The Sweet, Secret World of Forrest Mars (Fortune, 1967)March 31, 2013: 5:00 AM ET
Barred from his father's company, he quietly got rich on his own. Now everything's wrapped in one tasty package and he sells more candy here and abroad than Hershey.
Editors note: Every Sunday Fortune publishes a relevant story from our magazine archives. This weekend, as children gather to hunt for candy-filled Easter eggs, we take a look at the family and culture that created some of America's favorite sweet treats.
by Harold B. Meyers
Not even all the executives of Mars, Inc., knew Forrest E. Mars well when he took over the Chicago candy firm three years ago. Their lack of knowledge was scarcely surprising. Forrest Mars is as deliberately anonymous as a business leader with his wealth and power can be. About the only thing that most employees knew for sure about their new boss was that his father--the company's founder--had given him a check, some candy-bar recipes, and instructions to go away more than thirty years before. Since then Forrest had been seldom seen around Mars, Inc., even after he became a director. For a time he had been barred from the plant. Now, at the age of sixty, he had finally got his hands on his father's company, merging it with his own Food Manufacturers, Inc. Soon after, he summoned a group of executives and other employees to a buff-colored conference room.
Mars did not just walk into the room; he charged in. His ring of hair was gray around his gleaming scalp, but he still had the athletic stance of a much younger man. He wore an English suit with wide lapels, and his tie was unstylishly wider still. "We didn't know if he was ahead of the times, or behind," recalls a participant. After a few quips, which sparked a little dutiful laughter, Mars talked of his plans and hopes for the Mars Candies Division, as the Chicago operation was henceforth to be known. He paused. "I'm a religious man," he said abruptly (he's an Episcopalian). There was another long pause, while his new associates pondered the significance of his statement. Their mystification increased when Mars sank to his knees at the head of the long conference table. Some of those present thought that he was groping on the floor for a pencil that had slipped from his hands. From his semi-kneeling position, Mars began a strange litany: "I pray for Milky Way. I pray for Snickers..."
For men accustomed to an orderly kind of life within a closely held, profitable company, it was an unnerving moment. But Mars's litany had purpose. His listeners, without knowing it, were being introduced to a basic tenet of Forrest Mars's management system: all members of an organization must be united in a coordinated drive to a single objective-profit-through faith in the company's leadership and product. Trained as an engineer, Forrest Mars is a practitioner of scientific management. To him, management is "applying mathematics to economic problems." He has thought through his operating methods down to the finest detail, defined his goals completely, evolved an intricate system of controls through charts and tables--and woe betide any executive who wavers on the well-marked path to profitability.
Whether it is prayer or logic that does it, Mars's operating methods seem to work. In thirty-two years away from Chicago, he had amassed a large personal fortune (it is estimated now at about $250 million). Most of his wealth was accumulated through enterprises that he started--M & M's candies and Uncle Ben's rice in the U.S., along with the biggest pet-food company and the third- or fourth-largest candy company in the United Kingdom. At the time of the merger the annual sales of Food Manufacturers, Inc., including its subsidiaries, were several times larger than those of the old Mars, Inc. After the merger the combined corporation (about 80 percent owned by Forrest Mars and his family) took the name of Mars, Inc. In 1966, FORTUNE estimates, it had sales in excess of $350 million--compared to $226 million for the best-known U.S. candy company, Hershey Chocolate Corp.
The first candymaker in the Mars family was Forrest's father, who struggled hard for wealth, achieved it late, and enjoyed his riches fully, if briefly. Frank C. Mars was the son of a gristmill operator who had moved to Minnesota from Pennsylvania. In December, 1902, he married Ethel G. Kissack, and Forrest was born fifteen months later. In 1910, Ethel divorced Frank in Tacoma, Washington, on grounds of non-support and was awarded custody of their son and $20 a month for his support. Frank was not always able to make the payments.
Soon after, Mars married another girl named Ethel--Ethel V. Healy. He had been working as a candy salesman but now he went into business in Seattle as a candymaker himself. The business failed; creditors took even his personal belongings. He started another candy company in Tacoma, but in 1914 he had to file for bankruptcy. Mars kept on trying, but brief prosperity seemed always to be followed by abrupt failure.
By 1920, Frank and Ethel Mars were back in Minnesota with $400 in cash. Here, in the midway district between St. Paul and Minneapolis (deliveries could be made to either city for only a nickel trolley fare), Mars turned to the candy business once more. The family lived upstairs over a one-room factory. Every day Frank rose at 3:00 A.M. to make the candy, which Ethel sold to retail stores. Soon Frank began experimenting with candy bars, and about 1923 he struck on the recipe for the Milky Way bar. In one year sales leaped from $72,800 to $792,900.
Having long since proved that he could cope with failure, Frank Mars finally had a chance to see what he could do with success. Before long, he was distributing his candy bars nationally. By 1930, Mars, Inc., was one of the largest candy-bar makers in the country. Sales that year totaled $24,600,000 while net profits were $2,296,000.
"I have a lady in the balcony, Doctor"
The previous year Mars, Inc., had moved to Chicago to a large new plant near Oak Park, where Frank felt he would find a reliable work force. He always paid higher-than-average wages, and had his pick of employees. One worker who was hired when the new plant was built says that he was chosen out of a large group of applicants because he had manners enough to remove his hat on entering the hiring room. But Mars could be rough with employees who did not follow instructions. Once when he saw a worker begin to wrap a bar that had dropped on the floor, he leaped off a catwalk, seized the offending employee, and hustled him off the premises.
Though sales dropped by nearly two-thirds in the early years of the depression, Frank Mars was able to live--and spend--on a grand scale. Mrs. Mars had a $20,000 Duesenberg town car and, as a runabout, a sixteen-cylinder Cadillac. For a summer place, Frank built Marlands, a 100-by-200-foot log mansion beside a lake near Minocqua, Wisconsin. But his real prize was a 2,700-acre Tennessee showplace, which he called Milky Way Farms. In the course of a couple of years he spent some $2 million on the estate, where at least 100 men were regularly employed. His herd of registered Hereford cattle roamed over hand-raked fields; his show horses were stabled in stalls of polished oak.
Frank Mars died in 1934 at the age of fifty. Control of Mars, Inc., passed to his widow, Ethel V. Mars. Although she became president, she had long since ceased to take an active part in the business. After Frank's death, she developed an outstanding racing stable at Milky Way Farms. In six years she bought $598.400 worth of horse-flesh at the annual Saratoga yearling sales, and in 1940 her Gallahadion won the Kentucky Derby, paying 35 to 1.
While the president concentrated on horse racing, Mars, Inc., was run by her half brother, William L. (Slip) Kruppenbacher, the vice president and general manager. Kruppenbacher, one of Frank's first full-time salesmen, did things just as he imagined Frank would have wanted them done, and Mars, Inc., continued to be profitable all through the Thirties. In 1939, Kruppenbacher introduced his first major innovation when he enlarged the advertising budget and sponsored Dr. I.Q. ("I have a lady in the balcony, Doctor"), a popular radio quiz show. Sales shot up, and continued to grow even during World War II. Then, on Christmas Day, 1945, Ethel Mars died.
During the years of Mars, Inc.'s early development, Forrest Mars had been far away. He remained with his mother after his parents were divorced and seldom, if ever, saw his father as he was growing up. His mother supported herself by working as a salesclerk. Forrest attended public schools in Seattle, in North Battleford, Saskatchewan, and in Lethbridge, Alberta. In 1923 he enrolled in the mining school of the University of California at Berkeley, but transferred to Yale in his junior year. There be entered the Sheffield Scientific School to study industrial engineering.
Shortly after graduating from Yale in 1928, Forrest--already balding and more than a little brash--joined his father at the new Chicago plant. Forrest--like Frank--had definite ideas on just how things should be done. While he carried no formal title, his position as the boss's son gave him sufficient standing to see an occasional idea put ill to effect-until Frank heard about it and countermanded his son's orders. One former associate recalls that Frank Mars "was proud as Punch of his son-but he wasn't about to let him run things." In 1932, tradition says, Frank Mars gave Forrest $50,000, the foreign rights to Milky Way and other Marl) bars, and an edict: "This company isn't big enough for both of us. Go to some other country and start your own business."
Bars against the boardroom wall
Backed by loans from his father's company, Forrest Mars set up a factory at Slough, an industrial town near London, after making a survey of European candy markets and manufacturing techniques. His first product was an Anglicized version of the Miiky Way bar; he used an English chocolate coating instead of the Hershey coating used in the U.S. His first plant was in an old building, and once he was nearly ruined when rain poured through its leaky roof onto his supplies of raw materials and stacks of candy. But he had a good product, and the British sweet tooth did the rest. Mars, Ltd., was soon among the leading candy firms in the U.K. In the only interview he is ever known to have granted to any reporter, Mars told the Candy Industry and Confectioners Journal last year: "If you make a really good product that people want and are willing to pay for, money will come."
Mars's insistence on quality amounts almost to fanaticism. A former employee recounts that on one occasion Forrest came across an improperly wrapped candy bar at a store in Slough. He immediately returned to his plant, summoned the company's top management, and had cases of the ill-wrapped candy bar brought to the boardroom. While the entire office staff watched in fascination through a large glass panel set in the boardroom wall, Mars hurled candy bars one by one against the glass. Fortunately it did not break.
Soon after Mars, Ltd., was established, Forrest set up another company to produce food for pets. Up until then English cats and dogs had generally been fed table scraps, and Petfoods, Ltd., had little competition--and few customers--at the outset. Today the company, the largest in a prospering industry, has over 50 percent of the British pet-food market.
At the outbreak of World War II, Mars returned to the U.S., leaving a trusted lieutenant in charge of his English properties. He brought with him a plan to mass-produce a European candy--sugar-coated pellets of chocolate--in this country. Aware that the war would disrupt supplies of cocoa, Mars cannily invited R. Bruce Murrie, a son of Hershey's president, to join him in the venture, which they decided to call M & M, Ltd. Says Murrie, who sold his 20 percent interest to Mars in 1949, "We had tremendous help from my father--an assured supply of chocolate and a lot of technical help."
About the same time, Forrest Mars began developing still another business based on a method of processing rice to improve its storability, nutritive value, and cooking properties. The first small plant in Houston was later enlarged with the help of a government loan and became the nucleus of what today is Uncle Ben's. Mars got one bad scare during this period. The Reader'$' Digest ran an article in 1944 about the marvelous new process for "converting" rice. Government officials, then searching for ways to feed huge numbers of troops in tropical areas, read the article and suggested that the company share its patented secrets with competitors. The suggestion--or threat--was never acted on, but one of Mars's friends suspects that this incident is one reason for his aversion to any kind of publicity.
When his stepmother died in 1945, Forrest Mars thought that he would finally get his chance to run his father's company. Forrest then owned a third of the company's common stock. His half sister, Patricia Mars Furst Feeney, had another third. Her half uncle, Kruppenbacher, owned about a sixth of the shares, and the remaining stock was split among a group of old employees--most of them loyal to Kruppenbacher and his traditionalist operating methods. Forrest hoped to gain control by forming an alliance with Patty, who had a large family and had inherited her parents' lavish tastes; her interest in the company focused on the size of the dividend. Forrest attempted to convince her that Mars, Inc., was not producing as large a return as it would under his management.
Early in 1946, Forrest Mars took over an office in the Chicago headquarters, where he sought to marshal evidence that it was time for a more aggressive management. But Kruppenbacher--who had become chairman and president on Ethel Mars's death--headed him off by spending four days with his niece at Marlands, the family's Wisconsin estate. Here, Kruppenbacher convinced her that loyalty to an uncle she had known all her life should come before dividends or a half brother she had seldom seen. "He bled sugar and water," according to one report.
Kruppenbacher, with Patty's support, continued to head Mars, Inc. One man suspected of loyalty to Forrest was tired (he went to work for M&M). Kluppenbacher started a pass system for entry into the plant--and, for a short while, let it be known that Forrest Mars was not among those eligible for a pass. Then a truce of sorts was struck, and in 1947 Forrest was given three out of nine seats on the company's board of directors. For years he kept the board in a turmoil as he contentiously put forward new ideas that were resisted more often than not.
At the time of the thwarted take-over attempt, Mars, Inc., had sales of just under $30 million. The sales of companies controlled by Forrest Mars totaled only about half as much. His foreign enterprises were doing well, but both M & M and Uncle Ben's were going through a difficult period of adjustment to postwar markets. In the years that followed, however, Forrest's companies grew much more rapidly than Mars, Inc.
In late 1959, James R. Fleming, Patty's third husband, replaced Kruppenbacher as president and chief executive officer of Mars, Inc. Near the end of the Kruppenbacher era, annual sales had reached an all-time high of about $60 million, but under Fleming they slowly declined.
In 1962, Kruppenbacher and his family sold their shares back to the company for $5,450,000. As a result, Forrest and Patty Fleming each owned 41 percent of the outstanding common. The rest-the balance of power-was held by a small group of employees. It was obviously an unstable and unsatisfactory state of affairs, and in 1964, Patty sold out to her half brother. (She died of cancer the following year.)
Everyone got what he wanted from the merger. James Fleming was given a salary increase--from $100,000 to $125,000 a year--and a title, chairman of the surviving corporation. Employees of the old Mars, Inc., who held stock received a handsome $1,800 for each of their shares. Patty Fleming got stock that provided a minimum income of about $350,000 a year. (Her shares were inherited by her seven children.) And Forrest Mars got what he had sought for years: firm control of his father's company.
Almost immediately, Forrest began changing the way of life--and business--at the old Mars, Inc. Since he believes that there should be as little differentiation as possible among employees, the executive dining room was dismantled. It had been decorated at Jim Fleming's direction in an old-English style with stained-glass windows and family crests on the wall for each person entitled to eat there regularly. Partitions between most of the formerly lavish private offices were knocked down and glass panels were installed in the walls of the few individual offices that remained. Divisional President Norman Vance Jr. explained to employees that the glass was installed to prevent office walls from becoming "barriers to communication."
Other changes were more substantive. Instead of relying on outside suppliers, chiefly Hershey and Baker, for its chocolate, Mars Candies has begun manufacturing its own coating--as M & M has done for years. And in line with Forrest Mars's emphasis on quality, the proportion of chocolate (the most expensive single ingredient) in each Mars bar has been increased substantially. Production lines have been expanded and modernized, and more emphasis has been given to the search for new products. But the most important change of all was Mars's introduction of his own rigorous system of management to the Chicago operation.
Black arrows for errors
Says Bruce Murrie, the former partner in M&M, "Brains are what Forrest wants most." Many of Mars's associates possess graduate degrees, including Ph.D.'s, and his executives are expected to emulate his intellectual approach to business. Mars reads avidly, and has been known to supply his subordinates with reading lists. Among the books he has recommended: Henri Fayol' s General and Industrial Management; Lyndall F. Urwick's Elementsof Administration; and James D. Mooney's The Principles of Organization. These erudite works share a common assumption: management is more science than art. Urwick writes that scientific management means "a wholehearted attempt to deal with every question arising in the conduct of business...in the temper and spirit of the scientist and by using the tools of definition, analysis, measurement, experiment, and proof."
Mars runs the company from an office at Marland, his country estate near The Plains, Virginia. Corporate headquarters is just an hour's drive away in a downtown Washington, D.C., office building. There a small general staff oversees and coordinates the company's worldwide operations.
Both general-staff and divisional executives are guided by a constantly revised and closely detailed administrative manual that summarizes Mars's management system. Each part of the system ties in with every other part, and nothing is left to chance. Controls all along the line assure Mars of full information about his multi-division operation, and full control over it. But there are also incentives that serve to reward initiative and efficiency at every level. Says a former Mars executive: "Forrest has the best management system I've ever come across. It permits decentralization and encourages initiative--but keeps firm control at the top."
In many respects the Mars method of appraising financial performance is patterned after the procedures pioneered by Du Pont. At regular intervals, company divisions and subsidiaries supply the Washington headquarters with charts and tables showing actual and projected performance. Twice a year the board of directors sits as an executive committee in Washington. Divisional presidents are called in one by one--without aides--to present their latest detailed forecasts. On these occasions, intimidating black arrows on the charts point to every past error in forecasting, and the presidents must justify their previous mistakes while defending the accuracy of their current projections.
A rush to the time clock
Mars's principal goal for his company is growth in sales volume. But his chief measure of performance is return on total assets used in the business. Calculations made for this purpose follow a sophisticated formula that enables Mars to evaluate every division and every manager on a uniform basis. The formula uses the original (rather than depreciated) cost of all purchased and leased assets, and a definition of "earnings" that includes profits before taxes plus interest on borrowed money, rent on leased assets, and depreciation. Mars believes that this unusual formulation removes possible distortions from comparisons of performance.
Mars expects a pretax return on total assets of 22 percent--no less and no more. Less than that return means, of course, that profits drop. More than that indicates that too little may have been spent on advertising or on product improvements that might have increased sales volume. Year-to-year fluctuations are permitted-for cause. But, says a former executive: "Forrest gets his 22 percent in the long run."
Fair treatment of employees is an integral part of Mars's operating technique-not just to keep unions out (no Mars plant has ever been organized), but to provide incentives to keep everyone working at peak efficiency. As a matter of policy, the company pays at least 10 percent more than other employers for comparable jobs in each plant's area. There is an elaborate grievance system in each plant, and fringe benefits are generous. Mars calls employees "associates" and fringe benefits "diversification of payroll." Moreover, every Mars worker--from a $100,000-a-year divisional president down--gets a 10 percent "punctuality bonus" for each day on which he punches a time clock on or before his scheduled starting time. Says a former associate: "I used to think it was a wonder no one got killed rushing to work."
Pay scales for salaried employees are set by "zones." Mars, Inc.'s president is in Zone I, divisional presidents are in Zone II, and on down to Zone VII (factory foremen and salesmen). Within each zone, salaries are linked to both sales volume and return on assets used in the business. The president of a division with sales of $30 million would be in Zone II, along with the president of a $75-million division. But his pay would be considerably less. This circumstance provides him--and his associates in lower pay zones--with an obvious personal incentive to work diligently for greater volume.
The link between salaries and return on assets forms an even sharper incentive. If return on assets (as measured by a moving average) falls below the 22 percent goal, paychecks for all salaried employees in the division are reduced. When performance improves, so do the paychecks.
Mars is scrupulous in all respects in his dealings with employees. Just after World War II, when M&M's prospects looked grim, a discouraged employee-stockholder offered to sell his shares at a very low price. Mars refused to take advantage of what he felt sure was a temporary setback in M&M's affairs. He bought back the shares--but insisted on setting the price at five times the amount that the man had asked. Says an old friend: "Forrest cuts square corners."
A difference in profitability
At the time of the merger Mars's company, Food Manufacturers, had total assets of $56 million and estimated sales of about $200 million. The old Mars, Inc., had assets of $22,600,000 and sales of about $50 million. Since then, growth has more than met Mars's goals. FORTUNE estimates that 1966 sales of the Mars Candies Division amounted to about $65 million. M & M's volume was about $50 million, and Uncle Ben's sales totaled approximately $30 million. Abroad, Mars, Ltd., and Petfoods, Ltd., had sales of about $75 million each. Other divisions and subsidiaries of Mars, Inc., here and abroad, contributed an additional $60 million or so to sales.
Last year Mars, Inc.'s after-tax profit totaled only about $10 million-much less than Hershey made on its lower volume. Part of the difference is due to advertising. Hershey's name is virtually synonymous with "chocolate" and it sees little need to advertise. Mars, Inc., aggressively seeking growth, is a heavy user of TV. The expenditure seems to be effective. Mars, Inc.'s candy sales in this country account for nearly 10 percent of the U.S. total.
The industry in which Mars has such an important share has been growing steadily for years. Per capita consumption of candy in the U.S. is high--about eighteen pounds a year--and the chief candy-buying part of the total population, children and teen-agers, has been growing rapidly. But the candymakers have had to fight hard to keep their good name--and market. The National Confectioners Association is engaged in a running squabble with dentists over whether candy causes more tooth cavities than other foods (the N. C. A. says no, the dentists say yes), and even children are becoming more calorie-conscious.
Meanwhile, competition within the industry is getting stiffer. Many relatively small, family-run candy firms have been taken over and given new muscle by larger firms seeking diversification. Last year Warner-Lambert Pharmaceutical acquired Williamson Candy; American Home Products gobbled up E. J. Brach & Sons; and P. Lorillard absorbed Reed Candy. The added resources of management and capital supplied by their new parent companies will help the candymakers to scramble more effectively, through stepped-up merchandising and advertising programs, for shelf space and consumer acceptance.
"They'd have shoved me under"
This year Forrest Mars has been rearranging the management roster of Mars, Inc.--typically, with no public announcement whatsoever. In early 1967 he stepped aside as president and chief executive officer of Mars, Inc. The man to whom everyone in the company will now report (and who, in turn, will report to Mars) is A. Colin Baxter, fifty-four. A British citizen who won his colors as a cross-country runner at Cambridge, Baxter was a director of Unilever Ltd. and "world coordinator of food" at a salary estimated at about $75,000 a year. At Mars he will make more than double his previous salary, and presumably will also receive stock options.
Just nine years younger than Forrest Mars, Baxter is probably an interim chief executive, who will serve only until one or both of Mars's sons have had enough seasoning in the business to take over. Forrest E. Mars Jr., thirty-five, is president of Mars Chocoladefabriek, N.V., which makes candy in the Netherlands for sale throughout the Common Market. He recently moved his family to Paris, apparently in preparation for a new candy venture there. His brother, John, who is thirty-one, formerly headed up Vendepac in London, a Mars-owned vending-machine and institutional feeding operation. Lately he has been directing studies of business opportunities for Mars in Canada and Australia.
Like their father, both sons are graduates of Yale and hard-driving businessmen. But John seems to be the more aggressive, and more like his father and grandfather in personality. On a tour of one plant, John was warned to step out from under an overhead conveyer. "In some plants I've been in," he said, "they'd have shoved me under." Replied the guide: "Maybe they know you better than we do."