reveries - tom indoe - newman's own

MARCH 1999

What do you do when your brand's image is a mixture of celebrity, quality and charity? For Tom Indoe of Newman's Own the answer is easy. You tell people about it.

Why, of course. You probably don't know this but Newman's Own salad dressings had 1998 retail sales of about $35 million and are the 8th largest brand in the category with a 2.7% share of the market. Their pasta sauces post around $25 million as the 9th largest brand with a 1.9% market share. That's according to IRI.

But here's what you probably really didn't know: Over the past 19 years, Newman's Own has given away over $100 million to over 1,000 different charities. Really.

You probably didn't know this because Paul Newman has a keen distaste for what he calls "noisy philanthropy." As far as he's concerned, it's tacky enough that his face appears on all of those packages of Newman's Own products. You mean we have to market the stuff too?

We are, you know, talking about a guy who, after his Ford Pinto caught fire said to Lee Iacocca: "You can get straight A's in marketing, but still flunk ordinary life."

The sentiment is A-OK with Tom Indoe, because his background is in sales, not marketing. A veteran of RJR Nabisco and Del Monte, he joined Newman's Own two years - ago as chief operating officer and has -- for the first time -- brought both sales and marketing disciplines to the company. Under Tom's gentlemanly guidance, Newman's growth has tripled.

Newman's offices are quirky and unpredictable as you might expect. World headquarters is a modest, two-story brick building in lovely Westport, Connecticut. The front entrance is on the side. The carpeting looks new, the wallpaper is fresh and there is an elevator. The reception area is furnished in white wicker porchware.

Is this really where Butch Cassidy hangs? Paul's desk is one of those plastic poolside tables, with the umbrella up. You were wondering about his exact title? According to the nameplate on his desk it's "Assistant Lifeguard on Duty." You get the idea. Somebody looks like he's having some fun. Tom Indoe is clearly caught up in the spirit of the thing.

The whole escapade started, legend has it, after Paul Newman and his buddy A.E. Hotchner had a few beers and decided to mix up a batch of salad dressing and pour it into a bunch of empty wine bottles. It was just before Christmas, 1980, so they corked and ribboned the vessels, went caroling around their neighborhood, and gave them away as they went.

Fast forward 19 years.

So, what is it like working for Paul Newman?

Paul is interesting, to say the least. I think the thing I like best about Paul is he has a great sense of humor. When we're trying to come up with names for products he comes up with some you couldn't print on labels! When we were coming up with this family Italian product, the character on the label was going to be Paul dressed up as the Godfather! Could we have done that? I don't think so. We ended up using a gondola person from Italy instead.

We take the business seriously, but it's certainly not life and death. That's the most enjoyable thing about Paul.

The second thing is -- and this might sound a little strange -- Paul is a very gentle man. He's caring and concerned and just plain nice. There are not many people like that in the world today. It's great to work for a guy who has done as many good things as he has.

What brought you to Newman's Own?

Two things. Newman's Own had a couple of little niche businesses that I thought did not get a lot of attention in a professional way.

The charity aspect was the second thing. You look back at what you do in life. If you look at 1998, we donated a million dollars more than we did in 1997. How and where could I have done that, except at a place like this? I don't know exactly what 1999 will be like, but I think we'll probably donate a million and half more this year than last year. Last year we did $8.4 million. If we come out at the $10 million mark, that would be pretty neat.

How did your getting the job come about exactly?

Newman's Own is kind of strange as a company because Paul has a friend, the writer A.E. Hotchner, who ran the company for 12 years. Hotch -- outside of eating -- had no food experience. Then Paul hired somebody in from a consulting firm who also had no food experience. That didn't work out.

So Paul was looking for somebody to run the company. A mutual acquaintance faxed him my resume. Some time passed, and so I just called up and said, "Is Paul in?" You know, that whole thing!

The next week Paul and I and his lawyer and a friend of Paul's who is in the food business met. Over the next two and a half months -- between Paul and his lawyer -- I guess we had about four different meetings. Paul and I had good chemistry. We both have a "different" sense of humor. We enjoyed each other and I think he also knew he had to bring in somebody who had some basic skills. It's been a good ride.

This must be a very different environment for you, coming out of RJR Nabisco and Del Monte.

The transition here goes from a structure process company -- I don't care if it's Del Monte or RJR Nabisco or Sterling Drug. There are processes and disciplines. Here, there is none of that.

So, we have to have a balance between "let's have a party" and "let's conduct some serious business." It's a question of how much balance do you want, how much discipline, how many really good business characteristics do you bring to this company.

I've chosen to add some add some of that. When I got here -- and this is amazing to me and I still don't believe it -- we had no budgets! Paul has a plaque in his office that says: "If we ever have a plan we're screwed." It's just the opposite. We've got to have a plan. Last year was the first year the company had a plan. We made our plan, and more than tripled the growth the company had experienced. That's a big change for me, coming into a loosey-goosey company.

Even though all of Newman's Own products are food, you've got something of an eclectic array of offerings -- popcorn, salad dressing, pasta sauce, lemonade, ice cream. How do you decide what to market?

What we try to do, and are adhering to, are things that Paul would make in his kitchen. Those are the items we have the most interest in coming out with.

The company came to be called Newman's Own because it all began with Paul Newman's own recipe for salad dressing. From there we went to pasta sauces because Paul had a couple of favorite recipes. Our supplier helped us develop additional ones. Then we went into popcorn and salsa and lemonade. Paul's wife, Joanne Woodward, had a recipe for lemonade.

We have had people come in and try to convince us to get into the bottled water business. But that doesn't fit.

Maybe drawn from his own well?

Or his swimming pool! It's really items or products that Paul would actually make in his own kitchen. To that point, Paul does taste all the products and is very involved in the makeup of the products.

Why do you think most people buy Newman's Own?

The focus groups we've done with our own consumers say that people buy the products because they trust and like Paul Newman. But that's beginning to change. Most consumers actually don't know about the charity aspect. Even our own customers, the people who buy Newman's Own, don't realize that the donation is 100% of profits and that the total donations to date totals over $100 million. We've started to very aggressively talk to consumers about the charity aspect. And I think that will draw them into buying our product.

But the final thing is that the product has to be high quality and the consumer has to want to have the Newman's Own eating experience again. If the product isn't good, then this business won't grow and we won't have any more money to give away.

So, our foundation is good products – good, natural products – unlike our competitors who have preservatives and additives. We're the only ones out there in salad dressing in a fairly significant way doing natural products.

Paul's daughter -- Nell -- has also now come out with a line of organic products. What is the relationship between the two companies?

Newman's Own Organics is a sister company to ours, it's part of Newman's Own. Paul enjoys organic products and even though we keep calling it a "niche" business it's growing rapidly. They started with pretzels and chocolate and then moved into cookies – Fig Newmans. And now they've just come out with a line of tortilla chips.

Is there a long-term changing-of-the-guard in the works here? Will Newman's Own one day become Nell's Own?

Well, I think there will always be a Newman involved in Newman's Own in some way, shape or form. Whether it's Nell or another of the daughters, there will always be a Newman involved.

How has the marketing of the brands changed since you arrived here?

Originally, the thought was they would just put the products on the shelves and they would sell. Up until I got here Newman's did not do any advertising. This is the first year we've done any advertising, and that was radio. We did some radio with Imus in the Morning.

This year, we will run five, full-page newspaper coupon inserts, FSIs, nationally. We've also done some self-redeeming premium offers and tie-ins with other companies. We did a video game with a computer video game company. So, we're looking to do tie-ins and also do some co-marketing with retailers. That's dramatically different from two years ago.

The other thing that we're trying to do, in all our FSIs - we do regional FSIs - is highlight the charities we support in each region of the country.

Who writes the funny little anecdotes on the packages?

Those -- we call them legends-- are written by Paul and A.E. Hotchner. For me, they are cute, cute things to read. A lot of people don't notice them. But they're a lot of fun and Paul enjoys putting them together.

Obviously Paul Newman's face is on the packages, but other than that he's kept a pretty low profile where the marketing is concerned. Why is that?

I don't think you'll see Paul Newman opening car washes! But, you know, he is very proud of this company. The Hole in the Wall Gang Camp is something that Paul -- among all the achievements he's had in the movies, the car racing -- the Hole in the Wall Gang Camp is one of the things he's most proud of, if not the thing he's most proud of. Without this company, he never would have achieved that.

Just to give you an idea, each year we have a gala fundraiser at the camp. It's an afternoon of eating and an auction for charity. Then in the evening Paul and Joanne and friends -- everyone from Tony Randall to Big Bird -- do these little skits. One minute you're laughing at a skit, the next minute one of the campers comes out and talks about his or her experience.

There was this one child who was born in Russia near Chernobyl and developed cancer. Ten kids were selected to go to the United States for treatment. He was number 12 on the list. Two people died, so he was moved up. Today, out of those ten kids, he is the only survivor. He's now been at the camp for eight years. I get teary-eyed just thinking about it now. But he got up and said, "There's nothing I can say to really express how I feel except, thank you."

I don't think there was a dry eye in the place.

There are a lot of emotional experiences in the camp. The thing that Paul says is, "You think you open that camp and give something to somebody. But in reality, the campers have given more back to the people involved in the camp." It's an amazing thing.

So, Paul is thrilled with this company and he's very involved and wants to see it grow and succeed.

How exactly does the Hole in the Wall Gang Camp relate to Newman's Own?

It's only related in that the monies used to start the Hole in the Wall Gang Camp came from Newman's Own. The camp was started ten years ago, up in Ashford, Connecticut. The land was purchased out of this office and plans were made to build the camp out of this office. Newman's Own -- Paul Newman -- provided the seed money. Now the camp is a free-standing charity of its own.

About 20% of the $100 million we've raised through Newman's Own has gone directly to the Hole in the Wall Gang Camps. There are six camps now -- in Connecticut, Florida, New York, Illinois, Ireland and France. About 20% of the money has been given to the camps over the years. The other $80 million has been donated to several thousand charities. Some might be small, like a school that's looking for a few thousand bucks to build a playground. Others are quite large.

And Paul Newman personally donates the money?

Yes. One hundred percent of the profits of this company -- every nickel in profit that this company makes -- Paul donates to charity after taxes. He actually goes through all the requests and decides where and what we're going to spend as far as contributions go.

How does he decide?

We kind of put them in categories -- or buckets -- of arts, children, people in need, and so forth. Last year we had two natural disasters – the Hugo and Mitch hurricanes. We just donated, I think $150,000 to one and $200,000 to the other, through America Cares. We didn't have any plan. These disasters happen and we had some money to donate. We try to spread it out over a fair amount of needs.

You know, when I tell people about Newman's Own, sometimes they're cynical at first. I wouldn't name the account but it was Wal-Mart (laughs). The buyer couldn't believe that this was happening, that there is a company giving all of its profits away.

So then this person goes on to say, "Well, Paul Newman must be taking a large salary out of this." In fact, Paul doesn't take anything. Last year our only company expense was a luncheon for about thirty-six bucks that was charged through the company. But that's it.

Is there any other company that's set up like this one?

No, not that I know of. There are some celebrities who are working off royalty arrangements. Clint Eastwood has a beer, Pale Rider, that is a royalty arrangement. That is somewhat different, and you quite honestly cannot make as much money as a company selling and marketing its own products.

But there isn't a week that goes by that somebody -- somebody with some money-- doesn't contact us because they want to start a company like this one. A sports figure or some other kind of celebrity will come to us and say, "help me do this." This thing -- Paul would say this -- has evolved into something much bigger than anyone ever dreamed it would be. And there's a lot of growth left in this company.

Right now, there are only 15 people in the company. We only have hard assets of a little over $80,000. Everything we market is made by third-party. All of our products are made by co-packers. We outsource our quality assurance and all our research and development.
Some people say it's a virtual company, but it's really a sales and marketing company. You see a lot of major companies doing that today, not worrying about the manufacturing output, but having somebody who is good at that take care of it.

When Newman's started out 16 years ago, that degree of outsourcing wasn't done then. But if you look at Lipton and a lot of other companies, there are a lot of people who wish they didn't have manufacturing facilities. We've been very fortunate.

Our net profits are equal or better than most food companies. If you took the top thirty food companies, our net profits would be better than their average.

Do you think Newman's Own represents a business model that others could replicate?

The laws in this country governing donations specifically outline how much a corporation can give and how much an individual can give. An individual can give up to 50% of his total earnings. I don't think it will be a model unless it's only for the very wealthy people. There have to be laws changed in this country for companies that want to do cause-related selling of products to be able to model themselves after this company.

Should the laws be changed?

I personally don't think it will ever happen because there are too many people in consumer products businesses who earn a livelihood in it who wouldn't want competitors who donate all of their profits to charity.

How will the company grow and succeed moving forward?

It comes down to focus. We have some strengths in salad dressing, and we want to continue to look at salad dressings and where Newman's Own fits in that category. We just launched two new salad dressings this year that just started shipping. One is a family recipe Italian, which is oil and vinegar with some spices and cheeses which we worked up and Paul felt was terrific. Then we have a Parisian Dijon salad dressing. Those are the newest items. We'll continue to expand in pasta sauce, too. We know who our consumer is, and it's a matter of getting our message across. Those are the two major arenas for us. Both of those are billion dollar plus categories, so there's lots of room for a company our size to compete.

One very interesting point is that we have research showing that something like 76% of all consumers said they would buy a cause-related product if the quality and pricing were equal. What we're really trying to do is put a quality product out there and let people know that it's for a good cause. There's an immense amount of motivation among consumers to buy quality products that help charitable causes.

It's an amazing little company. I just think there's huge potential for marketing Newman's Own in bigger and better ways.