EVERY SPOKEN WORD
150 min read · 30,009 words- 0:00 – 1:44
M&M’s variety trivia kicks off a bigger Mars story
- BGBen Gilbert
Okay, David, how many current varieties of M&M's can you name?
- DRDavid Rosenthal
Ooh, wow! Okay. Well, plain, peanut, peanut butter.
- BGBen Gilbert
Uh-huh. Actually, plain is technically now called milk chocolate.
- DRDavid Rosenthal
Oh, interesting. There's dark, right?
- BGBen Gilbert
Yep, which I've got right here. [packaging crinkling]
- DRDavid Rosenthal
Uh, they had mint for a while. Did they discontinue mint?
- BGBen Gilbert
Mint is a holiday-only theme.
- DRDavid Rosenthal
Hmm.
- BGBen Gilbert
So that's a seasonal one.
- DRDavid Rosenthal
Oh, [sighs] what else? I mean, at the end of the day, it's kinda only plain and peanut that matter, right?
- BGBen Gilbert
I think in sales numbers-
- DRDavid Rosenthal
Are there pretzel ones?
- BGBen Gilbert
There are pretzel ones. There are also [packaging crinkling] almond.
- DRDavid Rosenthal
Oh, almond. See, I- yeah, I'm allergic to almonds, so I never think about almonds.
- BGBen Gilbert
There's also some weird ones. Caramel?
- DRDavid Rosenthal
Yeah.
- BGBen Gilbert
I don't want that at all, but they make it. Crunchy Cookie, which replaced Crispy of our youth. Do you remember the blue packaging, Crispy M&M's?
- DRDavid Rosenthal
Oh, yeah, I remember the Crispies. Yeah.
- BGBen Gilbert
And then there's some specialty ones: Dark Chocolate Peanut, which I really want, Fudge Brownie, Campfire S'mores, and Caramel Cold Brew.
- DRDavid Rosenthal
Ooh, I don't know about any of these.
- BGBen Gilbert
And then there's these really wild limited edition ones. In addition to Holiday Mint, Birthday Cake, Chili Nut, and Pumpkin Spice Latte.
- DRDavid Rosenthal
[chuckles] Oh, that sounds disgusting.
- BGBen Gilbert
I know. [laughing]
- DRDavid Rosenthal
[laughing]
- BGBen Gilbert
But yes, I think you are right-
- DRDavid Rosenthal
Oh
- BGBen Gilbert
... the milk chocolate and the peanut are the sales drivers.
- DRDavid Rosenthal
Yep.
- BGBen Gilbert
All right, should we do it?
- DRDavid Rosenthal
Let's do it.
- 1:44 – 5:05
Why Mars matters: a $50B+ private giant with a sprawling portfolio
- BGBen Gilbert
Welcome to the Fall 2024 season finale of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.
- DRDavid Rosenthal
I'm David Rosenthal.
- BGBen Gilbert
And we are your hosts. Listeners, we were thinking, "What episode would be fun to do before the holidays?" We picked M&M's, thinking, "This will be just some nice, lighthearted fare about the candies and the characters on commercials that remind us all of our childhood." But as we dug into Mars Incorporated, the parent company, we realized that the story is totally thrilling. It's got World War I, World War II, new technologies and inventions, and serious, serious family drama, and their corporate strategy over the years is just as clever as companies like LVMH, Walmart, and Costco. I mean, you don't get to be the second wealthiest family in America without it.
- DRDavid Rosenthal
Yeah, [chuckles] seriously. Maybe it's because we just did it, but I feel like there are a lot of echoes of Ikea in this one, too.
- BGBen Gilbert
Absolutely, and the Mars family is way more quiet and reclusive than the Kamprad family, too.
- DRDavid Rosenthal
They're way more quiet and reclusive than anybody.
- BGBen Gilbert
Yeah. Mars also owns way more than you think. You may know that they own the world's most popular candy, Snickers, in addition to M&M's, or perhaps you know they're in the pet food business. But they also own everything from Ben's Original Rice to now KIND bars, and they have one massive deal in the works that we will talk about later on this episode. David, here's one crazy stat to illustrate their sheer size. Do you know Mars now does more revenue than The Coca-Cola Company?
- DRDavid Rosenthal
I know. Wild.
- BGBen Gilbert
Mars crossed $50 billion in sales last year, and they're still completely privately owned by the Mars family, making it one of the top five largest private companies in America. This really is an incredible American and global story. Well, listeners, after this episode, come listen to ACQ2. We just had one of my favorite conversations ever on the show, in part because I just love talking computer architecture, with Renee Haas, who is the CEO of Arm Holdings, the chip design company that makes the designs and the instruction set architecture of everything inside your smartphone, your car, your laptop, and now even massively in the data centers.
- DRDavid Rosenthal
Gosh, between Synopsys and now Arm, we're gonna have to rename ACQ2 into, like, Acquired Semiconductors. [chuckles]
- BGBen Gilbert
Totally. It was a great computer science lesson and history lesson sort of all rolled into one, so go subscribe to the ACQ2 feed in the podcast player of your choice to check it out. We've got a survey winner. Thank you to everyone who took our survey. It is Kurty from Boston. We will email you with details on how to claim your free Ray-Ban Metas, and 10 other folks, in addition to Kurty, will also receive free ACQ dad hats. So keep an eye out in your email if that is you. Now, before we dive in, we wanna briefly thank our presenting sponsor, J.P. Morgan Payments, for an incredible year.
- DRDavid Rosenthal
Yes, just like how we say every company has a story, every company's story is powered by payments, and J.P. Morgan Payments is a part of so many of their journeys, from seed to IPO and beyond.
- BGBen Gilbert
Yep. So with that, this show is not investment advice. David and I may have investments in the companies we discuss, although not Mars, obviously, and this show is for informational and entertainment purposes only. David, where do we start our story?
- 5:05 – 9:31
Frank Mars: polio, penny candy, and three early bankruptcies
- DRDavid Rosenthal
Oh, well, we start in September 1883. There's some debate about whether it's in Pennsylvania or Minnesota, but, you know, there's a lot of, um, legend, shall we say, about the Mars family-
- BGBen Gilbert
Hmm
- DRDavid Rosenthal
... which we will get into as we go here. But before really we start, I have to say a thank you to Joël Glenn Brenner, who wrote the amazing book, Emperors of Chocolate. Mars, as we'll talk about, is an incredibly private company and private family. She's the only journalist that ever got real access to the company, like, ever.
- BGBen Gilbert
And it was in 1991, almost a century after founding, that she actually got access for a Washington Post article, and then that turned into the book. Is that right?
- DRDavid Rosenthal
Yep. She was a young reporter at the Post and, uh, called the company, like, every day for a year and finally got access, and that became a piece in The Washington Post Magazine, and then she turned it into the book, Emperors of Chocolate.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
... Okay, so back to 1883, and, uh, let's just call it Minnesota, one Frank Clarence Mars is born. Now, Frank's father is a flour gristmill operator, and his mother, Elva, is a housewife. Both of those trades are gonna become very important here. So Frank, sadly, when he's very young, and in what I think was also very sadly commonplace at the time, he contracts polio, and he has a mild case. Luckily, he survives, but it does affect his legs, and he has to wear orthopedic braces all growing up, which means that Frank can't play outside, he can't play sports. He has to stay home after school with his mother in the home, and so what does he do after school with his mother? Well, his dad would bring home extra bags of flour, and somebody had to put that to use, so Elva and Frank do lots and lots of baking. They're baking bread, they're baking pies, they're baking cakes, and most enjoyably for Frank, they are baking candy.
- BGBen Gilbert
And what was candy at this point in time?
- DRDavid Rosenthal
Well, I'm glad you asked. It's not chocolate. Chocolate is basically not a thing in America yet. Candy, though, was big, and specifically, we're talking about penny candy, gumdrops, licorice, all sorts of sugar-based sweets, and they were typically unbranded. Like, there were no big national or really even, like, local brands of candy at this point in time, and they're sold wholesale by small regional bakers to local retailers and drugstores who stock them for kids. Like, the main market here is selling sweets to kids, and that's what Frank is doing.
- BGBen Gilbert
You can think about the candy industry at this point in time, sort of like the baked goods industry today. You've got some local baker that's making 'em, distributing to a bunch of coffee shops, and, like, you don't really know, except in really bougie ones, who the baker of that particular scone is. It's just, "Oh, I go to that coffee shop, and they have scones there."
- DRDavid Rosenthal
Exactly. So this is what Frank and his mom are making in their kitchen. Now, fast-forward to high school, and Frank has kinda become the local candy chef extraordinaire. He's mastered all of his mom's recipes. He's experimented with some of his own. People are liking them, and so after high school, he does the natural thing. He becomes one of these candy entrepreneurs. When he's 19 years old in 1902, he establishes his own candy company there in Minneapolis and goes into business, selling his creations and other people's creations wholesale to these local retailers, merchants, drugstores, et cetera, for kids to buy. In that same year, in 1902, he would also briefly marry a woman named Ethel Kissack. Now, remember this Ethel, she will come up much, much, much later at the end of the story, but for the moment, the two of them have a son named Forrest, Forrest Mars.
- BGBen Gilbert
Our real protagonist, this story.
- DRDavid Rosenthal
Yes, but put a pin in Forrest. We will come back to him in a few minutes. So his dad, Frank, starts this candy business. You'd think you're like, "Yep, this is it. This is the company, you know, Mars, Snickers, M&M's, Milky Way. It's all to come here."
- BGBen Gilbert
Out of this one company named Mars.
- DRDavid Rosenthal
[chuckles] Yes.
- BGBen Gilbert
Not true.
- DRDavid Rosenthal
Well-
- BGBen Gilbert
[chuckles]
- 9:31 – 17:14
Chocolate arrives in America: Hershey’s scale play and WWI tailwinds
- DRDavid Rosenthal
... not yet. [chuckles] So we mentioned a minute ago that chocolate was not a thing yet in America. Now, at this point in time, in 1902, that is not technically true. Milton Hershey has started selling his Hershey's Chocolate bars in Pennsylvania, which he started in 1900.
- BGBen Gilbert
The notorious five-cent just chocolate. I don't even think they had made Hershey's with almonds yet. It was just the, like, single five-cent slab of chocolate bar called the Hershey Bar.
- DRDavid Rosenthal
Yep, there weren't even any Kisses yet. Nothing, it was just the very beginnings. Hershey had not yet figured out how to scale production, so it was regional, and it wasn't popular around the country and certainly not in Minneapolis.
- BGBen Gilbert
Hershey had just figured out, by the skin of his pants, production and the recipe at all. He almost built an entire factory to produce milk chocolate without knowing how to produce milk chocolate. That was, like, a lucky diving save at the last minute, right before they needed to turn everything on.
- DRDavid Rosenthal
Totally. So what Frank's selling, this penny candy stuff, it's fine, and like I said, the target market is kids, which is a good market, but, you know, kids turn into adults, and then they stop eating penny candy, and so the market is not that big. There's also another problem with the penny candy business, a bigger one, which is, in those days, it was all pretty highly perishable.
- BGBen Gilbert
And there's not air conditioning yet.
- DRDavid Rosenthal
Exactly, exactly, and so most candy producers end up having really, really horrible inventory problems, and a lot of them end up going out of business, which, after a couple years, is exactly what happens to Frank. So in 1910, Frank's now bankrupt. His wife, Ethel, divorces him and takes their six-year-old son, Forrest, and sends Forrest off to live with her parents in a remote mining town in Saskatchewan, Canada, and Ethel stays in Minneapolis and takes a job as a department store clerk and just hits reset on her life. It's wild!
- BGBen Gilbert
Do you know why?
- DRDavid Rosenthal
Well, I think because nobody had any money to support him, right?
- BGBen Gilbert
And in particular, Frank actually owed her $20 a month for child support for Forrest when he was six years old but was failing to make payments, and so she just couldn't support him and needed to send him to live with the grandparents.
- DRDavid Rosenthal
I mean, you gotta remember, like, we're in the early 1900s here. This kinda stuff happened all the time.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
So Frank, undeterred by bankruptcy, divorce, being a deadbeat parent, not paying child support, he marries another woman, also named Ethel-
- BGBen Gilbert
... unbelievable.
- DRDavid Rosenthal
Specifically, they move to Seattle.
- BGBen Gilbert
Heyo.
- DRDavid Rosenthal
Where Frank does, what else? He sets up another candy business and starts hawking his candy again. This Seattle candy venture goes about as well as the Minneapolis one. Within one year, Frank is bankrupt again. The creditors are coming after him, so he skips town again, this time just down the road to Tacoma.
- BGBen Gilbert
So this is two failed candy companies under his belt.
- DRDavid Rosenthal
Yep, we're now on number three. He sets up another candy business in Tacoma in 1914.
- BGBen Gilbert
Out of his house.
- DRDavid Rosenthal
Yes.
- BGBen Gilbert
He's running the business out of his kitchen.
- DRDavid Rosenthal
That's right, and that business also fails after a couple years. So three down, three strikes. We're now in 1920, and Frank and Ethel number two return once again to Minneapolis, figuring that ten years have gone by, they can now show their face around town again. So Frank sets up, yet again, [chuckles] another candy company, candy company number, uh, four now in total, if you're keeping track at home. And against all odds, this candy company would go on to become the globally famous, fifty billion dollar annual revenue, private family business, Mars Incorporated, sort of.
- BGBen Gilbert
It's not totally Frank that is the reason for its success.
- DRDavid Rosenthal
Yes. Okay, so what's different now about this fourth candy company that Frank starts? It's chocolate.
- BGBen Gilbert
And chocolate is a completely different universe than these penny candies, than caramels. The first thing you have to know is it uses cocoa. I mean, this is a very, at this point in history, scarce and not very common in America. Like, very few people are importing it from South America, where it originated. It's a totally different and difficult thing to try and process, and at this point in history, only Europeans really are doing it, except for one American entrepreneur, Milton Hershey.
- DRDavid Rosenthal
Yep. So we gotta rewind a little bit and tell the Hershey story because, A, it's also crazy, and B, it is deeply, deeply intertwined with the Mars story. [chuckles] So Milton Hershey had been also a actually successful candy entrepreneur. He had his own shares of failures, but he started eventually a caramel company that became quite big regionally in the Philadelphia area.
- BGBen Gilbert
Yep, he sold it for a million dollars in 1900, which is thirty-six, thirty-seven million today with inflation.
- DRDavid Rosenthal
Yep, he is among the most successful of this kind of generation of pre-chocolate candy entrepreneurs. Before he sold the business, though, in 1893, Hershey traveled to Chicago, where, at the Columbian Exposition, which I didn't know this, was the precursor to the World's Fair-
- BGBen Gilbert
Mm
- 17:14 – 35:56
How chocolate is made—and why milk chocolate changed everything
- BGBen Gilbert
Sort of Nestle. We're gonna talk about how to make chocolate, and then we're gonna use that as a basis of understanding for how to make milk chocolate and how the discovery of milk chocolate came about. So first of all, how do you make chocolate? And we have a huge thank you to Todd Masonis at Dandelion Chocolate, which is an excellent, excellent bean-to-bar chocolate company in San Francisco, for walking us through this entire thing, not only giving us all the notes of how to describe it on air, but also taking us through their factory in San Francisco, which is unbelievably cool if anyone has a chance to do it. So where does chocolate come from? There's a cocoa fruit that grows on a tree, originally in South America, now very commonly in Africa, where they've been transplanted. It's kind of a football-looking thing. You pick it, you cut open the pod, and inside, there are the seeds of the fruit. David, you and I sort of ate some of it or sucked on some of it. It's sweet, but it's not-... chocolate. It has no reflection of a chocolate flavor. That all comes from the seeds or the beans.
- DRDavid Rosenthal
Yep. Yeah, the fruit itself is actually quite delicious, but it's like a pulpy, sort of milky type thing.
- BGBen Gilbert
Yes. So that fruit is actually the thing that people ate for thousands of years, but the seed ends up being the thing that becomes chocolate. You first ferment those beans in wooden boxes. The yeast eats the sugar. That creates alcohol. Then the acid eats the alcohol. There's fermentation that kills the beans. So after this fermentation, you then dry it. All this kind of happens at the site of production or of growth, typically in South America or in Africa. So then after the fermentation, you dry it out, so this could happen sort of in drying beds or in mechanical smoke dryers or on banana leaves. All the different ways that you dry it can affect the flavor. How aggressively you dry it contributes to how much acid is in the beans, so there's a lot of fluctuation here in the flavor just based on the way that you are harvesting the bean itself. The beans then go into sacks. They go on boats. They go, at this point in history, basically to Europe, 'cause that was the only place that was making chocolate. They then get sorted, sterilized, de-bacterialized. I suspect not a lot of this was happening in the old days, but it is what happens now. They get roasted. You remove the shell, which is a process called winnowing, so now you have nibs.
- DRDavid Rosenthal
So just, like, the core, like, meat of the bean after it's been roasted?
- BGBen Gilbert
Yes. You can press those nibs into ... create two separate things, cocoa powder and cocoa butter. Both of those come from the nib, but there are many reasons why different chocolatiers will first separate them out and recombine them in different ratios later. You grind the nibs down to the right particle size. It then goes through something called conching.
- DRDavid Rosenthal
Conching is awesome. It's basically, like, these big cylinders, right? That, like, spin around and around and smooth out all these particles.
- BGBen Gilbert
Yeah, and then there's a great story back in 1879 that Rudolf Lindt, which is another name you may recognize, the Swiss chocolatier, discovered it by accidentally leaving his cocoa in a roller grinder over the weekend instead of shutting the machine off. So it accidentally pressed the beans for a three full days, which created this silky, smooth, flowing texture, and then you could do cool stuff like add more cocoa butter in to get that Swiss chocolate texture that we all know of today. If you've had it, and you're like, "How is this so unbelievably creamy?" You know, you separate the nibs into cocoa powder, cocoa butter, and then you add a bunch more cocoa butter back in, and it's that delicious Swiss chocolate. So 1879 is when conching is sort of first discovered. Now there's, David, to your point, specific conching machines that will do this as a part of the chocolate production process.
- DRDavid Rosenthal
Still not done yet.
- BGBen Gilbert
You now have this great conched, liquidous, wonderful chocolate sitting there. If you just let it dry, it's actually not shelf stable. It will bloom. For any of you who ever left a chocolate bar in a hot car, and it sort of melted and then re-solidified, it gets that sort of white, gross stuff on top, and it doesn't have that shine to it. It doesn't snap nicely the way that you're used to a chocolate bar snapping. There's actually some pretty complicated chemistry that happens, where you are taking this conched chocolate, and you are tempering it, and what tempering it does is you are aligning the crystals in the cocoa butter to make it so that it forms into that shiny, breakable chocolate that you know of today.
- DRDavid Rosenthal
And this is an incredible process, right? You take this liquid chocolate after conching. You heat it up to, like, kind of super liquefy it, and then you cool it down to, like, just the right amount of temperature, where the right sort of seed crystals form.
- BGBen Gilbert
That's exactly right.
- DRDavid Rosenthal
Right, and then you heat it back up again, and then you let it cool, and if you don't do that second step, all the bloom will happen. But you're going to get, like, just the right seed crystals to set the right crystalline structure for how it'll come together.
- BGBen Gilbert
That's exactly right. When you're superheating it, you're eliminating all crystals, so then you can kind of start from scratch with this seed crystal, and then you're trying to let the rest of the chocolate form around that seed crystal so they're all aligned in that nice, shiny break.
- DRDavid Rosenthal
Believe me, I appreciated chocolate before doing this episode- [laughs]
- BGBen Gilbert
... [laughs]
- DRDavid Rosenthal
but now, like, knowing how it's made, right? And we haven't even gotten to milk chocolate yet, which is even more complex. This is more complex than wine. This is more complex than coffee.
- BGBen Gilbert
Ooh, shots fired on wine and coffee.
- DRDavid Rosenthal
[laughs]
- BGBen Gilbert
You're gonna hear something.
- DRDavid Rosenthal
Well, at least in terms of, like, stages of production, right? Like, let's take coffee. Coffee looks pretty similar until, you know, you get the beans that are roasted, but then you grind the beans, and you just put the beans in liquid. You're not getting any of these steps here.
- BGBen Gilbert
Chocolate is remarkably hard to make. I think that is a huge takeaway. The fact that I... looking down here at all these bags of M&M's and this Snickers bar, we sort of just assume, oh, this is a industrial thing that just sort of comes off the line. It's an agricultural product that then has to go through a variety of different processes, developed on different continents many decades apart, in order to create something very uniform and predictable and desirable out of that pure agricultural product.
- DRDavid Rosenthal
Yep.
- BGBen Gilbert
Okay, so that's all the way from the fruit through the fermentation, through the processing of the beans, through the conching, through the tempering.
- DRDavid Rosenthal
And in those last steps of the process, in the conching and the tempering, you're also adding sugar in, right? So, like, unless you wanna make 100% dark chocolate, which is, like, very complex but very bitter-
- BGBen Gilbert
No one's gonna eat that. Most people max out at 85% chocolate, and the rest, the 15% is sugar, or you're getting a 70% bar, and the 30% is sugar, or if you're getting a milk chocolate bar, it's more in that 30 to 50% cocoa, and the rest is sugar and milk. But in reality, most of the time, you're eating chocolate these days, unless it's a bean-to-bar producer, like a Dandelion or something, you're ending up with all sorts of stuff added in that process. You know, more cocoa butter, sugar, soy lecithin. Oftentimes, you'll get vanilla that's added in part of this process to kind of create a chocolate taste you know of. [chuckles]
- DRDavid Rosenthal
Yep.... Okay, so we're still in the dark chocolate world here. Let's talk about Nestle and milk chocolate.
- BGBen Gilbert
Which is sort of a funny misnomer, right? Dark chocolate. It's just chocolate. It's chocolate that doesn't have milk, so we needed to retronym it something, like, we needed to come up with a name, and we're like: "Oh, it's dark chocolate." Okay, it's chocolate that's chocolate and sugar but doesn't have milk. Okay, anyway, dark chocolate. So what is milk chocolate, then? Well, now we need to flash back thirty-five years before Milton Hershey sells his first caramel company. This is before he started the Hershey Chocolate Company, 1866. Henri Nestle, David, to give some credence to your comment, is researching infant feeding as a means to solve infant mortality. He invents a new type of food for babies who are unable to breastfeed there in Switzerland, and remember, at this point in time, something like one in five babies died before their first birthday, so infant mortality is a massive, massive global problem. Now, he's researching this alternative infant feeding methods. Milk would quickly turn rancid, so there was this question of: How do you keep milk fresh? He eventually solved it. It is hard to condense milk without burning it, but he figured out this method of using an air pump at low temperatures to concentrate sort of a milk powder, and then he added a bunch of cereal, a proprietary cereal mix he created, and this is effectively the first baby formula. So in 1867, he demonstrated that a baby could drink this formula that he made rehydrated, and it was effectively a miracle to keep babies alive.
- DRDavid Rosenthal
Totally. This is, like, one of many mind-blowing things in the research that I learned. Nestle was a baby formula company. [chuckles] That's how it started.
- BGBen Gilbert
Totally! It's great. It's in the same way that Hermes, the, uh, Birkin bag, was a bag for baby bottles.
- DRDavid Rosenthal
Yeah, right. [laughing] Who knew that baby formula literally leads to the modern chocolate industry?
- 35:56 – 39:37
The candy bar explosion: Prohibition, adult demand, and Hershey as ‘AWS’
- DRDavid Rosenthal
Yeah, it's got caffeine. Totally. So these soldiers then come home, and right after the war is Prohibition in America. So you can no longer buy alcohol, or at least legally [chuckles] buy alcohol, and all these adults are now like: You need some sort of social lubricant here. Well, what's the natural alternative? It's chocolate, which brings us to the candy bar. So all of these former penny candy entrepreneurs all around the country-... They're like, "Wow, you know, chocolate is amazing. You know, we can market to adults, et cetera. It's expensive. Hershey's selling their own bars. What if I take just some chocolate and some other stuff and also make a bar? Well, that I could make a lot cheaper, 'cause the other ingredients, whether it's nuts or nougat or sugar or whatever, are cheaper, and I can develop my own unique taste that people in my region might find appealing." So by the end of the 1920s, there are more than 40,000 different-
- BGBen Gilbert
Whoa!
- DRDavid Rosenthal
-candy bars being made in America.
- BGBen Gilbert
Oh, my God.
- DRDavid Rosenthal
Almost all of which are these regional entrepreneurial operations. The most infamous of these is... Ben, do you know the story of the Baby Ruth candy bar?
- BGBen Gilbert
No.
- DRDavid Rosenthal
So still available today, the Baby Ruth candy bar, named, I think, for President Grover Cleveland, I think,'s daughter, Ruth, baby daughter, Ruth. To introduce the bar, the Curtiss Candy Company, which made it, chartered an airplane to fly over the city of Pittsburgh and drop bars down-
- BGBen Gilbert
Whoa
- DRDavid Rosenthal
... with little paper parachutes over the city.
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
It is, like, a literal drop. It puts the Visa drop to shame. [laughing]
- BGBen Gilbert
[laughing] Wow!
- DRDavid Rosenthal
Amazing.
- BGBen Gilbert
We're gonna have to do that for an Acquired marketing stunt at some point.
- DRDavid Rosenthal
I know, I know, charter an airplane and drop- [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
I think we would get in-
- BGBen Gilbert
Little parachutes
- DRDavid Rosenthal
... a lot of trouble if we did that these days. [laughing]
- BGBen Gilbert
I think so, too.
- DRDavid Rosenthal
Oh, man. So okay, you might be scratching your head a little bit and being like, "Wait a minute, you just told me about how, like, Hershey controls the means of production for chocolate, and nobody in America can make chocolate except Hershey." Well, that's right, and Hershey is freaking loving all of this because they are supplying the chocolate to all of these entrepreneurs. They're like the AWS of the chocolate business.
- BGBen Gilbert
They've become the blue jeans and pickaxes company in this gold rush.
- DRDavid Rosenthal
Yes. So like, if you've ever wondered, how the heck did Milton Hershey build a town, and how did he become like Rockefellers or Carnegies or Vanderbilts? Like, this is how.
- BGBen Gilbert
This is when you start to see this separation of the different players in the value chain of chocolate. It used to just be, well, I buy beans, and then I make consumer-branded chocolate bars, and this is the first time there's a sort of intermediation step where you say, "Well, Hershey makes the chocolate, and then other people buy the chocolate from Hershey for their consumer products." And, yeah, Hershey also makes a chocolate bar, but in America, this is really the creation of the wholesale business of chocolate.
- DRDavid Rosenthal
Yep, and there's one game in town, at least when it comes to milk chocolate, which is most of the market, and that's Hershey.
- BGBen Gilbert
And the US military loves it, too, because you can put all these high energy density ingredients inside of the candy bar and then use the chocolate effectively to seal it in and keep it fresh. And so you put a wrapper around it, you send it off with the troops, and, you know, you've got eggs in the nougat, which has protein. You've got nuts, which is protein and fat. I mean, all of this, y- you're delivering these kinda complete meals, [chuckles] complete in quotes, but it's carbohydrates with sugar and other carbohydrates. It's fat, it's protein. It's not a ton of protein, but they're energy bars, and it's all because the chocolate seals up the ingredients inside.
- 39:37 – 50:24
Mars’s fourth try works: truffles, Maro Bar, and the Milky Way breakout
- DRDavid Rosenthal
Totally. So this now brings us back to Frank Mars in Minneapolis and the fourth candy company, and what is different this time, which is chocolates. So when Frank first gets back to Minneapolis and starts up the fourth company, he had seen out in Seattle and Tacoma that buttercream truffles were, like, really, really popular. So he brings the buttercream truffles, he steals from the companies out there, uh, brings the concept back to Minneapolis. That's quite successful. He calls them Victorian Butter Creams, and I believe started coating them in chocolate, using Hershey's chocolate-
- BGBen Gilbert
Mm
- DRDavid Rosenthal
... which makes sense, given everything that's going on. That becomes pretty successful. He adds another line called Patricia's Chocolates, named after his new daughter, Patricia, that he has had with wife Ethel number two, and after a couple years, the business is doing, like, call it $100,000-ish in revenue, so, like, really, really well. We're not talking Hershey levels of entrepreneurial, uh, ambition here, but that's not the ambition that Frank has. And then in 1922, he decides that he's gonna get in on this candy bar craze that is sweeping the nation, and he introduces his first combination bar or candy bar called the Maro Bar.
- BGBen Gilbert
Yes. And do you know the other name for these types of candy bars that are sort of chocolate-wrapped something else?
- DRDavid Rosenthal
Combination bars, right?
- BGBen Gilbert
Uh, the term I read was count lines.
- DRDavid Rosenthal
Oh, no! I didn't come across that.
- BGBen Gilbert
So this is from the Cadbury book. Interestingly, all chocolate before was measured by weight, and once somebody kinda rolls their first candy bar off the line, you know, what we now know today, the Snickers bar or the Milky Way, all these things, you couldn't really just measure it by weight because it's got a bunch of much cheaper ingredients inside. Treating chocolate as one substance that has weight no longer maps to the consumer product, and so these lines, where you'd manufacture these candy bars, were measured by count of bars, so they're called count lines. So these manufacturers are spinning up count lines instead of, I don't know, weight lines or whatever they were before.
- DRDavid Rosenthal
Amazing. It's like, uh, the KD furniture from the IKEA episode. So here we are, the first candy bar, count line bar from the Mars company, 1922. Comes out, and I don't wanna say it's a flop, but it's not a success.
- BGBen Gilbert
No one's eating Maro bars today.
- DRDavid Rosenthal
Correct. Correct, indeed. But then the next year, in the summer of 1923, a fateful reunion occurs in Frank's life, which is that his estranged son, Forrest Mars, reappears in highly dramatic fashion, and the two of them team up-... father and son to introduce a new candy bar, one that will take the nation by storm, that would end up being called the Milky Way. Or at least that's the legend, and we will tell that in just a second.
- BGBen Gilbert
Yes. But first, this is a great time to tell you about our presenting partner, J.P. Morgan Payments. So everyone listening knows that we started working with J.P. Morgan earlier this year, and you can probably tell it's going very well. David and I, on this final episode of the year, wanted to pause and tell you why.
- DRDavid Rosenthal
Well, first is the team, the folks that we work with there. They are absolutely world-class, and also they really get Acquired. They're huge Acquired listeners, just like you. I mean, just look at the Chase Center show. [chuckles] They took our vision and said, "What if we did all of this times ten?"
- BGBen Gilbert
Yeah, and deeper than that, our two products and brands just fit together like a glove. J.P. Morgan Payments is the world's largest payments franchise. They power eighteen of the top twenty corporations in the world, and most companies we've covered on the show. In fact, ninety percent of Fortune five hundred companies do business with them. They're extremely trusted.
- DRDavid Rosenthal
And at first, when we started working with J.P. Morgan, we were a little worried of like, "Oh, this might only be for big companies," but it's not. We've seen startups that heard about J.P. Morgan Payments on Acquired earlier this year for the first time become customers. Our goal in picking partners is to find the very best companies that, A, create value for our audience right now, and, B, will scale with your success and be around forever. That is J.P. Morgan Payments. They do literally ten trillion dollars in payment volume a day. [chuckles]
- BGBen Gilbert
Yeah, listeners, think about how insane that is. With J.P. Morgan processing over fifty percent of all e-commerce transactions in the US, their software and payment rails basically underpin our entire global financial system.
- DRDavid Rosenthal
Yep, and lastly, payments is a process that every single one of your companies needs. If you make revenue, you need payments, and J.P. Morgan thinks about payments as a lever for growth, not just vanilla operational stuff. They've been investing heavily with products now for fraud prevention, foreign exchange, working capital, and more. All, of course, built enterprise-grade and with developer tools and APIs.
- BGBen Gilbert
So thank you, listeners, for tuning in all year. You can learn more at jpmorgan.com/acquired, which itself is a very cool custom site they built just for this partnership. And when you get in touch, just tell them that Ben and David sent you, or shoot David or I a message in Slack, and we'll get you connected with their team. Our thanks to J.P. Morgan Payments. All right, David, so Forrest emerges into his father's life, and somehow we end up with the Milky Way. How does that happen?
- DRDavid Rosenthal
Well, let's tell the legend. So summer nineteen twenty-three, young Forrest Mars is nineteen years old and on summer break from college. More on college in a minute. He's got a summer job as a traveling salesman selling Camel cigarettes.
- BGBen Gilbert
Times sure were different. [chuckles]
- DRDavid Rosenthal
Times sure were different. I mean, it's debatable how true any of this is, so [chuckles] we'll roll with it. One night, he's in Chicago in late summer, and he gets instructions from his boss that they really gotta blow it out. They need to hit big time sales numbers here in Chicago. "Forrest, you gotta go blitz the whole city with posters marketing Camel cigarettes." So Forrest goes around, and he puts billboards up all over downtown Chicago. Supposedly, like, every storefront window on State Street, he's plastering with Camel cigarette posters, which certainly gets attention.
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
It actually makes the Chicago Tribune the next morning that this happened, but also, much like if we were to do an Acquired marketing stunt like Baby Ruth and drop stuff from an airplane these days-
- BGBen Gilbert
We might go to jail.
- DRDavid Rosenthal
-it's also illegal. [chuckles]
- BGBen Gilbert
[chuckles]
- DRDavid Rosenthal
Yes, and it lands young Forrest in jail. So from his Chicago prison cell, Forrest makes his one phone call to the only soul that he knows in the area who could possibly bail him out, his estranged father, Frank Mars.
- BGBen Gilbert
Which this whole thing, I mean, this is the legend, and this is the Mars company's version of the story. This is the journalist's version of the story. This has been in other books, but, like, the guy hasn't seen his father since he was six years old, and he somehow knows his phone number to call him from jail? [chuckles]
- DRDavid Rosenthal
By the way, his dad lives in Minnesota. [chuckles] There's the whole state of Wisconsin between Minneapolis-
- BGBen Gilbert
[laughing]
- 50:24 – 57:14
Forrest Mars emerges: Yale, DuPont systems thinking, and bigger ambition
- DRDavid Rosenthal
Totally. Now, first question you should be asking here is, "Wait, Forrest is in college now and ends up in jail in Chicago? Like, what the hell happened here?" [chuckles] Okay, so when Forrest is six years old, as we said, he gets sent off to live in Saskatchewan in Canada, in, like, a hardscrabble, rural mining community with his grandparents. Unlike I imagine most of the folks around him, Forrest is a total outlier there. He's super smart, super entrepreneurial, super ambitious, and he's a super arrogant show-off, [chuckles] probably because he's so insecure from his deeply traumatic childhood.
- BGBen Gilbert
Deborah Cadbury has a good line in her book: "Noah's Flood wouldn't have deterred Forrest Mars."
- DRDavid Rosenthal
Yes. So when Forrest graduates, unlike everybody else there who goes off to work in the mines, he supposedly wins a scholarship to the University of California in Berkeley. Now, how he wins a scholarship to UC Berkeley, which is, you know, the public university of California, when he's living in Canada, and he's from Minneapolis, is suspect, but we'll go with it. He does show up at Berkeley, though, we know that, and he enrolls in the School of Mining there with the idea that he is going to study to become a mining engineer and go back and run a mine instead of just being a laborer in a mine.
- BGBen Gilbert
And this all makes sense. He had an engineer's mind. I mean, he also had a marketing mind, but he ended up building a company that ran on incredible efficiency and thought through it as sort of a systems thinker.
- DRDavid Rosenthal
Yes, a hundred percent. So while he's at Berkeley in his first year there, to make money and support himself, he takes a job in the cafeteria, and supposedly, he finagles a deal with the head cook that if Forrest can go source meat and other ingredients for the meals cheaper than budget from local wholesalers, that he and the chef would split the savings and just pocket the difference. [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
And of course, you might get a sense that Forrest is a good negotiator here. This works like a charm, and supposedly, he's soon taking home, like, a hundred dollars a week, which, if you annualize that to, you know, fifty-two hundred dollars a year, that's about double what the average American was earning at that point in time, so he's making bank.
- BGBen Gilbert
Which, by the way, is a trend among all these entrepreneurs that we study. You look at Ingvar, you look at Sam Walton, you look at Buffett... I mean, all these guys, it feels like it's a part of their childhood story that, as a teenager or college student or something, they were outearning the average head of household.
- DRDavid Rosenthal
Totally. And you know what? It is still true these days. Remember the Zuckerberg story of he and, uh, Adam D'Angelo are coding up SydApps, and people wanna buy it for a million dollars?
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
Just turns to software instead of candy bars.
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
Anyway, this is all during Forrest's freshman year at Berkeley, and then the summer comes, and, of course, the cafeteria closes down, so he needs to get a job for the summer. That's when he joins the traveling Camel cigarette sales team, and that probably is when, somewhere or another, maybe it was in Chicago, maybe it was in Minneapolis, he reconnects with his dad, Frank, and discovers that Frank had become a wealthy man. And I think regardless of whether Forrest had anything to do with the Milky Way idea or launch or anything like that, meeting his dad, seeing that there is a business in the family, starts recalibrating Forrest's ambitions even higher than just being an engineer who can now go run a mine. He's like, "Oh, I should run a business. I should run my family's business. I should run my dad's business."
- BGBen Gilbert
And I imagine seeing one of his dad's businesses be successful is sort of a different type of data point for him. He always knew, "My dad starts a company, and it fails," and just seeing an existence proof of a successful business has gotta be a reorientation for him.
- DRDavid Rosenthal
Yeah. Even when the candy company before Milky Way was just making a hundred thousand dollars a year... I mean, a hundred thousand dollars a year, I mean, I don't know. Who knows what the margins are on that? But even if they're ten percent, he's making 4X, 5X what the average American is. This is-
- BGBen Gilbert
Yeah, good point
- DRDavid Rosenthal
... eye-opening to Forrest. So his literal words about this when he gets back to Berkeley are-... the hell with running some mines in the backwoods. [laughing]
- BGBen Gilbert
[laughing] I'm so glad you have these Forrest quotes.
- DRDavid Rosenthal
Oh, my God, they're so good. Like, supposedly, in the Mars family archives, there's a video of Forrest, of, like, Forrest chatting with one of his longtime lieutenants from the company after he retired but before he died, and it's, like, in the family archives, and Joel got access to go watch the video-
- BGBen Gilbert
Mm
- DRDavid Rosenthal
... which is where all these quotes are from. It's amazing. So he does his sophomore year at Berkeley, but he's got his sights set higher now. He, with his father's help and presumably money, for Forrest's junior year, he transfers to Yale, and he's going to Yale with the goal of, "I wanna learn about business." He's, like, focused. You know, it's like the Zuckerberg story of going to Harvard. Yeah, Forrest wanted to go to Yale 'cause it was Yale, but really, he wanted to go to Yale to meet all the other people.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
So it just so happens that his roommate his first year when he shows up at Yale is the nephew of Pierre S. du Pont.
- BGBen Gilbert
Wait, really?
- DRDavid Rosenthal
Yes, really!
- BGBen Gilbert
No way.
- DRDavid Rosenthal
That's Pierre S. du Pont. His nephew is Forrest's roommate at Yale.
- BGBen Gilbert
Whoa!
- DRDavid Rosenthal
And Pierre S. du Pont, at this point in time, is not only running du Pont, which is in and of itself one of the most important-
- BGBen Gilbert
Oh
- 57:14 – 1:08:05
Chicago expansion and the hit lineup: Milky Way scale, Snickers, 3 Musketeers
- DRDavid Rosenthal
So after a couple years, when Forrest graduates from Yale, he's ready to go put all this knowledge to work in his dad's candy business. So the first thing he suggests to his dad, Frank, is that, "Hey, we gotta get out of Minneapolis. We gotta move to Chicago." Chicago is the center of the candy industry at this point, but also, it's just a way bigger city, and it has way better freight distribution to the rest of the country.
- BGBen Gilbert
Yep, if you wanna go national, Chicago is a great place to do it.
- DRDavid Rosenthal
Yeah.
- BGBen Gilbert
And why else, David? You said it's the center of the candy industry. Why else is that true?
- DRDavid Rosenthal
Ooh, well, I think, yeah, definitely at this point already, the Wrigley Company is there.
- BGBen Gilbert
Yep, you bet.
- DRDavid Rosenthal
Yeah, if you wanna know how good a business gum is, [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
you should just ask yourself, why do the Cubs play in a building called Wrigley Field?
- BGBen Gilbert
And why is there an entire neighborhood called Wrigleyville?
- DRDavid Rosenthal
Yes, yes, exactly. It's kinda like Hershey in the chocolate business. Anyway, we will get to that much later in the episode. Spoiler alert, Mars now owns Wrigley. Okay, so Frank goes along with this idea that they're gonna move to Chicago, but in his heart of hearts, he's not the same man that Forrest is. Like, he doesn't have anywhere near the same level of ambition. He likes being wealthy now. He likes being comfortable. He's like: I'll go along with you to Chicago, but really, I wanna focus on enjoying the fruits of our labor here. So the factory that he builds in Chicago, on the inside, is really state-of-the-art, per Forrest's designs. On the outside, he spends $500,000 in, you know, whatever this is, 1928, '29, buying a tract of land next to a golf course to put a factory in. The outside of the factory is, like, this beautiful Spanish-style building with stucco and cupolas and, like, wrought iron ornamentation. It looks like a Hollywood studio building. Dude, you're building a factory.
- BGBen Gilbert
Yeah, must have been great margins on those Milky Ways.
- DRDavid Rosenthal
Yeah, exactly. Shows you the difference of where Frank's head is at and where Forrest's head is at, and probably its differences over this factory, I would assume-
- BGBen Gilbert
Start to chafe the relationship here a little bit?
- DRDavid Rosenthal
Chafe the relationship, yeah. He contracts the Austin Company, which had built and designed all the Ford automobile plants-
- BGBen Gilbert
Oh
- DRDavid Rosenthal
... and assembly lines, to build the lines in the Mars factory. So Forrest is pushing the workforce super hard. He's like: We have this factory. We have these state-of-the-art lines. We need to run these lines 24/7 with multiple shifts. Like, everybody else is just, you know, "Oh, we run our lines during the day." Like, hell no! We spent all this money investing in this factory. We need to crank out as many Milky Ways as possible.
- BGBen Gilbert
Scale economies, baby.
- DRDavid Rosenthal
Totally. So by 1929, which I think is the first year that the factory is up and running, they're producing 20 million Milky Way bars annually, [chuckles] and Forrest is just like, "Go, go, go, go, go."
- BGBen Gilbert
20 million of anything at this point in history is massive.
- DRDavid Rosenthal
Yes. Now, one thing that they are not making in the factory, of course, is chocolate. They're buying all the chocolate wholesale from Hershey, which probably is another reason for the move to Chicago of like, "Hey, we need to be on a main train line, not only to get the product out, we need to be there to get the ingredients, including chocolate, in."
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
So very quickly, Mars becomes Hershey's biggest customer.... They are buying millions of dollars of chocolate every year from Hershey.
- BGBen Gilbert
Which my understanding, at this point in history, is still that Hershey's like, "Great, we love being a industrial wholesaler, supplier to other candy companies. This is only good for us."
- DRDavid Rosenthal
Yes. I mean, I think the right way to think about Hershey at this point in time is like Amazon. They are both amazon.com, and they are AWS.
- BGBen Gilbert
Mm, yeah.
- DRDavid Rosenthal
They're very happy either way. As long as chocolate is being sold in America, they're taking their tax.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
So once this gets going, and money really starts flowing into the company, Frank wants to spend it, so he builds a 20,000-square-foot vacation home on a lake in Wisconsin. He buys a $2 million horse ranch in Tennessee that he names the Milky Way Ranch. He buys his own airplane so that he can be flown around to all of these places. Forrest hates all of this.
- BGBen Gilbert
He's trying to reinvest as much into the business as possible.
- 1:08:05 – 1:14:56
Father–son rupture: ultimatum, split, and Frank’s death without reconciliation
- DRDavid Rosenthal
Here we are, 1932, the worst years of the Depression, and Forrest totally recognizes all this, like, "We need to invest, invest, invest, pedal to the metal. We are gonna use everything happening here to blow away our competition. We're gonna go compete with Hershey. We're gonna become huge." Frank, though, has no interest. According to Forrest, quote, "My father says we're making enough money. We have an airplane. We've got the fishing place. We've got horses. Why do we need any more?" And Forrest's reply to that is, quote, "I want to conquer the whole goddamn world." [laughing]
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
So he issues his dad an ultimatum, "Look, obviously, you wanna just go enjoy life. Let me run things. Give me one-third of the stock of the business. You keep two-thirds, and you relax, and I will make you even richer." Frank turns him down.
- BGBen Gilbert
And I think he turns him down and kind of insulted. Like, "I built this business, and you came in recently, and you're just randomly asking me to give you a third of it? Go to hell." [chuckles]
- DRDavid Rosenthal
Yeah, and, you know, of course, there's more behind this. Forrest was not liked within the company. He's driving everybody hard. Frank is this-
- BGBen Gilbert
Kind of a distracted leader.
- DRDavid Rosenthal
You can imagine, you know, if you're a line worker or even if you're a manager within the company-
- BGBen Gilbert
That's great
- DRDavid Rosenthal
... which boss do you prefer? [chuckles]
- BGBen Gilbert
Right.
- DRDavid Rosenthal
Yeah, so the company certainly sided with Frank here. There's also the family element, too. Frank's got a new family now, so he's got his wife, the other Ethel. He's got his daughter, Patricia. Frank's like: "Yeah, hey, I mean, you're my son, too. You've helped me build this business, but I'm not just gonna give you a third of the business."
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
Either way, there's quite a bit of animosity around this, and Forrest walks out, and in the process, tells his dad to, quote, "Stick his business up his ass."
- BGBen Gilbert
There's no mincing words in any of these direct quotes. It's crazy. [chuckles]
- DRDavid Rosenthal
Yeah, literally, I mean, this is what he said he said. So Forrest leaves town, not to Chicago, but leaves America entirely, goes off to a new continent to build his own business his own way, leave Mars Incorporated totally behind him, leave them in the dust.
- BGBen Gilbert
Almost. He takes with him a right.
- DRDavid Rosenthal
Yes.
- BGBen Gilbert
He has the right to what, David?
- DRDavid Rosenthal
He takes actually two things with him that his dad sorta gives him as he's heading out the door: one, fifty thousand dollars, and two, the foreign rights to the Milky Way recipe.
- BGBen Gilbert
Yes, but I don't think the Milky Way name.
- DRDavid Rosenthal
No, not the Milky Way name, just the recipe.
- BGBen Gilbert
You can't market this as Milky Way, but you can sell this recipe internationally.
- DRDavid Rosenthal
Yep, so Forrest takes these two sorta parting gifts, tells his dad that he'll never hear from him again, leaves America entirely, and super sadly, Frank doesn't ever hear from him again.
- BGBen Gilbert
Yeah, this is the last time that Frank and Forrest would ever speak.
- DRDavid Rosenthal
Yeah, the next year, when Frank is just fifty years old, he collapses in the Chicago factory and dies of kidney failure, and Forrest doesn't come back for the funeral.
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
Yep, that was it.
- BGBen Gilbert
Now, granted, in the '30s, much harder to come back from Europe on short notice, but still.
- DRDavid Rosenthal
Yep.
- BGBen Gilbert
So Forrest is over in Europe, and the set of events of what he does in Europe to build this ridiculous, almost Trojan horse, like the set of skills he acquires, the assets he builds up, is crazy before he comes back to the S. And before we talk about his European adventure, now is a great time to talk about one of our favorite companies, the climate-aligned AI infrastructure company, Crusoe.
- 1:14:56 – 1:27:52
Europe as a training ground: learning chocolate, building Mars Bar, and buying pet food
- DRDavid Rosenthal
Summer or, you know, close to a decade in Europe. So we're here at the end of 1932. Forrest and his young family now, by the way, with his young son, Forrest Jr., land first in Paris, and Forrest tries a couple little things, but eventually he decides that if he's really gonna build his own big company and stick it to his dad, he needs to learn the one critical thing that his dad didn't know. He needs to learn how to make chocolate.
- BGBen Gilbert
Yes. No better place than Europe to learn.
- DRDavid Rosenthal
Here's his quote on it: "You can hire lawyers, you can hire accountants, you can hire advertising men or financial types, but if you wanna get rich, you gotta know how to make a product, and you aren't gonna hire anybody to make a product for you to make you rich. They'll only make it for themselves." True that. Forrest is just like... He's such a freaking G. Like, if it hasn't come across already on this episode, he is hall of fame, complete G.
- BGBen Gilbert
You gotta know how to do the scarce thing.
- DRDavid Rosenthal
Totally. So important. So in early 1933, Forrest moves his family from Paris to Switzerland to go learn from the chocolate masters, and Forrest goes to work, first at Jean Tobler, making Toblerone, and then at the original itself, Nestle.
- BGBen Gilbert
In the factories, without disclosing to anyone who he is. [chuckles]
- DRDavid Rosenthal
So yeah, when I say he goes to work there-
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
... it's not like he calls them up and is like, "I'm Forrest Mars." He doesn't tell anybody who he is. His quote on this later is like, "Well, they never asked." [laughing] And he doesn't go get management roles; he goes and gets jobs on the line as a factory worker, learning directly how these machines work, how these chemical processes work, how to make chocolate.
- BGBen Gilbert
Amazing. Who would do this today? It, it takes a very specific type of person. If you're sitting there thinking, "Hmm, only some European company knows how to do this well, and I'm someone who attended an Ivy League college. My family is wealthy."
- DRDavid Rosenthal
"I'm friends with the DuPonts. Not only that, I basically feel like I've already built a twenty-five million dollar business."
- BGBen Gilbert
"But I'm gonna upend myself, my family, and my life and go and be a line worker in a plant in another country?" I mean, in this era, in the '30s, where it's difficult to get over there, I imagine he went by boat. I imagine they didn't speak English in the Swiss factory.
- DRDavid Rosenthal
Yeah.
- BGBen Gilbert
Would you ever do this, listener? If you're looking around at a pretty good life that you have and you're saying, "I'm gonna go to a different continent, move my family, upend my whole life, so I can go and learn this scarce skill that I know is the key to building a world-dominating business." It's a big trade-off.
- DRDavid Rosenthal
Big, big trade-off, and totally on brand [chuckles] for Forrest.
- BGBen Gilbert
'Cause you couldn't learn it in America. That's the other thing. Hershey is super secretive at this point in time. No one knows their formula.
- DRDavid Rosenthal
Well, I think not only is Hershey super secretive, the sense I get, at least from Emperors of Chocolate, is they knew how to productionize their recipe, but they didn't actually know the science of how it worked. They kinda got there through trial and error.
- BGBen Gilbert
Huh.
- DRDavid Rosenthal
The sense I got is that the European chocolate manufacturers, and probably Nestle in particular, they really knew what they were doing, and Hershey, sort of in an industrial sense, knew what they were doing, but nobody there really knew the science behind it. And in fact, there's a story about how the first plant that Hershey expands to, their first second plant outside of Hershey, Pennsylvania, they can't get it to work. They can't get the chocolate to taste the same-
- BGBen Gilbert
Hmm
- DRDavid Rosenthal
... 'cause they, like, don't exactly know how they get that specific sour note in the taste.
- BGBen Gilbert
That's so interesting.
- DRDavid Rosenthal
But anyway, back to Forrest. So for most of the year of 1933, they're just in Switzerland, and he's working on the factory lines, learning how to make chocolate.... And then, toward the end of the year, when he feels like he's learned everything he needs to know, he moves the family to England, where he uses the $50,000 to open up a small factory in Slough, England, which is a small industrial town about 20 miles west of London. It's right near where Heathrow Airport is today. And he installs the family in a one-room apartment above the factory, and they start making a version of the Milky Way adapted to British tastes.
- BGBen Gilbert
Which basically means more sugar, right?
- DRDavid Rosenthal
Yep, more sugar and less malt.
- BGBen Gilbert
Mm.
- DRDavid Rosenthal
Malt is not as big in British tastes. So he has the recipe to the Milky Way that he's adapted now for British tastes, but he doesn't have the naming rights, and so he names it the Mars Bar. And this, of course, goes on to become the most popular candy bar in the UK, I think, still to this day.
- BGBen Gilbert
The funny thing is, the lineage of this weird family split and this, "You have the rights to the recipe, but not the marketing," is the way that the world works today, even though they are, spoiler alert, one company now. If you get a Milky Way in the US, and you go, and you get a Mars bar in the UK, they're a little different, the way you just described, but those are effectively the same products. They never unified the brand.
- DRDavid Rosenthal
Yes. Now, there is also an important difference besides the level of sweetness and level of malt, and that is the type of chocolate that is used-
- BGBen Gilbert
Mm
- 1:27:52 – 1:49:20
The Mars Principles and ROTA: quality, responsibility, mutuality, efficiency, freedom
- DRDavid Rosenthal
Yeah, so that's a huge success. So as this company is getting set up, I mean, would you expect any less of Forrest, I guess? You know, he's hitting it out of the park with Mars bar on the candy side. He's building a whole new industry on the pet food side. And this here in Slough, in England, is really where the principles, you know, literally the principles, Mars calls them the five principles of the company today, but just the culture of Mars gets set.
- BGBen Gilbert
Yeah, you found the original ones, right?
- DRDavid Rosenthal
Yes. So if you talk to anybody who works or worked at Mars, they will quote the principles at you religiously.
- BGBen Gilbert
It's like the Amazon leadership principles.
- DRDavid Rosenthal
Totally. It's like, "Oh, that's principle number five, freedom," or, "Oh, that's principle number three, mutuality," et cetera, et cetera. I think how these started, maybe even back in England, Forrest started a, a document called The Mars Way, where he was, like, codifying all this, and I think... And then after he retired and the business passed to his sons and the next generation, I think that's when they sort of adapted that document into the Mars Principles.
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
But it's really interesting. It's worth going through them all. So number one, the first principle is quality. Forrest was completely obsessed with quality on every dimension, you know, the ingredients that are going into the candy bars, the candy bars themselves, the wrappers, the shelf placement displays. He was way ahead of the curve on all this stuff. He knew that candy was an impulse purchase, and, like, the way the product actually looks, how it's displayed, what the packaging is, what the placement is on the shelf in the retailer-
- BGBen Gilbert
How consistent it is.
- DRDavid Rosenthal
How consistent it is. These were, like, big, big drivers of purchases.
- BGBen Gilbert
And there's, of course, the famous story about he, uh, you know, finds a defect in a wrapper, and then he calls his executives into a room, and he hurls it at the glass and says, you know... Yeah, it's his temper and his obsession with quality all combined into one.
- DRDavid Rosenthal
Yeah, I'm laughing. You say famous story, I'm like, "Which one?" [chuckles]
- BGBen Gilbert
Right.
- DRDavid Rosenthal
I think there are a million of these stories. But even here in the '30s, in the UK, he basically implements the Toyota Production System in the Mars factory. This is long before the Toyota Production System exists. Any employee in the factory could stop the line for any reason at any time.
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
If there's anything that's out of place, anything that could impact quality, you know, anything is dirty, anything is not perfect, every single worker in the entire facility can stop the whole line.
- BGBen Gilbert
And he also, if something had a defect, he would throw out the whole batch, right?
- DRDavid Rosenthal
Yes.
- BGBen Gilbert
As like a, "Let's scorch the earth around the defect."
- DRDavid Rosenthal
Yep. I'm sure he wasn't thinking about it in these terms, but he really wants to instill this as a cultural norm in the company. So anytime [chuckles] if there was a mistake that Forrest then found that hadn't been caught on the line, he would just berate whoever should have stopped the line and be like, "You needed to have stopped and fixed this, so, like, you cannot let this get into the finished product." The other aspect of the quality principle, though, much like IKEA, it's not just quality for quality's sake, it's quality for money. [chuckles] It's quality at a given price, value for money. You know, we've already been talking about how this is, like, the ultimate scale business and scale economies business in candies. Forrest knows that if you can offer a higher-... quality for a given price than your competitors, you're just gonna build a lead and compound forever and ever, and ever in this business.
- BGBen Gilbert
Interesting.
- DRDavid Rosenthal
So quality, principle number one, most important. Two, [chuckles] this is awesome, responsibility is the second principle. And you might feel like, "Oh, responsibility, like, okay, whatever." For all of his crazy intensity, Forrest was not a micromanager. He wanted to, like, know how to do everything in the business, including making chocolate, but he knew that if he was gonna scale, like, he wants to be DuPont here, you know, he wants to be General Motors. He needs the best people working the hardest in charge of everything. Like, he can't be around telling them how to do their jobs. So the question then is, when you're starting up in a new country, tiny factory, how do you get the best people? How do you incentivize them? He's like, "Well, I'll just pay them. I'll just pay them a lot." So for years and years, the standard within Mars was that you should make three to four times the normal salary for your job.
- BGBen Gilbert
That's so insane.
- DRDavid Rosenthal
And I think that's come down over the years. It's now, like, 2X, but it's still true.
- BGBen Gilbert
I even saw numbers that say they try to pay their employees a minimum of 10% higher than other companies in the industry.
- DRDavid Rosenthal
Ah, interesting. But definitely in those early days, it's like, "No, we're gonna pay you three or four times the amount that you would make elsewhere."
- BGBen Gilbert
I also know they try to tie pay aggressively to the performance of the company, so high bonuses rather than high salaries, which also means in tough years, they would just cut. It's not quite having equity in the company, but it's much more akin to being a partner in a business than it is to being an employee.
- DRDavid Rosenthal
Exactly. Okay, so you know, I said salaries. It's not salaries, it's bonuses. This is what your take-home pay should be. Everyone's salary in the company, again, starting in the earliest days there in Slough, tied to overall company performance and hitting overall company metrics. There is no, at least in the early days, individual performance element to your bonus, except for one thing. Do you know what the one thing is-
- BGBen Gilbert
Oh-
- DRDavid Rosenthal
... the one individual performance metric?
- BGBen Gilbert
I do. Did you show up on time?
- 1:49:20 – 2:24:03
M&M’s origin story: Hershey partnership, WWII rationing, and postwar marketing win
- DRDavid Rosenthal
Right, but he's confident in his chances because he has brought back a secret weapon. Before Forrest leaves Europe, he had spied a new, to him at least, type of chocolate candy that had become popular with soldiers in the Spanish Civil War.... called dragee, and I think it's called dragee because I believe it was originally a French style of candy intended for French noble ladies who wanted to eat chocolate, but not have the chocolate melt on their white-gloved hands.
- BGBen Gilbert
Oh, interesting!
- DRDavid Rosenthal
And so what is dragee? Well, dragee is small, round pieces of chocolate coated with a candy shell to prevent them from melting in your hand or in hot weather.
- BGBen Gilbert
And confectioners call this hard panning, the colored candy shell, which is effectively hardened sugar syrup. Yes.
- DRDavid Rosenthal
And so Forrest, as he's heading back to the US, thinks, "You know, I think there might be some global appeal here in this dragee product." But before we tell the M&M's story, now is a great time to tell you about one of our favorite companies, Statsig.
- BGBen Gilbert
Yes, we are going to do something a little bit different today, listeners, by sharing a story from one of their customers, Bluesky.
- DRDavid Rosenthal
I was somehow not at all surprised when Statsig told us Bluesky was a customer. It really does seem like every up-and-coming tech company these days is using Statsig: OpenAI, Figma, Vercel, Notion, Bluesky, et cetera.
- BGBen Gilbert
Yep. So listeners, by this point, you've probably heard of Bluesky. They're a new open social network that has a serious emphasis on user choice. For example, users can build their own home feed and move between apps in the open ecosystem, and if you ever decide to leave Bluesky or switch providers, you can just take all of your followers with you. They've got a ton of momentum, and David, I didn't even tell you this yet, I actually just set up the @acquiredfm account there yesterday.
- DRDavid Rosenthal
Ah, I saw the email come in to the AcquiredFM, uh, email address. That must be what that was.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
The influx of new users that they have gotten over the last few weeks is massive. They have added 10 million new users just in the last couple of weeks. Pretty crazy for a relatively new social media app.
- BGBen Gilbert
Yep, and the Bluesky team has been using Statsig for pretty much everything, from running experiments to collecting user analytics and releasing new features.
- DRDavid Rosenthal
We asked Bluesky to share a couple specific use cases with us to illustrate. One, when the Brazilian Supreme Court banned X in Brazil, Bluesky obviously saw an influx of Brazilian users. The way they realized this was Statsig. They had a dashboard that tracked posts by language, and all of a sudden, they saw Portuguese posts spike, which tipped them off. Two, you may also be one of the many people crying out that you just wish you had a feed of people you follow in chronological order, like the old days of social media. Bluesky has been using Statsig to run an experiment to mathematically prove that users want and enjoy this style of browsing a feed. It's kind of an inversion of the rest of algorithmic social media these days.
- BGBen Gilbert
Totally. So, listeners, we are a grown-up podcast now, and we do things like get real quotes from customers as a part of segments like this. So here's what Bluesky's CTO had to say: "Bluesky collects a lot of feedback from users, but Statsig gave us concrete answers about what was working and what wasn't. We thought that we didn't have the resources for an A/B testing framework, but Statsig made it achievable for a small team. It remains our best tool for evaluating product decisions."
- DRDavid Rosenthal
So good. If you wanna leverage Statsig to grow your business, there's a bunch of ways to get started. Statsig has an insanely generous free tier for small companies, a startup program with one billion free events, which is $50,000 in value, and significant discounts for enterprise customers. To get started, just go to statsig.com. That's S-T-A-T-S-I-G.com/acquired, and remember to tell them that Ben and David sent you.
- BGBen Gilbert
All right, David, M&M's. Let's do it!
- DRDavid Rosenthal
Hell yeah, let's do it.
- BGBen Gilbert
I'm gonna eat some dark chocolate and some almond M&M's to celebrate.
- DRDavid Rosenthal
Ooh, nice. [packaging rustling] I think I'm gonna pop a peanut butter. [chuckles] Okay, so the legend is that the reason peanut butter M&M's are not as big as what you would think their market potential is in the US, is because Forrest Jr. and John Mars, the sons of Forrest Sr., who would take over and then launch peanut butter M&M's, they grew up in England, so they didn't get the peanut butter and chocolate thing.
- BGBen Gilbert
Hmm. Is that, like, a uniquely American...
- DRDavid Rosenthal
Yeah, it's an American thing.
- BGBen Gilbert
Fascinating.
- DRDavid Rosenthal
Reese's kind of invented it, and-
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
There's a whole great Reese's story. Reese's was a separate company from Hershey that was built down the road.
- BGBen Gilbert
And I think it was a former Hershey employee.
- DRDavid Rosenthal
Former Hershey employee started it, and then Hershey's later acquired the company. Great story.
- BGBen Gilbert
Yep.
- DRDavid Rosenthal
Anyway, here we are in August of 1939. Forrest and the family have moved back to America. He's ready to hatch his plan, his revenge campaign, and he goes and pays a visit to Hershey, Pennsylvania, and by pays a visit, in typical Forrest fashion, I mean that he shows up there anonymously and unannounced, and he signs up and does the public factory tour. [laughing]
- BGBen Gilbert
So awesome.
- 2:24:03 – 2:39:49
Reuniting the empire: hostile-style takeover of Chicago Mars and vertical integration
- DRDavid Rosenthal
And Ethel, like we said, installed her half-brother, William, running the company. Ethel dies in 1945, and when that happens, her stock gets split 50/50 between Patricia and Forrest, per Frank's original will. Ethel had two-thirds; one-third goes to Patricia, one-third goes to Forrest. As we get on into the 1950s, and Forrest has now turned M&M's into a big success, he starts turning his attention to Chicago Mars. So he goes to the board, and he says, "Hey, I own a third of this business. I think I should have an office at the company and the right to come in and inspect the operations whenever I want." I think they were like, "Sure, this seems like an easy demand to give this guy. Like, whatever, we'll make an office for him."
- BGBen Gilbert
There's a fox that wants to hang out in our henhouse. Is there anything anybody sees that's an issue here? Nah, just build him an office.
- DRDavid Rosenthal
Clearly, they did not know Forrest very well because he shows up. I think he basically, like, relocates to Chicago and is, like, coming in every day. He's spending a ton of time. He's criticizing everywhere. He starts writing memos to the board about everything that is wrong at the company-
- BGBen Gilbert
[laughing]
- DRDavid Rosenthal
... all the big mistakes that William is making as CEO and why William should be fired and Forrest should take over. [chuckles]
- BGBen Gilbert
This is not so different than how Elon ended up owning Twitter.
- DRDavid Rosenthal
Yeah. Yeah. [laughing] It actually is very similar.
- BGBen Gilbert
"Oh, I'm just a 5% position. Oh, I should be on the board. Oh, I have recommendations."
- DRDavid Rosenthal
Yeah.
- BGBen Gilbert
Before you know it-
- DRDavid Rosenthal
This is exactly [chuckles] the same way. Oh, boy. Still, though, William and Patricia, and the rest of the management, isn't gonna get on board with selling to Forrest or letting him take over, and, in fact, in 1959, William retires as CEO. Forrest figures like, "Okay, great, this is my chance." He starts lobbying Patricia. He's lobbying everyone else who owns the company, all the management, saying, like, "Great, sell to me. Let me take over. Let me run this business." Instead, Patricia decides to install her husband, James, who had been working in the business, as CEO.... whether he was a good employee or not, he is a totally, totally terrible CEO of Mars, Chicago. So once he takes over in 1959, revenue drops from about 50 million, like we said, to, by 1963, it's down to about 40 million. So on the one hand, okay, a 20% decline. On the other hand, this is a very, very high fixed cost business.
- BGBen Gilbert
Yeah.
- DRDavid Rosenthal
So a 20% decline in revenue on a significant fixed cost base is catastrophic.
- BGBen Gilbert
That would be a huge, huge change in the negative direction on your return on total assets.
- DRDavid Rosenthal
Yeah. It is a disaster for the company. Now, it's also a very convenient disaster for Forrest, who wants to pressure everybody else into selling and being able to take things over. So finally, as this is happening in 1963, Forrest flies to San Diego, where Patricia lives. Again, to give you a sense of James, the husband here, he's commuting from San Diego [chuckles] to, uh, run this business.
- BGBen Gilbert
And they didn't have Zoom then.
- DRDavid Rosenthal
No, they didn't, and it's a manufacturing business, so yeah. Anyway, Forrest finally convinces Patricia to sell. He says like, "Look, if we don't do something here, this company's gonna go bankrupt. I can save it. I will take it over. I will run it." She says, "Okay, I will finally agree on two conditions. One, you have to promise me that you will not fire James, my husband. He can remain as CEO." Forrest is like, "Okay?"
- BGBen Gilbert
"Are we putting that in writing, or for how long?"
- DRDavid Rosenthal
"And condition number two, you need to promise me that you will make this company, our father's company, Mars Incorporated, the new parent company of all of your businesses and preserve our father's legacy." And he says, "Sure, done," which is probably what he wanted anyway.
- BGBen Gilbert
Totally. It's also his name, and so is it that different if left absorbs right or right absorbs left, then if you're the controlling shareholder of both? No, it doesn't matter.
- DRDavid Rosenthal
Yes. Not yet CEO. So Patty sells out in 1963. Forrest now owns two-thirds of the business. He spends the next few months going around to all the other shareholders of the business, again, mostly current and former management, and buying out their shares, and by mid-1964, he has full control of Mars Incorporated.
- BGBen Gilbert
Which, by the way, is 20 years after Ethel dies. That's how long he has been on this quest to get full control of the business.
- DRDavid Rosenthal
Right. Well, and really, I mean, going back to him leaving for Europe, like, you have to imagine that this was on his mind the whole time.
- BGBen Gilbert
And just as a, like, a side note here, it's pretty insane that Forrest is able to, out of his pocket, without external financing, go and buy up two-thirds of a business that is doing 40 million a year in revenue. I mean, it's just because he owns M&M's, and Uncle Ben's Rice, and the UK businesses. This is not a strategy that most people could run if they're like, "Oh, I wish I was a larger shareholder of this business that is large and dominant." [chuckles]
- DRDavid Rosenthal
Right. You need some other way to get the money. [chuckles]
- BGBen Gilbert
Yes.
- DRDavid Rosenthal
Now, it was a distressed business at this point, but like, yeah, still.
- BGBen Gilbert
I'm gonna guess it's still valued north of 40 million.
- DRDavid Rosenthal
Seems reasonable.
- BGBen Gilbert
He needs to come up with 25-plus million in cash to pull this all off.
- 2:39:49 – 2:47:50
Beating Hershey: shrinkflation backlash, TV-era marketing, and scale-driven wars
- DRDavid Rosenthal
Yep, totally. So now that Forrest finally has his own chocolate-making [chuckles] means of production, how do they finally knock off Hershey's? Well, when Milton introduced the Hershey chocolate bar in 1900, as we've talked about all episode, he priced it at a nickel so that everybody, even in 1900, could afford it. The problem, as we've been talking about Hershey's decades-long brain deadness here, they kept the price at a nickel from 1900 until November 1969.
- BGBen Gilbert
What?
- DRDavid Rosenthal
They never changed the price.
- BGBen Gilbert
I didn't realize it was that long.
- DRDavid Rosenthal
Almost 70 years, a hair's width from 70 years, they not once changed the price of the chocolate bar. And which, you know, it was sacrosanct. It was like, "It's the nickel chocolate bar. It's Milton Hershey's legacy. We can't change the price." So what did they do? How did they manage inflation? They just kept shrinking the bar size. [laughing]
- BGBen Gilbert
I gotta say, by the way, that five cents in 1900, just so people get a sense, is 23 cents in 1970, so it's a four-and-a-half X that they sorta have to figure out how to handle.
- DRDavid Rosenthal
Yep. So what do they do? Rather than changing the price, they change the quantity. They just keep shrinking, and shrinking, and shrinking the size of the bar.
- BGBen Gilbert
Consumers are gonna love that.
- DRDavid Rosenthal
Oh, yeah, they're gonna love that. So the original Hershey's bar was 1.25 ounces, one and a quarter ounces in 1900. By the time 1969 rolls around, it is half of the original weight.
- BGBen Gilbert
Hmm.
- DRDavid Rosenthal
Ben, I see you're looking at a Snickers there. How much is a Snickers today?
- BGBen Gilbert
1.86.
- DRDavid Rosenthal
1.86. Now, that's not all chocolate. A lot of the mass of that is cheaper stuff, like peanuts. But you can see in the consumer's mind, you're like, "Wait, I've got this paper-thin Hershey's bar that like, yeah, it's a nickel," but compare that to the big, meaty, satisfying Snickers. This looks ridiculous.
- BGBen Gilbert
Consumers don't care that the new gets cheaper. Consumers care about... I mean, truly, that is why Snickers is the satisfied slogan. Consumers care about how much value does it seem like when I bite into this thing and eat it?
- DRDavid Rosenthal
Yep. So finally, in 1969, Hershey can hold out no longer. Commodity prices spike, and they make the historic decision to raise the price of the bar to 10 cents.
- BGBen Gilbert
Da-na-na.
- DRDavid Rosenthal
[chuckles] And they think that the way they can make this palatable to consumers is they will also boost the size of the bar back up to the original one and a quarter ounces. So actually, economically, they're still at a loss here. Both were about double.
- BGBen Gilbert
Okay, so it doesn't solve their problem.
- DRDavid Rosenthal
[chuckles] It's just totally brain-dead. The problem is inflation, and I think the thought process probably was, "Okay, consumers are gonna be outraged when we double the price of the bar after 70 years."
- BGBen Gilbert
"Oh, the first time we raise the price of the bar, we should give them some value, so when the second time-
- DRDavid Rosenthal
Well, [chuckles] this is where not having a marketing department or doing consumer surveys or anything-
- BGBen Gilbert
A way to communicate with customers at all.
- DRDavid Rosenthal
Yeah. Turns out to be a really big problem. Consumers are just like, "What the hell? A, you just raised the price. You doubled the price. But B, you have just totally exposed that you have been gaming us for 70 years."
- BGBen Gilbert
I mean, this is literally still a big deal today, so much so that... Do you remember the commercial that aired, I think it was during the Super Bowl, from Joe Biden talking about shrinkflation?
- DRDavid Rosenthal
Oh, no. [chuckles]
- BGBen Gilbert
This is like a presidential thing in our country today, where the president is railing against shrinkflation by keeping prices the same and making CPG food smaller.
- DRDavid Rosenthal
Amazing, amazing.
- BGBen Gilbert
So yeah, I believe that people were outraged by it.
- DRDavid Rosenthal
People were pissed. So Forrest is like, "Oh, man! Boy, am I ever glad that I started my own chocolate-making process here." [chuckles] Because he now decides that in response, he is not only going to increase his advertising and blitz the nation with M&M's and Mars products, he's also gonna increase the size of his bars while keeping price the same.
- BGBen Gilbert
Mm.
- 2:47:50 – 2:57:11
After Forrest: privacy deepens, global expansion, and mega-deals (Wrigley, pet care, Kellanova)
- DRDavid Rosenthal
Total G, total G. So speaking of, this is incredible, here we are, 1973, Mars passes Hershey to become the number one candy company in America, and a pretty surprising twist happens here in Forrest's story, which is the end.
- BGBen Gilbert
He retires.
- DRDavid Rosenthal
He hangs it up. He walks away.
- BGBen Gilbert
And concurrently with him deciding that's it, this is basically when the company stops communicating with the outside world. So everything we're about to share from here on out is short, is basically just headlines that happen from news articles, and the company gets way, way, way more private after this.
- DRDavid Rosenthal
Yeah. End of 1973, he's built up this whole empire, gone to Europe, built the Europe business, built the pet business, come back to America, built M&M's, retaken over Mars Inc., battled Hershey, beat them at their own game. He gives the company to his three children, a third each to Forrest Jr., John Mars, and Jackie Mars, and totally walks away and retires. At this point, the empire is doing about 800 million in annual revenue, and, uh, he's just done. He no longer owns any part of it, for the moment. So Forrest spends the rest of the decade of the '70s in retirement. His mother, the original Ethel, is actually still alive, and I think he spends a lot of it with her and taking care of her. And then after, you know, call it six, seven years, he's starting to get a little feisty. [laughing] Uh, you know, you can't keep an old horse out to pasture here. So in 1980, when Forrest is 76 years old, he decides he's getting back in the game.
- BGBen Gilbert
He is his father's son. What's he gonna do? He's gonna start a candy company. [laughing]
- DRDavid Rosenthal
He's gonna start another candy company, which he names Ethel M Chocolates after his dear mother, Ethel, who, of course, he considers the real Ethel Mars and matriarch-
- BGBen Gilbert
Yep
- DRDavid Rosenthal
... of the family.
- BGBen Gilbert
By the way, I ate some Ethel M Chocolates last night. I, I ordered some to prep for this episode. They're great. Delicious.
- DRDavid Rosenthal
Ooh! I have never tried any. I need to get my hands on some.
- BGBen Gilbert
It's extremely different than the rest of Mars products. It's like a specialty chocolate.
- DRDavid Rosenthal
Yes. Well, so Forrest's business plan in starting Ethel M is basically to build a competitor to See's.
- BGBen Gilbert
Oh, that makes sense.
- DRDavid Rosenthal
He sees, just like Warren and Charlie did back in the day, that See's and high-end chocolate is actually a really, really good business.... And the plan is, the way they're gonna compete with See's, is they are going to specialize in liquor-filled chocolates. So they'll make regular non-alcoholic chocolates, you know, high-end chocolates just like See's, truffles and the like, but they also will specialize in alcohol-filled chocolates, which were going through a moment of popularity here in the go-go 1980s. So Forrest, as always, decides he's all in on this. Liquor-filled chocolates are not legal in every state, and Nevada is the epicenter of them, so he moves to Nevada.
- BGBen Gilbert
I did not realize that's why Ethel M is in Nevada. That's so funny.
- DRDavid Rosenthal
That is why Ethel M is located in Henderson, Nevada, which is a suburb just outside of Las Vegas, and Forrest, by God, builds a factory there outside of Las Vegas, builds an apartment directly above the factory- [laughing] ... and lives in the apartment above the factory, from which he runs the business.
- BGBen Gilbert
Guy has one speed and one playbook.
- DRDavid Rosenthal
And this dude is, like, in his late seventies. It's a success! Within a couple years, Ethel M is doing $150 million in revenue. [laughing]
- BGBen Gilbert
Unbelievable.
- DRDavid Rosenthal
Like, get out of here! Unbelievable. Now, as you said, Ben, it's not competing with Mars in any way, it's competing with See's, but the business gets so big, and Mars and Forrest's children decide that they wanna own this business. So in 1988, after Forrest has been running it for seven, eight years, Mars acquires Ethel M- [laughing] ... for an undisclosed amount. [laughing] I would love to have been a fly on the wall for those negotiations between Forrest and his children.
- BGBen Gilbert
I mean, what's the point of even negotiating? He's already given all of Mars to the kids, so what's he gonna do after the sale completes, give the new stake to the kids, too?
- DRDavid Rosenthal
Unbelievable. It is, like, the best coda ever, [laughing] to the story. So shortly after the Ethel M acquisition is when Forrest Jr. and John Mars, the brothers who are running Mars now as co-CEOs, this is when they give Joël Brenner access, and the Washington Post access, to write the piece about the company. But yeah, Ben, as you say, they weren't happy with it, and, uh, they never gave anyone access again.
- BGBen Gilbert
And today, their CEO does speak publicly, like, does give quotes and statements. They do release press releases. They have a website. They, as a company, have recognized that times have changed, that consumers are not willing to go buy a product off the shelf when they know nothing about the company. In this era of people wondering about, what is Mars doing with sustainability? And we live in an, America and a world right now where diabetes is a massive epidemic, and obviously they make a lot of products that contribute to that. They want to have a voice in that conversation, too, and so they do say more now than they used to, 'cause they've kinda realized, "We can't be a $50 billion company that doesn't ever say anything, ever."
- DRDavid Rosenthal
True. But what they don't do is allow books to be written about them or any sort of in-depth piece.
- BGBen Gilbert
No one knows what their balance sheet looks like, including their bankers. They don't produce financial statements for their bankers. [chuckles]
- DRDavid Rosenthal
Yep.
- BGBen Gilbert
And some product stuff that happens in this time, in 1974, they start producing Skittles in the United States after it becomes a success in the UK.
- DRDavid Rosenthal
They bring Twix over from the UK, they bring Starburst over, which was Opal Fruits in the UK.
- BGBen Gilbert
Yep. 1986, Mars acquires Kal Kan Foods in Los Angeles and begins its association in America with dogs, cats, and their owners. They've had the British business for a long time. Kal Kan Dog becomes Pedigree, Kal Kan Cat becomes Whiskas or Whiskas.
Episode duration: 3:53:11
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Transcript of episode GyWJeY55x-8
