FMCG
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Perhaps surprisingly, Uncle Ben’s was not the first Mars food product the company marketed in the UK; that would have to wait until the mid-1980s. In 1962, Forrest’s eye had been taken by a new technology for freeze-drying potato. Accordingly he had set up a business, Dornay Foods, to explore the technology on the British markets. Chipples potato sticks, the first offering, soon made way for Yeoman instant mashed potato. In the 1970s, canned meat lines were added to the range and Mars, in a most unusual move for the company, bought an individual brand, Tyne, to bolster its range. The arrival of the Uncle Ben’s brand in the mid-1980s signalled the change in direction, followed by moves into pasta and pasta sauces under the Dolmio brand. The pet food pouch technology was transferred over in 1999 to add new life to the range.
UK: Drinks
Having been in the vending business since 1955, the big breakthrough came with the company’s invention of the Klix hot drinks system in the mid-1970s. With the dry drinks ingredients already included in every cup, vending machines could be simplified and made more reliable. The pre-filled cups could be sold to anyone who had a hot water dispenser, enabling a much wider distribution, out of the company’s vending heartland in schools and workplaces. In 1982, the innovative Flavia drinks system prepared fresh, single servings of coffee, tea, and hot chocolate drinks. The ‘Fresh Pack’ (the actual brewing chamber), meant each drink would not be tainted by the previously sale. The technology was later further developed for in-home use.
Western Europe
Even before Forrest left for the US, he had opened a small factory in Belgium to supply the European market, just in time for the German invasion whole to stymie the whole thing. But after the war, the Belgian factory was re-opened, supplying the large French market amongst others; the first Mars Bar hit France in 1951. This marked the beginning of the Mars modus operandi. Product would initially be imported and sales and distribution networks developed until a local factory became viable. Imports of and cat food brands, for example, began in 1959; a factory was built the very next year. A similar and much more stately model followed in France: Mars pet brands first appeared 1962 but the factory took eleven years to materialize. The West German sales office for chocolate products opened in 1961; but here the factory took 18 years to follow it. The French, Belgian and German factories supplied Mars sales organisations across the rest of Europe. Mars’s drinks and foods divisions soon followed.
Australia/New Zealand
In 1954, Mars signed a deal with MacRobertson’s, Cadbury’s main competitor in Australia. The company would manufacture Mars Bars and Maltesers under licence, a very rare instance of Mars contracting out. In 1963, however, this arrangement was dislocated: arch-competitor Cadbury bought out MacRobertson’s and Mars quickly terminated the arrangement, although it was partially re-instated on later consideration: Cadbury could keep making Maltesers as they did not compete directly with any of its product range and, in any case, Forrest Mars had the sort of warm and cordial relationship with the Cadbury family (as with other chocolate dynasties) that helped smooth over such potential conflicts.
But the sale did inhibit Mars’ Australian chocolate ambitions, so the company switched its attentions to pet foods, launching Pal and Whiskas in 1965 and building a pet food factory the next year. In 1967, Mars fast-tracked its way into the Australian food business by purchasing Masterfoods, a local maker of herbs and spices, a name Mars would later transfer to several other of its foods units. Then, a year after building a second pet food factory in 1978, Mars opened its first confectionery factory in Ballarat. It could now tackle the chocolate market properly. Meanwhile, exports of pet foods further south to New Zealand had gone so well that in 1993 Mars purchased a pet food factory to ramp up production there.
Today, Mars is by far the dominant pet food manufacturer in Australia and New Zealand, with around 50% of the market. The pet food factories also act as a supply hub for more than twenty markets in the Far East. Mars Chocolate has also done well, building up to number two behind a very dominant Cadbury, which has been manufacturing in Australia since 1921. The Mars Ballarat factory, like its pet food counterpart, also supplies more than 30 markets in the Far East, Africa and the Middle East.
Eastern Europe
While other companies saw acquisition as the way to enter Eastern European markets, Mars stuck to its standard approach: get distribution for your product any which way, develop demand, and only then take the final plunge. As the barriers to Western companies in Eastern Europe began to crumble in the late 1980s, Mars did exactly that. Mars chocolate products appeared in Hungary in 1989, the year of the fall of the Wall: the company simply bartered them for animal parts that could be used in the company’s pet food plants.
But the real prize was the Russian market. In late 1989, Mars plastered Moscow with advertisements announcing that the first ever Mars Bars on sale (legally) in Russia would appear, on 4th January 1990, at a store created especially for the occasion. The company had bartered the product for shipping rights. Soon after the Moscow launch, distributors appeared everywhere, working flat out to get Mars Bars and M&M’s into the major Russian cities. In 1991, food and pet products were added to the distribution network and the relaxation of currency controls in 1992 meant the company could now think seriously about building a chocolate factory. It opened in the summer of 1995, at a cost of $140 million, and produced nine different products. A pet food factory opened the same year. By 1997, the Russian operation recorded its first profit, survived the Russian economic crisis, and by 2000 had a 40% share of the market with an annual ad spend of $25 million. By 2012, the company had nine factories supplying Russia and the rest of the CIS.
China
But Mars would eclipse the undoubted success of the Russian venture in the Chinese market. The company opened its first sales office in 1990 and decided to focus on M&M’s, because of the brand’s much greater temperature tolerance: air-conditioned retail outlets were still very rare and distribution was sketchy. However, Chinese consumers had a much more upscale image of foreign chocolates and a fun brand for kids didn’t fit that pre-conceptiion. Mars got the picture very quickly and switched to the Dove chocolate bar, concentrating on the more developed coastal city markets. In 1996, the first factory opened, producing Dove bars to exactly the same standard recipe, a stark contrast to Nestlé, which compromised its recipe to for lower prices, and to Cadbury, which had major quality-control problems trying to replicate its Dairy Milk recipe using locally sourced fresh milk.
Dove was ideally positioned. It was cheaper than the imported Swiss bars and much better quality than the cheap, locally produced brands and, with a wide range of sizes to suit most price points, soon became the country’s best-selling chocolate bar. However, Mars was missing another substantial market opportunity: upscale boxed chocolates, an issue it tackled by producing a new product based on the Ethel M line developed by Forrest Senior. As the Chinese teenage market developed, Snickers and M&M’s took a more prominent position and, by 2005, Mars was the clear market leader. It had products in 250,000 distribution points across the country and, for the first time, it made a profit. The company now has four factories in China, two for pet foods and two for chocolate, supplying both the ever-growing Chinese market and also exporting to other Asian countries.
Middle East
Once again, after setting up a sales and marketing infrastructure in 1993, Mars opened its first chocolate factory in Dubai in 1998 to service the entire Middle East. A new factory in Saudi Arabia was opened in 2013.
Latin America
Other than as an exporter, Mars was a bit late to the Latin American region: its first factory in Mexico didn’t open until 1995. Very unusually, and to help catch up, Mars bought, in 2002, Lucas World, another candy manufacturer. As well as producing a step change in its Mexican market share, the purchase also provided the opportunity to import Lucas World products to Hispanic markets in the US. Mars is now market leader in both pet food and confectionery in Mexico.
How Did It Build Its Modern Business?
When the second Ethel died in 1945, Forrest got his foot back in his father’s door: half her stock in his business passed to Forrest, as had been stipulated in Frank’s will. But the other half went to hers and Frank’s daughter, Patricia, who turned out to be the activist shareholder from hell. Forrest, who now held a third of the company, pleaded with her to let him buy her out. He was rebuffed.
Forrest promptly began an assault on his half-sister’s daughter’s citadel. The shares, he claimed, not only gave him the right to an office at the company, but also access to all the financials, which he used to berate management on a daily basis. He was banned from company property. But he was a very persistent – and surely very annoying – individual and, in 1950, a weary Chairman/CEO partially caved in. Forrest was offered one-third of the board’s nine positions, which he used to push for expansion, expansion and expansion. At least in he was a change in tactics: his usual agenda was to call for the sacking of the CEO and the appointment of himself as chairman.
Forrest’s biggest beef was that the Chicago plant, state of the art when he left for England in 1932, was now hopelessly outdated and highly inefficient. This was anathema to Forrest, who had never stopped updating his British chocolate and pet food factories. He won. By the end of the 1950s the plant had been expanded, updated and was running along lines not dissimilar to his British outfit. The management of the company, however, was still a frustration. Forrest had finally won the chairmanship in late 1959 but was outflanked. Patricia’s latest husband was installed as President and CEO, boxing Forrest in.
His new adversary, James Fleming, knew an enemy when he saw one. He started an all-out war, in which Forrest more than gladly reciprocated. The outcome was a disaster for sales but a triumph for Forrest. The in-fighting, coupled with James’s unsuitability for the role – he responded to falling sales by cutting the size and quality of the products – resulted in a 20% decline by 1963. At this point Patricia bowed to the inevitable. She agreed to sell out to her nemesis, a new level of control for Forrest which he cemented a year later by buying out the remaining shareholders. He could now merge; the M&M Company would join forces with Mars Company and the whole thing would become Mars Inc. This, actually, had been a condition of Patricia doing the deal.
Forrest’s first task was to remake his vastly expanded US chocolate business in the image of what was already in corporate place. He wasted no time. Senior Chicago management got new bosses transferred from M&M, saw their offices knocked down, their secretaries fired and all their perks abolished. Forrest’s way was open-plan, no meetings, no memos, long workdays and the delivery of the best results. Anyone who wouldn’t or couldn’t fit in was despatched in short order. He then set about the more arduous task of restoring Frank’s brands to their past glories. Product recipes were revised back to the highest standards. Even a pinhole in the chocolate of one bar would so enrage Forrest that would see the entire day’s production junked - along with the career of the guy who had let the shoddy product through.
While the fortunes of the combined US confectionery operations were being rebuilt, Forrest, as ever, still found time to add new and interesting businesses. The success of his by now worldwide pet food empire encouraged him to grab a stake in the burgeoning US market, buying the Kal Kan firm in 1966. Pet foods in the UK had been very successful in growing the dog food products with brands such as Pal, and in developing the cat foods with the launch of Whiskas in 1959. Forrest saw no reason why Kal Kan, once converted to his way of running things, could not achieve the same results. In the UK pet sector, Forrest had also bought Thomas’s, a firm that made all manner of pet accessories: dog leads, fish food, budgerigar food, all sorts. Forrest’s eye had also been taken by the drinks vending sector and in 1955 he set up a British company, Four Square. The company later moved into the technology of electronic payment systems.
Back in the US, however, Mars Inc. had been making substantial gains on a complacent and somewhat outdated Hershey, helped by Hershey’s complete failure to advertise, which persisted, unbelievably, until 1970. Hershey did another foolish thing: its practice of maintaining the price of the Hershey Bar at 5c while steadily reducing its weight as ingredient costs rose was beginning seriously to dismay even the most loyal of customers. Mars Inc., a prodigious user of television advertising, always offered excellent value for money and was much more aggressive than Hershey in grabbing retail display space. It was steadily chipping away at Hershey’s lead. In 1973, with victory in sight, Forrest Mars, in a career full of surprising moves, did the most surprising thing of all: he turned over all his shares in his businesses to his three children and resigned from the company. His two sons, Forrest Jnr and John (who had both worked in the company from leaving college) were left in sole charge.
To their credit, Forrest Junior and John changed very little. The individual companies, by now collectively turning over $800 million a year, ran as they had always run. The principles Forrest had established – quality, individual responsibility, mutuality, efficiency and freedom from outside investors – remained in place, as did the unique corporate work style. The only noticeable change was that one boss (Forrest, who managed mostly from a distance) was swapped for two bosses who managed in a very hands-on style. Individual company heads, until now allowed to run things almost autonomously, (unless they missed their targets in which case they found themselves in Forrest’s crosshairs), at first struggled with the new regime. But enough had remained unchanged to maintain continuing success and, in the mid-1970s, Hershey was finally overtaken, whilst in the UK, Mars would soon be on the verge of overhauling both Cadbury and Rowntree’s.
The problem child of the Mars family of businesses in the early 1980s was Kal Kan, whose loss-making performance was in complete contrast to the highly successful pet foods businesses in the UK, Europe, Australia and South America. One of the key Mars’s philosophies shared by Forrest Junior and John was that success ought to be transferable, so the US pet business moved to adopt UK recipes and brand names such as Pedigree and Whiskas. Changing over the Kal Kan brands to their new identities was rocky at times but ultimately successful – Kal Kan’s market share doubled by the end of the decade – vindicated Forrest’s original beliefs, as well as reminding Mars that how to do things properly was how to do things the Mars way.
A key theme under the Mars brothers, who by now had been joined by their sister Jacqueline, was the globalisation of what until that point had been a collection of semi-autonomous regional businesses. Their sponsorship of the 1984 Olympics in Los Angeles had been a success in the US businesses, but following decades of autonomy abroad, the company had barely any brands on Olympic hoardings that were recognisable across all markets in all countries. In addition, the US Mars Bars and Milky Ways were a completely different pair of products in the US compared to the rest of the world.
Outiside the US, Snickers was known as Marathon and M&M’s as Treets. Pet food names also varied. So it was decided to harmonise the brand, ending the problem of sponsoring future Olympics and World Cups across national frontiers and reaching a global audience with global brands. The advent of satellite television in Europe had made a nonesense of national advertising boundaries, a further spur for change.
Changing brand names that had been around for decades was a bold and forward-thinking move, but in other areas the business had become a lot more cautious under the new regime. In 1982, Mars had passed up the chance to have M&M’s feature in the film ET, deciding an alien was too scary to asso
ciate with a brand aimed directly at children. The subsequent runaway success of recently-launched Reeses Pieces announced that a Hershey fight-back had been launched, which indeed culminated in the company regaining leadership of the US chocolate market in 1988, much assisted by the purchase of Cadbury’s struggling US business and the subsequent acquisition of US Cadbury brand rights. Mars had been offered first refusal on the Cadbury deal but had declined; it saw difficulties in converting the Cadbury way to the Mars way. There were, however, one or two new product launches in the 1980s and a handful of acquisitions, of which by far the most notable was the 1986 purchase of DoveBar International Inc., makers of a hand-dipped ice cream bar. It was a move that mystified competitors and commentators alike.
Despite grossing over $7 billion in 1988 with three of the four best-selling chocolate products in the US (Snickers, Plain M&M’s, Peanut M&M’s), such was the apparent inertia creeping through the organisation that Fortune magazine ran a long article asking whether or not the Mars siblings had lost the corporate plot. But intimations of the company’s demise were premature. In 1989, Mars Inc. switched tack on new product development and instead of trying (and mostly failing) to invent new chocolate bars, it focused on differently flavoured brand extensions that greatly reduced the financial risk of innovation but still benefited from the company’s ability to persuade its consumers to give the developments a try. New lines like Peanut Butter Snickers and a host of new M&M variants were soon hitting the shelves. A much bigger surprise came in the same year when the Dove subsidiary launched ice cream versions of 3 Musketeers, Snickers and Milky Way. It was a move that would create an entirely new and profitable category in markets around the world for the now globalized range of Mars range brands.
The company was in the ascendancy again. By the end of the 1990s, the company was still neck-and-neck with Hershey in the US but had grown enormously around the world, operating over 40 factories globally, 25 of which were outside the US. Now it began to focus much of its energies on finding new markets for the Mars range of confectionery, pet food, rice and vending machine drinks. And with an eye to the future, particularly issues it could see down the line surrounding the ethical sourcing of crops - not least its own key ingredients of cocoa and rice - one of Mars’s rare acquisitions came in 1997 when it purchased Seeds of Change, an organic seed company.