Newman’s Own, Inc.

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Newman’s Own, Inc.

246 Post Road East
Westport, Connecticut 06880
U.S.A.
Telephone: (203) 222-0136
Fax: (203) 227-5630
Web site: http://www.newmansown.com

Private Company
Incorporated: 1982
Employees: 18
Sales: $100 million (1999)
NAIC: 311421 Fruit and Vegetable Canning; 312111 Soft Drink Manufacturing

Since its founding in 1982 by veteran actor Paul Newman and writer A.E. Hotchner, Newman’s Own, Inc., has grown from a small salad dressing producer into a highly successful specialty prepared foods company. After initial success with salad dressings, the company added pasta sauce, salsa, steak sauce, popcorn, and lemonade to its food line, each bearing Paul Newman’s famous face on the label. Newman’s Own Organics: The Second Generation, an organic food division headed by daughter Nell Newman, was established in 1993. All the company’s products are made without artificial ingredients or preservatives, and are distributed in major U.S. grocery chains as well as in Canada, Europe, Israel, Japan, and Australia. Paul Newman, founder and president of Newman’s Own, donates 100 percent of after-tax profits from Newman’s Own to charitable and educational organizations. As of November 1999, he passed the $100 million mark in charitable giving from the proceeds of Newman’s Own, benefiting over 2,000 charities. Of note among his many philanthropies is The Hole in the Wall Gang Camp in Ashford, Connecticut, which was founded by Newman in 1988 for children with serious illnesses, and five affiliate camps in the United States and Europe. Paul Newman remains closely involved as high-profile company spokesperson and philanthropist, and Newman’s Own, Inc., continues to thrive. He personally approves all new products and recipes.

1982: Newman’s Own Begins on a Whim

For several years, Paul Newman and his long-time friend, author A.E. Hotchner, were in the habit of giving bottles of their homemade salad dressing to friends as holiday gifts. They would mix up a batch in Newman’s basement and hand out old wine bottles filled with the dressing while Christmas caroling in their Westport, Connecticut, neighborhood. The response was favorable, and their “limited edition” bottled dressing became a sought-after item in neighborhood gourmet shops.

Newman and Hotchner reasoned they might attempt to market their dressing. They were told to expect to spend $400,000 on test marketing, but instead they simply invited a group of friends to choose from among a few salad dressing samples, and then selected the favorite. The two men each contributed $40,000, and a private manufacturer agreed to bottle the dressing. Thus, in 1982, Newman’s Own, Inc., created its first product: Olive Oil & Vinegar Salad Dressing. As a joke, Newman put a likeness of his own face on the label, deciding to give any after-tax profits away because he had no need or desire to make money from the business. He convinced his friend Stew Leonard of the famous Stew Leonard’s grocery store in Norwalk, Connecticut, to take 10,000 cases, though Leonard cautioned Newman not to expect much from a celebrity food product.

Marketing experts also had their doubts, warning Newman to expect $1 million in losses during the first year. Instead, Newman’s Own Olive Oil & Vinegar Salad Dressing was wildly successful, generating after-tax profits of nearly a half million dollars in the first year, which was all donated to charity. Quoted in a company press release, Newman stated, “If we’d followed the experts’ advice, we’d probably still be bottling dressing in our basement, wondering if Newman’s Own was a worthwhile business venture.” Hotchner went on to become Newman’s partner, vice-president, and treasurer of Newman’s Own, Inc., based in Westport.

1983–99: Growing A Business; Increasing Philanthropy

What had begun as a lark quickly took on a life of its own. The Olive Oil & Vinegar dressing was soon followed by Newman’s Own salad dressings in varieties including Caesar, Creamy Caesar, Balsamic Vinaigrette, Italian, Ranch, and others. Success inspired Newman and Hotchner to branch out into other food items, and the Newman’s Own product lines grew to include pasta sauce in seven varieties, steak sauce, Bandito salsa in three strengths, Old Fashioned lemonade, and Picture Show popcorn. By 1987 the company was growing at about 20 percent per year. Only five years after the company’s inception, Grocery Marketing reported that the success of Newman’s Own appeared to be due to the combination of the popular Paul Newman image on the product labels, a strong public relations effort, and quality products that inspired repeat sales. Each year the company showed increased earnings, grossing $36 million in 1988. The next year the company realized a reported 16 percent pre-tax profit, about five times the 3.4 percent food industry average.

The company’s finances remained an internal affair, while manufacturing and distribution were subcontracted out to various concerns around the United States. The pasta sauces were manufactured in Rochester, New York; the popcorn was pack-aged in Iowa and Illinois; the salad dressing was bottled in Fullerton, California, and Framingham, Massachusetts; and the lemonade was created in various locations throughout the country. Supermarkets and giant chain stores such as Wal-Mart and Kmart were responsible for 90 percent of all sales. As the company grew, opportunities for increased profits and visibility were sought. One such opportunity came with an alliance between Newman’s Own and Burger King Corporation, with good results. In 1990, the fast food chain reported that by adding Newman’s Own salad dressings to its offerings, the company doubled its salad dressing sales for the month of July.

A notable aspect of Newman’s Own’s success was the company’s lack of advertising. However, the food labels them-selves—printed with an illustration of actor Paul Newman’s face smiling out at the consumer—served to create an easily identified brand identity. The Newman image on the label was often cleverly customized to illustrate the product, for example, putting the actor in a sombrero on the salsa labels, adding steer horns to his head on the steak sauce bottle, or translating his image into a “Roman” bust for the Caesar dressing. The witty, tongue-in-cheek marketing copy on the labels, which seemed almost to poke fun at the Newman’s Own enterprise, added to the products’ appeal. The company said that the label and promotional copy were written by Paul Newman and A.E. Hotchner themselves, who imbued it with their distinctively off-beat sense of humor. For example, the Sockarooni spaghetti sauce label claimed that it “delivers a zesty twist that will knock your socks off,” while the “Virgin” lemonade label said it was “made from lemons that have never been squeezed.” This irreverent marketing approach seemed to wink at the consumer while promoting a line of high-quality, all-natural food products.

For publicity, the company turned to charitable events. In 1990, Newman’s Own and Good Housekeeping magazine began sponsoring an annual national recipe competition. To be eligible, every recipe entry needed to include a Newman’s Own food product among the ingredients. The recipes were chosen from thousands of submissions from around the United States, and the final judging was held at prestigious venues such as New York City’s Rainbow Room or the Waldorf Astoria hotel. Each year, several recipe semi-finalists were chosen, and a professional chef prepared the recipes. To lend excitement to the event, Newman and Hotchner personally tasted the resulting creations, with Newman’s wife, actress Joanne Woodward, sometimes joining in. The top prize of $50,000 was given to a worthy cause of the recipient’s choice, with smaller prizes given to the runners-up, as well as to favorite charities of selected supermarkets that sold Newman’s Own products. The contest judging and Good Housekeeping received good publicity, helping to market Newman’s Own products while promoting a high-profile charitable event.

With the steady growth and increasing success of Newman’s Own the company remained fully committed to charity, with Paul Newman continuing to give away 100 percent of after-tax profits in the form of grants to non-profit organizations. At the end of each year, Newman and Hotchner sat down together to review grant applications personally and divide the year’s pro-fits among educational and charitable organizations that they deemed most in need of assistance. As Paul Newman’s charitable giving became more widely known, more and more organizations began to apply for aid. As early as 1993 there was a notable increase in applications, from 1,500 up to 2,500. In that year alone, 460 applicants were given aid.

Perhaps the most well known of the Newman’s Own philanthropies was The Hole in the Wall Gang, a charitable association founded by Newman to operate a group of six camps for gravely ill children. Named for the outlaw-heroes in Newman’s celebrated film Butch Cassidy and the Sundance Kid, the first Hole in the Wall Camp—inspired by letters to Paul Newman from children with life-threatening diseases—was founded in Ashford, Connecticut, in 1988. A nonprofit residential camp, The Hole in the Wall Gang Camp offered free lodging, medical care, counseling, and recreational activities for children with cancer and other serious diseases. Subsequently, five affiliated camps were added, all partly funded by Newman’s Own: The Painted Turtle Gang Camp (California), The Boggy Creek Gang Camp (Florida), The Double “H” Hole in the Woods Ranch (New York), L’Envoi (France), and The Barretstown Camp (Ireland).

Company Perspectives:

Paul Newman’s unique flair for successfully combining business and philanthropy has proved to be right on target, endorsed by satisfied customers and appreciated by charities throughout the world.

In 1993 a new division, Newman’s Own Organics: The Second Generation, was established. The brainchild of Nell Newman, the third of Newman’s five daughters, it was created to develop products using certified organic ingredients, marketed with the slogan: “Great products that just happen to organic.” According to a 1998 New York Times report, Ms. Newman convinced her father to start the division after impressing him with an all-organic Thanksgiving dinner she prepared. The division was based in Aptos, California, where Nell Newman lived, and was headed by herself and her business partner Peter Meehan. The first product, seven-grain organic pretzels, was followed by organic chocolate bars and fat-free Fig Newmans.

Plans for a major marketing push of Newman’s Own products were set in motion in the United Kingdom in 1993. It was reported in Marketing that a budget of £500,000 was set aside for the first advertising campaign, planned for print ads in the women’s press. It was hoped that the appeal of the famous actor combined with the company’s policy of donating profits to children’s charities would be a draw for consumers. Fisher Quality Foods, Newman’s Own’s sole importer in the United Kingdom since the brand launched there in 1989, was set to become the brand’s sole manufacturer, in anticipation of the new marketing campaign. At the time of the reported expansion, Newman’s Own pasta sauce had a two percent U.K. market share, while the salad dressing enjoyed a five percent U.K. market share.

Newman’s Own’s unorthodox success caught the attention of several business schools. In 1995, Newman and Hotchner’s offbeat company became the focus of a hands-on business course at Fairfield University’s School of Business in Fairfield, Connecticut. With the cooperation of a group of management, finance, and marketing professors, Newman’s Own invited teams of stu-dents to run focus groups, brainstorm about new products, and plot marketing strategies for the Westport company. At the end of the course, the student teams reported their findings, with the top two teams receiving $2,500 to be donated to their favorite charities. Three years later, Newman addressed a group of students at the Harvard Business School, joking that he was planning a “hostile takeover” of the H.J. Heinz Company, according to the student newspaper The Harbus. Newman mesmerized his audience with his unusual approach to business. James Austin, chairman of the schools Initiative on Social Enterprise, said, “Newman’s Own reveals the synergistic relationship between the social purpose and the commercial operations.”

As the company continued to evolve, Newman’s Own acknowledged the need for a more directed marketing approach. Thomas Indoe, a former executive with Del Monte Foods and RJR Nabisco, was brought on board in 1997. His first big change was to include a line of copy on the actual product packaging advertising the philanthropic mission of Newman’s Own, since focus group research had determined that less than 25 percent of consumers knew that after-tax profits went to charity. Indoe also instituted the practice of using newspaper inserts to advertise Newman’s Own products with a headline reading “Over 90 Million Given to Charity by Paul Newman,” aimed at improving public awareness of the company’s charitable goals.

1998 was a busy year for the company. Retail World noted plans to increase Newman’s Own’s range in Australia, with four new pasta sauces to be introduced in that country in the second half of the year, and new salad dressings to follow. The same year, Frozen Food Age reported the launching of Newman’s Own Ice Cream. Though it was manufactured and packed by Ben & Jerry’s Homemade of Waterbury, Vermont, the line of all-natural premium ice cream was to be marketed apart from Ben & Jerry’s ice cream, without that company’s identification printed on the packaging. Ben & Jerry’s retained the license to produce, distribute, and sell the five-item Newman’s Own ice cream line, which bore such humorous flavor names as Pistol Packin’ Praline, Milk Chocolate Mud Bath, and Obscene Vanilla Bean.

Two Newman’s Own-inspired cookbooks were published in 1998: The Hole in the Wall Gang Cookbook: Kid-Friendly Recipes for Families to Make Together (Fireside), with an introduction by A.E. Hotchner, and Newman’s Own Cookbook (Simon & Schuster). Both well-received cookbooks contained recipes using Newman’s Own products, as well as recipes contributed by such famous friends as Whoopi Goldberg, David Letterman, and Julia Roberts. In keeping with the company’s charitable spirit, all proceeds from the sale of the two cook-books went to The Hole in the Wall Gang Fund.

Into the New Millennium

As the year 2000 approached, most Newman’s Own products were still in production and going strong, with only the Newman’s Own ice cream line discontinued. Organic cookies were added to the organic food line, and the seven-grain pretzels had become the natural food industry’s best-selling organic pretzels. Most important for Newman and Hotchner’s unique enterprise, however, was the announcement in November 1999 that Paul Newman had passed the $100 million mark in charitable giving since his company began, to over 2,000 charitable and educational organizations. In April 2000, talk show celebrity Oprah Winfrey highlighted Paul Newman and Newman’s Own’s charitable efforts on her television “Angel Network.” Winfrey announced the establishment of a weekly “Use Your Life” award of $50,000, funded in part by Paul Newman, to be given to an honoree chosen for his or her work on behalf of the betterment of others.

For his part, Paul Newman remained actively involved in the company: working as spokesperson, writing ad copy, tasting new food products, judging recipes, and personally choosing and approving charitable and educational donations. As he once told a New York Times reporter, “If we stop having fun, we’re closing up shop.”

Key Dates:

1982:: Newman’s Own, Inc., is founded by Paul Newman and A.E. Hotchner.
1988:: The Hole in the Wall Gang Camp is founded and built in Ashford, Connecticut.
1990:: First annual recipe award co-sponsored with Good Housekeeping magazine.
1993:: Newman’s Own Organics division is launched.
1998:: Two Newman’s Own cookbook titles are published.
1999:: $100 million in lifetime charitable giving is reached.
2000:: Paul Newman makes significant donation to Oprah Winfrey’s Angel Network “Use Your Life” award.

Principal Divisions

Newman’s Own Organics: The Second Generation.

Principal Competitors

Kraft Foods, Inc. (salad dressing); Lipton (salad dressing, pasta sauce); Campbell Soup Company (pasta sauce); Nabisco, Inc. (steak sauce); The Coca-Cola Company (lemonade); The Pills-bury Company (salsa); Conagra Grocery Products Company; General Mills, Inc. (microwave popcorn).