by Greg Thain
How Did It Evolve?
Somewhat surprisingly, since JL had spent almost his entire working life in cheese and it had made him and his brothers wealthy, he did not see Kraft as just a cheese company. In 1922, the company launched a brand of mayonnaise and three years later acquired a maker of French dressing. The company was also a prolific and accomplished advertiser, striving to be at the forefront of this developing art. In 1929, the company sponsored its first radio programme. Kraft was also one of the first to employ a home economist – Marye Dahnke – who, after a solid grounding handing out cheese samples in-store, developed a cheese road-show. Here, she demonstrated to conservative American housewives that there were more ways to cook with cheese than sandwiches or with macaroni. In 1926, JL stumped up $1,000 for a kitchen, from which Kraft Kitchens was born. Even at this early stage, the future development of Kraft was that of a wide-ranging food company known for its product innovations and its marketing modernity and competence.
Two pivotal events occurred in 1928 that would be at the heart of Kraft’s future development. JL’s progress beyond being a middleman in the cheese trade was motivated by an obsession with reducing waste. This obsession led directly to the company’s next blockbuster. Kraft’s cheese factories, acquired in 1914, produced mountains of whey. This was a by-product of the cheese-making process, and JL set his technical experts the task of developing a product to make use of it. The outcome, launched in 1928, was Velveeta, described on the packet as ‘The nutritious cheese food that’s digestible as milk itself.’ The product was more meltable than ordinary cheese and soon became America’s leading cooking cheese. With Velveeta, Kraft had hit on an important insight: as long as the product had a nice cheesy taste, consumers valued its utility and practicality irrespective of whether, technically, it was cheese.
This insight would also play a role in the marketing of a brand acquired by Kraft the same year. It merged with the Phoenix Cheese Company of New York. Phenix Cheese had been formed in 1901 with the express purpose of acquiring the world’s first cream cheese. This had been invented accidentally in 1872 by an American dairyman, William Lawrence: he subsequently called it Philadelphia. The attraction to Kraft was that Philadelphia was universally agreed to be a great product. Under Phenix, whose owners were investors rather than cheese experts, it had a painfully short shelf life of around two weeks. This severely limited its appeal. Kraft thought it could extend Philadelphia’s shelf life, and, almost immediately through process adjustments, it took it to eighteen days. Continuous improvement of the utility and practicality of cheese products had already become a Kraft USP. This attracted the eye of the National Dairy Products Corporation, which acquired Kraft in 1930. National Dairy would run Kraft as an autonomous subsidiary, which left the company expertise in place but backed it up with a greater financial clout than the brothers had been able to muster. With greater financial muscle, Kraft would be able to spend big, behind product innovations coming through the pipeline.
The company’s big hit of the 1930s developed in the least auspicious circumstances. The ever-acquisitive JL had bought up a host of regional salad dressing companies, including the makers of Wright’s Mayonnaise. Kraft rebranded the latter in 1930 as Kraft Mayonnaise, to launch alongside Kraft Thousand Island Dressing and Kraft French Dressing. In hindsight, the Great Depression was not the best time to launch a series of salad dressings. By the end of 1931, JL’s sales team agitated to pull out of mayonnaise: they could hardly give it away. JL, however, was a glass half-full man: ‘I appreciate your concern, but we have to move forwards.’
Moving forward for JL meant improving the product. He buttonholed members of the Wright family, who were Kraft’s resident experts on mayonnaise. What was needed, said the Wrights, was a hitherto unknown machine that: could automatically measure the ingredients to fine tolerances; blend them to a hitherto unattainable fine emulsion; and run continuously so that one batch was the same as the next. The solution came, improbably, from a class JL ran in his spare time at the local Baptist Church. A new attendee introduced himself to JL as an inventor. JL was taken with Charles Chapman and his latest invention of a combination tea wagon and dishwashing machine. He signed him up on the spot and pronounced to his bemused technical boffins the next day that Charles would be designing their new whipping machine.
While Charles tinkered away in his workshop, Kraft managers realised the new machine, amazingly, not only could do the job but would also be good for making an improved salad dressing. Then someone had the brilliant idea – perhaps thinking of the work that would be involved cleaning this machine between productions of mayonnaise and of dressing – of mixing the two products together. The answer actually tasted delicious, was cheaper than mayonnaise (and thus Depression-friendly) and was christened in honour of Charles’ miracle whipping machine, ‘Miracle Whip.’
JL was delighted and announced to Kraft’s January 1933 sales conference that he had a product that would give the company its best year ever. Reportedly, he was drowned out in catcalls and boos when he unveiled what looked for all the world like another jar of unsellable mayonnaise. You would think by now his staff would have realised that James L. Kraft was tone-deaf to defeatism. He silenced the protests by announcing the brand would be backed by a million dollars of advertising – a colossal sum in the midst of the Depression – and would be launched at the forthcoming World’s Fair in Chicago. The product went straight into test market and after just eight weeks the results were judged good enough to go national. By the end of the year, Miracle Whip was outselling all other brands of mayonnaise and salad dressing. If anything demonstrated the drive and verve of the Kraft Company at this stage, it was Miracle Whip.
James L. Kraft would also be at the heart of two other big successes for Kraft in the 1930s. The first was a triumph in the business-to-business market that was almost twenty years in the making. In 1935, JL had heard of a Chicago bakery that made an amazing cheesecake with Philadelphia. So he travelled to try a slice and was so amazed he introduced himself to the owner and offered to help in any way he could. Fourteen years later, the bakery owner finally decided to launch his cheesecake and took JL up on his offer. Kraft technicians, engineers and Marye Dahnke herself were sent to design machinery, processes and the recipe for the newly named Kitchens of Sara Lee Company. Within a few years, Sara Lee was the single largest customer for Philadelphia.
As demonstrated, JL knew a genius and/or a good idea when he saw one and had the skills and determination to back the innovation, overcoming any objections. Without these attributes, it is doubtful that one of the biggest hits in Kraft’s entire history would have happened. In the early 1930s, JL received from his sales manager in St Louis a sample picked up from a store. It was a packet of Kraft Grated American Cheese attached to a packet of macaroni by elastic bands. This homemade combo deal was the work of an enterprising St Louis macaroni salesman. JL was all over the idea. He brushed aside his brother’s response - that they weren’t in the macaroni business and it was hard enough selling cheese - and went straight to Marye Dahnke’s kitchens for a second opinion. Marye immediately saw the appeal. It saved the housewife trailing to two different parts of the store. A recipe was quickly developed and, very sportingly, the St Louis macaroni salesman was hired to work on the launch of Kraft Cheese and Macaroni Dinner. The revolutionary ‘meal for four in nine minutes’ was launched in 1937 as one of the first true convenience foods and cleared a million boxes in its first year.
Following other new ventures in the 1930s included Kraft Caramels in confectionery and Kraft Sandwich Spreads. Kraft was a vibrant, modern, innovative, broadly-based food company, and one the government naturally turned to on the outbreak of the Second World War, The Company would make two main contributions to the war effort: one would improve the nutrition and morale of millions of servicemen and women, the other would save millions of lives.
Kraft was heavily involved in the development of ‘K’ Rations in 1943. Kraft’s exist
ing sterilised cheese, just like everyone else’s, did not meet the much different needs of the war. The shelf life and quantities required were far above existing capabilities. The development of a rapidly curing cheese processed at extremely high temperatures became another ‘drop everything’ project. The result in 1943 was a cheese that took just 24 hours to turn from fresh milk, in at one end of the factory, to, out of the other, tins of cheese that essentially lasted forever. The US Government ordered 100 million pounds of the stuff and the technology would benefit Kraft’s production of a wide range of products. Within the next two years, further breakthrough innovations included an industrialised process to make Swiss cheese, and another that extended the shelf life of Philadelphia to several months.
Kraft’s second contribution to the war effort came with its involvement in an issue of such importance it would be second only in priority to the Manhattan Project. In 1941, the US Government had been approached by British scientists who had been trying, and failing, to industrialise the production of a potentially wonder antibiotic, penicillin. The British had been able to produce it in minute quantities, enough only to test on mice and one person. The patient, a policeman who had pricked his thumb on a rose thorn and developed a massive infection, had made what seemed like a miraculous recovery until the drug ran out. Then unfortunately he relapsed and died. Penicillin was derived from the Penicillium notatum mould which, as it turned out, was the mould used in the production of Camembert cheese. Kraft employed the free world’s leading expert on making Camembert, ‘Doc’ Stine. JL told Stine to drop everything and solve the problem of growing enough penicillin cultures. The British scientists had only ever been able to make a test tube full.
Stine decided, after encountering the same frustrations as the British, that he needed to find a stronger strain. He isolated hundreds of strains from as many types of Camembert cheese as he could muster. By June 1942 he had made enough penicillin for a ten-person trial. It was so stupendously successful the Government immediately authorised Doc Stine’s cultures and process to be industrialised by large pharmaceutical firms. It had been an amazing achievement given that penicillin had been discovered as long ago as 1928 and no one had been able to solve the problem of industrialising it.
After the war, Kraft, which was still a wholly owned, autonomous subsidiary of the National Dairy Products Corporation, changed its name to Kraft Foods Company. This better reflected the broad nature of its product range. Kraft next set about its most ambitious marketing exercise to date: embracing the emerging medium of television. On Wednesday, 7th May 1947, the Kraft Television Theatre became the first commercially sponsored programme on network television. Commercials during the hour-long programme consisted of live cooking demonstrations masterminded by the indefatigable Marye Dahnke. They featured what became known as the ‘Kraft Hands’ - the demos concentrated entirely on the products and only the hands and wrists of the home economists were in view. Marye came up with enough recipe ideas for over 650 weekly episodes, and the Kraft Television Theatre would go down in history as one of the most successful sponsorships ever.
The Kraft Television Theatre was the perfect vehicle to promote the next slew of Kraft product innovations. These were aimed at increasing the convenience of cheese, the two most successful being Kraft Cheese Slices and Kraft Cheez Whiz. For once it was not James L. Kraft behind a major innovation, but his brother Norman, who ran the R&D function. Norman would require the same Kraft disregard for naysayers to bring Cheese Slices to market. He first had the idea in the mid-1930s to make cheese slices, instead of making cheese which the grocer or housewife would then slice. In manufacturing terms it was also a lot cheaper, if the technology could be developed, to makes cheese slices rather than slice cheese. The big difference was the saving of labour costs and production difficulties involved in slicing.
By 1941, the product was being test marketed, but the Army’s requirements for cheese took up the entire capacity of the factory involved. So the project was shelved until after the war. In 1945, when Norman got things moving again, he encountered the typical sales force reaction. They wanted the easiest sell. Quizzed on value for money, cheese slices versus loaf cheese, he said that sliced would cost six cents a pound more. Cue mass head-shaking, tutting and sucking of air through teeth. He was told to come back when it was the same price per pound. Norman was back in 1947 and Slices was test marketed in Detroit, with disappointing results. Consumers could not tell that the product was sliced: when they could, they did not believe the slices would come apart. After more work and another test market, the company nervously went national in early 1951. They booked a phalanx of demonstration spots on the Kraft Television Theatre. These did the trick and, within a year, Kraft Cheese Slices was the most successful new product in the company’s history. James L. Kraft lived to see this success before passing away on 16th February 1953.
While Kraft Cheese Slices was breaking all sales records, next off the production line was another soon-to-be-star of the Kraft Television Theatre’s ad breaks. Cheez Whiz was created as an all-purpose cheese sauce. So all-purpose did it become that, when the company did market research to ascertain how consumers were using the product, they came back with over 1,000 different answers. Other launches included: Cracker Barrel in 1954; Kraft Fudgies and the first portion-controlled mayonnaise servings for the food service channel in 1956; Kraft Catalina French Dressing in 1957; and Kraft Jet-Puffed Marshmallows together with whipped cream cheese in 1959. It seemed Kraft had an endless production line of innovations to stay at the forefront of the convenience food revolution.
Kraft also remained at the forefront of other shifts in American society. In 1960, it was the first major player to introduce low-calorie salad dressings. This tapped into a hitherto niche market of hard-core dieters rather than counter any objections to its mainstream offerings. Another big innovation came from the next generation of the Kraft family. G. Howard Kraft, son of JL’s brother Charles, solved the company’s long-running attempts to extend shelf life of the range of regular cheeses, which could not benefit from sterilisation.
Hitherto, the focus had been on minimising the growth of the naturally-present mould hrough the development of mould-inhibiting wrapping materials. G. Howard’s insight was to deny the mould oxygen, so it couldn’t grow at all. He replaced air in the package with carbon dioxide. This was absorbed naturally by the cheese, shrinking the wrapper tight around the product. If a wrapper wasn’t tight, it meant there was a hole somewhere letting air in. This would be visible to quality control checks. It was a brilliantly simple and effective technology that became the industry standard once Kraft had reaped first-mover benefits.
Its Kraft subsidiary was National Dairy’s leading and most successful component. National Dairy took closer interest, first absorbing Kraft into more of a divisional structure and then in 1969 renaming the entire company Kraftco Corporation. In 1976 it was renamed Kraft Inc. With sales of just under $5 billion, mostly coming from Kraft products, it had been one of the best acquisitions in packaged goods history. But the times they were a-changing’.
The days when the majority of American women stayed at home and cooked recipes gleaned from the Kraft Television Theatre were over. More women than ever before were working full-time and home baking was becoming a thing of the past. This was hurting sales of Philadelphia, a product primarily used in baking.
Snacking was all the rage and consumers told Kraft via focus groups that they still liked the taste of Philadelphia and wanted to use it on snacking occasions, but the product simply didn’t deliver. Philadelphia cream cheese was too hard to spread; it either broke the crackers or dug holes in slices of bread. The infamous whipping machine was dusted off to aerate the product but that didn’t work. The project of making a spreadable Philadelphia was dropped until someone remembered that the huge 50 lb blocks sent to bakeries had a cream dressing mixed in to make it malleable. The same mix was tried in consumer-sized portions but rejected because it di
dn’t taste the same. One tweak to the cheese culture later and Philadelphia Soft Cream Cheese was born. Launched in 1979, it saved the Philadelphia brand from a lingering death.
Kraft’s next move was by far its least predictable to date. The changing lifestyle issues behind the development of Philadelphia Soft Cream Cheese had also slowed the growth of the entire company. Kraft was no longer groundbreaking emergent consumer trends as it had been for its first 40 years. Many Kraft products were now showing their age. Modern, trendy, working moms were more likely to associate the Kraft name with what their mom used to cook. This was also the era when conglomerates were in vogue; why tie yourself to the fate of one particular category when you could buy or merge your way into faster-growing ones? Even so, not many would have predicted that in 1980 Kraft would merge with the industrial firm Dart Industries.
Dart Industries was a $2.4 billion turnover mishmash containing, among other things, a paper cups business, West Bend kitchen appliances, Duracell batteries and, the jewel in its crown, Tupperware. Why would Kraft want to buy Tupperware? That brand was just as dependent on women having the time to attend Tupperware parties as Philadelphia had been on women baking. It was a mystery, known only to the Kraft board.
Added to Kraft’s $6.4 billion sales, the newly-merged Dart & Kraft was now the 27th-largest US Company. They had combined sales of more than $9 billion, although each company would be run autonomously. A year later, the company added to its kitchen appliance business by acquiring Kitchen Aid for $460 million. Whether this was all a big distraction for the Kraft division or whether the company had just lost its way matters not. The outcome was that the foods side of Dart & Kraft spent the next few years going nowhere fast. Its $4 billion sales of US consumer foods in 1982 would not be exceeded until 1987. Not only were many brands tired but also the once-innovative marketer had become known as the Dudley Do-Right of the packaged goods industry. Breakthrough innovations were few and far between, the only ones of note being the development of light versions of Philadelphia and Miracle Whip in the early 1980s; and the spending of $35 million to become the first major food company to switch over to tamper-evident packaging.