FMCG

by Greg Thain

  In the summer of 1923, Forrest had taken a job as a travelling salesman for Camel cigarettes. He ended up in Chicago, where he was thrown in jail after illegally covering Chicago’s State Street from one end to the other with Camel posters. And who should bail him out but Feckless Frank, who was now living high on the hog thanks to the continued success of his Victorian Butter Creams. The two repaired to a local milk bar and began a heated exchange about business, in particular Frank’s business. It was a conversation that created an empire.

  Forrest’s time selling Camel cigarettes had endeared him to the concept of scale. One, you could sell Camels across the country. Two, the more the company made and sold, the cheaper and more profitable they were to produce, and consequently the more profitable they to sell. So he was somewhat underwhelmed by Frank’s little hand-made candy business. Brainstorming about what could be a nationwide success, they came up with the idea of putting the chocolate malted milk drinks they had in front of them into a chocolate bar. Here was something Forrest felt could be sold anywhere and mass-produced cheaply. Frank agreed and soon produced a bar with a malted flavour nougat centre topped with a layer of caramel, encased in a cheap chocolate he named Milky Way. The bars sold as fast as Frank could produce them; in its first year, 1924, the business grossed a staggering $800,000.

  It may not seem so today, but the idea of the Milky Way was revolutionary at the time. Until this point, the chocolate bar market consisted almost entirely of bars of chocolate: milk chocolate, dark chocolate, chocolate with nuts in it, but essentially all just chocolate. But nougat, whipped up nougat that was predominantly air, was a lot cheaper than chocolate. Nougat interiors with chocolate coatings still looked like chocolate bars, but, given all that air inside, they could be made much bigger but still sold at the same price. Consequently, the Milky Way looked a very good deal on the counter in comparison to the ubiquitous Hershey.

  In September 1924, Forrest returned to Berkeley to resume his mining studies only to realise business was his true calling. The next year, he transferred to Yale, funded by the now wealthy Frank, to study business. He graduated in 1928 and returned to work in Frank’s now thriving company. By this time, on Forrest’s urging, Frank had relocated Mar-O-Bar Co. to Chicago and by 1929, with a much bigger factory crammed with new equipment, he was churning out twenty million bars of Milky Way a year. The next year, following Forrest’s advice to keep things simple, Frank invented the Snickers bar, essentially the Milky Way with nuts and differently flavoured nougat in the caramel. This he followed in 1932 with Three Musketeers, the Milky Way nougat whipped up a bit more and without the caramel layer. All three products could be made on the same equipment and were now covered in excellent chocolate supplied by none other than the Hershey Company. Company sales in 1932 topped $25 million, propelling Mar-O-Bar to America’s number one candy maker in the country, albeit in a very fragmented market.

  It was at this point that the relationship between father and son, testy at the best of times, seriously deteriorated. Frank kicked Forrest out. Forrest told Frank he could stick his business up his ass. The bone of contention had been expansion plans; Forrest wanted to expand as far and as fast as possible, whereas Frank, perhaps understandably given his past track record, was happy with things just as they were. They struck a deal. Frank gave Forrest $50,000 and the foreign rights to Milky Way and they parted company, never to meet again. Forrest took his wife and young son off to Europe to start his own business. Fifteen months later Frank was dead from a heart attack. This was the acrimonious break between father that signalled not the end of the Mars business but the opposite.

  How Did It Evolve?

  It might be thought that the Mars Inc. of today grew out of Frank’s thriving US business, by now renamed Mars Candies. But in fact its genesis would be in the company Forrest created for himself in the United Kingdom. Forrest, who had never been overly impressed with Frank’s attitude to product quality, moved the family to Switzerland in 1933 and took hourly paid jobs on the factory floors of first Jean Tobler and then Nestlé, to learn for himself the secrets of Swiss chocolate-making. When he felt he had learnt enough, he moved the family to Slough in England to set up his own chocolate company. Whilst he put every penny into his small factory, which began with just four employees, his wife Audrey and son Forrest Junior lived in a one-room apartment with no hot water, intermittent heating and very little food. So bad were conditions that Audrey took up her father’s offer to ship herself and young Forrest Jnr temporarily back to America, leaving Forrest Snr to concentrate on building the business.

  Forrest was canny enough to realise he had to adapt to local circumstances. First of all, his Milky Way recipe was not attuned to the very sweet British tooth, so he tinkered with it. Once he’d got it right – or perfect rather – he was so pleased with the outcome that he rechristened it: the Mars Bar. Second, Forrest knew he was up against an even more powerful foe in Britain than Hershey in the United States: Cadbury Brothers, who bestrode the British chocolate market like a colossus or three. Its Bournville Birmingham factory was the largest, most modern and most efficient cocoa and chocolate factory in the world. Using mass production techniques Forrest thoroughly endorsed, Cadbury had in fifteen years quadrupled the volume of chocolate sold in Britain by using the benefits of modernisation and mechanisation. And by cutting prices. Dairy Milk by fell by 70% from its pre-First World War levels. No one could compete with it on chocolate bars: six out of every ten chocolate bars sold in Britain were Cadbury’s Dairy Milk. The company had taken over its arch-rival, J. S. Fry & Sons, while the only other major player, Rowntree’s, had been driven to the brink of bankruptcy.

  Forrest clearly needed Cadbury inside the tent peeing out. So, recalling his experience in sourcing Frank’s chocolate from Hershey, he did a deal with Cadbury’s industrial sales department to supply him with its chocolate, found other suppliers for malt, sugar, glucose and other ingredients, and in August 1933 the first Mars Bars appeared on the shelves. Paradoxically, the very strength of Cadbury’s Dairy Milk was his opportunity. People were eating so many of them - just about time anytime an occasion arose where confectionery could be eaten – that they welcomed something that was both very different and, because of its size, more suitable to eat in place of a missed meal.

  With Mars Bars selling well – two million bars were sold in the first year and the workforce had increased to a hundred – Forrest realised that offering more alternatives to Dairy Milk – selling a million bars a day – was a winning strategy, so he borrowed the Three Musketeers recipe, sweetened it up a bit, and cheekily named it Milky Way. Soon after, Forrest, never shy to copy and improve a good idea, produced his own version of an American brand called Whoppers and launched it in the UK under the name of Maltesers. He did have his failures – a pineapple-flavoured version of the Mars Bar brought on by a fall in the price of pineapples was a typical example – but his successes occurred often enough to form be the basis of a successful and growing business.

  Incredibly, in the midst of getting his British chocolate company off the ground, in 1934 Forrest bought Chapple Brothers, a struggling British dog food company, even though most British dog owners fed their pets scraps from the table. Forrest, a keen observer of industry in general, had noticed the emergence of a dog food category in the US before he left prior to his leaving and was betting the same trend could be developed in Britain. And he was right: within five years, he had increased Chapple’s sales fivefold. Pet food would become the second leg of the future Mars empire.

  It is at this point that it became clear where Forrest’s talents lay. Although he had worked for Frank’s chocolate business and studied production techniques in the Swiss chocolate industry, Forrest was no chocolatier; he was a businessman, and a unique one. He wanted to create a very different kind of company that was moulded around his beliefs on how a business should be run. He was strongly influenced by DuPont’s planning system and T. G. Rose’s Higher Control in Management,
a book he never tired of reading. He combined these two sets of ideas with his own and the Mars way of doing things was born.

  First and foremost, Forrest believed in hiring the best people, giving them clear accountabilities and empowerment, paying more than anyone else, and bawling out or firing anyone who let him down. He abhorred bureaucracy in all its forms, had no time for management perks and firmly believed in mutuality: if the business did well then everyone did well, and vice versa. He was fanatical about product quality and demanded everyone follow suit or woe betide them. Perhaps influenced by Cadbury’s success, he wanted only the newest, most modern and most efficient machinery so that he could make his Mars Bars even more cheaply, not to award himself fatter profits but to reinvest those profits into giving even better value. It was so a potent a mix that, by 1939, Mars Ltd was Britain’s third-largest chocolate company behind Cadbury and Rowntree’s. (it would overtake them both one day). In the meantime, the pet foods company too was also going from strength to strength.

  But just as everything had begun to run smoothly, the Second World War intervened and the British Government slapped a hefty tax on all foreign residents. It was a tax Forrest had no intention of paying: it would take investment money out of his precious businesses. It was also clear that the war would put the brakes on expanding his companies, so Forrest, always a good delegator, handed over control of both the chocolate and pet food companies to his British number twos and headed back to America to start up his next business.

  Forrest took an idea home with him for a product that had been in the back of his mind for some time, and which he had come across while travelling in Spain in 1938. There he had noticed Civil War soldiers eating chocolate lentils with a sugar coating that prevented the chocolate from melting. A year previously, Rowntree’s had also launched a similar British concept with Smarties, small pieces of chocolate in a hard sugar shell. By the time Forrest got back to America he knew what his next business would be. In starting it, he would also be up against his deceased father’s own chocolate business.

  After Frank’s death, his company had passed into the hands of his second wife, who left the running of it to her half-brother, a salesman who had joined in 1930. Forrest, loyal to his mother, would have nothing to do with the other Ethel, so knew he would have to look elsewhere for help in setting up his new American chocolate business. And who filled the bill better than Hershey, the largest suppliers of chocolate in the country? Forrest barged his way into the office of the Hershey president, who, having sampled the prototype new chocolate, accepted an offer he could scarcely refuse: a joint venture between Frank and the president’s son to make it. To show his commitment to the idea, Forrest called his new confection would name M&Ms, standing for Mars & Murrie, the son’s name. The deal was sealed and M&Ms Ltd. began production in the spring of 1940.

  Forrest’s motivation in offering the deal was not an admiration for Murrie’s business acumen – their relationship deteriorated almost immediately owing to Forrest’s fury at Murrie’s approach and attitude – but because Forrest wanted access to Hershey’s engineers, who would help set up the new plant. Forrest had also realised that only Hershey could guarantee him supplies of raw materials during the war. It was a brilliant plan. Huge M&Ms orders from the armed forces helped him build the scale he desired for his products. After the war, however, sales settled down to about $3 million a year, not bad. But Forrest was still a small fish in a big pond. Blaming Murrie for the lack of new orders to replace the wartime ones, Forrest bought out Murrie’s 20% share in the business for $1 million.

  As had been the case in the UK, Forrest had barely got the M&M business off the ground before turning to yet another new venture. This one came from an article Forrest read in a patent journal about a Texas rice mill owner who had patented a new process for rice milling. By steaming the rice before the de-hulling stage, the rice that resulted was more nutritious, cooked faster and was fluffier in texture. At this stage rise was mostly sold in bulk, from barrels in stores, so the market looked somewhat unpromising. But the rapid rise of the dedicated grocery store was creating huge demand for the packaging and branding of everything. Forrest could see that would apply to even the most basic products, rice included. So he bought the mill together with its patented process and, after a long lunch with the advertising guru Leo Burnett, produced a name and a pack. Uncle Ben’s rice was launched in 1944. The Houston plant would eventually produce 200,000 tons of Uncle Ben’s a year.

  Back in the M&M business, and perplexed at the lack of progress for a product Forrest was convinced anyone and everyone should be buying, he engaged another advertising agency, Ted Bates & Co. Bates conducted a full brand audit which was supposed to point the way forwards. It did. It turned out that M&M’s was young children’s most popular chocolate. But how did you persuade their parents to buy it for them? The answer to both Forrest’s and American housewives’ dreams came in the Bates tag line: ‘Melts in your mouth, not in your hands’, which by 1954 was being hammered into the nation’s brains by the M&M cartoon characters. Two years later, M&M’s was the best-selling chocolate product in America, grossing $40 million a year. Now Forrest had the scale he needed to accomplish his real goal: taking over his father’s old company.

  How International Is It?

  Mars Inc. is that rarity of an American company which actually started off, at least as far as Forrest Snr was concerned, as an international business. His British collection of businesses was the testing ground for his theories on how to run a business; their success bankrolled his reverse international expansion back into the US. The UK has continued as Mars’s most important foreign outpost since the day Forrest went back to America in 1939.

  UK: Confectionery

  Forrest missed little action in Mars Ltd, his renamed UK chocolate company: rationing controls on practically everything sweet, from 1940 until 1953, effectively put the whole confectionary market into a state of suspended animation. And when rationing ended, pent-up demand put sales into orbit without any need to launch new products. The only major launch was Bounty in the mid-1950s, a straight copy of the American brand Mounds. Mars however was one of the first companies to use television advertising in Britain and by 1959 had developed a hugely successful campaign for Mars Bar, with a stapline that ran for decades: A Mars a Day Helps You Work, Rest and Play.

  And the up-to-date and highly efficient Mars factory stood in complete contrast to those of its key competitors, Cadbury, Rowntree’s and Fry’s, all of whom were saddled with pre-war manufacturing facilities. Combined with Forrest’s conviction that profits were to be reinvested rather than simply squandered, this meant Mars could offer much better value for money. It built on this advantage in the 1960s, adding a slew of new brands to the product range. His US best-sellers, Snickers and M&M’s, were launched under the names of Marathon and Treets, and were joined by Topic, Twix, Spangles, Tunes and Lockets. However, Mars’ boldest launch came in 1960 when it launched Galaxy, a milk chocolate bar that went head against Cadbury’s flagship Dairy Milk bar. Mars and Forrest saw that the Cadbury best-seller was not the invulnerable colossus it had once been.

  The 1970s was another good decade, driven by innovations such as a super-size 72 gram Mars Bar, the biggest ever, which would be followed by a raft of differently-sized, best-selling Mars brands. By 1979, Mars had all but caught Cadbury up. The 1980s saw Cadbury fight back, modernising its factories and ramping up its own innovation programme. But the inspired launch, in 1989, of the ice cream versions of Mars brands took competitors by surprise and left them scrabbling to come up with ice-cream licensing deals with ice cream manufacturers. They were terrified by this interloper.

  The big Mars sponsorship deals of the 1980s and ’90s of Olympics and World Cups gave Mars, now a global company, a scale advantage over its regional rivals. Mars complemented this approach by sponsoring the London Marathon and the Euro ’96 football tournament. The globalisation of Mars brand names saw the Snickers name re
place Marathon and M&M replace Treets, with few new brands being launched. The big sellers were flavour extensions of best-selling brands. Forrest Mars’s Slough-based factory is still the heart of the UK business and the company’s global R&D hub, producing over 100,000 tonnes of chocolate products a year. Mars’s 27% share of the UK chocolate market would have been enough to lead it in years gone by, but the merger of Kraft with Cadbury means Mars is now a strong number two.

  UK: Petfoods

  The Mars Petfoods business pretty much established the British market for packaged dog and cat food from scratch, and the company continues to hold a dominant share of the market. Behind the strength of its Pedigree Chum brand – the company changed its name to Pedigree Petfoods many years ago - the company has developed a reputation for both market innovation and strong basis pet science. When most pet food came in cans, the company was the first to launch the two-piece can in 1979, then transformed the market in the late 1990s by switching to pouches for greater quality, freshness and ease of use. Forrest had instilled as much an emphasis on product quality in his pet food businesses as he did for confectionery: managers had to taste test the products themselves every day.

  Mars had begun studying pet nutrition in the 1950s and ten years later had a fully staffed nutrition research unit, expanding over the years from cats and dogs to fish and horses. The company now has several horse food brands and, through acquisition and internal development, now has a range of cat and dog snack and treat brands.

  UK: Food