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April 1999 - Volume 31 Issue 4

THE EMPERORS OF CHOCOLATE: Inside the Secret World of Hershey and Mars Joel Glenn Brenner Random House, $29.95

You don't have to go very far to find evidence that we live in a global economy. Just take a drive down to the local convenience store and pause in front of the register, where you'll see rows of a product whose raw material comes from South America, whose manufacturing and packaging takes place anywhere from Mexico to Pennsylvania, and whose marketing is now ubiquitous around the world. Yes, the candy bar is a multinational product par excellence.

But the candy bar--or, more accurately, chocolate--is also an American product par excellence. Aside from Coca-Cola and McDonald's, is there a more recognizable symbol of American consumer culture than the Hershey bar? From Lucy Ricardo stuffing her face with bon bons while working on the candy line to E.T. being lured from hiding with Reese's Pieces, candy has been an integral part of American pop culture. Americans even have different tastes in chocolate than much of the rest of the world, preferring Hershey's slightly sour milk chocolate to the more traditional European flavor.

All of this means that there's something inherently interesting about Joël Glenn Brenner's The Emperors of Chocolate: Inside the Secret World of Hershey and Mars, an often entertaining but ultimately thin mix of business and cultural history. Brenner does an excellent job of tracing the separate stories of the two American candy powerhouses, Hershey and Mars. Her book is filled with sharply drawn anecdotes about candy making and candy eating, and she gives us convincing character studies of the two key figures in this history: Milton Hershey and Forrest Mars. In the end, though, the book comes up short in its understanding of American business, which is something of a problem for a book that's supposed to be about the competition between two companies. You walk away from The Emperors of Chocolate knowing a lot more than you thought you ever would know about chocolate, but not much more than you did about business.

Ironically, though, it's the business implications of this story that are the most interesting, and the most perplexing. In certain respects, after all, the contest between Hershey and Mars (who together control something like 75 percent of the U.S. candy market) is much like that between Coke and Pepsi, or for that matter between General Motors, Ford, and Chrysler. These companies' economies of scale and their superior marketing and sales strength allow them to muscle smaller competitors aside--you didn't think convenience stores just gave away the space underneath their registers, did you?--even as they remain locked in a pas de deux that's difficult to escape. An important part of this story, then, is the story of oligopolistic competition, and how having even one competitor is enough to keep a company on edge.

The more important part of this story, though, has to do with the fact that both Hershey and Mars are quite unusual corporations, since they are remnants of a day when businesses were family fiefdoms, and when outside attention was considered both unnecessary and undesirable. Mars, which was formed by the merger of two different companies--one started by Frank Mars, the other by his son Forrest--remains a privately-held firm owned and run by Forrest Mars' children. Not coincidentally, Mars is notoriously hostile to the press and even hesitant to give important information to the financial community. Hershey, for its part, is officially a public corporation, but it has been insulated from outside pressure by the fact that the Hershey Foundation owns a sizeable chunk of the company. In recent years, Hershey has tried to be more open with information about its core business, but its basic attitude toward Wall Street remains "the less said, the better." Needless to say, that attitude has not helped the company win the hearts of investors.

Why should we care about the degree to which Mars and Hershey are and are not like other American corporations? Because their history runs counter to the current assumption that family-owned businesses are likely to be less efficient, less forward-thinking, and less profitable than public corporations.

Mars, for instance, which is the very definition of a family business--it's not really clear that the Mars brothers who run the firm even like their jobs, but they apparently work like dogs--seems to be run as rigorously as General Electric or Microsoft, with strict profit targets for each division and tight cost controls. Mars sells 15 percent of all the candy in the world, and although it still trails Hershey in domestic market share, it has been neck-and-neck with its chief rival since the 1970s. At the same time, although Brenner retails some hair-raising stories about Mars family members' martinet-like antics--screaming furiously at workers, demanding that every little change get their approval, etc.--the company is a model of what's often called "flat management." The company's CEO works at a desk like all the others on his floor, and there is no key to the executive washroom, because there is no executive washroom. As I mentioned above, Mars assembly-line workers are able to stop the production line, and managers' pay is linked to performance in a way guaranteed to make any shareholder smile (if there were any shareholders).

Hershey, on the other hand, is a public corporation, but often acts as if it isn't. Arguably, in fact, Hershey never really recovered from the death of its founder, Milton Hershey, in 1945. In the wake of World War II, for instance, Hershey had the opportunity, much as Coca-Cola did, to become a truly global brand, since its European competitors had been decimated and since anything American had an immediate competitive advantage. But the company simply failed to move aggressively into foreign markets, preferring instead to continue as it always had. Along the same lines, in the early 1970s Hershey, after decades of refusing to advertise, at long last began to advertise heavily. But as soon as economic turmoil hit, the company cut back on advertising and slashed costs. That helped protect the company in the short term, but in the long term it kept the company from mounting a significant challenge to Mars. Since then, Hershey has had occasional successes--Reese's Pieces being the most notable--but the company is increasingly out-of-step in the global economy. The fact that it has outside shareholders has simply not ensured its competitiveness. It's really a family business that happens to be run by non-family members.

Brenner is aware of the significant differences between Hershey and Mars, but seems to underplay them, perhaps in the interest of making the competition between the two companies seem more even than it is. And while she mentions the question of ownership, she doesn't try to draw out any broader conclusions from her story. So we're left with a fundamental but unanswered question: How is it that some family businesses are able to become bigger than the families that run them, while others remain essentially trapped by their pasts?

James Surowiecki writes for Slate and is a contributing editor for Fortune magazine