, thousands of items seek her attention. Order seems to prevail. But the goddess of the marketplace knows differently. She's a veteran propeller of a shopping cart and, therefore, a realist.

She is at once suspicious and vulnerable; coldly calculating and yet ready to be enchanted. Above all, she knows that order does not always prevail, and that price and value of some manufacturers' products at times are hard to determine.

OFF WHAT?

Our girl is in the Wonderful World of Off. Two Cents Off, Three Cents Off, Six Cents Off, Send in The Label With One Dollar and Get, Enter This Contest and Win A, The Greatest Prizes of All, 50 Extra Stamps, Complete This Jingle ***.

This is why a strange change comes over a woman in a store. The soft glow in the eye is replaced by a steely financial glint; the graceful walk becomes a panther's stride among the bargains.

A woman in a store is a mechanism, a prowling computer. Mentally she is a memory bank, calculating the variables, thousands of little lights flicking over the great question of her life-last week that package was 43 cents, now it's only 39; and right beside it is this new brand-slightly larger-for 41 cents.

This is why she pinches and prods and shakes things, listens to cans and boxes. She is mentally X-raying the interior of the package. The American housewife is her own final bureau of standards.

THE WIZARDS OF OFF

At first the whole epic struggle seems no contest. On one side we have this frail creature. On the other side we have her surrounded by some 20,000 square feet of branded canned goods, branded dry groceries, nonfoods, dairy products, and hosts of other items. In the background are the unseen masses of manufacturers trying to bewitch and bedazzle her into buying.

But when our girl starts down the aisle, her defenses are massive. Jungletrained, her bargain-hunter's senses razor-sharp for the sound of a dropping price, our girl is the easy winner almost every time. She is accustomed to the

merchandising circus.

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The losers are those Wizards of Off-those manufacturers who seek her trade by decorating their packages with overprinted banners and stickers proclaiming 6 cents off, or one extra for a penny more-by in-pack premiums, or send-in-for premiums, or coupon inside good for 10 cents toward your next purchase or by dozens of other devices. They may get a one-time trial purchase; they don't get her loyalty for any brand.

What happens is that those little numbers on the edge of the shelf often do not reflect the real price or the true value of the product on display. Lost somewhere is that old simple equation: Value equals quality plus price. And the store, be it a giant supermarket or a small neighborhood store, can do little about it.

THE SCOTT PHILOSOPHY OF VALUE

Where does Scott Paper Co. come in?

Scott itself has even played a part, though briefly, in the marketing mixup, the cents off, coupon, contest route for the temptation to fight fire with fire is irresistible.

But last year we took stock of the results; the cost of the deals and the potential damage they might do to the Scott image we had spent so many years in creating in the eyes of the consumer.

Our business had been built for three generations on the philosophy of valuethe finest quality at the lowest possible price. This reputation apparently could not be enhanced by 3 cents off, free paring-knives, or two packages for a penny

more.

So in January of 1962 Scott decided to reaffirm our faith in a basic precept; if we offer our products to the homemaker at a fair price, and of uncompromising quality, she will recognize their honest value and buy them. And retailers everywhere, from the giants to the little ones, applauded.

THE SCOTT PLEDGE

We announced a positive policy. It began with a pledge.

The pledge is that we at Scott will maintain the highest possible quality in our products and offer them at the lowest possible price.

We will forego all cents-off label promotions, consumer contests, coupons, and premiums unrelated to the use of dispensing of our products.

There will be one simple and clear-cut exception to the "no-dealing" promise the introduction of a new product or a significantly improved product. At such times it becomes necessary to induce as many consumers as possible to sample the new product immediately. To accomplish this quickly, temporary sales inducements are often required. And we shall use them. But once a new product is established in the marketplace such sales stimulants will end. Prizes and premiums do not create loyal customers. Scott Paper Co. knows there is no substitute for quality.

THE PROOF OF THE PUDDING

Reception of the new Scott policy has been gratifying. Sales have shown must encouraging results. We hope this proves unmistakably that Scott products don't need free balloons or other stimuli. Without premiums, promotions, or cents-off gimmicks, Scott products are successes in the stores, and our customers approve wholeheartedly.

Inevitably we tend to feel a fine, warm sense of security. This success means that the American housewife, goddess of the market, buys our products for quality and value, not for premiums.

To some other manufacturers our policy may have seemed idealistic, or unworkable. We want to reassure them that this merchandising attitude actually brings specific, positive benefits far beyond those we originally anticipated. By her own response, in the form of increased Scott sales, we believe the American housewife appreciates the fact that Scott gives her first-rate quality and first-rate value-with no cents off the label. She can be confident always that, for the top-quality products of Scott Paper Co., those little numbers on the shelf strip represent real value.

SCOTT PAPER Co., PHILADELPHIA, PA.

Scott makes it better for you

[U.S. Department of Commerce, U.S. Travel Service, Washington, D.C., for release at 1:15 p.m., Tuesday, Oct. 16, 1962]

ADDRESS BY SECRETARY OF COMMERCE LUTHER H. HODGES, PREPARED FOR DELIVERY TO THE 24TH ANNUAL PACKAGING FORUM OF THE PACKAGING INSTITUTE, CONRAD HILTON HOTEL, CHICAGO, TUESDAY, OCTOBER 16, 1962

I am pleased that you have asked me here to discuss with you the application of ethics in the business world.

As you know, we at the Department of Commerce have been concerned with this problem, and in order to aid the business world in making critical decisions along this line, we set up the Business Ethics Advisory Council. We did not do this because of any feeling that businessmen were less ethical than any other segment of our citizenry, but because we felt that the ethical conduct of businessmen means so much to the health of our economy and the strength of our Nation.

The English philosopher, Alfred North Whitehead, summed up just how important this is. He said:

"The behavior of the community is largely dominated by the business mind. A great society is a society in which its men of business think greatly of their functions. Low thoughts mean low behavior, and after a brief orgy of exploitation, low behavior means a descending standard of life. The general greatness of the community, qualitatively as well as quantitatively, is the first condition for steady prosperity, buoyant, self-sustained, and commanding credit." The importance of business conduct to the vigor of our economy and the stature of our country puts a heavy burden, indeed, on the business community. Yet, I suggest that it is not unreasonable to expect standards in our business and professional dealings every bit as high as those we employ in our private affairs. I realize that the problems we face are not simple they are difficult and complex, but the stakes in solving them are high. We in America are striving to maintain our defense efforts in a perilous world. We need a growth economy if we are to absorb our rising labor force and those employees released by automation.

We need economic expansion if we are to meet a growing international competition and bring the fruits of prosperity to all of our citizens.

We are moving in this direction. Today we have 1.3 million more people working than a year ago. Corporation profits are up by $6 billion. Personal income is at an all-time high, and retail sales are nearly $1 billion above a year ago. But we still have a long way to go if we are to absorb our unemployed and put our unused capacity to work.

I know we can achieve our goals. But if we are to fulfill our dreams as a Nation, we must solve the accompanying problems of growth. One of the most important of these problems is how to maintain a posture compatible with our ethical standards and still survive among the growing competitive pressure that an expanding economy creates.

Your packaging industry has shared in both economic growth and the rise of ethical dilemmas.

In 1961, the value of shipments of containers and packaging materials in the United States was put at $13 billion. In 1939, for example, the value of packaging amounted to only $2 billion. The gain, therefore, in this 22-year period was 550 percent. The growth of the U.S. economy in that same period was 470 percent.

Furthermore, this $13 billion for packaging represents only that portion pertaining to shipments of the fabricated containers and packaging materials, f.o.b. plant. It does not include the broad and important area of packaging dealing with contract packaging, consulting, package design, laboratory testing, research and engineering, and direct labor and overhead cost of assembling, filling and handling, and shipping of package goods. Add these costs to the plant value of packages, and the total money spent in the United States in 1961 for packages amounted to approximately $22 billion, or over 4 percent of the total economy.

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I am delighted to say that according to estimates made by the Business and Defense Services Administration at the Commerce Department, container manufacturers expect that final reports will show record shipments for the first 9 months of this year. This is an increase of 5 percent over the same period of 1961.

Of course, it is unnecessary to tell you that the cost of doing business has risen, too. For while material costs have held about even, the cost of labor has risen from 1953 to 1962 by almost 43 percent, while container prices, we understand, in that period gained only 22 percent.

Add to this the fact that the history of growth of the packaging industry has attracted many firms, so that there are now more than 5,000 plants engaged primarily in the manufacture of containers or packaging materials. It is easy to see that here is indeed an industry in which there is much promise of success, but also one in which the competition is strong.

One way in which the packaging industry has moved to meet the challenge of competition is through exploiting the possibilities of research and development. It is capitalizing on the basic research in the raw materials industries and is itself expending research money at a rate approaching $200 million a year. Your industry has forged ahead with new fabrication methods of cutting, trimming, sealing, punching, wrapping and working our multiple packaging techniques, in its efforts to put the latest engineering and scientific discoveries to work.

Yet most impressive is the array of new packages.

Just think, not too many years ago merchants got their merchandise pretty much in two containers-the barrel and the keg Today consumer products are attractively and enticingly put up in paper, steel, aluminum, glass, plastics, wood, and textiles. There are thin tinplate containers, aluminum containers, fiber-foil containers, polyethylene bottles, bubble displays, aerosol bombs, wax and plastic coated cardboard milk bottles, pulltop cans, and laminations, coatings and combinations of every conceivable sort. And new developments are constantly coming out of our research efforts. I understand they are working on edible containers to eliminate surplus weight in our space capsules.

This is wonderful. This is a good sound way to move ahead. Efforts at attractive packaging, coupled with the trend to self-service have been so successful that the package is no longer simply one of those things which once you empty the contents you don't know what to do with. Packages have become salesmen, and very potent ones.

After all the advertising and publicity and marketing plans have been made and carried out, the success or failure of any sales campaign may well hinge on the design of a package, sitting with a host of competing products on the supermarket shelf. It has to have some quality about it that says, "Choose me." This is quite a challenge.

Many clever and sophisticated approaches have been designed with a great deal of effectiveness. Much money has been spent in surveys and motivational research in order to find out just what it is that catches the consumer's eye. We have come a long way from the days when the red salmon people tried to win away the pink salmon sales by putting on the label, "Guaranteed not to turn pink in the can."

While the industry has worked hard at developing new products, new manufacturing techniques, and new methods of testing consumer acceptance, the intense competition within the industry has brought with it some shadowy practices.

We have witnessed a flurry of bottles with false bottoms and pinched waists to make them appear to hold much more than they do; of boxes much bigger than their contents; of large, giant, and super, but no small sizes; of weights or contents printed so small as not to be seen, or printed in ink nearly the same color as the containers, so that they can be read only with great difficulty.

We have witnessed the use of odd weights such as 33% ounces to thwart comparison shopping. We have seen the practice of pricing the large economy size to cost more per ounce than the smaller sizes It has got to the point that slide rules are being marketed for housewives to use when they go shopping to figure out just how much a product really does cost.

The list goes on, and I'm sure you can tell me a great deal more about this than I can tell you, and I hope you will: I don't want to belabor the point or leave the impression that these are industrywide practices. What I do want to emphasize is that a handful of unethical firms in any line of endeavor