Paul Newman was a WWII veteran. Paul Newman was a movie star. Paul Newman was race car driver. And oh yeah, Paul Newman was also a successful entrepreneurial iconoclast. Yes, you read that right.
In 1982 Paul Newman and his good friend, A.E. Hotchner, started the Newman’s Own food product line from scratch and turned it into a consistently profitable niche food company. Not only that, they decided that ALL…not some…not half…but ALL the profits would be donated to charities through the Newman’s Own Foundation. Remarkable.
You can find a good but brief history of Newman’s Own Inc. here; for a detailed account I highly recommend reading, “In Pursuit of the Common Good: Twenty-Five Years of Improving the World, One Bottle of Salad Dressing at a Time” available at Amazon or Barnes & Noble.
Think different, Act different
From a business perspective there are actually some lessons to be learned. After all why didn’t the ruthless competition from established operators prevent their success? What made Newman’s Own extraordinary considering that nothing prevented other products from replicating their tactics? What made their story special?
The first thing to point out was how Newman & Hotchner had a mental willingness to think & decide differently. Paul Newman was an actor, A.E. Hotchner was a writer. They had no special insight as to what would work versus what wouldn’t work. Tradition was flouted, convention was damned and institutional habits were defied. They simply relied on their moxy, common sense and an attitude open to making radical decisions. That’s basically a fancy way to say they had balls. As it turns out almost everything Newman’s Own did was against industry logic. Check out some of their initial unorthodox tactics:
- They bottled an all natural, no preservative dressing (which was never done before partly due to cost, partly due to shelf life concerns from absence of preservatives); this bold idea allowed them to be first producers to be able to use ‘FRESH’ on its label.
- They labeled their product with Paul Newman’s face and combined it with witty labeling. This was intentional satire and meant to counteract the seriousness & tackiness of traditional industry advertising practices.
- They strived to use higher quality ingredients. For example instead of using Apple Cider vinegar (which is cheaper) Newman used red wine vinegar & got a more authentic taste.
- They spent little on direct advertising. Instead they relied on word-of-mouth buzz from all the positive press they received from food reviews that awarded them high ratings.
Ahead of Their Time
Perhaps in 2011 these tactics seem unusual but not entirely radical, however in the early 1980s it wasn’t standard to design brand-new products entirely centered on stand-alone quality with no supplement of a gimmicky pitch, slogan or concept. Most established producers were not interested in selling products to suit every taste and fill every niche; they tended to opt for a mainstream product approach that resulted in watered-down quality & taste.
And Newman’s Own decision to NOT pursue direct advertising was considered totally off the wall; since social media would not exist for another few decades the task of reaching lots of consumers using roundabout methods was considered borderline idiotic. But Newman’s Own trusted their products and let word-of-mouth buzz serve as the majority of their promotion.
A Pretty Face does not Guarantee Pretty Profits
It’s definitely worth noting that Newman’s Own Inc and Newman’s Own Organics (sister company) did not find long-term success because of Newman’s good looks or popularity either. Those attributes didn’t hurt at first but it’s not even clear if they truly mattered in the long run. In fact celebrity food products typically have a high failure rate. See for yourself; here’s a short list of some historical examples:
- Rocky Graziano’s spaghetti sauce
- Mickey Mantle BBQ sauce
- Nolan Ryan fruit snacks
- Gloria Vanderbilt salad dressing
- Reggie Jackson candy bars
- Carl Yastrzemski’s Big Yaz Bread
- Diane von Furstenberg’s facial tissue
- Bill Blass’s chocolates
- Polly Bergeen’s Turtle oil
- Marilyn Monroe’s Merlot
- Richard Simmon’s salad spray
- Tommy LaSorda spaghetti sauce
- Yves St Laurent cigarettes
- Frank Sinatra’s neckties
- Roger Staubach peanut butter.
A lot of those products had initial success, probably due to curiosity, but ultimately they died off. Most of the products were gimmicks & not good quality by any stretch. Basically consumers won’t buy an ‘image’ twice; they have to like the product over the long-run.
Rich in Quality, Low in Operating Costs
Operationally speaking Newman’s Own Inc does not actually manufacture its own products. Instead they license out their secret product recipes to partner companies who must adhere to high quality standards. Newman’s Own Inc employs its own marketing team and quality assurance experts, to keep its food standards intact, but is otherwise a small operation with around 30 employees. Same goes for the Newman’s Own Foundation which also runs a lean operation as they are committed to keeping its managerial costs to less than 10 percent of its grant making.
Can’t Argue with Success
So why does Newman’s Own continue to succeed? There probably isn’t a single polished reason. I think a combination of an uncompromising commitment to quality, novel marketing approaches, low operating costs and a charitable twist have something to do with it. Either way this success story is summed up well by the founders themselves:
“Sometimes you get what you want but it ain’t what you expected. Newman’s Own was supposed to be a tiny boutique operation-parchment labels on elegant wine bottles of antique glass. We expected train wrecks along the way and got, instead, one astonishment followed by another astonishment followed by another. We flourished like weeds in the garden of Wishbone, like silver in the vaults of finance. A lot of the time we thought we were in first gear we were really in reverse, but it didn’t seem to make any difference. We anticipated sales of $1,200 a year and a loss, despite our gambling winnings, of $6,000. But in these twenty-six years we have earned over $300 million, which we’ve given to countless charities. How to account for this massive success? Pure luck? Transcendental meditation? Machiavellian manipulation? Aerodynamics? High colonics? We haven’t the slightest idea.” -PL and AE
Human profit
Not to be forgotten is how great a human Paul Newman was too. He and his co-founder A.E. Hotchner could have made a robust personal profit from their successful concept but it didn’t fit in with Paul’s humanitarian vision. By deciding to donate all their profits to charities they created a wonderful blueprint of how to marry business and philanthropy.
In addition to setting an example with his own company Paul Newman also co-founded the Committee Encouraging Corporate Philanthropy in 1999 to galvanize business leaders to further the practice of corporate giving.
And while big-time philanthropy is getting a boost these days from well publicized examples of philanthropy, such as The Giving Pledge, whereby super wealthy individuals have pledged to admirably donate the majority of their net worth to charity, let’s not forget Paul Newman made similarly bold philanthropic decisions before it became the cool, iconic thing to do.
Rest in Peace Paul.
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