Mars Inc.: A History of Chocolate, Strategy, and Acquisitions

This document summarizes the history and strategy of Mars, Incorporated, a massive privately-owned company largely unknown despite owning iconic brands like M&M's, Snickers, Milky Way, Ben's Original Rice, and various pet care businesses. The company's success hinges on its family ownership, long-term vision, focus on scale economies, brand building, and continuous innovation, often driven by the empire-minded vision of Forrest Mars.

Key Themes and Ideas:

Secrecy and Family Ownership: The Mars family is the second wealthiest (and perhaps first most secretive!) family in the United States. "Mars itself is 100% owned and deeply intertwined with the Mars family." This private ownership allows for a long-term strategic outlook, prioritizing Return on Total Assets (ROTA) over short-term profitability. "Complete ownership, or at least board control… is freedom. You can do things like invest for 10 years from now... If you believe in the long-term vision, you can sub optimize the short-term. For Mars, that means private ownership."

The Importance of Being First to Market and Establishing Taste: Milton Hershey's success was attributed to being the first to scale chocolate production in America, setting the standard for American chocolate taste. Hershey was crazy in believing in the potential for all this, but because he invested so much money, he set up the only scale chocolate production facility in America. He was able to set this taste for the country, which basically locked him in as what chocolate was in America."

The Rise of Combination/Count Line Candy Bars & Hershey as Chocolate Supplier: The emergence of combination bars (later termed "count lines") like Baby Ruth and Snickers created new business dynamics with Hershey acting as the primary chocolate supplier. "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."

Forrest Mars: An Empire-Minded Visionary: Forrest Mars is a central figure in the Mars story, driven by ambition and a desire for control. "I’m not a candy maker, I’m empire-minded." His strategic decisions, like establishing Mars Limited in the UK and partnering with Murrie for M&M's, were pivotal for the company's growth. His focus on high quality standards was legendary, though his temper was equally as well-known.

M&M's: A Brilliant War-Time Innovation: Forrest Mars' M&M's venture, initially a partnership with Bruce Murrie of Hershey's, thrived due to its innovative candy shell preventing melting and its exclusive contract with the U.S. military during WWII. Forrest is offering Murrie the chance to have wealth, a legacy, and a business to pass on to his son...Hershey has an exclusive arrangement to supply chocolate to the US military...Forrest Mars has this thing that if you think the military liked count lines, they’re going to love these non-melt candy-coated chocolates."

Diversification and Strategic Acquisitions: Mars, beyond candy, expanded into pet food (Chappie/Pedigree/Whiskas), rice (Ben's Original), and later, health bars (Kind). They also strategically acquired companies like Dove, and Wrigley. Acquisition of Wrigley brought not only brands like Altoids and Lifesavers, but also well-developed distribution networks, such as through Starbucks. They bought a significant stake in the Banfield Pet Hospital chain, which is the largest chain of pet hospitals in America. Also related, is the recent purchase of Kellanova to further diversity product lines.

Marketing and Branding: Mars excels at marketing and branding, investing heavily in advertising campaigns, associating with popular brands (NFL, Olympics, NASA), and adapting products to local tastes.

"They find ways to associate with national or global premier brands that everyone loves, that you have nostalgia for."

"Mars is constantly rebalancing the ratios of colors in M&M bags to suit current tastes."

Resilience and Universal Appeal: The candy business proves resilient, even during the Great Depression. "This tells you everything you need to know about the resiliency of the candy business. Mars’ revenue goes up to $25 million in 1932. They’re just growing hugely...from $800,000 of revenue in 1924 to $25 million in 1932, all amidst the throes of the worst years of the Great Depression." Candy, because of it's addictive qualities and universal enjoyment, experiences recurring purchases that are difficult to supplant. "A survey done by the Food Institute says that 98% of households buy candy every year. Of those, 97% are recurring purchases at an average of 35 times a year."

Scale Economies and Market Dominance: Mars and Hershey dominate the candy market domestically. Their scale allows them to influence shelf placement, pricing, and commodity trading.

"Given the impulse nature of purchases here, it really is whatever candy is right in front of your face... Being the scale player, being able to have the muscle with retailers to push Hershey’s and other candy to the back of the aisle or bottom of the shelf, makes all the difference in the world here."

"Mars has actually made many billions of dollars of profit from commodity trading over the years."

Power: Mars's power derives from Scale Economies and Branding.

Key Facts and Statistics:

• Mars crossed $50 billion in sales last year.
• Mars is one of the top five largest private companies in America.
• The Mars family is worth $117 billion.
• In 1924, Milky Way did $800,000 in sales in its first year, and Mars reached $25M in sales by 1932.
• Mars and Hershey each have about 24% market share of candy and confections in the US.

Outstanding Questions/Areas for Further Research:

• What are the exact color ratios in M&M bags and how do they change?
• The details of Mars' commodity trading strategies and profitability.
• The role of Banfield Pet Hospitals and other ancillary brands.
• The specific terms of Mars' agreement with Berkshire Hathaway regarding Wrigley.
• What is the potential overlap of RXBAR and Kind Bar?
• What is the impact of Nestle and other competitors?

This document provides a foundational understanding of the Mars story. The company's enduring success is a testament to its long-term focus, strategic decision-making, and unwavering commitment to quality and brand building.

Timeline of Main Events (Mars Inc.)

• 1883: Frank Mars is born (location debated: Pennsylvania or Minnesota).
• Late 1800s: Frank Mars and his mother, Elva, bake bread, pies, cakes, and candy. Candy primarily penny candy, not chocolate.
• Early 1900s: Milton Hershey starts selling Hershey's chocolate bars in Pennsylvania (1900). Hershey's doesn't yet have scaled production.
• 1902: Frank Mars briefly marries Ethel Kissack and they have a son named Forrest Mars.
• Early 1900s (date approximate): Frank Mars starts a candy business.
• 1920s: Over 40,000 candy bars being made in America, mostly regional operations that purchase chocolate wholesale from Hershey's.
• 1922: Frank Mars introduces the Mar-O Bar, his first combination bar (candy bar). It is not successful.
• 1923: Frank Mars' estranged son, Forrest Mars, reappears and teams up with him.
• 1924: Milky Way bar is released by Frank Mars; becomes a big hit. Sales go from $73,000 to $793,000 in one year.
• 1928-1929: Mars builds a factory in Chicago.
• 1930: Frank Mars creates the Snickers bar, named after his favorite horse.
• 1932: Mars adds 3 Musketeers to the lineup. Revenue reaches $25 million.
• Early 1930s: Forrest Mars is in England, he comes across Chappel Brothers, a canned dog food company.
• Mid 1930s: Forrest Mars leaves Mars Incorporated due to disagreements with his father. He takes $50,000 and foreign rights to the Milky Way recipe.
• Mid 1930s: Forrest Mars launches the Mars Bar in the UK (adapted Milky Way recipe). He also buys Chappel Brothers, a canned dog food company, and develops a new method for milling rice called parboiling.
• 1942: Forrest Mars and a chemist form a joint venture in Houston, Texas to produce parboiled rice to sell to the military. This becomes Uncle Ben's Rice.
• Early 1940s: Forrest Mars returns to the US due to WWII; encounters dragée.
• Early 1940s: Forrest Mars and William Murrie work out a deal to start a new joint venture candy company called M&M’s. Forrest owns 80% and Murrie's son Bruce owns 20%. Hershey's provides chocolate.
• World War II Era: M&M's sales primarily to the U.S. Military. Air Force is the biggest customer.
• Post World War II: M&M's relaunched as a consumer candy.
• 1950: Forrest Mars hires Ted Bates & Company ad agency for market study; M&M’s appeals to kids.
• 1954: M&M’s ads featuring the slogan "Look for the M on every piece."
• 1955: Mars gets into the vending machine business through VendPack.
• Mid- to Late-1950s: Forrest Mars's various companies are doing approximately $200 million in revenue.
• 1963: Patty sells out her shares in Mars Inc. to Forrest, making him the majority owner with two thirds of the business.
• Mid-1964: Forrest Mars gains full control of Mars Incorporated.
• 1979: Mars begins marketing their products as "impulse buys", getting their candy bars placed near cash registers.
• 1984: Mars starts sponsoring the Olympics, unifying product brands globally.
• 1986: Mars acquires Dove (ice cream bars and chocolate)
• 2008: Mars acquires Wrigley for $23 Billion.
• 2000s (Date Approximate): Mars acquires a significant stake in Banfield Pet Hospital.
• 2017: Mars acquires VCA (veterinary centers) for $9.1 Billion.
• 2020: Mars acquires Kind bars.
• 2024: Mars is planning sale of Kellanova. Forbes pegs Mars' worth at $117 Billion enterprise value.
• Fall 2024: Air date of Acquired podcast episode on Mars Inc.

Cast of Characters (Mars Inc.)

• Frank Mars: (1883-1934) Founder of Mars, Inc. Started in penny candy, later innovated with combination chocolate bars. Father of Forrest Mars. Lacked Forrest's national and international ambition.
• Elva Mars: Mother of Frank Mars. Helped Frank bake and make candy.
• Ethel Kissack: Frank Mars's first wife and mother of Forrest Mars.
• Forrest Mars Sr.: (1904-1999) Son of Frank Mars. Visionary entrepreneur who expanded Mars into an international empire. Known for his drive, demanding nature, and focus on quality. Created Mars Bar, M&M's, Uncle Ben's.
• Ethel V. Healy (Ethel number two): Frank Mars's second wife. Mother to Patricia.
• Patricia: Frank Mars's daughter with his second wife.
• William Murrie: President of Hershey's. Partnered with Forrest Mars to create M&M's through his son Bruce.
• Bruce Murrie: Son of William Murrie. 20% owner and head of sales of M&M Limited Partnership during the WWII era. Later bought out by Forrest Mars.
• Pierre S. du Pont: Nephew of Pierre S. du Pont, Forrest’s roommate at Yale.
• Forrest Jr. and John Mars: Sons of Forrest Sr., grew up in England and took over the business later.
• Warren Buffett: CEO of Berkshire Hathaway. Provided financing for Mars' acquisition of Wrigley.
• Milton Hershey: (1857-1945) Founder of Hershey's. Pioneer in mass-producing chocolate in America.
• Rene Haas: CEO of Arm Holdings.
• Jo?l Glenn Brenner: Author of "The Emperors of Chocolate," a definitive history of the Mars family and company.
• Deborah Cadbury: Author of "Chocolate Wars."
• Rudolph Lindt: Swiss chocolatier who accidentally discovered the conching process for smooth chocolate.
• Daniel Peter: Created milk chocolate by combining baby formula with cocoa and sugar.

Frequently Asked Questions About Mars, Inc.

What makes Mars, Inc. such a unique company?

Mars, Inc. is a privately owned, family-controlled global company that owns a vast portfolio of well-known brands ranging from candy like M&M's and Snickers to pet food like Pedigree and Whiskas, as well as businesses like Ben's Original Rice and Kind bars. With revenues exceeding Coca-Cola, Mars maintains a low profile despite being one of the largest private companies in the United States, deeply intertwined with the Mars family, who prioritize long-term vision and quality over short-term profits.

How did Frank Mars initially get into the candy business?

Frank Mars started baking and creating candies with his mother after school, utilizing the extra flour his father brought home. He initially focused on penny candies like gumdrops and licorice since chocolate was not yet widely available or popular in America. He sold these unbranded sweets wholesale to local retailers and drugstores, primarily targeting children.

What was Milton Hershey's crucial innovation that shaped the American chocolate industry?

Milton Hershey successfully scaled the production of milk chocolate, making it affordable and widely accessible. By setting a low price point of 5 cents for his Hershey bar and pushing distribution everywhere, Hershey established the taste of chocolate for the American public. He also became a key supplier to regional candy entrepreneurs.

What were some of Forrest Mars's key business strategies and innovations?

Forrest Mars was empire-minded and focused on quality and efficiency. He took the foreign rights to the Milky Way recipe and created the Mars Bar in the UK which became a hit. He implemented production system improvements and was obsessed with quality, famously throwing a glass across the room upon finding a defect. He established a partnership with Bruce Murrie (M&M's) using Hershey's chocolate and leveraging Murrie's military connections during WWII.

What was the significance of M&M's development and launch?

M&M's were innovative because of their candy shell, which prevented melting and made them ideal for military rations during World War II. Forrest Mars partnered with Bruce Murrie of Hershey to ensure a chocolate supply. After the war, Mars focused on consumer marketing, and adding the "M" print protected against copycats, building brand recognition and trust with consumers.

How has Mars, Inc. adapted to changing consumer preferences and market trends?

Mars has diversified its product offerings beyond candy to include pet care, food, and healthier snack options like Kind bars, demonstrating an ability to anticipate and adapt to changing consumer tastes. They also have a sophisticated commodities trading department which allows them to avoid risks associated with commodity price spikes. They also adapted to consumer demand over the years, rebalancing the ratios of colors in M&M bags to suit current tastes.

How important is marketing to Mars and its competitive advantage?

Mars relies on marketing to create durable brands. This includes associating with premier global brands that everyone loves and for which people have nostalgia. M&M's, Snickers, and Milky Way were better products due to marketing and brand building, establishing a frame of mind and a trust with consumers.

What are some key elements contributing to Mars, Inc.'s sustained success over the long term?

Key elements include scale economies achieved through dominant market share, strong branding built over decades, diversification across various sectors (candy, pet care, food), and a focus on quality and efficiency. Their commitment to a long-term vision and private family ownership allows for investments that may not yield immediate profits. Finally, they maintain the discipline of marketing to achieve and maintain market share.