Monthly Archives: November 2011

Paul Newman, Scrappy Startup Entrepreneur

coolhandluke

"Sometimes nothin' can be a real cool hand."

After watching Paul Newman in “The Hustler” on Netflix this weekend – and then reading the spectacular details of his life (according to Wikipedia) – I decided to buy his book that tells the origins of his “Newman’s Own” food brand. I know that the Newman O’s mint cookies are the best in the market and I knew vaguely that it donated to charity (about $300 million; all of its after-tax profits, since the company’s start), but didn’t really know there was much of a story behind it. After all, he’s Paul Newman. He could put his name on cowpies and they’d sell, right?

However, according to the book, Newman and his partner, author A. E. Hotchner, faced all of the challenges of a modern day startup (except perhaps, having to put their whole lives/assets on the line; Newman was still a busy actor into his last years). Early on in the book, they describe having a meeting with “the largest marketing company in America.” Despite Newman’s name recognition, the marketing executive informs him that “Just because they liked you as Butch Cassidy doesn’t mean they’ll like your salad dressing.”

Newman and Hotchner are told that the marketing alone – which includes focus groups, promotion, distribution and public relations – would cost more than $1 million. Newman and Hotchner leave the meeting and decide to launch their salad-dressing company with just $40,4000.

The origin story of Newman’s Own ends up sharing some traits common among today’s Internet-age startups:

Thinking you can do it better than the big guys:

Over the years, even in four-star restaurants, PL had been rejecting the house dressings and concocting his own….On one occasion, when the restaurant mistakenly served the salad with its own dressing, Paul took the salad to the men’s room, washed off the dressing, dried it with paper towels, and, after returning to the table, anointed it with his own, which he concocted with ingredients brought to him from the kitchen

Having previous entrepreneurial experience

When Paul was in college, he had demonstrated a knack for getting a business invention to fly. He was attending Kenyon College in Gambier, Ohio, when, to augment his dwindling GI Bill funds, he went into the laundry business. The school’s laundry company used to visit the dorms, going from room to room to pick up individual laundry; then Paul made a deal with the company for a much lower rate to pick up the laundry at one site in the town.

Paul rented an abandoned storefront in a partially developed part of Gambier…and advertised in the school paper that his laundry service would serve free beer to any customer bringing in his laundry. Figuring the cost of a keg of beer, plus rent and the laundry’s charges, against what he charged for the laundry, Paul was able to turn a profit of $80 a week, which by today’s conversion amounts to about $500.

Paul finally sold the business in his senior year to a friend of his, but as luck would have it, a month or so later one of the customers who had overimbibed the free beer put on a boxing glove, staggered out into the street, and started to masturbate a horse that was tied up there. The authorities shut down the business, busting the whole shop

Using a ping-pong table as a desk

So instead of buying office furniture, Paul decided that since it was September and he was closing his swimming pool, he would simply furnish the office with his pool furniture, even to the extent of keeping a beach umbrella over our shared desk (his picnic table).

Paul’s Ping-Pong table became our conference table, but the only conferences we held were when we played Ping-Pong. Paul wrote our scores on the low ceiling, but when his losses mounted significantly, he had the ceiling painted.

Staying true to the vision, damn the reality

Newman’s and Hotchner’s were both appalled by the amount of preservatives found in supermarket dressings. They were determined to use a recipe that contained only fresh ingredients, not thinking how that would make production and storage difficult:

We did not have EDTA (ethylenediaminetetraaceticacid) in our formula, which was thought to be essential in preserving life span on the shelf. “If a bottled dressing cannot stay on the shelf for somewhere in the neighborhood of a year,” Andy explained, “it will not be acceptable to the supermarkets.

All those big outfits have chemists who’ve been using these fixes for as long as I’ve been in business. The food business is a very practicalaffair—whatever you put in a bottle has to have shelf life or forget it. Let’s try half of the usual EDTA. What about it?”

We didn’t budge.

All-natural meant positively no chemicals. Andy’s chemists gave him a hard time about it, but eventually they put our formula through the longevity test. The result was not what they expected. They found that in the process of making mustard, in grinding the whole mustard seed, a layer of mucus is released that is a natural gum and did everything that EDTA did, but did it naturally.

The company leader eating his own dog food

People would say to me, ‘Is Newman really involved in this thing?’ and they were surprised to hear that no product ever goes out unless he personally eats it, and if he doesn’t like it, it’s not going anyplace. Hotchner and Newman were hands-on about everything. They wrote the legends, they tinkered with the label, they were thoroughly involved

And:

Mr. Newman went on: “Some people have sexual dreams, but I dream about food. Then when I wake up I want to eat the food I dreamed about. That means I have to keep a big pantry, because you never know.

Facing rules that favored entrenched competitors

In the course of churning out new products, we came perilously close to putting ourselves out of business because we hadn’t taken into account a new phenomenon in the food business, a diabolical supermarket invention—slotting…slotting involved actual cash payments of $28,000–$30,000 to each store for the privilege of displaying a new product, and there was no guarantee as to how long a store would keep it on the shelf.

Of course, there are unrepeatable aspects of Newman’s business that just won’t apply to most other startups, mainly a) He’s Paul Newman and b) all of the company’s profits go to charity. But this book is a fast and fun read. It helps that Newman is one of the few (living or dead) uber-celebrities who, the more you find out about him, the more you love him.

The book is called “Shameless Exploitation in Pursuit of the Common Good: The Madcap Business Adventure by the Truly Oddest Couple” and is authored by Newman and Hotchner and published by Random House (2003). (Amazon / Google Books)