Mars Inc. - The Chocolate Story (Audio)

okay David how many current varieties of M&M's can you name oh wow okay well plain peanut peanut butter uhhuh actually plain is technically now called milk chocolate oh interesting there's dark right yep which I've got right here uh they had mint for a while did they discontinue mint mint is a holiday only theme so that's a seasonal one oh what else I mean at the end of the day it's kind of only plain and peanut that matter right I think in sales numbers are there pretzel ones there are pretzel ones there are also almond oh

almond see I yeah I'm allergic to almonds so I never think about almonds there's also some weird ones Carl yeah 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 oh yeah I remember the Krispies yeah and then there's some specialty ones dark chocolate peanut which I really want fudge brownie campfire s'mores and caramel cold brew ooo I don't know about any of these and then there's these really wild limited edition ones in addition to Holiday mint birthday cake chili

nut and pumpkin spice latte that sounds disgusting I know but yes I think you are right the milk chocolate and the peanut are the sales drivers yep all right should we do it let's do it who got the TRU [Music] is it you is it you is it you who got the truth now is it you is it you is it you sit me down say it straight another story on the way got the truth Welcome to The Fall 20124 season finale of acquired the podcast about great companies and the stories and playbooks behind them

I'm Ben Gilbert I'm David Rosenthal 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 light-hearted fair 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 yeah 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 absolutely and the Mars family is way more quiet and reclusive than the comprod family too they're way more quiet and reclusive than anybody 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 I know wild Mars cross $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 AC Q2 we just had one of my favorite conversations ever on the show in part because I just love talking computer architecture with Renee H 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 gosh between synopsis and now arm we're going to have to rename aq2 into like acquired semiconductors totally it was a great computer science lesson and history lesson sort of

all rolled into one so go subscribe to the aq2 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 ctie from Boston we will email you with details on how to claim your free Rayban metas and 10 other folks in addition to cty will also o receive free acq dad hats so keep an eye out in your email if that is you now before we dive in we want to briefly thank our presenting sponsor JP Morgan payments for an

incredible Year yes just like how we say every company has a story every company's story is powered by payments and JP Morgan payments is a part of so many of their Journeys from seed to IPO and Beyond yep so with that this show is not investment advice DAV and I may have investments in the companies we discuss although not Mars obviously and the show is for informational and entertainment purposes only David where do we start our story o 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 which we will get into as we go here but before really we start have to say a thank you to Joel Glenn brener 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 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 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 yep okay so back to 1883 and uh let's just call it Minnesota when Frank Clarence Mars is born now Frank's father is a flower Grist Mill operator and his mother Elva is a housewife both of those trades are going to become very important here so Frank sadly when he's very

young and and what I think was also very sadly common place 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 and what was candy at this point in time 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 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 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 them 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 exactly so this is

what Frank and his mom are making in their kitchen now fast forward to high school and Frank has kind of 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 etc for kids to

buy in that same year in 1902 he would also briefly marry a woman named Ethel kissak 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 forest forest Mars our real protagonist this story yes but put a pin in Forest 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 out of this one company named Mars yes not yet 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 the notorious 5cent just chocolate I don't even think they had made Hershey's with almonds yet it was just the like single 5cent slab of chocol bar called the Hershey bar 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 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 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 and there's not air conditioning yet 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 forest and sends Forest 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 do you know why what I think because nobody had any money to support him right and in particular Frank actually owed her $20 a month for child support for Forest 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 the grandparents I mean got to remember like we're in the early 1900s here this kind of stuff happened all the time yep so Frank undeterred by bankruptcy divorce being a deadbeat parent not paying child support he marries another woman also named Ethel unbelievable specifically they move to Seattle heyo 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 so this is two failed candy companies under his belt yep we're now on number three he sets up another candy business in Tacoma in 1914 out of his house yes he's running the business out of his kitchen 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 10 years have gone by they can now show their face around town again

so Frank sets up yet again 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 $50 billion annual revenue private family business Mars Incorporated s of it's not totally Frank that is the reason for its success yes okay so what's different now about this fourth candy company that Frank starts it's chocolate and chocolate is a completely different Universe than these Penny candies then caramels the first thing you have to know is it uses Coco

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 y so we got to 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 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 y he sold it for a million dollars in 1900 which is 36 37 million today with inflation 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 Colombian Exposition which I didn't know this was the precursor to the world Fair he tries chocolate for the first time and he's smitten in

the German Pavilion there there's a German company that is displaying chocolate and chocolate making equipment and Hershey is so taken by the rich complexity deliciousness of chocolate that he buys from this German company all of the equipment on display there just like on the spot and says I want this shipped back to my production facility in Lancaster Pennsylvania out in the Philadelphia Countryside and I am going to set up a chocolate making operation now this is not milk chocolate this is just plain chocolate and it's worth noting too this concept of solid chocolate is a

pretty new thing like a chocolate bar up until I don't know 15 20 years before this basically all chocolate was drinking chocolate and so this notion of a machine that makes chocolate as bars at the Columbia Exposition is quite novel yeah I mean chocolate is a very rich very complex food very difficult to make and the history goes all the way back to monuma in the Aztecs and even before the Aztec about 5300 years ago around Ecuador wow I didn't even know that so we're talking about a 5,000 year old tradition here yes but like

you said until call it the late 1800s this is a drinking activity yes and it's so different than the chocolate we think of today there's no milk chocolate it's not sort of that nice breakable chocolate with a shine it's a very different and only barely enjoyable flavor it's better than everything else but it's not a bar of chocolate like you know today yep so you said milk chocolate and I said Hershey at this point is not making milk chocolate when he first introduces it to his caramel company as he gets deeper and deeper into the

Chocolate World he travels to Europe and learns about milk chocolate which had just been invented not too long before in Switzerland by the Swiss company Nestle sort of nestle we're going to talk about how to make chocolate and then we're going to 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 dear 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 yep yeah the fruit itself is actually quite delicious but it's like a pulpy sort of Milky type thing 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 bean 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 because that was the only place that was making chocolate they then get sorted sterilized did you remove the shell which is a process called winnowing so now you have nibs so just like the core like meat of The Bean after it's been roasted 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 chocolateers 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 cing coning is awesome it's basically like these big cylinders right that like spin around and around and smooth out all these particles yeah and there's a great story back in 1879 that Rudolph lint which is another name you may recognize the Swiss Cher 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 Stu 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 still not done yet 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 resolidified 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 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 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 that's exactly right 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 want to get like just the right seed crystals to set the right crystal in structure for how it'll come together 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 lined in that nice shiny break believe me

I appreciated chocolate before doing this episode but now like knowing how it's made and we haven't even gotten a milk chocolate yet which is even more complex this is more complex than Wine this is more complex than coffee o shots fired on wh and coffee you're going to hear something 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 there roasted but then you grind the beans and you just put the beans in liquid you're not getting any of these

steps here chocolate is remarkably hard to make I think that is a huge takeaway the fact that I'm looking down here at all these bags of M&M's and the 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 y 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 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 want to make 100% dark chocolate which is like very complex but very bitter no one's going to 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 lesin often times you'll get vanilla that's added in part of this process to kind of create a chocolate taste you know of yep okay so we're still in the Dark Chocolate World here let's talk about Nestle and milk chocolate which is sort of a funny misnomer right dark

chocolate it's just chocolate it's chocolate that doesn't have milk we needed to retroit 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 dark chocolate so what is milk chocolate then well now we need to flash back 35 years before Milton Hershey sells his first caramel company this is before he started the Hershey Chocolate Company 1866 HRI Nestle David to give some Credence to your comment is researching infant feeding as a mean 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 totally this is like one of many mind-blowing things in the research that I learned Nestle was a baby formula company that's how it started totally it's great in the same way that heres the uh birken bag was a bag for baby bottles yeah right who knew that baby

formula literally leads to the modern chocolate industry yep so incredibly one of his neighbors who desperately needed this formula because his baby was rejecting breast milk happened to be a choler guy by the name of Daniel Peter so he had this idea for milk chocolate in 1867 by combining the dehydrated baby formula with cocoa and sugar to create a creamy drink we're still in the drink era and people at that time were already pouring milk in with their drinking chocolate but he sort of said well can I create this as a pre-made product yep and

again to the issues with creating baby formula and then now here the issues with creating milk chocolate milk is not a stable product milk goes bad fast so how are you gonna put this in a product milk chocolate is something that sits on a shelf for six months and you can eat it and it's not spoiled it's kind of unique in that way totally so the issue that he kept running into this is Daniel Peter was that the mixture was grainy the water in the milk didn't blend well with the Coco's Bean oils it was

a mess and when he tried to dry the milk on his own it was really easy David to your point that it was spoiling and the chocolate would sort of be rancid by the end when he finished it eventually Daniel Peter walked away from HRI Nestle's powdered milk entirely and instead he tried condensed milk which is more like a concentrated syrup not actually dried powder and when he tried this plus then a final step of spreading the milk chocolate mixture on these big trays to slowly dry them and slowly add a little bit more heat

to turn it into these milk chocolate flakes that is the thing that worked that he finally was able to create this marketable milk chocolate flaky stuff that would turn into a drink and then later especially over at Cadbury and you know other European chocolate companies would turn into milk chocolate bars that Milton Hershey would try to ulate ah interesting I didn't actually know that it was condensed milk not the formula milk that ended up working for Nestle that's my understanding I got this from um there's a descendant of the Cadbury family Deborah Cadbury who wrote

this book called chocolate Wars and two chapters out of 20 or something are about Mars but it was this great primer on the history of the chocolate industry to learn all this um interesting yeah so you're deeper on this part than me so you might be asking yourself why was everybody going through all this trouble to combine milk and chocolate it's the perfect combination chocolate is so wonderful and complex and delicious on its own but it's heavily bitter and when you temper it not tempering in the chocolate process but sort of temper that flavor with

the smoothness and the creaminess of milk anybody who likes chocolate knows it's just absolutely delicious yeah so by 1879 once you have milk chocolate in solid form and then you have conching you now go from bars that are sort of really gritty and hard to bite to this kind of amazing mouth feel that just massively increased the market 10x it's hard to get a number on it but the market for what chocolate would be from 1879 onward is way bigger than before yep totally so back to Hershey he of course learns about all of this

as he's building his new Chocolate Company there in Pennsylvania and he decides that he's going to make milk chocolate too except he's not a chemist he doesn't employ any chemists he basically has no idea what he's doing and for years he just experiments via trial and error to try and find a way to produce milk chocolate he builds a huge new Factory in what would become Hershey Pennsylvania like the town of Hershey Pennsylvania he's basically betting it all of I am going to figure this out and I am going to bring chocolate and milk chocolate

to America at scale finally after a couple years he does hit on a method that works for producing milk chocolate however you know it's not quite as scientific as uh what you were just describing Ben and in the process effectively the milk does spoil a little bit which is why I'm sure all of our you know European and other inter non- American friends who are listening to us here and are saying like Hershey's that is so disgusting I have no idea how all you Americans eat Hershey's chocolate and why it tastes sour if you're not

used to it this is why it is sour yeah so there are two versions of the story and we don't know which one is true but either way David it leads to this thing that you're talking about which is there's kind of a little bit of a funk or a little bit of a sourness in Hershey's chocolate and that is just what Americans are used to so to Americans that's chocolate Okay account number one and this is all in the Cadbury book that I just mentioned after a series of laborious failures schabach who was a

scientist working with Hershey seized on the initiative and tried a slow evaporation of non-fat milk over low heat he succeeded in reducing the water content of the milk and added the sugar to create a sweet creamy concoction with no hint of a burned flavor better yet they found that that the mixture could be blended with the ingredients of the cocoa bean without spoiling to produce a smooth milk chocolate Hershey was thrilled slightly sour but distinctly original the perfect American chocolate bar now there's a second view which is that Hershey happened to acquire a large batch

of milk powder from Europe which had slightly soured by the time it crossed the Atlantic reluctant to waste such a large amount he used it to make chocolate and found that it sold Well Company officials have always denied that soured milk powder played any part in the company's formula amazing amazing thank you Deborah Cadbury for all that if written by a member of the Cadbury family you can imagine uh uh why that story is preferred regardless here's the amazing thing though that this illustrates when it comes to candy and specifically when it comes to Chocolate

the most important thing in the business is being first to Market and setting the taste of a specific area because again Europeans think that her's chocolate is disgusting and Americans are like this is chocolate when you're a kid and you eat this stuff for the first time your taste gets associated with oh this is what this is there's also a Nostalgia element to this too because the tastes are so strong so powerful so complex you bite into a Hershey's bar and like subconsciously or not your brain is going right back to Childhood when you first

ate that yep and actually today 75% of candy is eaten by adults and in fact it accounts for 90% of total purchases a complete departure from The pre- Chocolate World you were talking about with the penny candies at the checkout counter yep totally so Hershey he 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 period in America he was able to set this taste for the country which basically locked him in as what chocolate was in America fascinating and

he's smart about this too from a business perspective like Ben you mentioned the nickel Hershey bar he intentionally setss the price at a nickel he totally could have charged a lot more this is like this great delicious luxurious item he wants it to be ubiquitous so he prices the bars at a nickel and he pushes distribution everywhere five and dime stores grocery stores gas stations news stands Standard Oil stations he's pushing everywhere I mean he basically invents the modern candy industry by doing this yes and Hershey's kind of uniquely positioned to do it imagine you're

walking around today with 40 million bucks from the sale of your previous company you realize there's something going on in Europe you know it's going to work in America you can't get your hands on the formula but you're going to try and reverse engineer it your competitors can't self fund to the degree that you can and so he decides I'm rich I'm going to go big immediately and so he builds out this huge Factory to start production before he's even finalized the formula so it's really like a go Bigg or go home strategy where if

it works boom mass production Mass distribution I set the flavor profile in America and I set the brand in America for chocolate and if it fails it fails pretty catastrophically yeah so putting the final pieces on this initial Hershey success story right after Milton Hershey figures out milk chocolate and starts this production and is expanding distribution Nationwide World War I happens and the American Military as they have seen European armies do they Source chocolate as ration bars for the troops and Hershey's is the big supplier so millions and millions of American GIS now get introduced

and hooked on the slightly sour Hershey's chocolate and it's great it's a super dense store of energy it triggers an emotional response in the brain I mean everybody who eats sugar today knows that if you're eating sugar it is triggering I don't know if it's dopamine or serotonin but there's definitely a stimulus of a happiness release which if you're a soldier in World War I you could use a little of that 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 at least legally 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 Etc 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 cuz 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 candy bars being made in America oh my God 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 no 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 Curtis candy company which made it chartered an airplane to fly over the city of Pittsburgh and drop bars down with little paper parachutes over the city it is like a literal drop it puts the Visa drop to shade wow amazing we're gonna have to do that for an acquired marketing stunt at some point I know I know Charter and airplane and I think we would get in a lot of trouble if we did that these days I think so too 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 they've become the blue jeans and pickaxes company in this Gold Rush yes so like if you've ever wondered how the heck did Milton Hershey built a town and how do you become like Rockefellers or carnegies or Vanderbilts

like this is how 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 yep and there's one game

in town at least when when it comes to milk chocolate which is most of the market and that's Hershey 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 you're delivering these kind

of complete meals complete in quotes but it's carbohy Yates 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 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 miniapolis and starts up the fourth company he had seen out in Seattle and Tacoma that cream truffles were like really really popular so he brings the

buttercream truffles he steals from the companies out there and brings the concept back to Minneapolis that's quite successful he calls them Victorian buttercreams and I believe started coating them in chocolate using Hershey's chocolate 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 ethyl number two and after a couple years the business is doing like call it $100,000 is in Revenue so like really really well we're not talking Hershey levels of entrepreneurial ambition here but

that's not the ambition that Frank has and then in 1922 he decides that he's going to get in on this candy bar craze that is sweeping the nation and he introduces his first combination bar or candy bar called the marrow bar yes and do you know the other name for these types of candy bars that are sort of chocolate wrapped something else combination bars right uh the term I read was count lines oh no I didn't come across that so this is from the Cadbury book interestingly all chocolate before was measured by weight and once

somebody kind of rolls their first candy bar off the line you know what we now know today the Snickers bar 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 amazing it's like uh the KD furniture from the IKEA episode so here we are the first candy bar countline bar from the Mars company 1922 comes out and I don't want to say it's a flop but it's not a success no one's eatting marrow bars today 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 Forest 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 yes but first this is a great time to tell you about our presenting partner JP Morgan payments so everyone listening knows that started working with JP 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 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 they took our vision and said what if we did all of this times 10 yeah and deeper than that our two products and Brands just fit together like a glove JP payments is the world's largest payments franchise they power 18 of the top 20 corporations in the world and most companies we've covered on the show in fact 90% of Fortune 500 companies do business with them they're extremely trusted and at

first when we started working with JP 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 JP 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 JP Morgan payments they do literally $1 trillion in payment volume a day yeah listeners think about how insane that

is with JP Morgan processing over 50% of all e-commerce transactions in the US their software and payment rails basically underpin our entire Global Financial system yep and lastly payments is a process that every single one of your company's needs if you make Revenue you need payments and JP 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 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 ory a message in slack and we'll get you connected with their team our thanks to JP Morgan payments all right David So Forest emerges into his father's life and somehow we end up with the Milky Way how does that happen well let's Tell The Legend So summer 1923 young Forest Mars is 19 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 times sure we're different times sure we're different I mean it's debatable how true any of this is so we'll roll with it one night he's in Chicago in late summer and he gets instructions from his boss that they really got to blow it out they need to hit big time sales numbers here in Chicago Forest you got to go Blitz the whole city with posters marketing Camel cigarettes so Forest 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 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 we might go to jail also illegal yes and it lands young forest in jail so from his Chicago prison cell forest 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 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 6 years old and he somehow knows his phone number to call him from jail by the way his dad lives in Minnesota there's the whole state of Wisconsin between Minneapolis and Chicago but we're giving you a flavor of who Forest is here if forest was in

charge of coming up with the story of how this all went this is the story he would have come up with so yes exactly and as we'll see Forest is in charge of everything so Frank shows up at the jail father and son are reunited after 13 years during which yeah bed like you said they've had no contact with each other but Forest has his phone number to call him Frank bailes out Forest by now it's early afternoon of the next day and he says all right son let's go out for lunch and they go

to a lunchette to share a meal at which young Forest who is selling cigarettes orders a wholesome malted milkshake over this lunch reunion with his father they get talking they're getting reacquainted and Forest learns that his dad is now this middling successful candy entrepreneur and his dad's telling him about this marrow bar that he's introduced Faris says well hey I got an idea for you what if you take this malted milkshake here everybody loves a malted milkshake what if you take that and put that into a candy bar and you know like I'm obviously pretty

good at you know Street marketing here I bet I can go sell that all around the country so they get to talking jamming father and son and uh with that the Milky Way bar was born with the marketing of a malted milkshake in a candy bar and this is the story there's so much in between I have an idea that you should put a molted milkshake in a bar and actually what a Milky Way is it's nougat and caramel inside of chocolate it's a pretty different ingredient set than a malted milkshake there had to be

quite a bit of of R&D experimentation flavor development to figure out how to make the inside of your candy bar tastes like said malted milkshake but here is the exact quote from forest as recorded in the family archives that Joel got access to as part of her access to the company he says quote I'll be damned if a short time after our lunch the old man has a candy bar and it's a chocolate malted drink he put some caramel on top of it and some chocolate around it not very good chocolate he was buying cheap

chocolate back then but that damn thing sold no advertising oh Forest regardless of how all this happens Frank Mars does release in 1924 the Milky Way bar and it does become a big hit that year alone the first year that it comes out it does $800,000 in sales yes the Maro bar company went from 73,000 to 793 th000 in one year and that is all the Milky Way like undeniably huge success and effectively what they were doing was they were the first ones who said wait a minute if we're going to make a countline we

should do it in a mechanical way and so even though all these other people are selling these one-offs locally to different stores and handmaking them they were doing it in factory quantities all under the same production process and brand yep now it was early industrialization but it was still much more industrial than the rest of the manufacturers at this point totally now first question you should be asking here is wait Forest is in college now and ends up in jail in Chicago like what the hell happened here okay so when Forest is six years old

as we said he gets sent off to live in Saskatchewan in Canada In Like A Hard Scrabble rural mining Community with his grandparents unlike I imagine most of the folks around him Forest is a total outlier there he's super smart super entrepreneurial super ambitious and he's a super arrogant showoff probably because he's so insecure from his deeply traumatic childhood Deborah caby has a good line in her book Noah's flood wouldn't have deterred Forest Mars yes so when Forest 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 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 mind and this all makes sense he had an Engineers mind I

mean he also had a marketing mind but he ended up building a company that ran at incredible efficiency and thought through it as sort of a systems thinker yes 100% 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 Forest can go Source meet and other ingredients for the meals cheaper than budget from local wholesalers that he he and the chef would split the savings and just pocket the difference and of

course you might get a sense that farest is a good negotiator here this works like a charm and supposedly he's soon taking home like a $100 a week which if you annualize that to you know $5,200 a year that's about double what the average American was earning at that point in time so he's making bank 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 out earning the average head of household totally and you know what it is still true these days remember the Zuckerberg story of he and Adam D'Angelo are coding up synaps and people want to buy it for a million dollars yep just turns to software instead of candy bars yeah anyway this is all during Forest 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 cigar at 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 Forest had anything to do with the Milky Way idea or launch or anything like that meeting his dad seeing that there's a business in the family starts recalibrating Forest Ambitions even higher than just being an engineer who can now go run a m he's like oh I should run a business I should run

my family's business I should run my dad's business 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 it existence proof of a successful business has got to be a reorientation for him yeah even when the candy company before Milky Way was just making $100,000 a year I mean $100,000 a year I mean I don't know who knows what the margins are on that but even if they're 10% he's making

4X 5x what the average American is this is yeah good point eye opening to Forest so his literal words about this when he gets back to Berkeley are the hell with running some mines in the Backwoods I'm so glad you have these Forest quotes oh my God they're so good like supposedly in the Mars family archives there's a video of forest of like Forest 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 Joelle got access to go watch the video

which is where all these quotes are from it's amazing so he does his sophomore year at Berkeley but he's got his sight set higher now he with his father's help and presumably money for Forest junor year he transfers to Yale and he's going to Y with the goal of I want to learn about business he's like focused you know it's like the Zuckerberg story of going to Harvard yeah Forest wanted to go to Yale because it was Yale but really he wanted to go to Yale to meet all the other people yep so it just

so happens that his roommate his first year when he shows up at Yale is the nephew of Pierre S duPont wait really yes really that's Pierre S duPont his nephew is Forest roommate at Yale whoa and Pier S duPont at this point in time is not only running Dupont which is in and of itself one of the most important and biggest companies in America Pierre is also running General Motors at this point in time because Dupont is the largest shareholder in GM and that is a crazy story that we will save for a future episode

of acquired on how that came to be oh we got to do Dupont it's an incredible incredible story but back to Mars Forest worms his way through his roommate into getting to know pier and starts just pumping Pierre for lessons on how he runs his businesses like how does he run Dupont what is this Dupont planning system that you have how do you run a chemical industrial manufacturing process exactly how do you do accounting how do you do planning like I want to know everything about this business it's freaking unbelievable that here's this kid from

the mines in Canada who in a few short years in the 1920s has worked his way up through hook and crook that he's rubbing shoulders with one of the greatest businessmen of that era right up there with Rockefeller and Carnegie yep amazing so after a couple years when Forest 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 got to get out of Minneapolis we got to 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 yep if you want to go National Chicago is a great place to do it yeah and why else David you said it's the center of the candy industry why else is that true oh well I think yeah definitely at this point already the Wrigley company is there yep you bet yeah if you want to know how good a business gum is you should just ask yourself why did the Cubs

play in a building called Wrigley Field and why is there an entire neighborhood called Wrigleyville yes yes exactly it's kind of 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 going to move to Chicago but in his heart of hearts he's not the same man that Forest 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 want to 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 forest's designs on the outside he spends $500,000 in you know whatever this is 1928 29 buying a tra 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 kopas and like RW iron ornamentation it looks like a Hollywood studio building dude you're building a factory yeah must have been

great margins on those Milky Ways yeah exactly shows you the difference of where Frank's head is out and where Forest head is at and probably its differences over this Factory I would assume start to chafe the relationship here a little bit cha the relationship yeah he contracts the Austin company which had built and designed all the Ford automobile plants and assembly lines to build the lines in the Mars Factory so Forest 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 47

with multiple shifts like everybody else is just you know oh we run our lines during the day like hell no we spend all this money investing in this Factory we need to crank out as many Milky Ways as possible scale economies baby 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 and Forest is just like go go go go go 20 million of anything at this point in history is massive yes now one thing that they are not makinging

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 yep so very quickly Mars becomes Hershey's biggest customer they are buying millions of dollars of chocolate every year from Hershey 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 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 yeah they're very happy either way as long as chocolate is being sold in America they're taking their tax yep so once this gets going and money really starts flowing into the company Frank wants to spend it so he builds a 20,000 ft 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 Forest hates all of this he's trying to reinvest as much into the business as possible exactly he wants to be Dupont he doesn't care about a horse ranch or airplanes but even he I think probably would have to admit that he's thankful that Frank does these things because in 1930 the next year Frank creates a new chocolate bar that he wants to introduce to the market and he decides that he wants to name it after his

favorite beloved horse at his Tennessee Ranch Ben you are opening it right now he is the most popular chocolate bar in America and I think in the world yep yes the Snickers bar named after the horse in ten thank God they bought the horse ranch I've been waiting for you to get to this part cuz I'm just trying to be satisfied you know I just needed to grab a Snickers oh amazing it really is so good it's so good I massively prefer the bean de Bar style chocolate the dendelion you know I like dark chocolate

more than milk chocolate I might not even be able to finish a whole Snickers bar just because it's so sugary but oh my God is that first bite good I mean we're talking about two totally different products here of like high-end chocolate versus Mass Market chocolate but like Snickers are so good I feel like I go play in the NFL after a bite of this totally well so there's another potential story of the origins of Snickers that we heard some wind of rumors in the sort of forest Legend Cannon here supposedly forest was thinking about

what would be like you know an incredible product to build on the Milky Way success and Mark it to all of America and the world cuz by the way a Snickers is a Milky Way with peanuts exactly and so supposedly he went to the library he wanted to know what did the Roman army feed their legionnaires when they were you know out marching and uh apparently he learned that it was peanuts and eggs and sugar it's a lot of energy super dense so the other story is that that was the inspiration for Snickers was putting

what the Roman army fed their legionaires into a candy bar in practice it's actually a great energy bar I was being tongue and Chek at the NFL because they're a partner of the NFL today but there's a whole industry around Cliff Bars and things like that being marketed as energy bars and Snickers being marketed as candy but really what's the difference Snickers launches in 1930 in 1932 they add three musketeers to the lineup now Three Musketeers originally was something very different yes so listeners you are probably thinking to yourself a Three Musketeers Bar is just

that nou and chocolate it doesn't have peanuts it doesn't have caramel why would this come after a Snickers well Three Musketeers is actually a misnomer I see you're eating a Three Musketeers way to be in theme it was actually sold as a package containing three separate bars each with a different flavor chocolate vanilla and strawberry and due to restrictions during World War II they had to cut production to just the chocolate version I think part of it was also a spike in um strawberry prices and so they just did away with the vanilla and so

now it's just called Three Musketeers even though it's only the chocolate variant one musketeer doesn't have the same ring to it no no it doesn't so if you're paying attention here and thinking like wait a minute they built this Factory in 1928 1929 sales are skyrocketing Frank is living large 1930 they introduced Snickers 1932 they introduced three Musketeers what else is going on in America and in the world in the early 1930s the Great Depression yeah this tells you everything you need to know about the resiliency of the candy business Mar's Revenue goes up to

$25 million in 1932 they're just growing hugely I mean what did we say Milky Way did 800,000 in its first year in 1924 yep so they go from 800,000 of Revenue in 1924 to 25 million in 193 to all amidst the throws of like the worst years of the Great Depression yeah candy may not be good for you but when you really need a dopamine hit it is there for you and boy does it condition a uh addictive or addictive like activity where you sort of incorporated into your habitual everyday life it's a reoccurring purchase

and at this point in time between Mars and Hershey both were laser focused on keeping the price low to get as wide a distribution as possible that's exactly what I was going to say you know forest and I think it probably really was Forest here was closely studying Hershey and what they did and realized oh yeah this is a scale business if we get to scale we can make profits while pricing our bars such that they are still accessible even for Americans that have lost their jobs and are in the middle of the Great Depression

and by the way they want a sweet treat more than ever because their lives are depressing brilliant yep absolutely the other interesting thing is nowadays you've got all these variations of candy I mean M&M's Peanut M&M's almond dark M&M's the Milky Way The Three Musketeers and the Snickers are all just adding one ingredient to the same thing yes but they're not labeling them that way they're building entirely different brands and franchises around each of these three products I think that's fascinating they really didn't get into this whole variation thing until way later in their life

that was not the standard practice then this is a different product it needs a different name and a whole different personality yep and actually you know I think to be fair to Frank I think that is really like Frank's influence on the business and Company there Forest as great as he was at so many things he was never a product innovator in the way that Frank was H makes sense as evidenced by the fact that you know here we are today eating the most popular candies in the world that Mars makes and it's still Snickers

Milky Way Three Musketeers M&M's which we will get into that was Forest big contribution yep so depression sales are going great here we are 1932 the worst years of the depression and Forest totally recognizes all this like we need to invest invest invest pedal to the metal we are going to use everything happening here to blow away our competition we're going to go compete with Hershey we're going to become huge Frank though has no interest according to Forest 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 anymore and forest's reply to that is quote I want to conquer the whole goddamn world so he issues his dad an ultimatum look obviously you want to just go enjoy life let me run things give me one3 of the stock of the business you keep 2/3 and you relax and I will make you even richer Frank turns him down and I think he turns him down in 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 yeah and you know of course there's more behind this forest was not liked within the company he's driving everybody hard Frank is this kind of a distracted leader you can imagine Neo if you're a line worker or even if you're a manager within the company that's great which boss do you prefer right 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 athl 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 going to give you a third of the business either way there's quite a bit of animosity around this and Forest walks out and in the process tells his dad to quote stick his business up his ass there's no missing words in any of these direct quotes it's crazy yeah literally I mean this is what he said he said so Forest 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 him in the dust almost he takes with him a right yes he has the right to what David he takes actually two things with him that his dad sort of gives him as he's heading out the door one $50,000 and two the foreign rights to the Milky Way recipe yes but I don't think the Milky Way name no not the Milky Way name just the recipe you can't Market this as Milky Way but you can sell this recipe internationally yep so farest takes these two sort of parting gifs

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 yeah this is the last time that Frank and Forest would ever speak yeah the next year when Frank is just 50 years old he collapses in the Chicago Factory and dies of kidney failure and Forest doesn't come back for the funeral yeah yep that was it now granted in the 30s much harder to come back from Europe on short notice but still yep so Forest 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 US 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 cruso yes they build and operate GPU data centers for AI workloads and each one is powered by lowcost stranded energy that otherwise would go to waste or Worse get emitted as greenhouse gases for this episode though we

thought it'd be fun to talk about what actually goes into building and running a GPU cloud and how it's different from traditional clouds run by the hyperscalers right you might have been thinking have Ben and David lost their minds talking about a new cloud provider in 2024 isn't it impossible to compete with the incumbent hyperscalers at this point and yeah if you're trying to start a traditional Cloud but GPU clouds are different yes counter positioning yeah I mean all the infrastructure that the hyperscalers have built up over the past two decades actually is not optimal

for GPU clusters yep which brings us to crucial difference number one location hyperscaler data centers need to be physically located where the internet happens like latency is really really important when say you're powering an e-commerce website but for 99% of AI training workloads latency actually doesn't matter at all so instead cuso puts their data centers in remote locations where quote unquote energy happens like where oil is being flared and you can take that energy and use it to power your data center totally so this not only creates cost efficiencies it also just enables way more

absolute power density in a single location which is super important when you're trying to build a huge GPU cluster yep and that leads to big difference number two cooling AI training generates a tremendous amount of heat and traditional cloud data centers usually manage that with air conditioning but air cooling is not going to cut it when you're running a massive GPU cluster full out for weeks or months on end so cruso builds their data Halls which is the rows of racks within data centers with direct to chip liquid cooling this is where the liquid coolant

gets pumped through the racks to coldplate heat exchangers mounted directly on each individual chip yep it's super cool this is all state-of-the-art stuff and impossible for the hyperscalers to replicate in their existing data center Footprints which means that kuso's customers get AI infrastructure that just scales way way better bigger GPU clusters with less failures and when you're trying to train Cutting Edge large parameter models that doesn't doesn't just mean lower usage costs and better efficiency it can mean the binary yes or no difference in being able to accomplish your workload at all it's just an

awesome awesome company David and I are super proud to work with them and also to be investors so to learn more go to cruso doai acquired that's C o./ acquired or click the link in the show notes and just be sure to tell them that Ben and David sent you thank you cuso all right Forest summer in Europe little little longer than a summer summer or you know close to a decade in Europe so we're here at the end of 1932 forest and his young family now by the way with his young son Forest Jr

land first in Paris and Forest tries a couple little things but eventually he decides that if he's really going to build his own big company and stick it to his dad he needs to learn the one critical thing that is dad didn't know he needs to learn how to make chocolate yes no better place than Europe to learn 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 want to get rich you got to know how to make a product and you

aren't going to hire anybody to make a product for you to make you rich they'll only make it for themselves true that Forest 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 you got to know how to do the scarce thing totally so important so in early 1933 Forest moves his family from Paris to Switzerland to go learn from the chocolate Masters and Forest goes to work first at Jean tobler making tobler own and then at the original itself Nestle

in the factories without disclosing to any anyone who he is so yeah when I say he goes to work there it's not like he calls them up and is like I'm Forest Mars he doesn't tell anybody who he is his quote on this later is like well they never asked 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 amazing who would do this today it takes a very specific type of person

if you're sitting there thinking H only some European company knows how to do this well and I'm someone who attended an Ivy League College my family is wealthy I'm friends with the dupons not only that I've basically feel like I've already built a $25 million business but I'm going to 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 30 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 yeah 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 going to go to a different continent move my family up and 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 big big tradeoff and totally on brand for Forest cuz 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

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 kind of got there through trial and error huh the sense I got is that the European chocolate manufacturers and probably Nestle 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 H because they like don't exactly know how they get that specific sour note in The Taste that's so interesting but anyway back to Forest 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 slow England which is a small industrial town about 20 mil west of London it's right near where heo 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 which basically means more sugar right yep more sugar and less malt 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 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 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 in the marsbar versus the Milky Way o the marsbar is Cadbury right well in these early days yes so Forest has now learned how to make chocolate but of course with $50,000 in a new startup Factory like there's no way that he's going to make his own chocolate everything we talked

about in chocolate making it's like an insane amount of capex really hard easy to screw up potentially low Yi yep totally and like you know how are you going to get the supplier relationships for the beans and like that requires a lot of capital etc etc and this part of the value chain really wasn't well established yet where there's these companies specifically to go buy commodity beans from it was starting but it was early yeah Cargill wasn't the like massive giant with global liquidity for Commodities buying and selling that it is today speaking of gigantic

us privately held companies yes exactly we'll have to do that yep so as you said Forest goes and does deal with CAD berries to supply the chocolate for the Mars Bar just like Hershey had supplied the chocolate back in the US this is also important because remember we were saying their local tastes in each Country Market for chocolate and Cadbury's chocolate is to the British taste so it actually is a pretty different bar even though the core concept is very similar H but it's just a matter of time in Forest mind until the operation eventually

grows big enough that he can and will make his own chocolate David there is a Milky Way that you can buy today in the UK do you know what that is oh I do but I'm not remembering Three Musketeers that's right I knew it was one of them I was like it's not Snickers that is the brand that they decided to use for Three Musketeers overseas and um Snickers originally was Marathon I believe in the UK yes but now globally Snickers is Snickers so yeah yes far not making his own chocolate just yet but of

course his goal is that he will he has a great saying that he repeats often that I think this is maybe around the first time it starts coming up I'm not a candy maker I'm empir minded and that's like his Mantra so once they start producing the Mars Bar pretty quickly it becomes a hit and starts going really well so by 1939 five years is after they get production up and running Mars UK has become the Third largest candy company in Britain behind Cadbury and round trees so like they go from nobody to third largest

player big industrial scale pretty quick and in part I mean this is American capitalist coming in to an industry I don't know if you know this or not both of those families were Quakers oh I didn't know that interesting and so there was a pretty intense Spirit behind the company of looking after your community Yep this is Cadbury's in R tree right yeah in particular Cadbury built their Factory outside the city in sort of this almost attempt at a Utopia very Hershey like in the same way that actually Milton Hershey was inspired by when he

built Hershey PA so there's this very like devout Duty bound religiosity to the existing UK chocolate companies and in comes Brash Forest who's like we're going to do things the most efficient we possibly can we're going to make the most profit we possibly can and we're going to distribute as broadly as we can as fast as we can in many ways it feels uh Bernard Arno esque like you guys look what I learned in America yeah yes very very much so it's funny I was I wasn't even going to tell this story because he I

don't know how true it is it's just ridiculous but we'll tell it because I didn't realize the religious element of the competitors so Forest oh yeah uh oh man eventually Flash Forward he will come back and he will retake over Mars Inc in America and when he does his first thing he does is he goes in the boardroom it's a management meeting it's to his Executives and he falls down on his knees and says I'm a religious man and he clasps his hands together and starts to pray I pray for Milky Way I pray for

Snickers I pray for M&M's no what a freaking character yeah if he was religious at all he was religious about Milky Way and Snickers and M&M's Y and dog food so to this Empire thing so in 1934 just one year after he started the whole thing and started making Mars Bars he comes across this small British company called Chapel Brothers which had started making quote unquote chappies brand canned dog food and this is crazy crazy at the time nobody fed their pets pet food oh really pets dogs cats they just ate table scraps oh this

whole idea that you feed specific pet food to pets this all started in the 30s like before that you know it's like I don't know imagine go back to Medieval Times like the dogs and cats they just Eat Right throw them a ham that's the way you clean the table right so I have no idea how or why I couldn't fight it either I looked all over the place I was like why of all the things to buy did he buy a pet food company totally and why did the chapel Brothers start making pet food

I don't know there is like as little information as there is about the company and the family what we do have we have about the chocolate business we have almost no information about the pet business and who are you going to ask the chapel brothers are long dead Mars isn't going to tell you but I'm so curious how did Forest get the idea hey I should go buy a dog food company when the market for dog food is new and unclear and yeah well I think you know look he was Visionary and he got so

many things and I think he probably thought or maybe the chapel Brothers thought and convinced Forest that you know in the post Depression era and you know the coming modern world people's relationship with their pets would change and that they would start feeding them dedicated pet food I mean and obviously that was a huge huge Trend and there's kind of economies of scale to the manufacturing of this making canned dog food isn't that different than making snacks yeah it's a manufacturing process so yeah interestingly enough like I learned this and the fact that this happened

in 1935 completely blew my mind CU I knew that Mars was in the Pet Food business much like Nestle purina is in the Pet Food business I thought this was like a recent diversification hedge but here it is L at the founding of mars or at least forest's modern Mars and he's in the first second year of business buying and diversifying to pet food and it was immediately a good idea because it became profitable after just a couple years and started generating enough cash flow to fund the expansion of marsbars yeah it's um good margins

in the Pet Food business apparently even in 1935 yeah so that's a huge success so as this company is getting set up I mean would you expect any less of forest I guess you know he's hitting it out of the park with marsbar on the candy side he's building a whole new industry on the pet food side and this here in slow 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 oh yeah you found the

original ones right yes so if you talk to anybody who works or worked at Mars they will quote the principles at you religiously it's like the Amazon leadership principles totally it's like oh that's principle number five Freedom or oh that's principle number three mutuality etc etc I think how these started maybe even back in England Forest started a a document called the Mars way where he was like codifying all this and I think and 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 but it's really interesting it's worth going through the mall so number one the first principle is quality forest 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 the 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 in the Shelf in the retailer how consistent

it is how consistent it is these were like big big drivers of purchases and there's of course the famous story about he uh you know finds a defect in a rapper 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 yeah I'm laughing you say famous story I'm like which one I think there 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 H 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 and he also if something had a defect he would throw out the whole batch right yes as like a let's Scorch the Earth around the defect 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 if there was a mistake that Forest 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 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 sake it's quality for money 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 Forest knows that if you can offer a higher quality for a given price than your competitors you're just going to build a lead and compound forever and ever and ever in this business interesting so quality principle number one most important two this is awesome responsibility is the second principle and he might be like oh responsibility like okay whatever for all of his crazy intensity forest 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 going to scale like he wants to be Dupont here you know he wants to be General Motors he needs the best people working the hard artist 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 in years the standard within

Mars was that you should make three to four times the normal salary for your job that's so insane and I think that's come down over the years it's now like 2x but it's still true I even saw numbers that say they try to pay their employees a minimum of 10% higher than other companies in the industry ah interesting but definitely in those early days it's like no we're going to pay you three or four times the amount that you would make elsewhere I also know they try to tiay 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 exactly Okay so 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 slow 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 the one individual performance metric did you show up on time you get a 10% bonus if you are never late in the entire year and it's everybody from forest himself on down everybody has a time card you punch the time card when you go in I'm pretty sure this is still true that the CEO of Mars today has a time card and they punch in and out every day and a 10% bonus is contingent on not being late so

even more I don't think this terminology starts until they get back to America but everybody in the company is an associate obviously people are in charge of different things and have different external titles but internally everybody is an associate there are no perks for anyone so there are no executive parking spaces there's no Executive offices boy forest really wants to rebel against his father there are no offices period to this day at Mars is this the first open Office company so we said on the meta episode that we thought Facebook was the first open Office

no Mars was the first open Office starting in the 19 1930s so every building entirely open floor plan you get a black metal desk get this this is how crazy it is again even still to this day there are just a small number of conference rooms in any given Mars office oh yeah because they hate presentations right they hate presentations they hate meetings but like sometimes you have to have a meeting the conference rooms do not have doors there is no privacy allowed anywhere which is the craziest thing given the company itself externally is incredibly

private but no internally the culture is everything is open everyone is equal there are no perks here whatsoever and farest is doing this in the 30s this is crazy I was going to save this for later but this is a fun time I Google mapped the recent Factory that they built to make M&M's and it's like a corporate headquarters and Manufacturing facility and there's a bunch of pictures on Google maps of the exterior and interior just like you would expect from anything that's on Google Maps and it's pretty dated it's just a very boring drop

sealing fluorescent lit cheap office and the real estate that it's on is like near an Amazon fulfillment center I mean it's like kind of off the highway in the middle of no we inexpensive but there are two big M&M's waving at you out of the parking lot I think that's the standard decoration yeah you can tell how pissed forest was at his dad about about the Chicago Factory specifically but also just like how deep-seated this is yeah okay so then principle number three is mutuality so Forest obviously is like hyper competitive but he also knows

that this is an ecosystem that he's in and the retailers are super important the suppliers are super important Distributors are critical everyone needs to make money and everyone needs to be incentivized for the long term and as long as his partners are making money and making more money selling Mars product are supplying Mars than they are any of Mars's competitors that's going to be a compounding Advantage yep so that's three four is efficiency okay this is a really really interesting one probably back to his whole mindset and time at Yale and studying DuPont Forest is

crazy about studying business and management Literature Like I don't think anybody was reading business management literature in the 1930s and 1940s it's a good point it's true both for management and for investing if you think about the way that people were even investing back then it was like stocks were gambles you know Buffett was one of the first people to believe the intelligent investor oh you can tell something about the quality of Revenue and this intrinsic way to build to a value of a business the investment mindset of quality and a discounted cash flow and

the management mindset of there's a science to building an organization these were pretty new IDE ideas totally I mean Buffett had to go study with Ben Graham to learn this stuff yep so while he's in England Forest reads a textbook called higher control in management by TG Rose and the subtitle of this book is a method of producing the facts and figures of Industrial and Commercial undertakings so that they can be used for the purpose of management it's quite academic yeah business AC demia had not yet learned marketing about itself so in the book though

Rose argues that the primary focus of management should not be on revenue or profit or growth but instead on a metric called return on total assets or Roda and again if you talk to anybody in Mars today Roa Roa Roa Roa everything is about Roa it's funny I came across this researching I had to look up the term we've never studied it on an episode before all right so what is return on total assets it is net profit dollars divided by the total dollar value of the company's fixed assets so it's effectively an efficiency metric

of your profits divided by your fixed cost of your assets yep now the textbook way to do it is by the cost of your assets as measured on your balance sheet the way forest does it though and the way the company still does it today is no that's insane like whatever this is valued at on our balance whatever it cost us to build this Factory 10 years ago doesn't matter what matters is what is the value of it today oh interesting so they are constantly revaluing what the replacement cost is of all their fixed assets

all their factories Etc like okay if this Factory disappeared what's the market value if we were to sell this thing and get rid of it exactly and so that way they're always making sure that they're like hey we're really efficiently using our assets we're not just artificially being efficient based on what we paid for them 10 20 years ago it's fascinating so for you and I it' be like the profit dollars of the business from sponsorship divided by the cost of our microphones and you know the very modest tangible assets that we have in this

business actually I think if we were to use this we would divide our profit dollars by the value of the acquired brand and we would value the acquired brand sort of as highly as possible so you're basically wanting to say per unit of fixed investment I've made how much yield in terms of profit am I getting out of the fixed investment I've made exactly I'd argue David that for acquired we'd actually want to use our time valued at some certain amount as the denominator what's our profitability per unit of time which is our fixed resource

well it depends I think what you think is more valuable our time or the acquired brand we should probably do both actually who knew this would turn into an actual holiday special yeah so anyway supposedly Forest had and Mars has or at least used to have a specific Target of 18% return on total assets for every Division and every Factory which means essentially that every investment needs to pay for itself in less than 5 years so if you're making 18% of your value back every year you know that would be like 5 sixish years if

you're using the textbook definition but they're always increasing the value of their assets so it's like in effect anytime Forest is making a decision to invest in something he's like I want like foure payback on this four to five year payback and they don't want to be higher or lower than the 18% right because if you're lower than 18% you're not using your resources enough to generate enough profit if you're higher then you're taking too much profit you're taking too much profit which is bad for your customers or you're not reinvesting aggressively enough yeah you

should be spending more on advertising and marketing etc etc right it's totally fascinating I have a couple um other things on efficiency that I was going to say for Playbook but since we're here we should bring them up yeah let's do it so this one comes from friend of the show Arvin navaratnam at worldly Partners who writes this great research that we link to from every episode now he pointed out that despite operating with 30% fewer employees than its closest competitor so today this is Mars versus Hershey Mars generat ated more output per worker than

any other in the industry so in 1990 for example Mars's Revenue averaged 429,000 for employee compared to 228,000 at Hershey so they're just doing more with less yeah miles ahead and I think part of this comes from the fact that they're just amazing at the industrialization of production David you raised that point that the factories run 24 hours a day and at that Chicago plant you know I think today the funsize Milky Way bars are produced at over 5500 bars per minute it was a stat that I saw they just run at incredible efficiency in

production but they also then do effectively share this increase in efficiency with employees by doing the higher pay and the bonus based pay so if the revenue per employee is way higher than their competitors like Hershey they should pass some of that efficiency benefit along to their employees in terms of higher compensation with in turns retains people for longer you know which keeps tribal knowledge around which decreases recruiting cost I mean it's very Costco like in that way it is it's totally a flywheel type reinforcing structure where it all fits together the other thing that

they do is they aggressively try to reinvest profit dollars back into the business doing things like R&D on new types of manufacturing equipment that they can build for their plants that's the primary benefit the second benefit is they don't pay as many taxes since they're reinvesting for those dollars fall all the way to the bottom line as income yep totally it's very uh John Malone esque they want to keep as much capital in the business as possible and not recognize a lot of it as income yep Malone and Buffett too yep so then that brings

us to the last principle which is freedom which you know I think in the early days here to the extent Forest thought about this as a principle like I think it was just like he wants to build his own business be free from his dad be his own person prove himself over time this comes to mean family ownership and not going public being a private company not taking on debt and then in the Next Generation after forest and Beyond it means being incredibly private we've alluded to the privacy of the family like for years the

family refused to have any photographs taken of them for fear that they might get published they really really mean it about being private in fact when Joel wrote The Washington Post article do you know the thing about the photographs I think it was the first time that John and Forest Jr had ever been photographed in public it was but then Mars didn't like the Washington Post article like didn't like the way it came out so not only did they then fire their PR consultant they went and found the newspapers freelance photographer and paid off $20,000

for the rights to the photos to be sure they couldn't be reused yeah wild just wild but as we've talked about from Ikea to our business here at acquired complete ownership or at least board control in meta's case is freedom you can do things like invest for 10 years from now when it's going to be a super lumpy period between now and 10 years from now if you believe in the long-term Vision you can sub optimize the shortterm and for Mars that means private ownership yep and I think it means things like you can operate

with Roa as your primary operating metric instead of profitability good point so back to the farest tomor story in progress starting up in the 30s amazing success story within a couple years by the end of the decade they're the third biggest candy company in the country incredible achievement Riding High and then the end of the 30s brings something else which of course is World War II yep now to hear Forest tell it the UK government decides that in order to help fund the war effort they're going to impose a very heavy tax on All Foreign

residents living within the country which of course would include forest and Lars family which is kind of an interesting philosophical tax we need to go to war how are we going to finance the war well who's riding the coat Tales of us being an awesome place to live but isn't actually a citizen let's tax them to pay for the war right and so he would also claim that he believed that it was Cadbury's and round trees that actually lobed Parliament to implement this tax expressly to run him and Mars out of town because they were

threatening their business chocolate was a big national business they were among the biggest companies in the country totally it's not unreasonable to think that on the other hand I suspect Forest also had his Ambitions always on coming back to America anyway and now seemed like a pretty good time to do it in fact it was a very very good time to do it so in 1939 he leaves all of his businesses running in the UK and he moves with his family back to the US also that's crazy the fact that you can trust someone in

the UK as World War II is breaking out hey you run these businesses that I own and I can trust that I continue to own them while I move across the ocean I wouldn't be confident that when all the dust settled I would continue to own those businesses totally right which if cbes and round trees was actually behind trying to run forest out of town clearly they didn't know the Loyalty of his employee base well enough yeah yeah totally wild in 1939 that Forest could do that so he moves back to America and of course

he has his sight set back on Chicago and Chicago Mars honey I'm home yeah remember Frank had died a few years before and at this this point Chicago Mars is being run by forest's widowed stepmother the other Ethel and her half brother who is the president and CEO of the business and they of course detest forest and they won't let him anywhere near the company and who owns the company at this point so Forest has some shares after his dad has died but he's by far a minority shareholder the biggest shareholder I believe is the

other the second wife and then Forest half sister Patricia her daughter also holds a large stake and then I think the employees of the business owned Equity at this point so Forest I don't know I'm guessing he probably owns maybe 10 maybe 20% of the business not enough to be a controlling shareholder okay so forest does what forest does he says the hell with you I started from scratch once to prove you all wrong I can start from scratch and do it again back here in America America which is the final Gauntlet right it's one

thing to go across the ocean and start from scratch in a smaller Market where no one knows your name you can kind of sneak around and do these deals now he's here in America can he start a from scratch candy company on the world's greatest stage which on the one hand he has more connection here and more resources on the other hand he's battling the old Mars at every step of the way right and he hasn't lived here in close to a decade right but he's confident in his chances because he has brought back a

secret weapon before Forest 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 drag and I think it's called Dr because I believe it was originally a French style of candy intended for French Noble ladies who wanted to to eat chocolate but not have the chocolate melt on their white gloved hands oh interesting and so what is Dr well Dr is small round pieces of chocolate coated with a candy shell to prevent them from melting in your hand or

in hot weather and confectioners call this hard panning the colored candy shell which is effectively hardened sugar syrup yes and so farest as he's heading back to the US thinks you know I think there might be some Global appeal here in this dra product but before we tell the M&M's story now was a great time to tell you about one of our favorite companies stat EG yes we are going to do something a little bit different today listeners by sharing a story from one of their customers Blue Sky I was somehow not at all surprised

when stat Sig told us Blue Sky was a customer it really does seem like every up-and-coming tech company these days is using stats Sig open AI figma versel notion Blue Sky Etc yep so listeners by this point you've probably heard of Blue Sky 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 blue sky 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 acquired FM account there yesterday ah I saw the email come into the acquired FM email address that must be what that was yep 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 weeks pretty crazy for a relatively new social media app yep and the blue sky team has been using stat Sig for pretty much everything from running experiments to

collecting user analytics and releasing new features we asked Blue Sky to share a couple specific use cas with us to illustrate one when the Brazilian Supreme Court banned X in Brazil Blue Sky obviously saw an influx of Brazilian users the way they realized this was stats IG they had a dashboard that tracked posts by language and all of a sudden they saw Portuguese post 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 blue sky has been using stat Sig 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 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 Blue Sky CTO had to say Blue Sky collects a lot of feedback from users but stat it gave us concrete answers about what was working

and what wasn't we thought that we didn't have the resources for an AB testing framework but stat Sig made it achievable for a small team it remains our best tool for evaluating product decisions so good if you want to leverage stat Sig to grow your business there's a bunch of ways to get started stat Sig has an insanely generous free tier for small companies a startup program with 1 billion free events which is $50,000 in value and significant discounts for Enterprise customers to get started just go to stat.com that's St tsi.com Acquired and remember to

tell them that Ben and David sent you all right David M&M's let's do it hell yeah let's do it I'm gonna eat some dark chocolate and some almond M&M's to celebrate oh nice I think I'm gonna pop a peanut butter 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 Forest Jr and John Mars the sons of far a senior 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 is that like a uniquely American yeah it's an American thing fascinating Reese's kind of invented it and there's a whole great reesei story Reese's was a separate company from Hershey that was built down the road and I think it was a former Hershey employee former Hershey employee started it and then Hershey's later acquired the company great story yep anyway here we are in August of 1939 forest 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 Forest fashion I mean that he shows up there anonymously and unannounced and he signs up and does the public factory tour so awesome so Forest so freaking awesome after the tour is over however he asks the tour guide if he could please go see Mr William Murray William Murray of course being the president of Hershey and Milton Hershey's longtime number two president and coo type but the guy who actually ran the company Milton by this point is like very much focused on the town and

the orphanage and the Hershey trust and all that and the gist here is I need to buy some chocolate well let's keep telling the story so the guy's like uh excuse me who are you and uh why do you want to see Mr Murray to which Forest replies just tell him Mars is here that's all he needs to know because at this point while Hershey was still a supplier to Chicago Mars they were really starting to be a competitor they're starting to wake up to this idea that yeah we're selling these other people chocolate but

they could just go eat all of our market share yes they're starting to wake up to that but if this story is true Forest is saying tell Murray that Mars is here obviously the implication being Chicago Mars is here which is totally not true right because his father's passed at this point so the Mars that it probably is is whoever is running the Mars company right it's Ethel number two's half brother who is installed running the company either way forest does get in to see William Murray and Murray has never met Forest before but of

course knows who he is once Forest uces himself and where's like um great okay you're back in the US what can I do for you Forest then proceeds to theatrically remove a handkerchief from his pocket and place it down on Murray's desk and he opens up the handkerchief and there inside are Dr candy coated chocolates this is so Steve Jobs so steip it's amazing drama it's amazing uh farest is like try one so Murray does and he's like yeah it's pretty good Forest says what if I told you that I have had these candies in

my pocket all the way on the trip here from New York the whole train ride all the time outside in this hot muggy August weather all through the factory tour and not once did they ever melt in fact how do they taste do they taste melted they don't taste melted do they and Mar's like oh all right you've got my attention so forest and William Murray work out a deal to start a new joint venture candy company that will be 80% owned by Forest and 20% owned by Murray's son Bruce and Forest says I've even

got the name for it we're going to call it Mars and Murray M&M's and it's a new company that's what's worth noting here well several things are worth noting obviously for is totally brilliant this is probably his most brilliant scheme on so many levels he knows that if he's going to build a new candy company come back to the US take on and defeat his father's old company in Mars he's going to need resources he's going to need chocolate which means he's going to need Hershey's chocolate yep and he's also going to need capital and

money he just can't get that much Capital out of his UK businesses remember the tax so there's a reason though that he specifically goes to Murray to make this proposal not to Milton hershy a Murray is kind of the COO type he's actually running the place and can Marshal resources but even more important Murray doesn't own Hershey he's just an employee the Hershey trust owns Hershey Murray has no inheritance to give his family he's now at this point I think Murray is 66 years old so Mars isad Ling something he wants Forest is offering Murray

the chance to have wealth and a legacy and a business to pass on to his son do you know what else Bruce Murray had access to the military yep purchasing division yes okay we will get into that it's so brilliant so this deal is nuts because Hershey has an exclusive arrangement to supply chocolate to the US Military the exclusive agreement and Forest Mars has this thing that God if you think the military liked count lines they're going to love these non-melt candy-coated chocolates and so he is going to the person who has the sole ability

to provide the military with chocolate and saying let's start a new company together with your chocolate that is rationed for the war in World War II for the military we're only goingon to sell this to the government I'm gonna own 80% of it your son's going to own only 20% of it I'm showing up with just the idea and Hershey's going to provide the chocolate the sugar and the technical expertise and capital yep and it's going to be an 8020 deal I don't understand how this deal got done well what else is Murray GNA do

if he wants a legacy to pass on to his son Murray's not going to go off and do this himself that would be disloyalty to Hershey and in fact I would guess it's to avoid a conflict of interest for Marie himself to say my partner is actually your son not you yeah so his employment contract isn't in violation and he's only a 20% owner blah blah blah yeah when you think about if Forest were to go to William Murray and say Hey you and me enter into a partnership that's at least going to be 50/50

if not 8020 Murray to Mars but by saying no your son yeah he's just so freaking brilliant what a g yeah so Murray agrees to this and in the spring of 1940 forest and Bruce Murray the sun set up Eminem limited as a partnership they build a factory in New York New Jersey and they start production in 1941 Ben as you say build a factory with Hershey capital and resources and chocolate and sugar and everything else yeah and there's a great quote in the Cadbury book about how amazing it is that this is how forest

makes his return to the US the line is without the support of his own family but with the support of his leading rival Hershey yep it is spooky it's like you want to say diabolical but like I don't think Forest is diabolical per se it's just truly genius it's just strategic yeah so of course now what else happens in 1941 right as they set up the factory and start production the US enters World War II which means significant chocolate rationing for all the consumers in America and significant chocolate consumption by the military so all of

a sudden the US military becomes Hershey's biggest customer just like during World War I which means and Hershey's is the only one with a chocolate contract and the only one producing milk chocolate at significant scale In America which means that they start severely limiting their wholesale chocolate Supply to all of their Enterprise customers like Chicago Mars or actually they limit their chocolate Supply to all of their wholesale Enterprise customers except for one Eminem limited partnership because of course it's Bruce Murray's company yep sort of in minority yes 20% of it is Bruce Murray's company now

of course just like Hershey the vast majority of young Eminem limited Partnerships production is also going to the military so the Air Force was the biggest customer of mm during World War II the Army was number two I presume the Navy was probably also a large customer and like we've been talking about who has the chocolate sales relationship with the purchasing officers in the Pentagon it's William Murray at Hershey's and Bruce gets to tag right along and as head of sales in the new Eminem limited partnership he is perfectly positioned to do that it's so

funny head of sales there's one customer yes they're not selling it to the public yet no there's three customers there's the Army and the Air Force and the Navy okay yeah they're not selling it to the public yet or in any sort of real valuee now there's an interesting little sidebar to the M&M's story here and I suspect many of our British friends are listening to all this and saying like hey guys what about Smarties Forest of course was not the only one to spot the potential of dra chocolates for military use and then eventually

for public consumption well like all things with Forest history it's a little bit hard to untangle truth from fiction but one thing that is undeniably true is that round trees introduced Smarties to the British Market in 1937 so 3 to four years before M&M start up in the US and two years before Forest even leaves the UK right so he's saying it's this Spanish American war or a thing but very plausibly he just saw smarty in the UK and was like I got to go back to America and launch this quick there is no way

that Forest did not see Smarties in the UK before he left and the early M&M's came in tube packaging just like Smarties suspicious also for the American listeners you're probably like Smarties those are a non-chocolate candy what are you talking about those are different Smarties that that are in the US market yes British Smarties are delicious I loved eating them growing up with my British family when I would go visit them in the Summers well as best as I think anyone can tell apparently there is some documentation about this in the Nestle archives apparently forest

and George Harris of Round Tree had both learned about draes around the same time so during the Spanish Civil War and supposedly they negotiated a gentleman's agreement that round could have the British market for Dr candies and Forest who was at this point in time starting to plan to go back to the US anyway he could have the American market and in return Forest supposedly gave Round Tree the rights to manufacture and Market Mars Bars in other British Commonwealth countries like Canada and South Africa so supposedly there's evidence to this effect in the Nestle archives

but we can't know for sure regardless none of this really matters at least for a few years because basically all of the world's chocolate production is going to Sovereign militaries around the world that are all fighting in World War II okay meanwhile during the war as M&M's is starting up and the US military is a big customer and Forest is sort of rebuilding his Empire in America he's on the lookout for his chappies equivalent to bring into the US you talking about rice time to talk about rice another business that can provide you know diversification

and cash and resources to build up the candy business this is so crazy he owns a British company that makes Mars Bars he bought the chapel Brothers he started a new partnership in the US a third business called Eminem limited and now he's looking to start a fourth company that makes rice yes in Houston Texas so there are also as always a couple versions of this story but I think the one that is closest to the truth is that back when Forest was in England he had gotten to know a chemist who had invented a

new method for Milling rice that was called par boiling and when you par boil rice through this new method it results in more nutritious and importantly faster cooking rice for when you ultimately prepare it for eating and in 1942 this chemist and Forest form another joint venture company in Houston Texas and they patent the method in America and start producing rice to sell just like M&M's to the military because what's the military need a lot of cheap calories rice and hey this is more nutritious it cooks faster like great great customer and this becomes Uncle

Ben's rice today Ben's original the idea of launching a branded rice product in America was crazy I mean it's not as crazy as like the Pet Food business but there were no brands in the rice category before Uncle B you just bought rice it's a commodity so this is the first brand at least in rice ever launched in America fast forward today Ben's original does over a billion dollars in Revenue annually crazy listeners you can tell all these did become one company at some point but at first they weren't right it was all these puzzle

pieces that forest was assembling so back to M&M's after the war forest and Bruce Murray of course now need to find new customers for M&M's they're going to relaunch it as a consumer candy like obviously that was the plan use the military bootstrap up the production Hershey's resources but like obviously this is going to be a consumer candy so yeah it's crazy basically 5 years elaps between when they founded the company and when they are able to actually do the consumer launch because of World War II yep and you would think great what potential for

the consumer Market all the soldiers and Pilots have been eating these all war it's going to be the same story as Hershey's bars all over again it's going to make M&M's be Forest big success coming back to America nope consumer launch pretty tepid doesn't get a lot of pickup back with consumers in America for years for years this of course as you would imagine creates quite a lot of tension between forest and Bruce especially because Bruce was in charge of sales and Bruce had been great at sales when he's selling to the military selling the

consumers not so much so did you hear about what supposedly Forest did to Bruce here no oh my gosh so the story is as sales are not going well Forest orders Bruce to produce a daily report of the past days sales of M&M's in a written form to him every morning in the office and every morning where the previous days sales did not hit Forest Target he would write in big letters in red ink failed on the paper and then he would go tape it up in the men's bathroom in the company we've obviously been

very laudatory of forest and he was incredible incredible genius the dude also had a temper to match his genius is he trying to get Bruce to leave the company at this point or is he just trying to motivate him well yes so here's the thing you know you read about lots of people who worked for forest and lots of accounts in emperor of chocolate and elsewhere about his temper and how awful he was and he clearly was awful he's also doing things for reason he's trying to get Bruce to leave the company he's trying to

push him out cuz he wants to own M&M's 100 % so in 1949 four years after the end of the war and midling sales at Best of E&M Forest finally succeeds in pushing Bruce out and supposedly it comes down to a confrontation one day where Bruce is like I can't take it anymore with Forest how you're treating me you know posting these reports in the men's bathroom supposedly they get into a literal fist fight in the office in New Jersey Forest kicks Bruce out of the plant has you know security or whatever come and take

him out and Forest is his boss I mean this guy owns 20% but Forest is the CEO it's not he can take his shares but he can fire him exactly so Bruce resigns and then once Bruce resigns after this this starts the negotiations of forest buying out his 20% stake they settle on $1 million for the 20% stake so they're valuing the M&M's business at $5 million which you know this is 1949 so if you adjust for inflation in $ 2024 that would be like valuing the business at 65 million and buying Bruce out for

13 million so you know $13 million payout you know in today's dollars for Bruce to walk away for a company that like it's not clear it's going to catch with consumers right exactly okay you worked on it for well it's nine years of work yeah it's nine years of work so like you know I think you could really debate yeah the valuation there in both sides certainly M&M were not yet M&M but in fact they hadn't even started having the M's printed on them yet no they hadn't as soon as Forest completes the purchase and

kicks Bruce out of the company takes 100% ownership he goes in 1950 and hires the Ad Agency Ted Bates and Company to perform a comprehensive Market study for the product this is also another genius Innovation on forest's part so other big Diversified cpg companies like Proctor and Gamble they were starting to do the sophisticated kind of market research here like we're talking about you know the legendary Proctor and Gamble product management function this was starting to happen but nobody in the candy industry did this like the candy industry still operated SE to the pants Frank

Mars type entrepreneurial stuff this is emblematic of the industry Hershey had a strict policy of not advertising at all no advertising whatsoever they did not do any advertising until 1970 that's so insane which is absolutely freaking insane they didn't have sales targets either right the story about sales targets and revenue growth Targets in Hershey was that in some file card in some system Milton Hershey had had written grow sales 4% every year and that was the plan that was Hershey's annual plan was grow sales 4% yeah I will say it is pretty incredible how much

from here on out the story is a story of AD campaigns we are getting from a place where before this it was all product Innovation and from here on out it's marketing Innovation like who won chocolate between 1950 and 202 for is a story of marketing and distribution yes 100% marketing and distribution and you say ad agencies I don't want listeners to get the sense that oh it's just ad agencies that are doing this and it's advertising it really is the discipline of marketing of which ad agencies I think were a lot more consultative in

this function back in the day than today they're much more execution oriented really this is like the creation of the modern marketing discipline yeah so the Ted bats agency goes off they do this product study Market study of who do M&M's appeal to and they find that actually M&M's are super appealing to kids now this is interesting the candy industry had obviously started as a kid's Market but by this point in time it's an adults Market everybody's marketing to adults that's where everybody thinks the market is and M&M's and Smarties Etc this had started as

food for soldiers so they were focusing on the adult Market turns out kids love the little pieces and the bright colors etc etc here's the problem though kids don't buy the candy the parents buy the candy so you got to mark it to the parents to buy them for the kids exactly so they need to come up with some way to get that message across to the parents and this is where frankly I'm going to think just like one of the most brilliant slogans and AD campaigns of all time is Born the milk chocolate that

melts in your mouth not in your hand and it's become like water these days everybody knows that slogan what makes it so effective I think is it just so gets at the very very very core of the psychology of being a parent of candy age eating children m M and the core truth that it gets at is yeah you want your kids to be happy but really what you want is for your kids not to cause chaos in your home David how do you know all this information I'm just reading about this and thinking I'm

like oh my God imagining myself as apparent in you know 1950 1951 when this comes out the last thing in the world I want is my snotty nodes kids running around the house smearing chocolate all over the furniture all over the walls all over everything which also is the last thing that I want as a parent in 2024 yep and now here is this message being delivered to me of make your kids happy get them to stop whining give them the chocolate that they so desire and it will not ruin your furniture and your house

it's perfect yep they of course back up the parent marketing with also sponsoring the most popular kids television shows of the day the Mickey Mouse Club and the howdy Duty television shows and boy does it work by 1956 so they start this campaign and call it 5051 so 5 years later M&M's have become the biggest selling candy in all of America doing over $40 million in annual sales and growing super fast bigger than stickers bigger than Milky Way bigger than the Hershey's bar incredible wow five years from basically zero to $40 million in sales they're

just crushing it and they're starting to get worried about copycat so they start adding the little m's actually they were black at first and then in 1954 they transitioned it to white and they ran a second ad campaign telling consumers look for the M on every piece to verify the authenticity so they're saying that we're building IP here we're not just making candy we are building a frame of mind and a Nostalgia point and a trust with consumers yep and of course today I say as a pop some M&M's into my mouth M&M's are not

just a kids candy kids still love them but adults love them too but it's back to this Nostalgia thing like everybody today who is an adult eating M&M's grew up eating them as kids yep 1954 there's the first TV commercial featuring The Animated M&M's characters obviously different than the ones you know today which are computer animated but very cute handdrawn uh actually a few different versions of them but pretty consistent concept all the way from then till now the personalities changed a little bit but these personified M&M's that have witty stuff to say is there

pretty early yep totally speaking of copycats M&M's were so successful that Hershey's really was getting worried David as you said it became the better selling candy than Hershey's bars so Hershey's launched something called Hershey ETS and we'll link to it in the show notes it's fun looking at the old marketing for this failed product the biggest issue with marketing hersheyettes is people would say what is it and in order to say what it is you had to say they're like M&M's which that's a tough marketing position to be in I mean you nailed it earlier

when you said being first to Market is really important and in markets where it is important to be first to Market getting scale quickly so you become the product of record or of reference when people are trying to describe the category M&M's was that to a te totally totally was Hershey's would then later as a part of the rees's franchise try to do Reese's Pieces actually there's a fun story around that that we will talk about a little bit later but here in 1954 land there's just a lot of fun dialing in happening of all

the marketing the peanut m m launched but first only in tan they then realized what are we doing that we need to change this so in 1960 they added yellow red and green right around the same time in 1955 TV started becoming a real factor in Americans homes and it was just perfect timing I mean it was a match made in heaven for these candy companies to utilize and create demand for their products after the war if you wanted a brief moment of emotion for your brand with a quick tagline a TV commercial is just

custom made for that and Deborah Cadbury puts it really well she says one great TV campaign could shift Decades of Customer Loyalty in a matter of weeks especially in a new category like candy coated chocolates yep 1955 Mars also gets into the vending machine business interestingly over in England they start this business called vend pack which created the earliest vending machines they eventually sold this off in 2006 but they had built coin mechanisms and Bill validators I think they were like the market share leader in how to read bills in vending machines all across the

world yeah they also got into change makers like you know you put bills in and you get coins out oh interesting yeah so speaking of Empire minded at this point Forest Empire is pretty much complete he's got the most popular candy bar in the UK with the Mars Bar Mars's European operations have become very very large in and of themselves I think they had started making their own chocolate instead of buying from Cadbury by this point I think that's right I think they had transitioned or were transitioning to making their own chocolate in the US

obviously he's got M&M's which are now the number one candy in the US he's crushing it there he's got the biggest and pretty much the only Pet Food business in the entire world he's also got the biggest and only branded rice business all told all of his sets of companies I believe here now in the call it mid to late 1950s are doing like 200 million-ish in Revenue so a big Empire however there are two things that he still doesn't have one of course is his father's company Mars Inc Chicago Mars and he owns what

10ish perent around this point but he doesn't control the company and then two of course is fully separating himself from Hershey's and controlling all the means of production for all of his American businesses and making his own chocolate in America right CU if Hershey's cut him off M&M's would be screwed he has a big liability there now of course hercus doesn't want to do that because then they'd lose a whole lot of business they'd lose their biggest customer yeah exactly and probably also knowing forest was strategic when he chose to push Bruce out of the

business because I believe William Murray had already retired from her at that point it would be like Forest to plan all that out to a te yeah anyway like I said at this point Forest Empire is doing call it 200 million-ish of Revenue annually around the world and Chicago Mars had about 50 million of Revenue so Forest is call it four times the size of Chicago Mars now when Frank Mars's dad had died the majority of the company went to his second wife Ethel it's about 2/3 I think that that she gets and then there

was onethird that had gone to random other shareholders over time many of which were employees I think yep I think that's right and I think maybe forest and Patricia got like some small Stakes at that point in time okay 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 Forest per Frank's original will had 2/3 1/3 goes to Patricia 1/3 goes to Forest as we get on into the 1950s and Forest 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 a 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 there's a fox that wants to hang out in our Hen House is there anything anybody sees that's an issue here now just build him an

office clearly they did not know Forest 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 all all the big mistakes that William is making as CEO and why William should be fired and Forest should take over this is not so different than how Elon ended up owning Twitter yeah yeah it actually is very similar oh I'm just a 5% position oh

I should be on the board oh I have recommendations yeah before you know it this is exactly the same way oh boy still though William and Patricia and the rest of the management isn't going to get on board with selling to Forest or letting him take over and in fact in 1959 William retires as CEO Forest 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 yeah so a 20% decline in Revenue Vue on a significant fixed cost base is catastrophic that would be a huge

huge change in the negative Direction on your return on total assets y it is a disaster for the company now it's also a very convenient disaster for Forest who wants to pressure everybody else into selling and being able to take things over so finally as this is happening in 1963 Forest flies to San Diego where Patricia lives again to give you a sense of James the husband here he's commuting from San Diego to uh run this business and they didn't have zoom then no they didn't and it's a manufacturing business so yeah anyway Forest finally

convinces Patricia to sell he says like look if we don't do something here this company's going to 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 not fire James my husband he can remain a CEO farest is like okay are we putting that in writing or for how long 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 totally it's also his name and so is it that different if left absorbs right or right absorbs left and if you're the controlling shareholder of both no it doesn't matter yes not yet CEO so Patty sells out in 1963 Forest 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 mar Incorporated 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 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 and just as a like a side note here it's pretty insane that Forest is able to out of his pocket without external financing go and buy up 2third 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 right you need some other way to get the money yes now it was a distressed business at this point but like yeah still I'm going to guess it's still valued north of 40 million seems reasonable he needs to come up with 25 plus million in cash to pull this all

off yeah amazing so once he takes control he comes to Chicago he immediately rips out all the office walls in the building open floor plan for everybody he demolishes the executive dining room he sells the company art collection and the company helicopter and he hands everybody including James a time card he may as well have walked in with a sink he as well have walked the seriously oh my God tragically later that year Patty dies of cancer super young I don't think she was even 50 years old yet and once that happens forest fires James

and makes himself CEO of the entire Empire all United finally under Mars Incorporated you know I read this story and I thought of the Darth Vader quote I am altering the deal pray I don't alter it any further yes yes oh now I'm not 100% sure he may have kept James still employed in the business or something but yeah he was out a CEO Forest is the captain now yeah I am altering the deal pray I don't alter it any further so so so great okay this now brings us to Forest final Conquest which is

making his own chocolate in America and fully ditching hery and we should say too at this point he has completely overhauled the Chicago Factory they're all in on mass Productions these count lines are moving at they used to make a Snickers bar in a day and now they can do it in under an hour I mean he's just going he's going so his First Act of business once he becomes CEO of Mars America is he call Hershey up and he's like hello remember me I'm the new CEO of Mars I just want to let you

know that we are going to start phasing out our chocolate purchases from you all and the way Hershey reacts to this is what you would be stupid to do that imagine how long it would take you to pay back the investment necessary to spin up your own Chocolate Factory you would have to be nuts to take on all that fixed cost we have literally an entire town here that is dedicated to making chocolate and we are supplying it to you at a competitive price yep so the Hershey's team estimates that it'll be at least 10

years before Mars turns profitable on this decision to make their own chocolate and okay so let's say he just did it for control and he didn't think the math would pencil which I don't think is right but let's assume that it's been 60 years since they made that decision so I am sure they have reaped plenty of benefits in operating leverage on having their own plant versus needing to pay all those extra little margin dollars here and there to Hershey's totally so Faris gives his Chicago plant managers a deadline of six months to start making

their own chocolate in the factory and I suspect they turn profitable on this decision a lot faster than 10 years out but there are obviously other reasons that Forest is doing this too one is the quality principle which you know I really do think the quality principle is number one in Mars for a reason and if you really are serious about wanting to produce the highest quality products at a given price you kind of need to control all the means of production yourself anyone who's serious about software should make their own Hardware yes yes Alan

Kay for the win the other reason that I think Forest always had the dream of making his own chocolate is to be able to scale as large as possible like we've been saying all episode this man so deeply knew in his bones how to operate in a scale economies market and by controlling all the production himself that was just another step that enabled him to scale as big as possible I think in any cpg business it's a scale economy's business but here we haven't talked directly yet about how important shelf space is for candy yes

I was about to bring up supermarkets yes so for candy especially it really is a zero sum game 90% 90 of all candy purchases are impulse purchases only 10% of candy purchases are planned purchases so I found that it was 70% and the place that I found it was from this is flashing forward a little bit some 1979 consumer market research that Mars commissioned and what they did with that information was they launched an allout initiative to Lobby Merchants to put candy displays near the cash registers which didn't happen until that point in history and

is now ubiquitous ah interesting so it may indeed be 90% now in part because of those efforts by Mars yes they were like how do we lean into the idea that 70% in 1979 of our candy is purchased on an Impulse basis wow I didn't realize that I thought that candy had always been by the cash registers it wasn't until this Mars initiative in 1979 maybe in smaller shops but that's I think especially with supermarkets when that changed interesting interesting well so given the impulse nature of purchases here I mean it really is whatever candy

is right in front of your face tempting you to buy is what you're going to buy and so 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 there's another interaction with supermarkets where the power actually flows the opposite direction it's sort of an aggregation Theory thing if you think about the way that Merchants used to work no one owned a lot of stores the power was sort of diffuse

among retailers and so if you were a candy maker and you went to the local store in your town and you said you want to buy my bar and they'd say sure and they didn't really have an ability to push back or bargain they didn't have a lot of Leverage supermarkets and especially chain supermarkets made it so there was a power concentration where the supermarkets could go to the candy manufacturers and say here's what we want we want to Market a uniform set of candy and a small number of SKS that don't overwhelm us with

inventory and we want you to put a lot of marketing behind those things that we're selling and we're only going to stock them in the store if you're really doing marketing campaigns because television's blowing up and we know that that moves product in our stores so tell us whatever you're going to do big campaigns on and that's the Shelf space that's going to get allotted yeah you're totally right it's a shift in technology with TV it's a shift in consumer Behavior with supermarkets and what it results in is massive returns to the scale player and

what's so frankly just kind of sad is with the exception of advertising Hershey had been benefiting from this for its entire life as a company I mean this really was Milton Hershey's strategy from the get-go lower prices get distribution go Nationwide get shelf space get placement build a big company he just didn't put his foot on the gas exactly well and then after his 10 and after Murray's tenure the company basically became brain dead for like three decades they don't do advertising they don't have a marketing department at all and it's not like you know

I mean Hermes doesn't have a marketing department like Hershey really didn't have a marketing department I think it was one of these things where a company internalizes a behavior because it's always been that way and they say well there's a rule and the rule is we don't do advertising but that rule was developed in a different time in a different environment where the rule made sense and now you're sort of senselessly following a religion that is no longer relevant in the new world y you know we haven't talked yet about Hershey's ownership structure so it

was and is a public company but the controlling interest is owned by the trust the management of the trust became super super removed from the realities of the business and the market and I think that's how this happened makes sense reflecting back on this period of time thinking about Forest Mars This sort of was the moment in world history for the global scale economy's founder to rise if you think about the early 1910s you couldn't take advantage of economies of scale in the way that you sort of can now with the rise of globalization there

are things that would have been non-economic before in addressing these small Regional markets but now that you're Distributing everywhere and America is a huge Market on its own finally and beyond that International you sort of have the potential for this personality type that Forest Mars was to really succeed and you can advertise and market and brand nationally for the first time via television and then in the coming decades internationally yeah it's the rise of the scale economies entrepreneur I think is sort of a way to summarize is it yep totally so now that Forest finally

has his own chocolate making 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 her's decades long brain deadness here they kept the price out of nickel from 1900 until November 1969 what they never changed the price I didn't realize it was that long 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 melon her's Legacy we can't change the price so what did they do how did they manage infl they just kept shrinking the bar size I got to say by the way that 5 cents in 1900 just so people get a sense is 23 cents in 1970 so it's a 4 and a2x that they sort of have to figure out how to handle 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 consumers are going to love that oh yeah they're going to love that so the original Hershey's bar was 1.25 Oz 1 and a/4 oun in 1900 by the time 1969 rolls around it is half of the original weight then I see you are looking at a Snickers there how much is a Snickers today 1.86 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 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 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 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 qu ounces so actually economically they're still at a wash here both were about double okay so it doesn't solve their problem it's just totally brain dead the problem is inflation and I think the thought process probably was okay consumers are going to be outraged when we double the price of the bar after 70 years oh the first time we raise the price of the bar we should give them some value so

in the second time well this is we not having a marketing department or doing consumer surveys or anything a way to communicate with customers at all yeah turns out to be a really big problem consumers are just like what the hell ay 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 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 shrink flation oh no this is like a presidential thing in our country today where the president is railing against shrink flation by keeping prices the same and making cpg food smaller amazing amazing so yeah I believe that people were outraged by people were pissed so Forest is like oh man boy am I ever glad that I started my own chocolate baking process here 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 going to increase the

size of his bars while keeping price the same and he starts a price in size war with Hershey now interestingly in response to this Hershey counters by actually finally starting to advertise for the first time here in 1970s the first time in the company's history that they advertise and surprised it works great but because commodity prices are staying high and it's putting pressure on profits the board pulls the plug on their advertising because they say like oh profits are down we can't be spending so we need to stop advertising so they do two years of

advertising it works great but profits are down so they say nope we got to stop that unbelievable and as a result in 1973 the combined Mars which is all of the Legacy Mars Inc products Snickers Milky Way Three Musketeers Etc plus M&M's passes of Hershey to become the number one candy company in America there it is I don't think they ever looked back well Hershey did eventually retake the lead in America from Mars much later but Mars is by far the largest candy company globally like Hershey is basically just in America and I think Mars's

American candy business is about the size of Hershey's American candy business today I think they're kind of neck and neck but Mars has everything else too yep this game that you're talking about David of the cat and mouse price war game would continue and Mars would basically have the advantage every time because Hershey's primary thing they're marketing is the chocolate bar which is made of the densest most expensive thing in the whole process and Mars just has a durable competitive advantage in that they're selling something to Consumers that they value at the same price but

the cost of good sold is way lower I mean it has nougat and peanuts and so what they basically do there's another time I think this happens in the early 80s where Mars knows that the commodity prices are on the uptick for Coco and so it's going to squeeze everyone's margins but it's going to hurt Hershey the most so what is Mars do they announce bigger bars at cheaper prices what can Hershey do they're just getting boxed in from all angles and so this is a sustainable competitive advantage that Mars has selling something that has

just lower cost of goods for a equal perception of value to customers yep the other thing that Mars builds up through the maybe even starting in the 60s but definitely in the 70s and 80s is a very very sophisticated Commodities trading Department that Hershey doesn't have oh really of course they do hedging and of course you know it's this very Mars style to do this now obviously it's a private company they never report any of this but rumors are these are rumors but heard it from multiple places Mars has actually made many billions of dollars

of profit from commodity trading over the years so whereas for competitors like Hershey's commodity spikes and prices are like a big risk and impact to the business I'm sure Hershey's hedging also these days they are but like back in the 70s ' 80s no no they wer Mars is actually profiting hugely from Market swings in commodity prices wow 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 forest's story which is the

end he retires he hangs it up he walks away and concurrently with him deciding that's it this is basically when the company stops communic 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 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 Forest 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 Forest 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 uh you know you can't keep an old horse out to pasture here so in 1980 when Forest is 76 years old he decides he's getting back in the game he is his father's son what's he going to do he's going to start a candy company he's going to 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 yep of the family by the way I ate some ethm chocolates last night I

I ordered some to prep for this episode they're great delicious I have never tried any I need to get my hands on some it's extremely different than the rest of mar products it's like a specialty chocolate yes well so Forest business plan in starting llm is basically to build a competitor to seiz oh that makes sense he sees just like Warren and Charlie did back in the day that seas and high-end chocolate is actually a really really good business and the plan is the way they're going to compete with c'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 Seas 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 Forest 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 I did not realize that's why ethm is in Nevada that's so funny that is why ethelm is located in Henderson Nevada which is

a suburb just outside of Las Vegas and Forest by God builds a factory there outside of Las Vegas Builds an apartment directly above the factory and lives in the apartment above the factory from which he runs the business guy has one speed and one Playbook and this dude is like in his late' 70s it's a success within a couple years llm is doing $150 million in Revenue unbelievable like get out of here unbelievable now as you said Ben it's not competing with Mars in any way it's competing with c's but the business gets so big

and Mars and fars children decide that they want to own this business so in 1988 after Forest has been running it for 7 eight years Mars acquires llm for an undisclosed amount I would love to have been a fly on the wall for those negotiations between forest and his children I mean what's the point of even negotiating he's already given all of Mars to the kids so what's he going to do after the sale completes give the new stake to the kids too unbelievable it is like the best Koda ever to the story sorry so

shortly after the llm acquisition is when Forest Jr and John Mars the brothers who are running Mars now as co-ceos this is when they give Joel brener 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 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 because they've kind of realized realized we can't be A50 billion company that doesn't ever say anything ever true but what they don't do is

allow books to be written about them or any sort of in-depth piece no one knows what their balance sheet looks like including their Bankers they don't produce financial statements for their Bankers yep 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 they bring twixs over from the UK they bring Starburst over which was opal fruits in the UK yep 1986 Mars acquires calan 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 calcan dog becomes pedigree calcan cat becomes Whiskas or Whiskas also in 1986 they acquire Dove Dove bars and Dove chocolate yes they enter the Frozen snack business and then later launched Dove promises and Dove chocolate bars on the brand so Dove was a ice cream bar company when they bought it and then they launched the chocolate bars and chocolate pieces after having acquired the company which I think works reasonably well yeah I think so it's not a huge business for them but it's their direct Hershey bar

competitor now of like a direct competitor to kisses and to the chocolate bar yep the really big story though I think of the brothers tenure and Jackie too as a third owner of the business and eventually later she does also work in the business herself is globalization so during their tenure by the time they hand the business over to Professional Management in 2001 they've grown it from you know that 800 million when Forest left to 20 billion in revenue and yes there are all those Acquisitions and product launches we just talked about but the big

big thing is going global the brothers take them to Japan China Russia the Middle East South America this is really fun in 1984 they start sponsoring the Olympics and they totally run the Visa Playbook this is when they start unifying all the product Brands globally Snickers is Snickers everywhere and we can Market globally they really do an amazing job yeah and so the brothers took it from 800 million to 20 billion yes over 28 years I believe was their tenure a 25x in 28 years it's almost like the Tim Cook story too where it's the

out years of compounding and the glob ization end up making the more recent story numerically far more interesting than the early story but the early story is where the Maverick is I mean we told this whole story about Forest senior we're going to spend 10 minutes here on the Next Generation and the Next Generation took it from hundreds of millions to 20 billion dollars yes a year incredible now that said while globalization was I'm sure a Herculean task and required a lot of vision and commitment to it from the brothers it really was outside of

the m&a was about globalizing all the successful brands that Forest had built yeah so speaking of m&a and uh we were also talking about seas and Warren and Charlie a minute ago in 2008 Mars buys Wrigley with the help of Uncle Warren and Uncle Charlie I love that they come into this story it's the best I know there's some amazing quotes from Warren at the time of the deal one of them's like I've been conducting a 70-year taste test on both Mars and Wrigley and uh they both passed the test oh it's so good cuz

you know the analysis is actually far deeper than that but that also totally sells it's Warren's Personality yeah he actually is a really insightful quote in the 2011 Berkshire shareholder letter while they were still a shareholder in Wrigley ASMR subsidiary he says quote buy Commodities sell brands has long been formula for business success it has produced enormous and sustained profits for Coca-Cola since 1886 and Wrigley since 1891 he doesn't say this but like obviously this is the Mars Formula 2 Sell Commodities by Brands uh buy commodity sell Brands oh not as an investor yeah not

as an investor companies that buy raw products and then sell them as a branded product basically you're allowed to create margin yes the mar Market is giving you the right consumers are giving you the right to do that yes it's funny if you flip it and you say sell Commodities buy Brands that's a good mentality for an investment portfolio yes definitely in fact I thought that's what he meant I want to buy this because it's a durable brand or House of Brands interesting yeah no no as the operating Paradigm for a company of purchasing raw

Commodities and selling them as branded products right if you have cocoa beans backed up to one side of your Factory and then stickers bars coming out the other it's a good buiness business yeah you're going to do good interesting so it goes down in the middle of the financial crisis they announce the deal in April 2008 but it closes in October 2008 like right after Leman collapses Mars buys the Wrigley company for $23 billion which is a 28% premium to where it was trading that day yep and even Mars at this point in time doesn't

have 23 billion of cash on hand well they may have but they didn't want to use it I'm always trying to guess how much through all these points in history I think Mars piles up a lot of cash but I think they're really conservative and how they decide to deploy it I mean this is the tradeoff with efficiency Freedom return on total assets as the way that you're going to manage is you're just going to be very conservative in how you run the company yeah but yeah so Mars pays 11 billion doll itself they get

$5.7 billion in Bank debt from Goldman Sachs and then Berkshire comes in with the rest of the financing about $6.5 billion do total and 4.4 billion of that was a loan and then 2.1 billion is an investment into the newly created Wrigley subsidiary over time Wrigley will use the profits from all their businesses to buy out Berkshire and so it must have been negotiated in that Mars had the right over some period of time to buy out that $2.1 billion Equity investment indeed that is correct so what happens 5 years later in 2013 Mars repurchases

the debt portion of Brookshire's financing and man this de God the financial crisis like Warren was so good to be investing in such high quality companies at the interest rates that he got so the 4.4 billion in debt that Berkshire invested had an 11.45% interest oh my God so during the 5 years that it was outstanding Burkshire earned $2.5 billion just in interest now when Mars bought it back in 2013 that was before the debt matured so they had to pay Warren a premium to buy it back early they paid a $680 million premium so

all told for the $4.5 billion debt investment Brookshire gets its money back plus another call it 3.1 3.2 billion just on the debt over five years over 5 years now the equity portion the 2.1 billion in 2016 Mars buys out Berkshire so Buffett sells Mars his entire stake back for $4.6 billion versus the 2.1 that he originally invested he more than doubled the money in 5 years on that in add to almost doubling the money on the debt even better for Warren because that Equity that he held was preferred Equity it also had a dividend

associated with it of which they likely made another billion dollars in dividends on the preferred Equity it's interesting that they did the bank debt from Goldman Sachs and this dual instrument from Berkshire yeah why not go all one or all the other because you would think they would have the option to well I think this gets back to the value that Warren and Berkshire always provide but we're especially providing during the financial crisis which is just the reputational guarantee and solidity oh you think getting Burkshire was what they used to be able to pull in

the Bank debt I bet it helped pull in the Bank debt cuz I doubt Mars had significant banking relationships going into this cuz they didn't have any debt No in fact they classically never do Acquisitions with outside Banks they're obsessed with using only their own cash yep and Goldman was berkshire's Preferred Bank so probably pull Goldman in the other aspect to this is the Wrigley shareholders you had to give confidence to the Wrigley shareholders to vote for the deal to get it done and so having Buffett come in you know put his stamp of approval

calm everybody down even in the midst of all the craziness with Leman I suspect there's no way the deal gets done if Berkshire doesn't get involved that's really interesting given what was happening in October 2008 wow all told Berkshire puts in 6 and A5 billion and about doubles its money in the whole eight years so 5 years on the debt and then another few years on the equity how much did Goldman make on the deal I doubt that much right definitely Burkshire got some sort of premium for using their reputation in this deal yep now

interestingly we didn't dive super deep on Wrigley as a company but is a very good business probably I'm guessing even better than the candy business because gum I believe is mostly a petroleum byproduct is it really yeah so for a long time I don't know if this is still true Good Year the tire company yeah was one of Wrigley's major suppliers and it was like unused byproducts from petroleum us that if you can brand that and sell it to Consumers you're going to have pretty good margins so Wrigley I went back and looked at their

old 10ks before Mars acquired them they had about 50% gross margins and 20% net income margins in the last you know sort of decade of the company pretty good for a business like that not bad not bad at all they also owned mints like Altoids and Lifesavers that's the other big part of the business right if chocolate is a expensive product to make gum is a not expensive product to make yep okay other things that happened in the 2000s they bought a significant stake in the Banfield Pet Hospital chain which is the largest chain of

pet hospitals in America and was started in part parip with PetSmart that's right cuz most of them are actually in PetSmarts yes that partnership is now ended and Mar is now owns Banfield outright 100% And I believe in 2007 they took a large stake and then in 2015 they fully bought out petmart for 100% ownership that's interesting it is worth noting we did some slight of hand there that's a completely different business pet hospitals than dog food related in pet care you can use the pet hospitals as channel for your dog food but very different

type of operation that needs to be performed yeah this really is the big story about Mars of the last 10 years so after they fully acquired Banfield in 2017 they acquired VCA which is even bigger right yes they were the largest independent vet hospital operator in America for 9 billion so like large acquisition and Ben like you say you know there's two interesting things about getting into this business one it's a super different business we're talking about a Services business like this is not manufacturing y so very very very different DNA I think a big

part of the strategy though like you said about distribution of pet food in 2002 Mars had bought a French pet food company called royal Kanan or I've also heard it pronounced Royal Canan and Royal Kanan makes prescription pet food like especially for like an aging dog or a Mobility Challenge Dog and as dogs became more and more family members and people started caring for them more and more like humans prescription pet food became a really really big business so I think Royal Canan was like a grand slay acquisition for the company and I think that's

partially what led them to then get involved with Banfield and BCA of like oh well let's consolidate a lot of the distribution and value chain here in this prescription Pet Food business pretty interesting I mean it's a very different business but they run so decentralized that it's probably okay that it's a Services business and you're not having people who are making candy trying to run a Veterinary Clinic it's a pretty small head office and it's a very decentralized operation I think the decision- making Authority really rests with the board still but these independent operating groups

are independent operating groups yep I'll pull a Playbook theme forward which is that this company obviously grows through inorganic Acquisitions so in buying Wrigley Royal Canan VCA All these Mars itself Mars itself they've kind of overpaid on a price to earnings basis I mean Wrigley was a 35x and a 27% premium over the public valuation Royal Canin was a 39x but if you kind of think about especially with Banfield pets hospitals they really understood what they were buying so they were able to underwrite better than anyone else and I think this is very similar to

the idea that ham shared with us way back in our 2021 episode which is multiples are kind of a blunt instrument used for valuation when you don't actually deeply know and understand the business and when you do you can just underwrite better than everyone else and you have more margin of safety in the price that you are willing to pay than the rest of the market does so when they want to come in over the top at a 35x for Wrigley maybe they know more about Wrigley than other biders do interesting yeah or at least

the case on Banfield was we've owned pieces of this business over and over and so now that we've amassed a minority share we feel good about buying a majority share yep I totally buy it are from worldly Partners had a good comment to me about this that they shoot bullets not cannonballs and when you sort of see that in an acquisition strategy you should be careful not to judge too harshly when people overpay for things because they're taking these little baby steps to try and understand first and maybe they know something you don't yep speaking

of they ran this Playbook again with their most recently completed big acquisition of kbar yes 5 billion in 2020 after buying a small piece of it a few years earlier and then buying the rest of it in 2020 I didn't realize how big kind was kind was doing one A5 billion in Revenue I believe almost completely domestically in America yeah and Mars took it Global and Mars took it Global yeah so I think that has been a big success for the company as well do you know how they grew so big domestically oh I don't

Starbucks ah makes sense checkout counters at Starbucks impulse purchase yeah there you go there you go and it fits with Starbucks brand ethos it's like healthy honestly I eat them all the time it's a 5 gram of sugar bar that's super satisfying that doesn't leave my teeth feeling gross or make me feel like I ate something with a bunch of unnatural ingredients I know it's still a candy bar but it's a 5 gram of sugar candy bar so I think as far as Mars thinking about gez we want some sort of diversification hedge if people

stop eating candy bars they're on a good Trend there which leads us to the final piece of the story maybe which is the biggest deal that the company has ever done yep or is attempting to do so in August Mars announced that they have entered a definitive agreement with Kellen NOA to purchase the company for $ 35.9 billion so what is Kell NOA right yeah as we were researching this and getting into this I was like Mars is paying $ 36 billion what is kova it's like mandes you're like o what's mandelas that sounds interesting

in forign and you're like oh it's craft it's like a weird corner of craft yeah so Kenova do I have this right is Kelloggs minus the American cereal business that is correct so it's all the snack businesses and international cereal so the snacks are like Rice Krispy Treats Pringles eggs Pop-Tarts RX bar which is going to be interesting that they'll own RX bar and kind bar it is the largest cpg transaction since the merger between craft and Hines in 2015 and so another birk Hathaway special I mean if you think about it the family is

worth 117 billion today which essentially means the company's worth 117 billion which is kind of interesting it's a $50 billion company that at least Forbes I think it's Forbes pegs it at 117 billion of Enterprise value of course there's no Market to buy these shares so who knows how to Value it really right and when you say $50 billion company that's their annual RIS Revenue annual revenue y so they have started reporting in recent years or at least alluding to what the Topline Revenue number is yes that's correct they're going to get a lot bigger

I guess is the takeaway from this if they're worth 117 billion now and they're using a bunch of their cash and presumably some outside leverage we'll have to see for a$ 35.9 billion acquisition that's a big size up that is transformative yes it also basically makes them look like Nestle yeah which Nestle has been the real competition for years now and Nestle's huge they're over a hundred billion dollar in revenue and they're extremely Diversified extremely Diversified yes which obviously again Mars has always been Diversified but nowhere near the extent that Nestle is and now with

the kinova acquisition they're going to look a lot more like Nestle and Mars is going to be selling uh I just looked it up investment grade bonds to help with its planned sale of Kenova so they are raising some outside capital for that not just using their cash interesting interesting so that brings us to today David we were just talking about it in 2021 they did 45 billion in Revenue 2022 was 47 2023 was 50 and to your point they're now saying over 50 here's the interesting thing that we have been hiding from listeners the

whole episode and I know you've been dying to say Mars snacking did $18 billion in Revenue that is a segment of their business that includes all the candy so we've told this whole story all about the smaller piece of the business you'll notice 18 is not only a smaller number than 50 it's less than half of 50 yeah Pet Care is actually the bigger business 59% of Revenue comes from the Pet Care segment and of their 140,000 employees almost 100,000 work in petare y of course services business they own thousands of hospitals yep so we

don't know the margin of the pet hospitals versus the dog food versus the candy specifically about Mars we can probably look at industry comparables to try to understand that but at least on a Topline basis and an employee basis Pet Care is the dominant component of this business if you want a little bit of a hint the new CEO in 2022 came from their Pet Care Division in many ways they are a pet food company that also makes candy and always has been I mean if you look back it was the year after Forest Mars

founded the UK division is when they bought the first dog food which was almost immediately cash generative totally that's like the biggest aha moment to me is they've been doing this the whole time other than the veterinary services that is again new so you might be wondering well how significant of the market of vets do they own Mars owns 3,000 locations out of 35 to 40,000 vets in the US so that's like 8% of vets they're not just exploring vets they're I don't know the largest or one of the few largest player in vets in

the entire country I think they are the largest there are other vet rollup plays it's been a darling of search funds and private equity in the last decade is Veterinary rollups Dental rollups you know stuff like that yeah looking at the market at least in the US Mars and Hershey each have about 24% market share of candy and Confections and no one else even comes close it's the Hershey and Mars Show here domestically internationally it's kind of a different story it is a very fragmented industry Mars is the whale with 11% but the next highest

are 7% and 5% and only a third of the market is made up by the top five companies Mars mandes Ferrero Hershey and Nestle so 2third of International candy and Confections is made up by smaller companies and that is even after all these mergers from the last few decades so there's still this huge International longtail of candy companies wow because there's already been huge consolidation yeah so that is the shape of the business today you've got a pet business masquerading as a uh candy business and uh we continued to perpetrate that narrative yes now obviously

the pet business huge bigger in revenue and I'm sure very very large in profits as well I don't know I'm just purely speculating but I suspect profit contribution wise they're at least equal if not bigger on the candy side oh man I could be totally wrong I don't know I don't know the economics of pet hospitals yeah I would love to know that if your last name is Mars please reach out or join us in the slack acquire. FMS slack we'd love to hear from you yeah power power so this is segment we do in

analysis in every episode based on Hamilton helmer's excellent seven Powers book and framework and the idea is that there are seven ways that a business can sustainably generate significantly more profit than its closest competitors and those seven ways are through counter positioning scale economies Network economies switching costs process power branding and cornered resources we have spent a lot of this episode talking about the biggest and most obvious one here in scale economies actually like a lot of the businesses we study on this show scale economies is the biggest deal it is actually kind of crazy

it's almost always scale economies is a big part of it I think for the biggest businesses in the world it's these businesses that operate at high gross margin in very large markets where you basically can build out a massive massive fixed cost base and then have great operating leverage can you amortize your high margin sales in huge volume across a comparatively small fixed cost base manufacturing businesses are like that software businesses are like that cloud computing is like that exactly and the businesses that get the biggest tend to benefit from this principle totally okay scale

economies check done so there's a thing I want to bring up with you and this has been a debate in the acquired slack I don't know if you've seen it at all around branding so the classic definition of branding and I need to reread seven powers to refresh myself on this but the idea is if I show you two products side by side that are identical but one is branded will you pay me more money for the one with the better brand you know the Tiffany Ring versus the unbranded ring yep I think there's another

way that branding shows up okay we said that Ikea doesn't have brand power last episode that's obviously not true it might be technically true in that they don't take margin because of their but they have to deploy their Brand Power in another way in the same way that Mars I don't think charges more for a Snickers than a different candy bar Mars doesn't take price in the form of brand but they do something else there's Brand Power here for sure consumers pick Snickers over unbranded random unsafe untrusted candy bar definitely I think it's got to

be a version of our Costco episode scale economy shared Brand Power shared there was someone in the slack that pointed out that this brand power could translate to volume essentially if you trust the brand more and the prices are the same you just buy more of it over time so you give more absolute margin dollars to that company over time especially in a reoccurring purchase business like this that's the way that brand power acures it's not in margin percentage it's in total lifetime margin dollars I totally buy that so by that definition they absolutely have

branding yep I've got one I want to talk about I'm curious if any of the other set jump off the page to you H I think the candy industry used to have cornered resources I don't really think it does anymore same with process power I'm not convinced that anyone's actually developed a superior way to make something that is not known by others in the industry I think Mars has always had the best technology and the best equipment and the best resources there's actually great stories about Forest perhaps both himself but also through employees and outside

firms he'd hire would come up with all these technical improvements to the manufacturing equipment but they would never patent it because he didn't want to tip off any competitors makes total sense keep it trade secret y totally uh no none of the others jump off the page to me so obviously we did not do a deep dive on the pet business despite it being the larger business I think though the main power in the pet business is switching costs oh if your dog doesn't have problems with its current food you're never changing to another food

yes well there's a couple Dimensions one you're never going to change to another food because it's going to cause digestive issues for a while like imagine if you only ate one food for years and years of your life and then all of a sudden you started eating what are we doing we should be feeding them table scraps so they get a well rounded diet just like the 30s exactly exactly I mean it happens dogs switch food all the time but it's not like humans choosing to eat something else it's a process right but then pet

hospitals like vets like huge huge switching cost so I actually think this is like the primary power in the business on the pet side yeah I think that's right okay that's power should we do Playbook yes the first one that I have is that you actually can build a durable sustainable business through great marketing not just great product and this makes me uncomfortable as someone who kind of doesn't want to believe that who always believes the best product wins I mean on the meta episode The takeaway was their growth came from product and not from

marketing on this episode I kind of feel like it's the opposite the whole thing is the story of marketing campaigns and how whoever had the better message for America at that moment I mean at least post 1960 was able to lean on that after the Advent of Television yeah and of course paired with distribution paired with grocery stores paired with actually let's talk about the ET thing yes let's talk about the ET thing this is really fun so in the late 1970s early 1980s when Spielberg is making ET the movie ET he's written into the

script that ET is going to be lured into the house by a trail of M&M's and anybody who remembers the details of the movie remembers that it is not M&M's and M&M's passed on the opportunity because it had to come with a guaranteed million dollars of co-marketing consumer promotion trade promotions displays featuring ET Mars was not down to do that with the M&M's characters and passed on the opportunity if you saw the movie there's a pretty memorable moment where it's Reese's Pieces Yep this was relatively early in the brother's tenure so I wonder a if

Forest would have made a different decision and also B if the brothers would have made a different decision had they had a little more confidence in their own Security in their own place as CEOs so I think there was a timing element to this Hershey almost passed too someone had to basically go bang down the door and say I'll actually pledge a million dollars from my budget that I was going to use for other stuff to use for this instead so Hershey leadership was also going to pass on it yeah I mean this was one

of if not the biggest deal up until this point for product placement yeah it was a paradigm setting deal and it worked in a huge way multiple sources cite that it 3x the sales of Reese's Pieces when this came out and Reese's Pieces they launched it a year before had done well initially it kind of fell off and then they were trying to use this to hey maybe we can Galvanize sales and I think it tripled Reese's piece of sales for a while and then It ultimately everyone knows Reese's Pieces are not M&M's they're good

but they're never going to be competitive with M&Ms but at least in my experience I haven't been to a movie theater much lately but I believe there is a lasting Legacy of this which is Reese's Pieces are a main stay at movie theater concession stand and it's all because of this totally so so maybe the takeaway is actually M&M's are a better product and Reese's Pieces are sort of this specialty Niche product and that's why they don't have the market share and maybe that this whole postulate is wrong that marketing can create durable Brands and

the reason why all these Snickers and Milky Way and M&M's are victorious is because they're just better products well I think they're good products but I think it's like the Nostalgia element is just so huge right they're somewhat commodity products or it could have been either product and then it was about who could create a better lifetime story over the story of your life about the associations you have with that product yep I think the candy industry is much like the luxury industry in that once you have an established product and product brand it is

impossible to kill it you just can't I mean all the fumbles that Hershey had for decades and decades still today what is a chocolate bar in America it's a Hershey bar you just can't kill it that's so true true and let's flip back to the Mars side of the world the associations that they have leaned into with the brands that people love it's a very Disney like Playbook that M&M's has run in fact they operate a M&M store in Disney World or in Disneyland I can't remember which one but they associate with the holidays they've

got that commercial where the two M&M's characters come in the house Santa's just come down the chimney run into them at the Christmas tree they do exist so great I mean it's a classic they've run it every year for 20 years or something I think it started in the 9s yeah the Rolling Stones they've associated with for Snickers they had the I Can't Get No Satisfaction ad obviously the Olympics I mean I'm looking at my Snickers bar right now the only other logo on it that is not Snickers is the NFL I mean they find

ways to associate with national or Global Premier brands that everyone loves that you have Nostalgia for in fact NASA they went up on I think it was the Space Shuttle NASA can't obviously endorse because it's a government agency but it's on the menu and it's a part of all the astronaut videos you watch where they're popping M&M's up and having fun trying to chase them around the cabin and zero gravity it's been a strategy for Mars to chase known loved Universal brands well sounds like we've learned a lot here at acquired from the Mars Playbook

yep another one just like the Innovation on commercials think about how long they've had those computer generated M&M's characters I looked it up the first one I could find was in 1994 Jurassic Park was in '93 and that was effectively the first use of computer generated 3D modeling in cinema that's right within one year they were running commercials with those characters yeah wow they know how to create these durable marketing franchises and moments in some ways it's actually shocking that they missed ET given how good they've been in all these other facets and ultimately the

ET thing's a fun story but did missing it really hurt them not really not in the long run no my last one around this is in this sort of marketing world do you remember in 1995 when they said they were going to do away with the tan M&M's yes do you remember anything about that is that when they were replacing when there was a vote right of which color to replace it with and blue won absolutely genius total genius they needed to spice it up because basically it was boring and does it cost them anything

or does it have any impact on their business if they change the color of one to something else no do they actually care what it is no but they got millions and millions of Americans to call 1 1800 fun color which by the way I called yesterday oh amazing is no longer in service you call 1 1800 fun color to vote so they're giving everyone this like vested interest in what the new color is blue wins blue replaces tan they lit up the Empire State Building after announcing it was blue with blue genius so great

this is like the Facebook internationalization where they have local people in each market translate and then they feel ownership over the product yeah yes totally all right that's all I got on their cons super marketing I'm sure you read too mars is constantly rebalancing the ratios of colors in &m bags to suit current tastes yes it's amazing yeah it's not even I was shocked I was like looking at the bag trying to I'm not going to go count but apparently it's a secret what the ratios are but I think they're adjusting it constantly interesting I

believe that okay next one I've got is be a Recession Proof business I thought candy was the one I was talking about and the deeper I got into the research I realized nope pet pet food is one too people don't stop buying candy when times are bad and they certainly don't stop feeding their pets especially now in this era where we consider pets part of our families and I think the data shows it if you look back at 2008 neither of their businesses took a hit from being in that recession and that's an awesome business

to be in if you can get it yep a coraly to being Recession Proof is being Universal a survey done by the food Institute says that 98 % of households buy candy every year and of those 97% are reoccurring purchases at an average of 35 times a year wo wow again good good business if you can get it it's just like our Starbucks episode 2 sugar is an addictive habit so all the research I don't know it seems like sugar is way worse for our bodies than coffee I'm not at all worried that I'm addicted

to coffee I'm pretty worried that I am addicted to sugar in fact I feel pretty crappy after eating all these M&M and Snickers I probably ate more than a recommended amount cuz we've been sitting here for 5 and a half hours doing this but that's probably the most concerning thing about the whole business is they're extremely participatory in the increase of sugar consumption among Americans and around the world and that it's very good for their business at least their original Core Business if we eat more sugar so I can see why they're diversifying away from

those core franchises into kind and Kenova etc etc yep more kind bars are uh my future maybe some detox tomorrow all that said no matter what happens I don't think M&M's and Snickers they're not going anywhere even if everyone starts taking OIC I don't actually think chocolate sales are going to fall in fact all the numbers show to this point everybody who's been saying oh people are trying to eat healthier and they're doing their very best and they're changing their habits chocolate revenues are still at an all-time high yep I think this is a good

place here in Playbook there are a couple things about chocolate that I want to talk about that are more General than specific to Mars one is just that chocolate I'm sort of biased here because I love chocolate me too same I loved doing this episode because I love learning about chocolate it really is a food part of that is marketing and part of that is a hundred years of Mars marketing and Hershey's marketing and all that but really really when you were describing the production process of chocolate earlier in the episode like it is one

of the most complex rich foods on the planet when Milton her shut down and got out of the caramels business he thought caramels is a fat but chocolate is a complete food chocolate is a food exactly and like he was totally right I don't think chocolate is going anywhere and the OIC risk for chocolate is way lower far lower than like gummy candies the other aspect about chocolate though and I think here is the right place to talk about it is the industry and what chocolate is is changing hugely I think most people have no

idea about this but both the first and second order effects of climate change are like massively massively changing the chocolate industry the cacao tree is a very very sensitive tree it's this bizarre plant I don't think we talked about this earlier but the pods the fruit that have the seeds and beans in them it grows directly on the trunk of the tree there's no like branches it's the weirdest thing to look at it's like these football siiz pods that just go right off the trunk of the tree yeah and that's something like only 25 years

of their full 10 and something year life they actually can produce the fruit in a way where you can use it to make chocolate yeah so it's this super super long lead time to get a tree to the point where it's productive and it's a really narrow temperature and climate band that they can be growing in so as both World consumption and thus production of chocolate has increased hugely over the past decades and climate change is happening these trees are so sensitive to it like it's really impacted production that's the first order effect on the

industry the arguably as bigger bigger is the second order effect of how the industry has responded so there's been huge efforts over the last couple decades in genetic engineering and hybridization and breeding of cacao trees to optimize for resiliency and output and production all of which is good you know ensuring continued production of chocolate as long as it doesn't come at the expense of taste right so that's the downside it has not been optimizing for Taste either preservation of the current taste or just good taste in general so like actually the taste of chocolate has

changed a lot in the last few years as the plants themselves have been engineered and changed a lot to more resilient and productive yep exactly so a lot of the real real richness and complexity that has for thousands of years made chocolate like a super attractive food for humans is sort of in danger of being lost or being watered down I will say the industry is very focused on this this is like a existential super super important focus of Mars in the entire chocolate industry yeah that is the correct takeaway whenever you talk to people

in the industry this is what they're talking about yep all right I have got a couple more the first one is conglomeration and doing it well they very early on learned how to acquire and conglomerate how to do Acquisitions which parts to centralize spoiler alert very few which parts to decentralize actually most of them when you are running two completely different businesses and running two completely different geographies from the first five years of your company's existence you end up actually developing the muscle to do this well and so I think it's very different than these

companies that later in life are like we're going to get into XYZ Mars always has been a diversified conglomerate and they actually look a lot like lvmh in that they aren't a private Equity Firm they're a Buy and Hold I think they've made 30 Acquisitions since the 9s and they've only sold two things since 2015 it's very Bernard are no style they also don't Rebrand things they keep the original Brands even in the Pet Hospital business yeah that's super interesting you think of anywhere where you would want to centralize the brand it's like no VCA

Banfield they're separate yeah it's super true and then my last one is duration if you look at them over the last 100 years they have grown Revenue at a compound annual growth rate of 14% for a century pretty good the question sort of comes back to to what conditions enable a business to grow like that for that long it's Global applicability it's the margin structure you're talking about where you can take in Commodities and spit out Brands it's the operational efficiency of doing it it's the reoccurring purchase that has a habitual if not addictive component

to it it's the scale economies of being able to achieve and maintain number one dominant market share over many decade long periods yep it's pretty amazing that those things come together in a way that make it possible to grow at 14% for a century if executed well wild all right David we are into the quintessence quintessence listeners this is a new thing that we added as we tried to figure out how do we land the plane what is the big takeaway that we can't stop thinking about after talking through the whole story of the episode

great I'll go first couple things about this company one man Forest senior was such a freaking G and because the company is so private like nobody knows about him you know like but he should be right up there with Sam Walton Henry Ford with the very very greatest American entrepreneurs of all time he was truly a genius I think probably had a lot of complications and faults in his personal life which is the same thing as basically everyone we cover on this show Rockefeller all of them yeah yes but when it comes to business and

entrepreneurial leaders he's one of the greatest yep for sure okay so that's one that's not necessarily the quintessence of the company but I feel like we need to say that just because it's not like a widely accepted fact totally two though you know we have not yet studied Coca-Cola we haven't studied Proctor and Gamble so with the caveat that those companies and ones like them probably also fit this bill I think is one of the first modern companies H that's interesting you know everything that forest was doing back in the 30s when he was starting

were like radical and now are just completely widely accepted yeah everything from open Office structures to diversification to getting into pet food to seeing that dogs and cats were going to become part of families maximizing yield on equipment for efficiency maximizing yield operating managing companies in a scientific way getting into television advertising you know all of it he was like really really Visionary on this stuff in an era where none of his competitors were doing this I mean God the market research and the positioning that they did with M&M'S taking what essentially was a failed

product and then doing the research to understand who the target consumers were and who the target buyers were and how that was different and then tailoring marketing messages appropriately for that way way way ahead of its time yep you're so right it's funny that leads me all to my quintessence of this episode is how path dependent the outcome was and what I mean by that is could you do all of the things that Forest Mars did to create a company like this today no you could not it required being in that place in that time

with that technology and that competitive set and this is probably true across all episodes but it just strikes me in the face right now that he needed to have the chip on his shoulder from the relationship with his Dad he needed the assets that he got from his dad when he went to Europe yeah oh even before that I mean he wouldn't have gone to Yale if it weren't for his dad finally becoming somewhat wealthy and if he hadn't gone to Yale he wouldn't have gotten exposed to the DuPont yeah so many dependencies here right

he happened to be a American capitalist competing against British Quaker and British Quaker inspired competitors industrialization and mechanization the timing of television and commercials and grocery stores when it did all these were brilliant decisions executed within the context of his time but you needed to be in that time in that place in that specific situation in order to pull any of this off so the question is how do you do this today with a completely different Playbook yep you don't you build your own company because all of the great companies that we study are their

own companies yep it's exactly right love it all right before we get to carv outs I have one piece of trivia for you oh I love trivia so you mentioned that the Hershey trust is responsible for maintaining the Milton Hershey School which started as a school for Orphans and now is a school for students that come from low-income families or need a home or you know just need a benefit from what the school provides David how big is the endowment of the Milton Hershey School I think it is by far the largest endowment of a

secondary school in America and assuredly the world yes I want to say it's like 10 or 15 billion yep 17.4 billion doar yeah for a high school well it's some younger than that but the enrollment of the school is 22 students and so the endowment dollars per student I assume are the absolute highest anywhere in the world it is totally incredible I mean we debated when we first set out to do this episode whether it should be about Mars or Hershey we ultimately decided Mars because these days it's the bigger and more important company but

the Hershey Story is freaking wild Milton Hershey gave the whole company to the Hershey trust yeah which operated a school for Orphans like a high school for Orphans that owns the company the primary shareholder has a primary purpose that is maintain the school right it is a very specific mission to support this school they have a hard time spending all the money I mean they're never going to get close to actually spending the endowment dollars or have any risk of spending the endowment dollars just think about what 4% of 17 billion is a year and

think about what the required budget is to run a 2200 person school yeah totally wild love it okay carv outs I got three one we've already talked about dandelion chocolate these people are the best the factory is so freaking cool and the chocolate is absolutely amazing they are a part of the beant to Bar movement so they Source beans that are not commodity beans they specifically Source single origin beans they go the extra mile to you know remove any imperfections and then in a very craft way they make some of the best chocolate you've ever

tasted it really is like the wine industry yeah I think I speak for you too we're both very grateful to Todd Elaine and the team there for just kind of taking us through it all and explaining how chocolate is made it was very cool so if you're looking for any late holiday gifts or just any good chocolate I can't recommend dandelion enough ah well you stole one of my car outs dandelion was one of my car outs but specifically the dandelion Advent calendar didn't you buy that for Jenny which thanks to our relationship with the

company yes I got the opportunity to buy I bought the double so that Jenny and I can both enjoy every night no o oh my God this is the single greatest Advent calendar that has ever been created in the history of mankind the artwork the design the presentation it's like this is if Hermes made an advent calendar with all of the presentation and the objectness like every day is an ornament that can go on the tree it's so great and then the chocolate inside they partnered with chocolateers all over the country I think maybe even

internationally all over the world to just HDE at some of the very best talent in the chocolate Mak industry globally anyway amazing Dand they're so great all right my second one I think a while ago I mentioned I got a Tesla Model Y which is just an awesome car it's just great went out the other day noticed that there was a bolt sticking through the tire that we had driven over and the tire was flat I opened up the app and within 90 minutes there was somebody at my house that was taking off the wheel

throwing it in a truck putting on a temporary wheel so I was good to go immediately you know within 90 minutes and then two days later it showed back up at my house they had repaired the issue with the tire pumped it back up gave me my wheel back took the other wheel I didn't have to do anything I'm just standing there and the whole thing cost me like 120 bucks wow it was like the best car service experience I've ever had in my life that's pretty awesome it is wild how different Tesla is from

other car companies the model Y is the best family vehicle ever created by mankind It's Like the Model T of Our Generation yeah it totally is so great okay that's number two you got one more last one I think last year I carved out Silo Silo season 2 is here on Apple TV and it is excellent uh yeah per usual part for the course for me I have not watched any of it but I did read the book and the book is excellent you read wool I read wool y it's great though I mean a

lot of times shows I think have a hard time maintaining their season one into momentum into two and two into three and there's no problem with that here didn't you get to meet the author a while back Hugh yeah he's great he's really great all right I had one other besides the dandelion Advent calendar which is the movie Home Alone this is sort of a humorous one but since this is a nostalgic episode about our childhood and the holidays Home Alone was my very very very favorite movie growing up as a kid I saw it

in theaters when it came out I was the perfect age I think mcau Cen and I are roughly the same age you give or take a year loved it so much after Thanksgiving holiday travel this year I have a whole new appreciation for that movie which is the perspective of the parents did you leave one at home no but I you come close I Now understand exactly how it could happen and I am excited to watch it again at the holidays this year through the lens of mom and dad nice yeah Thanksgiving travel was pretty

wild this year we went back to Pennsylvania to visit my parents and it was exciting on the plane ride there I'll put it that way and uh the most awesome moment though I mean it was this was one of those plane trips as a parent worried oh man like the lowest of the lows shall we say you're just sorry for everyone around you sorry for everyone around you but the most amazing thing happened we landed after the 5 and 1 half hour flight and uh very kind gentleman sitting in the seat directly ahead of my

three-year-old daughter who was causing Ruckus the whole time and kicking his seat and Etc he turned around he said are you David from acquired I like yes I'm sorry like oh no I've been no oh no he's like I've been listening to you the whole flight and then some other people in the row started popping up being like oh I've been list like it was um wait multiple people were popping up and saying yeah that they listened to a choir that either had been listening on the flight or these are their favorite episodes or it

turned what was like a truly one of the lowest lows of my parenting journey into a uh a wonderful memory so thank you to you all on on that flight from SFO to Philadelphia the day before Thanksgiving after watching your daughter kick someone's seat from for 5 hours you have to be like I really hope that guy doesn't never know who I am yeah yeah yeah yeah that was my first reaction too of like oh no but but no it turned into the most wonderful uh turnaround of the day wow wow wow all right listeners

well with that a huge thank you to JP Morgan payments to cruso and to stat Zig you can click the links in the show notes to learn more about some of our favorite companies special shout outs also to arvind navaratnam at worldly partners for his awesome awesome write up on Mars there's way more data in that than we were able to describe on air so if you want to see some great charts industry stats on chocolate over the years on sugar consumption on Hershey on Mars on the whole competitive Set uh it's linked in the

show notes I can't recommend reading through his whole PDF enough oh Arvid is so great so great to Todd at dandelion chocolate as we mentioned yes and also Clara Shen who works at dandelion as well and chatted with me and had a lot of great insights also on the industry and on Mars yeah to Gary guitard who I'm sure many of you have eaten guitard chocolate either directly by knowing it or indirectly by not knowing it as they are the chocolate supplier to many excellent chocolate companies around the world including the world famous Seas candies

yes which I didn't know how much I enjoyed guitar chocolate until well I realized how much of it I'd eaten through Seas yes speaking of trivia I've got one for you related to guitard before Milton Hershey started making chocolate in 1900 there were three chocolate producers in America who predated him and I believe all of which are still operating making dark chocolate not milk chocolate obviously at the time one of which was guitard here in San Francisco do you know who the two others were I don't think you will get the one on the east

coast but the third was also located here in San Francisco giradelli giradelli yep yes and then the uh East Coast I don't know the one on the east coast was Walter Bakers in Massachusetts I think oh shoot I did know that yeah yeah Baker is sort of like the Godfather of chocolate in the US right I think that's right I think that's right but it's super interesting how two manufacturers popped up here in San Francisco in the 1800s nice climate for it before air conditioning at least and then one more big thank you to say

on multiple fronts to Joelle Glenn brener the author of Emperors of chocolate and the only journalist ever to get access to Mars one for just writing the book we read a lot of business books business histories here on Acquired and emperess of chocolate is one of the greats it's a total page Turner and then also thank you to her for chatting with me as we were preparing she was very very helpful in uh clarifying A few points and getting the story behind the stories can't recommend the book enough go check it out great well if

you like this episode go check out our other episodes on lvmh Sony or Brookshire Hathaway if conglomerates are your thing or for more complex manufacturing Nova Nordisk the makers of OIC or if you want something more recent check out acq 2 we just had that awesome conversation with the CEO of arm Holdings Renee H if you're looking for more semiconductors in your life and if you want to discuss it please come join us at acquired. fm/ slack with the other smart respectful kind folks there with that listeners happy holidays and we will see you next

time we'll see you next time who got the truth is it you is it you is it you who got the truth now huh [Music]