(FORTUNE Magazine) – FOR A COMPANY whose trademark was a cow, Borden Inc. used to do a good imitation of a lost sheep. The dairy business that good old Elsie made famous wandered aimlessly among scores of disparate enterprises Borden bought as it rambled through a phase of conglomeration ranging from women's apparel to fertilizer. Nearly all that stuff has been swept out of the barn now. The company is still expanding, but this time has a disciplined strategy to bulk itself up into a consumer products brute in dairy products, salty snack foods, pasta, and specialty groceries. Some 40 acquisitions over two years have made Borden, already the world's largest dairy company, the worldwide king of pasta and the second-largest seller of snack foods behind PepsiCo's Frito-Lay. It will close out 1987 with revenues of $6.5 billion, a 30% increase over 1986, and estimated earnings of more than $265 million, a jump of 20%. Many food companies wouldn't find this diet too healthy. Nearly every marketing report available shows that consumers worry about high blood pressure, which is associated with salt consumption. The dairy business has leveled off as the population frets about cholesterol, and Elsie has become -- let's get this one out of the way now -- a cash cow. Though pasta is still popular, sales will likely grow no more than 4% annually. Finally, the company's grocery business consists of tiny concerns handling specialty products like bouillon and crab meat. These are notable mainly for minuscule sales compared with heavyweights like cereal or ketchup. Yet Borden may be in a unique position to benefit from a trend toward consolidation in the food industry by being the ultimate consolidator. The company is stringing together regional pasta, dairy, and snack food operations to marry efficiencies of scale in manufacturing with the marketing nimbleness ( of a regional operator. As it expands geographically, Borden centralizes production in the most efficient plants, lowering costs and fattening profit margins. The network of regional companies also gives Borden the opportunity to take any hot local product into national distribution quickly through a delivery grid that is already in place. In becoming a regional powerhouse, Borden is backing into the hottest marketing strategy among major food companies. Outfits such as Campbell Soup Co. are augmenting their national sales with more targeted regional marketing. They have begun to customize production and distribution of many products for smaller marketing areas to meet differing local tastes and shopping patterns. Campbell's nacho cheese soup made for the Southwest, for example, is spicier than the Northeastern variety. Borden is coming from the opposite end, using a solid regional base from which to take its brands national. The man in charge of seeing that Borden stays on its new high-calorie, high- profit diet is Chairman and Chief Executive Romeo Ventres, 63. His predecessor, Eugene Sullivan, began the process of deconglomerating a chaotic company and then a year ago turned the milking pail over to Ventres to keep filling. Known as Ro, Ventres spent 20 years in Borden's huge chemical business before becoming chief executive. Even so, he just unloaded Borden's commodity chemicals business and now has the company grazing in six areas: dairy, pasta, snacks, ''niche'' grocery products (ReaLemon juice, Eagle sweetened condensed milk), consumer do-it-yourself items (Elmer's glues, Krylon spray paint), and specialty industrial chemicals like resins and polyvinyl chloride films. Still plenty diversified, you say? Yes, indeed. But not nearly as wild as it used to be (see chart).

ALTHOUGH BEING the first American-born child of a family from Torre di Nolfi in the Abruzzi region of Italy may go some way toward explaining his fondness for pasta, Ventres had a better reason for his carbo-loading. It has helped boost the company's return on shareholders' equity to over 17% this year, from a low of 11% in 1982 -- good but still not great in the food industry. The rapidly expanding pasta division is also the place where Borden is applying its theory of using regional strength to muscle into the national market. The company's pasta sales will spiral to about $415 million this year from $169 million in 1985, giving Borden the largest share of the market and the clout to make its Creamette macaroni the first national pasta brand. ''The road had been littered with companies that tried to go national,'' says L. John Westerberg, Borden's group vice president for pasta. Concerns such as La Rosa, Ronco, and Prince tried to expand beyond their own turfs, only to encounter furious resistance from their regional competitors. Borden was no more successful in its previous attempts to take Creamette out of the Midwest. To invade a new market, the company would spend heavily for advertising and promotion. That advertising made consumers buy more pasta all right, but they didn't always buy Creamette. Says Westerberg: ''We couldn't kill a ((competing)) brand. We would make some progress, but in the process we were making our competitors stronger.'' If you can't beat 'em, buy 'em, Borden reasoned. So it did, scarfing down Gioia in Buffalo, Viviano in Pittsburgh, and Anthony's in Los Angeles, in addition to Boston's Prince brand. Now the company teams Creamette with its regional brand and sells both labels against the competition through the local sales distribution network. Using this method, Borden benefits from the marketing methods that used to be counterproductive. Creamette is in 46 of the continental states, and its unit sales increased 15.2% in the past 12 months, or about four times the industry average. Borden is applying a similar strategy to its snack food business in an effort to hold up the Frito bandito. Frito-Lay controls 51% of what is called the salty-snacks market -- nuts, potato chips, corn chips, and so forth. ''There is only one full-line national snack company in the country, and we figure that there can only be one more,'' says Peter M. Duggan, a Borden group vice president. Before it can take on Frito-Lay, Borden will have to head off Anheuser-Busch. The beer giant is trying to guzzle market share nationally with Eagle Snacks, but by most accounts has yet to make a profit. Snack distribution is a difficult business to break into the way Anheuser- Busch is trying to. This $7.5-billion-a-year industry is played out at street level by battalions of route drivers who stock the shelves in mom and pop stores and giant supermarkets. While groceries can be shipped to a warehouse 1,000 cases at a time once a month, snacks are distributed to 1,000 places, one case at a time. Companies are engaged in a week-to-week hustle for precious shelf space. Borden had the advantage of already owning Wise, whose * products are popular on the East Coast, and as competitors began to get aggressive, the company decided to expand its snack business.

SINCE 1980 Borden has acquired seven companies. The last three -- Snacktime, Jays, and Laura Scudder's -- have added more than $250 million to its sales base and have given the company national reach. Borden wasted no time in lowering costs. Jays in Chicago and Snacktime in Indianapolis, for instance, are in adjacent market areas, so Borden could close one of Snacktime's plants immediately. It also boarded up a Scudder's plant in Anaheim, California, saving $25,000 a day in operating costs. Borden is also building sales by filling in the gaps in the regionals' product lines. In Chicago, Jays is the leading brand of potato chip, but its cheese puff department captured less than 5% of the market. Borden began pumping Wise's Cheez Doodles, a cheese puff, into Jays' built-in distribution pipeline -- as simple as throwing them on the truck -- and spent some of Jays' advertising budget on the new products. Borden increased Jays' sales 22% and has boosted its share in cheese puffs to 8.5% in Chicago, much of it taken from Frito-Lay's Cheetos brand. Jays' gross profit margins have already increased by 2 1/2 percentage points. The regionals create new products as well as borrow from one another. In just six weeks Snacktime developed Krunchers!, a batch-process, kettle-cooked potato chip that is crispier than one made in continuous fryers. The chip became an instant success, generating about $17 million in annual sales in its markets. In New York the venerable Wise division kicked up its heels with New York Deli Chips, another crispy sliver of spud and another hit. With lots of these regional products coursing through the system, Borden can keep its chief rival guessing about what's coming next. ''How the hell do you read us if you're a Frito-Lay?'' asks Duggan. ''We look tremendously disorganized.'' Looks aren't everything. Profits in the snack division have increased 30% a year for the past three years, and Borden is being paid the sincerest form of flattery. Frito-Lay is giving its regional marketing managers more autonomy and shifting 25% of its national promotional budget into the regional battlefield. The milk business that Gail Borden founded in 1857 is among the most profitable in the industry. Borden maintains pride of place with a strategy that even Elsie might have figured out: It charges more. Simple, yes. But milk , is a commodity, virtually the same product whatever cow it comes from, and that should mean very little pricing difference among brands. Though the company maintains high quality and service standards through a program called the ''Borden Difference,'' asked exactly what that difference is, a veteran dairyman noted, ''About a buck a gallon.'' That's how much a shopper may have to pay to have Elsie's smiling face on the carton instead of the supermarket label.

ENDLESSLY reinforcing its brand name is how Borden maintains the differential. The company makes extensive use of radio advertising to portray itself as the dairy farmer down the road who rushes product from cow to counter even before the cream rises. The ads emphasize quality -- our milk is better than their milk -- the local angle, and a product pitch. Borden can choose from 45,000 different ads each week: a chocolate ice cream spot for a soft-rock station in Houston or a buttermilk pitch for an easy-listening station in Georgia, where Borden is, of course, ''Augusta's only hometown dairy.'' The ploy in groceries has been to overwhelm extremely small parts of the business. ''You have to look hard to find us in the supermarket aisles,'' admits Jon Hettenger, executive vice president for the division. Among the products shoppers have to hunt for are NoneSuch mincemeat and Cremora coffee whitener. This year the company picked up some canners of crab meat and shrimp to add to its Doxsee and Snow's clam products lines, making Borden the big fish in bivalves and canned crustaceans. Grocery sales will increase 25% to over $1 billion this year. The advantage of owning small brands is that they are less vulnerable to competitive inroads and they need relatively little advertising. Says Hettenger: ''A lot of these businesses aren't big enough to attract attention. No one cares about displacing Snow's market share. It would cost too much.'' On the other hand Borden passed up a chance to buy Bumble Bee tuna. The business is huge but beset by severe competition. The petit brands turn out to be extremely profitable. The grocery group, including pasta, contributes $169 million to income, proportionately higher than any other Borden division. Still very much a conglomerate, Borden is expanding its considerable business in wall coverings, chemical industrial specialties, and do-it- yourself consumer goods. And Ventres says that if the right $1 billion or $2 billion acquisition comes along -- a narrowly focused company that will fit into the fold -- he would be willing to herd it into the barn right alongside Elsie. But any additions to the business have to bed down within the six categories that he has outlined or be able to stand alone without confusing investors and managers alike. That's a big change from the Borden of the past. The company has long had a recognizable trademark in Elsie, who turned 50 last year. Now it also has a recognizable strategy.

CHART: INVESTOR'S SNAPSHOT BORDEN SALES (latest four quarters) $5.7 BILLION CHANGE FROM YEAR EARLIER UP 19%

NET PROFIT $241.4 MILLION CHANGE UP 20%

RETURN ON COMMON STOCKHOLDERS' EQUITY 15% FIVE-YEAR AVERAGE 14%

STOCK PRICE RANGE (last 12 months) $30-$64

RECENT SHARE PRICE $44.50

PRICE/EARNINGS MULTIPLE 14

TOTAL RETURN TO INVESTORS (12 months to 11/16/87) -8%

CREDIT:NO CREDIT CAPTION:NO CAPTION DESCRIPTION: Color chart.

CHART: NOT AVAILABLE. CREDIT:NINO TELAK CAPTION:Thousand Flowers No Longer Bloom Overdiversification hurt Borden's profits. When the company realized it had too many posies in the garden, it pruned some petals, and return on shareholders' equity rose from 11% to over 17%. DESCRIPTION: Borden's revenues in 1979 and 1987, and breakdown by sources of revenue for each year; years are pictured as flowers; Borden symbol Elsie the Cow at top of chart.