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Mars Inc strikes the balance between purpose and profit

Thello spiritual Mars Inc’s home is Slough, an unprepossessing town somewhere below the flight path to London Heathrow Airport. It’s not a place sweet dreams are made of. It serves as the British backdrop for Ricky Gervais’s “The Office.” It’s also the place where Forrest Mars, in the Depression of the 1930s, came up with two business ideas and a management philosophy that are still quietly shaping the world today.

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The story of the creation of the Mars Bar is well known. In 1920s Chicago, Forrest Sr, as he is now remembered, met his estranged father, a struggling chocolatier, over a malted milk and came up with the idea of ​​pouring malted milk chocolate as a filling in a bar. of chocolate. Thus the Milky Way was born. But Forrest Sr, as hot-tempered as he was enterprising, fell out with his father, fled America, and ended up in Slough. There, he renamed the Milky Way the Mars Bar. At a time when people needed low-cost calories, he took off with brands like meter&meters, Mars, based since 1974 in McLean, Virginia, is now the world’s largest pastry chef.

Less familiar is the origin of the dark horse from the empire of Mars, pet food. In Slough, Forrest Sr noted the British obsession with dogs. He didn’t like the way they ate table scraps. So in 1935 he bought a company that made Chappie, a canned dog food. Today, Mars reckons it supplies half of the world’s pets. Royal Canin, maker of fancy dog ​​food, is his biggest brand. It is one of the largest providers of veterinary care. On June 22, the company announced that Poul Weihrauch, head of pet care, would replace Grant Reid, his retiree. CEO. Mr. Weihrauch’s rise reflects in part the growing importance of the pet business, which now accounts for 58% of sales, overtaking snacks (38%). The food represents the rest.

The family business, while fiercely secretive on its finances, also updated its sales figures. They showed that since Reid took office in 2014, revenue has increased more than 50%, to $45 billion. That makes them bigger than Coca-Cola. The firm attributes its success to the austere business practices that Forrest Sr perfected at Slough, now known internally as the Five Principles: Quality, Accountability, Mutuality, Efficiency and Freedom. They may sound like managerial nonsense. But they strike the right balance between making money and doing good. Many flashier corporations point to that under the trendy slogan of “stakeholder capitalism.” Few pull it off as convincingly as Mars.

To understand why, first consider the relationship between the company and its sole shareholders, the family, a dynasty worth about $96 billion, according to forbes magazine. The fourth generation, known as GRAM4, run the board. Like shareholders everywhere, they have different priorities, ranging from sustainability to the well-being of “associates” (Martians for employees). However, his mandate to lead the company puts top-tier financial performance and long-term growth on a par with positive social impact and trust.

Shareholders get less than a tenth of profits as dividends. That frees up Mars to reinvest the rest in his business, allowing him to maintain a strong balance sheet and a staunchly independent streak. They lead discreet lives. That fits with Mars’ egalitarian spirit and his preference for privacy. They also retain some of Forrest Sr.’s eccentricities. One former board member recalls visits to the factory with family members where everyone tasted bites of canned dog food to check its quality. “It’s like pate. You get used to it,” he says. The practice continues, although “we don’t come to work every day and eat,” insists a current executive.

Next is the company itself. It has been professionally managed since 2001. People who know Mars say the clan doesn’t meddle much, as long as the managers don’t threaten to blow up the reputation of the company and thus the family. The delegation of responsibility runs deep. Mars has a relatively flat management structure, where bosses don’t get cushy perks like personal parking spaces. Associates are given the responsibility, even at a young age, to make important decisions. If they take a calculated business risk that goes wrong, so be it. If they behave unethically, there is zero tolerance.

In business, the company is competitive but not cutthroat, rivals say. It used to be noted primarily for a strong factory culture, operational efficiencies, and returns measured relative to its physical assets. But this is changing as the veterinary services business grows. Now he plays with the more intangible parts of the business. “If you meet a Mars man, he’ll talk about brands and people all the time,” admiring a rival executive, pointing to his high salary and good employee retention rates.

As for stakeholders, or what Mars calls reciprocity, it says it puts the interests of customers, workers, suppliers, communities and the environment before those of family shareholders. That comes with some big investments, like $1 billion to support sustainable initiatives like renewable energy and a policy of paying your taxes in full. But when he talks about it publicly, it’s mainly because it’s related to his business. He does not get into political debates, nor does he pontificate on all social issues.

What about the future? With little debt, plenty of cash, and products resilient to economic turmoil, Mars is in a strong position to expand further. Some of its competitors, such as Kellogg, a food company, are selling some of their business. Mars bought Wrigley, a chewing gum manufacturer, during the 2008 financial crisis; it was certainly not his best acquisition, but he held his own. It may rise further during today’s inflation turmoil.

willy wonka moment

However, he will not discuss the strategy. Although the family is more open about their commitments to society, they keep business matters secret. That legacy, which also goes back to Forrest Sr, may start to change. In 2020, Mars opened the Slough factory to TV cameras for the first time. Her chocolatiers were, anticlimatically, locals in hairnets, not Oompa Loompas. But at least some of the secrets of Snickers nougat filling were revealed.

Read more from Schumpeter, our columnist on global business:
In the EY division, fortune may favor the bored (July 25)
Amazon has a problem with the rest of the world (June 16)
What went wrong with the Committee to Save the Planet? (June 9)

For exclusive insights and reading recommendations from our US correspondents, sign up for Checks and Balance, our weekly newsletter.


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