September 2, 2019 • 39 mins
A side hustle for a creamery turned into a major business, but after climbing the top of the pickle heap Vlasic found itself in trouble. What happened?
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Speaker 1 (00:04):
Welcome to Business on the Brink, a production from I
Heart Radio and How Stuff Works. Joe Lastic had a
cream of the crop idea when he decided to add
polish pickles to the family creamery business, and then he
hated things up further with innovative packaging and marketing. But
(00:24):
despite holding a majority of this condiments market, things went
sour and the company soon found themselves in Well find
out what's the dial when we talk about how Blastic
became a business on the Brink. Hi everyone, I'm Jonathan
(00:49):
Strickland and I'm Ario Cast and welcome to Business on
the Brink and arial. Once again, my proverbial but metaphorical
hat is off to you for that amazing introduction. Thank you.
I wasn't sure if you're going to love it or
hate it. No, you weren't sure if I was going
to love it or really love it. Well, hopefully the
person who suggested this topic, Will Codis, will also really
(01:10):
love it. Yes, so we're talking about Velastic Pickles, which, uh,
you know, it's one of those those brand names that
I've certainly come into contact with but for some reason
didn't have sticking power in my brain. So as I
was going through the notes, I was sitting there thinking like,
why do I know this? And as soon as I
get to the the iconic character that was used to
(01:31):
market the pickles, and I said, oh, right, that's these guys.
Well you'd have to because and we'll get to it.
Most pickle companies don't do a lot of marketing. Yeah.
I remember the Kates Pickles folks because they were out
of the Carolina's and they cast an actor as their
spokesman who was later a slasher killer character on a
(01:54):
horror movie that I was in. That's a lot of
tangent that has nothing to do with the rest of
this episode. You know what, though, It's a glimpse into
your life, and we're all grateful for it. Jonathan, So, um,
do you even like pickles? You know what? Um? It
was a certainly a more recent acquired taste for me
as a kid. I despised them me too. I could,
(02:17):
once in a blue moon eats something that pickles in it,
like a potato salad or something, but I never wanted
to have a pickle spear. I didn't want pickles on
my burger. I was one of those those stereotypical picky
eater kids who there was like maybe three things in
the world that I wanted to eat, and I only
wanted to eat those things. But these days, um, actually
(02:38):
I like a good pickle, me too. I like a
lot of pickled things, pickled beats, jeered deli, Jeri della.
I can't pronounce it, but I like to put it
in my mouth. Well, I mean so, I also really
like pickled vegetables too. And uh, and and also you
and I both worked at a place where pickles were
(03:00):
pretty important to maintaining your ability to continue to stay upright. Yeah,
the George Renaissance Festival. Uh, that is actually where I
learned to enjoy them, because they weren't the little floppy
things you got next to your sandwich at a fast
food restaurant. They were nice, crisp pickles, like fresh pickles. Yeah,
and this was because they had a lot of salt
and electro lights in them that helped us maintain ourselves
(03:23):
after sweating like crazy all day. So let's talk about
Vlastic pickles in particular. And I did not even know
that they were named after the person who started the
whole business, Jove Lastic. So tell me a bit about Joe.
So Joe Lastic was the son of a creation immigrant
who moved to Detroit with his family and started a
(03:43):
creamery business. Um. He had been working a factory job
during the day and was saving his every pen he
could from his two dollar a day job to start
this creamery. Wow. Yeah, that's that's definitely a bootstrapped operation
right there. Yeah. Well, Joe took over the family creamery
in the twenties and then in seven he added pickles
(04:06):
to the mix of what this creamery was selling. Logical step.
There were some reports I read where he was asked
to distribute them. It might just have been a matter
of hey, here's this thing. That's it's a very the time,
pickles were a very regional product. They weren't sold nationwide necessarily,
(04:26):
and you could give them nationwide, but just they were
from regional like farmers and picklers like you would get
milk or cream from the milkman. So creamery pickles, they're
all very local delivery. Um. And he was selling specifically
Polish style pickles with garlic and dill. Those are the best.
They're good. Okay, we're going to have a fight. We're
(04:49):
going to do that. I also like a nice, nice
crisp bread and butter pickle. There so sweet, I know, Okay, okay,
I'm a sour persons, you are all right, um And
fun fact, Beryl Brant pickles, which is what he was
distributing and selling, don't really have the same shelf life
(05:10):
as the pickles you buy in glass jars at the supermarket.
But at this point they weren't. They weren't in jars.
They hadn't been canned pickles, they hadn't been camp pickles.
They might have been like given out in jars, but
not not like preserve. Yeah. Yeah, So at this point
you get to the beginning of World War Two, and
(05:30):
you know, there are a lot of stories about companies
during World War Two running into challenges because there was
there were shortages on materials. You wouldn't necessarily think that
such a thing would affect a pickles business, but in
fact it did. Yeah, the U. S. Government rationed pickles.
(05:51):
I mean, if you figure this, they're they're easy to ship,
they don't go bad right away. Even even if they
don't last as long as you know today's shelved pickles,
they still us longer than you know, a cucumber. Let's say, so,
the US government was rationing about pickles that were produced
at the time, which meant for everybody else there was
a pickle shortage there so so so for everyone else
(06:15):
they were they were not in a pickle because they
couldn't get ahold of one unfortunately. So this is around
the time when Joe started testing and um experimenting with
a new idea, and that new idea was hot pack pickles,
which meant he put the cucumbers into a glass jar,
covered them with the hot brine, and then the jar
was sealed. So this is essentially sort of a very
(06:36):
primitive version of canning. Okay, well, it essentially was canning
because it greatly extended the life, the shelf life of
these pickles. Hot packed pickles are what we get today
and they last a lot longer than a barrel brind pickle. Yeah,
and so this was in fact the introduction of the
plastic pickle. It was in two and people loved it
(06:59):
so much, so Joe had a hard time keeping up
with the demand once the war was over. Like you'd
imagine he'd have a hard time keeping up with the
demand during the war when pickles are being rationed, but
even afterwards, people really liked these hot pack pickles, and
continuing with the whole family business idea, his son, you know, Joe,
(07:19):
had inherited the creamery from his father. Then his son
Bob joined the Lastic Pickle Company and would rise to
the position of general manager for the company. And they
opened up a vlastic factory in Emily City, Michigan, which
is in the thumb of the mitten. So you've got
(07:41):
the mitten, you've got the finger. This is not a
geography class, Okay. So at the time Classic was still
doing their creamery business, and they were also making things
like sauer kraut. It makes sense. You know, you've got
all of the brining equipment there. Sauer Kraut is, yeah,
another sort of pickled sarma. Crowds also also, let me
(08:01):
ask you this areal. So the demand for pickles was
going through the roof. People were really going crazy for
these plastic pickles. The company is doing quite well. What
was give me an idea, what was the size of
lastic pickles at this point? Well, in they had five employees, which,
you know, it's a pickle business. Sure, twenty five sounds reasonable,
(08:24):
exception of the fact that their factory was three large buildings.
One was tour for receiving cucumbers, and then one was
for distribution. Basically, they had twenty eight Sauer Kraut tanks
and they were processing fixed fifty acres worth of cucumbers.
That's a lot of cucumbers. That is for people. It's
(08:46):
a lot for anybody. But yeah, when you're thinking about
twenty people having to deal with that as twice as
many acres as you have people working, and you know,
not all those people are out there in the fields
picking cucumbers. Yeah, some are having to sort through and
deeply inspect to cucumbers for bruises. I don't know, I'm
assuming that's a part of the process. Well, Joe Lastic
would retire in nineteen sixty three and his son Bob
(09:08):
officially took over the company. And this was at a
point where Vlastic was really riding high. I mean they
were they were the lead pickle company and pickle pickle
provider I guess you could say in the in the
United States, and they were hitting ten million dollars in
sales by nineteen sixty seven. Yeah, that's that's not too shabby.
(09:31):
That's a lot of pickles. Yeah. Uh. By the seventies
because they had these pickles that had this long shelf life,
they were expanding nationally. Yeah, they could actually ship them
across the country and they'd be still be good when
they got to their destinations. Yes, And they were really
really smart. So Plastic did a lot of things that
were really smart. So they were really smart about using
(09:51):
the entirety of their crop, or at least as much
of the crop as they could. So pickles that were
too big, cucumbers that were too big to fit in
a pickle jar that we cut up into chips or
spears or relish, so that they're using as much of
their stock as they possibly can, as much of their produce,
cutting down on waste dramatically. Yeah. And by four the
(10:12):
pickle consumption in the country was up from two pounds
per capita when the Plastic started to eight pounds per capita,
all because of last Yeah. Yeah, and that's when they decided, Okay,
we don't need to do the milk and cheese business anymore.
We're just gonna focus on pickle and pickle related things
and relishes. And people are eating four times as many pickles,
(10:33):
but they're drinking as much milk and eating as much
cheese as ever, Let's let's stick to the the growing,
incredible business of pickles. So Vlastic was number one, but
they were kind of number one at first, So at
this time they owned ten percent of the national pickle market.
Hines also owned Tempersition in the pickle market, but Lastic
did surpass Hines oily. So around this time this is
(10:57):
when Vlastic would introduce that advertising mascot, the one I said.
Once I saw who it was, I merely went, oh, right,
I know this company, and the mascot is a stork. Yes,
stork who sounds like Gratcho Marks. Yeah, and it's like,
you know, holds a pickle occasionally kind of like a cigar,
sort of like you know, Gratcho Marks would hold it
(11:20):
a cigar that looked like a cigar. Yeah. Yeah, but
it's a pickle, so it's healthier for you, definitely side
side effect curbing the smoking craze. Yeah, I don't know
anyhow storks. They picked a stork because they wanted to
capitalize on the idea that pregnant women craft pickles. Oh interesting, okay,
so they're they're playing on a stereotype, yes, that that
(11:43):
women when they are pregnant have cravings that people might
describe as being out of the ordinary, and pickles frequently
are among those. Crazy Yeah, and because you know of
vlass is the best pickle, of course, are going to
crave a Lastic Yeah. I mean, why would you crave
anything less for your unborn child? Yeah. Well, and also
on the Plastic upset, it says that the stork became
the mascot because the national birth rate at that time
(12:05):
was down, and so he was low on babies to deliver,
so time his Lastic managers wanted to offer him a
chance to deliver pickles instead. So, you know, a couple
of mixed stories. I don't think they're necessarily mutually exclusive. Well,
and more importantly, Lastic was actually taking the step to
advertise on a national level, which was sort of unprecedented
(12:27):
for companies that were, you know, selling pickles. It was
sort of a new thing. I mean, you certainly don't
see entire ad campaigns or mascots about it. You might
occasionally get a oh, here's a pickle to put on
your sandwich, add but you know nothing. Big by seven,
they held a quarter of the national pickle market. Yeah,
(12:50):
and it bumped up their sales two hundred million dollars
a year. Yah, that's so many picks. It's hard for
me to wrap my head around this. I mean, like
a yeah, it's one of those things where you know, yeah,
of course there's pickles everywhere. You see them, go down
the grocery store. You see jars and jars of the things.
But you don't think of a hundred million dollar business.
Well you have to realize, like in the seventies, were
(13:11):
still getting out of the aspect aspect in the jello
Like sure, the Jello castrole era kind of it's it's
a little past that. But you know, you also have
restaurants who get pickles, who include pickles with their sandwiches, delis,
things like that. So it's not necessarily just the homeowner. Yeah,
(13:31):
just gonna going through jar after jar. I mean to
be fair, I go through snack foods like that too,
they're just not pickles. There are some people who would
go through jar of jar after pickle, and we'll get
to that. But you know this, this marketing really skyrocketed them.
They convince bires to pay a premium for their pickles,
which is good because they spent two million dollars of
(13:53):
marketing for it, for the for the new pickle line,
and by this time there are up to about a
hundred and thirty eight pickle products. Yeah. What you know
that you really hit an unprecedented level of success as
a company. When that success is so great that the
Federal Trade Commission starts to think that maybe something is up. Yeah, yeah,
(14:14):
the Federal Trade Commission did do an investigation on them.
But they're just selling pickles. They just chose to market them.
They were just selling pickles way better than anybody else was. Uh.
And then Lassie Pickles who sold to Campbell's, like Campbell
Soup Campbell's for thirty three million dollars, which was one
of Campbell's large acquisitions ever. Um, And this decision is
(14:37):
actually what would put Lastic Pickles eventually on the brink.
It would make them a business on the brink. Well,
I need to hear more about that, but before we
get to that, let's take a quick break. Okay, So, Ariel,
before the break, you mentioned that Vlastic Pickles was acquired
(14:59):
by Campbell's. But we also had just mentioned that Lastic
Pickles was doing business like gang busters. They were doing
incredibly well on their own. So what would lead to
the decision to actually agree to this acquisition. Well, according
to Atlas obscura dot com, the price of cucumbers was
rising a lot by like over thirty five cent since
(15:22):
seventy three, and Lastic had to take loans to buy
their cucumbers about twenty million dollars worth. Okay, so this
was literally the raw materials that they were using. The
price was going up, and it's not like you could
easily switch to something else. I mean, pickles as we
think of them are like the word pickles, we think
(15:43):
of pickled cucumbers. So they didn't have a whole of
other options now, and I mean they were making they're
making about one point three million profit off of the
hundred million dollars worth of sales recording reports that I saw. Wow,
that is but that is eye opening. Right to do
a hundred million dollars in sales, but that's how much
you make in sales. And when you look at the
actual profit being one point three million, that is that
(16:06):
is different. That is amazing. I mean, well, they were
also spending money on expansion and renovation and things like that,
marketing as well, and and then the pickle market also
slowed down, So everybody was really excited about pickles for
a while. It was the food trend, and then people pickles.
Yeah I'm kind of I'm kind of pickled out, so yeah,
I'm so over it. Also, at the time, Campbell's was
(16:30):
looking at a competitor, right, they were. They were acquiring
companies like Classic, largely because they wanted to have a
better position against Hinns. So, you know, these are companies
that were known for the you know, really dominating things
like grocery store shelves, and obviously you want to have
(16:51):
the best, best potential position against your competitors. So that
was the the idea behind the camp Old side of it. Yeah. Um.
And then they did work on on growing the Lastic
brand and increasing sales even though the market wasn't really
growing in the eighties. The improof packaging, so they color
coded a lot of their packaging so you could better
(17:13):
tell what sort of product you're getting in the jar.
They improved the jars that the pickles came in, and
then they decided to expand Classic into other specialty food
arenas like open pit barbecue, sauce and olives and cheese.
Oh interesting. So Lastic, which started as an sort of
a additional business on top of a creamery now would
(17:36):
actually include a dairy product in its line. Yeah, the
cheese didn't do well. The cheese company they acquired when
bankrupt and they dropped it. The olives actually did well
and they became a leading all of wine, and that
I have less it's less of a logical leap for me.
You know, olives and pickles. You often see them next
(17:58):
to each other in grocery stores because again, I think
a lot of people just sort of have that association,
even though it's a slightly different process pickling and the
process you have to make you have to go through
to make olives edible. But yeah, I can I can
see that the cheese is what it was sort of
like when we talked about how cheese save PBR for
a while. Yeah, well, I mean they also bought a
(18:20):
barbecue sauce. They're kind of buying all of these condiments
sort of things. So I guess some people view cheese
as a condiment. I view it as a staple of life. Yes, yes,
I think of as a lifeline. Also. I don't really
go into it in the notes because it's it's its
own story. But Campbell's did acquire Swanson, the company Swanson
um and that will factor in and just a little bit.
(18:42):
So in Campbell's consolidated the lastic division to New Jersey
and kind of hundred and forty jobs. So because last
had expanded out, they brought them all back together and
made I guess the production of it a smaller production.
I got you, Yeah, gotcha. And they also started to
(19:03):
look into other new ways to package and market pickles,
including the the pickles snack packs, and sandwich stackers. Yeah.
So these aren't like little pickle chips, like the little
round things if you pick if you cut a pickle
long way, you get a long slice. So it's a
cross section of a pickle. Yeah, And and so that
(19:24):
you know, they're basically trying to find new ways to
get people to buy pickles. You know, like I have
a jar of pickles in my fridge for whenever I
make a sandwich. How often do I make sandwiches? Okay, well,
now you need to buy them to put in your
kids lunchbox as a snack. And up again it worked.
It didn't work enough because Campbells was viewing Glassic as
(19:45):
an underperforming brand. Now in you had mentioned that Campbell's
had acquired Swanson, and in they thought, let's offload this. Yeah,
they tried to sell it, it didn't go as planned.
They so they decided to spin off all of their
quote unquote non strategic brands into their own entity. I
(20:07):
guess non strategic is the nice way of saying unprofitable, unprofitable, superfluous.
The Pickles, along with Swanson, Open Bit Barbecue, and a
few other specialty feuds feuds feuds, especially foods, were spun
off from Campbell's into Lastic Foods International, Incorporated, and then
(20:32):
they eventually became publicly traded. Now we got Lastic as
its own company again, and its own company with other
companies now lumped in underneath it. Yes, Campbell's reasoning behind
it was, you know, last Ach and Swanson are both
strong brands, their historically strong maybe they can turn around
(20:55):
under new management. This whole move was called a leverage spinoff,
which meant they incorporated the new subsidiary, and then the
subsidiary would take on the debt that Campbell's attributed to
those companies when they owned it as a way of
purchasing the division. So when last Signs and Swanson and
(21:16):
all that was spun off. They took on five million
dollars in debt. Seems like a pretty convenient way for
Campbell's to try and just shed some debt of its own. Yeah,
and and so they actually it was a whole big thing. Uh.
Lastic took them to court over this. They said they
were being fraudulent, that it was a a that the
(21:41):
debt transfer was underhanded, Yeah, that they used false financial
data to push the spin off and the debt transfer um,
and that by doing so they aided a breach of
fiduciary duty by the by Flastic Foods Internationals directors um. Yeah.
Plastic also said that Campbell's overstated plastics of value in
(22:03):
this transaction to get tax saving measures. And some people
said that it saved both Campbell's and Lastic taxes they
didn't have to pay UM, but it really didn't help
Plastic obviously. Yeah. So this is one of those things
where there were lots and lots and lots of articles
(22:25):
that were written about this particular controversy, I guess is
what we could call it. Yeah, because this was and
this was a big deal. You're half a billion dollars
in debt, I mean that's that's enormous and it's you
would think this is also a great way to uh,
to not just shed debt, but to scuttle a company
(22:46):
before it even gets a chance to get going. Well,
the courts ruled that Campbell's was on the up and
up in this spinoff, in this debt trade off, that
it was in fact liabilities costed the sale. Uh, some
other debt that maybe last took on after they became
an independent company, maybe close to the spinoff. But um,
(23:06):
you know, Lastic did file an appeal to that. Um,
there are a whole bunch of legal documents that you
guys can can go look at if you want more
information on that. But it kind of gets into the weeds.
You So we get to Lastic is an independent company
(23:29):
again and their sales are not exactly performing up to
what they were hoping. Yeah, pickle consumption was down by seven.
They were spending millions on advertising new products, and then
they did a hill Mary. So when Will wrote us
about this, he had mentioned that he had read about
(23:50):
Lastic pickles in the Walmart Effect book, and so he
thought it was a bigger story, and it certainly was.
But in Walmart started selling gallon jars of lastic pickles.
H they were twelve pounds ajar. Okay, twelve pounds for
for essentially a almost a bucket of pickles. How much
(24:12):
did they cost? Two dollars and nineties seven cents a jar.
So for less than three dollars you can take home
twelve pounds of pickles. Yeah. They they were testing this
this product, uh around three dollars maybe a little bit
more ajar, and then when it got released nationwide, they
(24:33):
dropped the price. Yeah. I mean part of the Walmart
effect is that Walmart is so focused on pushing their
brand of like the cheapest price that they hurt other
companies doing it. Um. So this was really a way
for Walmart to get people to come into Walmart stores,
not necessarily a way to work with a vendor. Yes,
(24:56):
now it did raise blastic sales immensely. Jars flew off
the shelves. They were selling eight jars a week. It
made up thirty of lastic business at the time, but
it was causing the millions of dollars in profit loss.
They're only making pennies on the jar if they were lucky,
according to fast company dot com, and their dropped their
(25:18):
profits dropped by or so. Yeah, I mean if you
if you end up cutting your the sale price of
your product that dramatically, then your profit margin gets razor thin.
And with something like pickles, that's not that's not a
comfortable line to ride, I imagine. No, plus it people
are buying your pickles at Walmart or Sam's Club or wherever.
(25:41):
They're not buying them at the grocery store where the
prices are higher in your profit marks, where the prices
are reasonable. So you know, and and beyond that, now
you have to get enough cucumbers to meet demand, right
because yeah, if it takes a lot more cucumbers to
if your if your jars are now twelve pounds each
instead of like a couple of pounds. Yeah, and and
(26:01):
so you've got this product that Lastic has spent millions
of dollars to convince people it's a premium product you
need to pipe pay premium price for, and they're selling
it on the super cheap Vlastic did ask Walmart to
raise the price of their pickle jars to like a jar,
so about fifty cents more so, and Walmart said that
(26:23):
if they raised the price on those jars, they would
stop buying any of other any other of Lastics pickle products. Yikes. Yeah,
they did eventually let Lastic raise prices, but by then
it was pretty much too little, too late. Yeah. So,
you know a lot of people will quote the Walmart
(26:44):
effect as being what did last Again, the experts that
I've read about, at least some of them have said
Walmart didn't do like you'd think it would be the
reason that Lastic went under. Um, it was really the spinoff.
It was the debt acquisition in the leverage spin off
that did the man. But this certainly didn't help. It
might have been the nail in the coffin, got you. Yeah,
(27:04):
that's exactly what I was about to say, the nail
on the pickle. We've got some more to say about
this story and to kind of wrap things up, but
before we get to that, let's take another quick break. Okay,
So the spinoff was sort of a death sentence for Classic.
(27:25):
The Walmart effect was a very kind of sad funeral
for the Classic. But here's the thing that's crazy about
that is this is a case where you have a
company that's on the brink of financial ruin, but it's
still crazy popular in its individual market. Yeah, they still
(27:49):
held the pickle market maybe. Um. You know, they're selling
tons of pickles, they just aren't making money on them.
So it's funny to think about. I mean, we've seen
this happen before too, but it's funny to think about
a company that on on paper, if you're just looking
at sales, like the number of products being moved. From
(28:13):
a sales perspective, it looks like it's doing incredible. But
then when you look at the cost of doing business,
the amount of profit per sale, you start to realize,
but this is not sustainable. It would be like a
company trying to create a loss leader, you know, a
product that they're selling below cost in order to sell
related products at a much higher premium, and then no
(28:36):
one buys the other products. They just buy the main thing,
and then next thing you know, you're out of business. Yeah,
well that's what Classic was looking at Um and Hines
was looking at Plastic because Hines didn't have nearly as
large hold on the pickle market in the relish market
at that time, and I'm sure they would relish the
idea of having more Yes, you've just peppered this with Oakes.
(29:00):
It's actually the pickle pepper relish market. I tried to
put a pun in their guys, but I didn't mention
the peppers. Uh So they wanted to. Hines wanted to
bank on this and get Plastic on the cheap so
that they could obtain Lastics market share. At the time,
Plastic was employing around five hundred and fifty full time
(29:21):
workers and then another four hundred fifty to five hundred
and fifty seasonal workers between their pickles and their open
pit barbecue. Um, Hines thought it got it's chance to
acquire them in two thousand one because Plastic did file
for bankruptcy bankruptcy protection um after they were unable to
make a ten million dollar interest payment. Wow, then I'm
(29:43):
sure that was alone to try and pay off some
of that debt. Yeah. They stated at the time when
they filed that Vlastic did that they had six hundred
and forty nine point nine million dollars in debt as well.
Just round that on up to six fifty and a
d thousand dollars between friends a lot. I will gladly
(30:03):
take that hundred six hundred, so essentially six million in debt.
How much do they have in assets? Four hundred and
fifty eight point three million, So I guess four hundred
fifty eight million, what's point three among friends? That's that's
not that's not great. That's that's a lower number than
the amount of debt. And their stock was down from
its high of four dollars and cents. So yeah, things
(30:27):
are bad. So Lassic and Hines are potentially going to
make a deal. What was what was Lastic hoping for? Like,
what what was their asking price? Well, they were going
to sell to Hines for a hundred million, And then
I heard conflicting reports. Some said that that deal fell through.
(30:49):
Others said that another another deal came in and another
party came in. Another party came in and kicked Hines out.
So Hines was going to buy for a hundred They're
going to buy the pickles and the barbecue sauce. And
then there was another food distributor, Canagra ConAgra that said
they were going to buy some of the other brands
(31:10):
in the spinoff, but instead Hick muse Tat and first
a firm that did yeah, a firm that did leverage
buyouts created a food division, and I'm sorry Hicks muse
Tat And first, yes, I want to make sure I
had heard that correctly. Yes, all right, So so they
(31:31):
do leverage buiouts, that's just that's just what their businesses. Yes,
and they offered three hundred and seventy million dollars cash
okay for Classic definitely higher than yeah, which meant they'd
get all of Lastics North America assets in the buyout,
you know, subject to approval, yeah, Lastic. But it also
(31:53):
meant that unlike secured creditors wouldn't necessarily get all the
money they're owed, um, and you know, shareholders may not
get anything. So Lastic did also work to get some
financing about twenty five million dollars to help pay those
suppliers and vendors that they owed money too as a
part of this. Now, I assume the acquisition went ahead
(32:13):
and went through. Yes, And afterwards Lastic Foods International change
your name to Pinnacle Foods, which was the divisions of
Hick Muse. First, Yeah, the bought Lastic Um. Pinnacle did
lay off a few people, like about seventy out of
three thousand or so. And and that's among all of
last Foods International's divisions, which did include Swanson and things
(32:36):
like that, right, not just the pickles but these other
companies that have been lumped under when Campbell's spun them off. Yeah,
but overall they were looking to increase production volume, ad workers,
and acquire more brands, and they did, in fact acquire
more food brands to put under that umbrella. Um. Then
in two thousand seven, Pinnacle Foods was acquired by the
private equity company Blackstone Group. So the people the fish
(33:00):
that eight last, it got eaten by a larger fish. Yes,
because as as the Phantom Menace taught us, there's always
a bigger fish. But as a subsidiary, So Pinnacle Foods
stays a Pinnacle Foods are about to go through. We're
going to just kind of breeze through the rest of
their history, but they continue to be a subsidiary throughout
all of this acquisition. They got listed on the New
York Stock Exchange under the Blackstone Group and made a
(33:22):
good chunk of money. Um. Then in two thousand fourteen,
Hillshire Brands tried to buy Pinnacle, but then that deal
got canceled and Pinnacle got a whole bunch of money
because the deal got canceled, Like the sale didn't go through,
so it was kind of recompense. They got interest around
a hundred and nine million dollars for and then in
two thousand eighteen, Canagra, who originally was going to buy
(33:46):
some of lastic foods brands, yeah, the stuff, the stuff
outside of the barbecue and pickles, yes, came in and
bought Pinnacle for eight point one billion dollars. Wow, it's
a lot of it's a lot of cheddar at the
food business. Very clever, and they pulled Pinnacle off the
New York Stock Exchange. Um. You know, ConAgra owns way
(34:08):
more than Clastic, way more than Swanson, way more than
Open Pit Barbecue. They have a mountain of food brands
that they owned. But they are still putting efforts into
lastic pickles. So flastic pickles still exists even though it's
gone through like multiple changes in ownership at this point. Yes,
and they're still coming out with new fun innovations okay, yeah,
(34:30):
like wind up pickles like no, no, no, okay. So
in April two nineteen, they announced that they were making
pickle chips out of real pickles, so not like the
little circles that you bind to put on your sandwich,
but like freeze dried pickle rounds that you eat like
a potato chiptcha Okay, all right. You know I was
looking at you like you were crazy, but then I thought,
(34:51):
wait a minute, fried pickles are a thing, and I like, good. Yeah.
When I heard this, I was super excited. I think
that would be my preferred way to eat a pickle.
You get all of the flavor of like a salt
and vinegar potato chip, but it's not a potato fun
fat guys, I can't really eat potatoes very well. And
it's also not as messy as eating a pickle, where
it's it's a challenge to bite into like a big pickle.
(35:14):
There's a challenge to bite into one of those and
not have it just erupt over everything. Um. So I
really feel like looking at lessons that this is. There
were certainly some missteps, like trying to get their pickles
into Walmart. There were mistakes, for Classic, but I feel
(35:34):
like a lot of it was just circumstantial and outside
their control. In some cases, like in the case where
their their supply the cucumbers, the price was increasing. There's
not a whole lot you can do about that. I mean,
you can raise the price of your pickles, but there's
going to come a point where you're going to reach
a tipping point where the consumer is not going to
be willing to pay the amount of money that you
(35:57):
need to charge if you want to keep your profit
margin to be the same despite the fact that your
raw materials the prices increased. And we've seen that happen
with lots of other stuff too, Like anecdotally here in Atlanta,
there used to be quite a few places that sold
Ostrich for Ostrich burgers, and I used to go and
get Ostrich burgers because I don't eat mammals, but I'll
(36:17):
eat a bird. And now no one sells them anymore
because the Ostrich farms. It was just came to a
point where in order to make profit they were going
to have to keep increasing the price of an Ostrich burger.
But if you increase it beyond a certain point, no
one's going to buy it because they'll they'll view it
as being too expensive, or so few people will buy
(36:40):
it that most of your stock will go as waste
because it will spoil before they can sell it. Same
sort of thing here. So I think in many cases
this was this was something that was largely unavoidable. Like
you know, we said they were selling hundred million dollars
worth of pickles every year, but their profit would come
in just a million dollars. I say just a million
(37:02):
dollars when you're talking about a whole company, that is
a pretty small profit. Yeah. I also I am I
am sad Ariel that you did leave out the peppers
earlier in that because you could have picked upun of
pickled peppers. Uh. Yeah, I thought about putting that in,
and I decided I was cooler than that. Jonathan. However,
lastics not that cool because bob Lastic created a book
(37:26):
of jokes about pickles. He did. It was a part
of their marketing campaign, which, by the way, pob Blastic
told Forbes in that a lot of their competitors were
manufacturing oriented and they were the opposite. They were marketers
who manufactured something to sell. I don't necessarily like obviously
there was a love of pickle there, but I mean,
(37:46):
you know, I think I think as we traced the
history of lastic pickles, it wasn't like they were marketers
who fell into a creamery. It was But I do
think it's funny that they said that they were coming
from it from a marketing endpoint. That and They're like, well,
we're great at selling stuff. Where are we gonna sell?
I know, pickles? Well, And in order to sell the pickles,
they came out with bob Lastics one hundred and one
(38:08):
Pickle Jokes and it sold a quarter of a million copies.
It's first year. Wow. Yeah, I guess people really like
a pickle pun. I guess we We've gone through quite
a few, and I am resisting the urge to make more.
They prefer a pickle pun. Yeah, that's a that's definitely
becoming a tongue twister. Listen, we gotta we gotta stop
(38:28):
before we pickle again. Perhaps, Okay, well, all right, enough alliteration.
We're gonna We're gonna say goodbye now. But if you
guys have suggestions like this one was a suggestion from
a listener, If you have suggestions, where can they send those? Two? Well,
they can send them to feedback at the Brink Podcast
dot show. Yep, And you can visit the Brink Podcast
(38:51):
dot show. That's our website where you'll find an archive
of all of our past episodes, a little bit more
information about us, and until next time. I have been
of them strict ones, and I've been aerial casting business
on the Brink is a production of I Heart Radio
and How Stuff Works. For more podcasts for my heart Radio,
(39:12):
visit the i heart Radio app, Apple Podcasts, or wherever
you listen to your favorite shows.
Welcome to Business on the Brink, a production from I
Heart Radio and How Stuff Works. Joe Lastic had a
cream of the crop idea when he decided to add
polish pickles to the family creamery business, and then he
hated things up further with innovative packaging and marketing. But
(00:24):
despite holding a majority of this condiments market, things went
sour and the company soon found themselves in Well find
out what's the dial when we talk about how Blastic
became a business on the Brink. Hi everyone, I'm Jonathan
(00:49):
Strickland and I'm Ario Cast and welcome to Business on
the Brink and arial. Once again, my proverbial but metaphorical
hat is off to you for that amazing introduction. Thank you.
I wasn't sure if you're going to love it or
hate it. No, you weren't sure if I was going
to love it or really love it. Well, hopefully the
person who suggested this topic, Will Codis, will also really
(01:10):
love it. Yes, so we're talking about Velastic Pickles, which, uh,
you know, it's one of those those brand names that
I've certainly come into contact with but for some reason
didn't have sticking power in my brain. So as I
was going through the notes, I was sitting there thinking like,
why do I know this? And as soon as I
get to the the iconic character that was used to
(01:31):
market the pickles, and I said, oh, right, that's these guys.
Well you'd have to because and we'll get to it.
Most pickle companies don't do a lot of marketing. Yeah.
I remember the Kates Pickles folks because they were out
of the Carolina's and they cast an actor as their
spokesman who was later a slasher killer character on a
(01:54):
horror movie that I was in. That's a lot of
tangent that has nothing to do with the rest of
this episode. You know what, though, It's a glimpse into
your life, and we're all grateful for it. Jonathan, So, um,
do you even like pickles? You know what? Um? It
was a certainly a more recent acquired taste for me
as a kid. I despised them me too. I could,
(02:17):
once in a blue moon eats something that pickles in it,
like a potato salad or something, but I never wanted
to have a pickle spear. I didn't want pickles on
my burger. I was one of those those stereotypical picky
eater kids who there was like maybe three things in
the world that I wanted to eat, and I only
wanted to eat those things. But these days, um, actually
(02:38):
I like a good pickle, me too. I like a
lot of pickled things, pickled beats, jeered deli, Jeri della.
I can't pronounce it, but I like to put it
in my mouth. Well, I mean so, I also really
like pickled vegetables too. And uh, and and also you
and I both worked at a place where pickles were
(03:00):
pretty important to maintaining your ability to continue to stay upright. Yeah,
the George Renaissance Festival. Uh, that is actually where I
learned to enjoy them, because they weren't the little floppy
things you got next to your sandwich at a fast
food restaurant. They were nice, crisp pickles, like fresh pickles. Yeah,
and this was because they had a lot of salt
and electro lights in them that helped us maintain ourselves
(03:23):
after sweating like crazy all day. So let's talk about
Vlastic pickles in particular. And I did not even know
that they were named after the person who started the
whole business, Jove Lastic. So tell me a bit about Joe.
So Joe Lastic was the son of a creation immigrant
who moved to Detroit with his family and started a
(03:43):
creamery business. Um. He had been working a factory job
during the day and was saving his every pen he
could from his two dollar a day job to start
this creamery. Wow. Yeah, that's that's definitely a bootstrapped operation
right there. Yeah. Well, Joe took over the family creamery
in the twenties and then in seven he added pickles
(04:06):
to the mix of what this creamery was selling. Logical step.
There were some reports I read where he was asked
to distribute them. It might just have been a matter
of hey, here's this thing. That's it's a very the time,
pickles were a very regional product. They weren't sold nationwide necessarily,
(04:26):
and you could give them nationwide, but just they were
from regional like farmers and picklers like you would get
milk or cream from the milkman. So creamery pickles, they're
all very local delivery. Um. And he was selling specifically
Polish style pickles with garlic and dill. Those are the best.
They're good. Okay, we're going to have a fight. We're
(04:49):
going to do that. I also like a nice, nice
crisp bread and butter pickle. There so sweet, I know, Okay, okay,
I'm a sour persons, you are all right, um And
fun fact, Beryl Brant pickles, which is what he was
distributing and selling, don't really have the same shelf life
(05:10):
as the pickles you buy in glass jars at the supermarket.
But at this point they weren't. They weren't in jars.
They hadn't been canned pickles, they hadn't been camp pickles.
They might have been like given out in jars, but
not not like preserve. Yeah. Yeah, So at this point
you get to the beginning of World War Two, and
(05:30):
you know, there are a lot of stories about companies
during World War Two running into challenges because there was
there were shortages on materials. You wouldn't necessarily think that
such a thing would affect a pickles business, but in
fact it did. Yeah, the U. S. Government rationed pickles.
(05:51):
I mean, if you figure this, they're they're easy to ship,
they don't go bad right away. Even even if they
don't last as long as you know today's shelved pickles,
they still us longer than you know, a cucumber. Let's say, so,
the US government was rationing about pickles that were produced
at the time, which meant for everybody else there was
a pickle shortage there so so so for everyone else
(06:15):
they were they were not in a pickle because they
couldn't get ahold of one unfortunately. So this is around
the time when Joe started testing and um experimenting with
a new idea, and that new idea was hot pack pickles,
which meant he put the cucumbers into a glass jar,
covered them with the hot brine, and then the jar
was sealed. So this is essentially sort of a very
(06:36):
primitive version of canning. Okay, well, it essentially was canning
because it greatly extended the life, the shelf life of
these pickles. Hot packed pickles are what we get today
and they last a lot longer than a barrel brind pickle. Yeah,
and so this was in fact the introduction of the
plastic pickle. It was in two and people loved it
(06:59):
so much, so Joe had a hard time keeping up
with the demand once the war was over. Like you'd
imagine he'd have a hard time keeping up with the
demand during the war when pickles are being rationed, but
even afterwards, people really liked these hot pack pickles, and
continuing with the whole family business idea, his son, you know, Joe,
(07:19):
had inherited the creamery from his father. Then his son
Bob joined the Lastic Pickle Company and would rise to
the position of general manager for the company. And they
opened up a vlastic factory in Emily City, Michigan, which
is in the thumb of the mitten. So you've got
(07:41):
the mitten, you've got the finger. This is not a
geography class, Okay. So at the time Classic was still
doing their creamery business, and they were also making things
like sauer kraut. It makes sense. You know, you've got
all of the brining equipment there. Sauer Kraut is, yeah,
another sort of pickled sarma. Crowds also also, let me
(08:01):
ask you this areal. So the demand for pickles was
going through the roof. People were really going crazy for
these plastic pickles. The company is doing quite well. What
was give me an idea, what was the size of
lastic pickles at this point? Well, in they had five employees, which,
you know, it's a pickle business. Sure, twenty five sounds reasonable,
(08:24):
exception of the fact that their factory was three large buildings.
One was tour for receiving cucumbers, and then one was
for distribution. Basically, they had twenty eight Sauer Kraut tanks
and they were processing fixed fifty acres worth of cucumbers.
That's a lot of cucumbers. That is for people. It's
(08:46):
a lot for anybody. But yeah, when you're thinking about
twenty people having to deal with that as twice as
many acres as you have people working, and you know,
not all those people are out there in the fields
picking cucumbers. Yeah, some are having to sort through and
deeply inspect to cucumbers for bruises. I don't know, I'm
assuming that's a part of the process. Well, Joe Lastic
would retire in nineteen sixty three and his son Bob
(09:08):
officially took over the company. And this was at a
point where Vlastic was really riding high. I mean they
were they were the lead pickle company and pickle pickle
provider I guess you could say in the in the
United States, and they were hitting ten million dollars in
sales by nineteen sixty seven. Yeah, that's that's not too shabby.
(09:31):
That's a lot of pickles. Yeah. Uh. By the seventies
because they had these pickles that had this long shelf life,
they were expanding nationally. Yeah, they could actually ship them
across the country and they'd be still be good when
they got to their destinations. Yes, And they were really
really smart. So Plastic did a lot of things that
were really smart. So they were really smart about using
(09:51):
the entirety of their crop, or at least as much
of the crop as they could. So pickles that were
too big, cucumbers that were too big to fit in
a pickle jar that we cut up into chips or
spears or relish, so that they're using as much of
their stock as they possibly can, as much of their produce,
cutting down on waste dramatically. Yeah. And by four the
(10:12):
pickle consumption in the country was up from two pounds
per capita when the Plastic started to eight pounds per capita,
all because of last Yeah. Yeah, and that's when they decided, Okay,
we don't need to do the milk and cheese business anymore.
We're just gonna focus on pickle and pickle related things
and relishes. And people are eating four times as many pickles,
(10:33):
but they're drinking as much milk and eating as much
cheese as ever, Let's let's stick to the the growing,
incredible business of pickles. So Vlastic was number one, but
they were kind of number one at first, So at
this time they owned ten percent of the national pickle market.
Hines also owned Tempersition in the pickle market, but Lastic
did surpass Hines oily. So around this time this is
(10:57):
when Vlastic would introduce that advertising mascot, the one I said.
Once I saw who it was, I merely went, oh, right,
I know this company, and the mascot is a stork. Yes,
stork who sounds like Gratcho Marks. Yeah, and it's like,
you know, holds a pickle occasionally kind of like a cigar,
sort of like you know, Gratcho Marks would hold it
(11:20):
a cigar that looked like a cigar. Yeah. Yeah, but
it's a pickle, so it's healthier for you, definitely side
side effect curbing the smoking craze. Yeah, I don't know
anyhow storks. They picked a stork because they wanted to
capitalize on the idea that pregnant women craft pickles. Oh interesting, okay,
so they're they're playing on a stereotype, yes, that that
(11:43):
women when they are pregnant have cravings that people might
describe as being out of the ordinary, and pickles frequently
are among those. Crazy Yeah, and because you know of
vlass is the best pickle, of course, are going to
crave a Lastic Yeah. I mean, why would you crave
anything less for your unborn child? Yeah. Well, and also
on the Plastic upset, it says that the stork became
the mascot because the national birth rate at that time
(12:05):
was down, and so he was low on babies to deliver,
so time his Lastic managers wanted to offer him a
chance to deliver pickles instead. So, you know, a couple
of mixed stories. I don't think they're necessarily mutually exclusive. Well,
and more importantly, Lastic was actually taking the step to
advertise on a national level, which was sort of unprecedented
(12:27):
for companies that were, you know, selling pickles. It was
sort of a new thing. I mean, you certainly don't
see entire ad campaigns or mascots about it. You might
occasionally get a oh, here's a pickle to put on
your sandwich, add but you know nothing. Big by seven,
they held a quarter of the national pickle market. Yeah,
(12:50):
and it bumped up their sales two hundred million dollars
a year. Yah, that's so many picks. It's hard for
me to wrap my head around this. I mean, like
a yeah, it's one of those things where you know, yeah,
of course there's pickles everywhere. You see them, go down
the grocery store. You see jars and jars of the things.
But you don't think of a hundred million dollar business.
Well you have to realize, like in the seventies, were
(13:11):
still getting out of the aspect aspect in the jello
Like sure, the Jello castrole era kind of it's it's
a little past that. But you know, you also have
restaurants who get pickles, who include pickles with their sandwiches, delis,
things like that. So it's not necessarily just the homeowner. Yeah,
(13:31):
just gonna going through jar after jar. I mean to
be fair, I go through snack foods like that too,
they're just not pickles. There are some people who would
go through jar of jar after pickle, and we'll get
to that. But you know this, this marketing really skyrocketed them.
They convince bires to pay a premium for their pickles,
which is good because they spent two million dollars of
(13:53):
marketing for it, for the for the new pickle line,
and by this time there are up to about a
hundred and thirty eight pickle products. Yeah. What you know
that you really hit an unprecedented level of success as
a company. When that success is so great that the
Federal Trade Commission starts to think that maybe something is up. Yeah, yeah,
(14:14):
the Federal Trade Commission did do an investigation on them.
But they're just selling pickles. They just chose to market them.
They were just selling pickles way better than anybody else was. Uh.
And then Lassie Pickles who sold to Campbell's, like Campbell
Soup Campbell's for thirty three million dollars, which was one
of Campbell's large acquisitions ever. Um, And this decision is
(14:37):
actually what would put Lastic Pickles eventually on the brink.
It would make them a business on the brink. Well,
I need to hear more about that, but before we
get to that, let's take a quick break. Okay, So, Ariel,
before the break, you mentioned that Vlastic Pickles was acquired
(14:59):
by Campbell's. But we also had just mentioned that Lastic
Pickles was doing business like gang busters. They were doing
incredibly well on their own. So what would lead to
the decision to actually agree to this acquisition. Well, according
to Atlas obscura dot com, the price of cucumbers was
rising a lot by like over thirty five cent since
(15:22):
seventy three, and Lastic had to take loans to buy
their cucumbers about twenty million dollars worth. Okay, so this
was literally the raw materials that they were using. The
price was going up, and it's not like you could
easily switch to something else. I mean, pickles as we
think of them are like the word pickles, we think
(15:43):
of pickled cucumbers. So they didn't have a whole of
other options now, and I mean they were making they're
making about one point three million profit off of the
hundred million dollars worth of sales recording reports that I saw. Wow,
that is but that is eye opening. Right to do
a hundred million dollars in sales, but that's how much
you make in sales. And when you look at the
actual profit being one point three million, that is that
(16:06):
is different. That is amazing. I mean, well, they were
also spending money on expansion and renovation and things like that,
marketing as well, and and then the pickle market also
slowed down, So everybody was really excited about pickles for
a while. It was the food trend, and then people pickles.
Yeah I'm kind of I'm kind of pickled out, so yeah,
I'm so over it. Also, at the time, Campbell's was
(16:30):
looking at a competitor, right, they were. They were acquiring
companies like Classic, largely because they wanted to have a
better position against Hinns. So, you know, these are companies
that were known for the you know, really dominating things
like grocery store shelves, and obviously you want to have
(16:51):
the best, best potential position against your competitors. So that
was the the idea behind the camp Old side of it. Yeah. Um.
And then they did work on on growing the Lastic
brand and increasing sales even though the market wasn't really
growing in the eighties. The improof packaging, so they color
coded a lot of their packaging so you could better
(17:13):
tell what sort of product you're getting in the jar.
They improved the jars that the pickles came in, and
then they decided to expand Classic into other specialty food
arenas like open pit barbecue, sauce and olives and cheese.
Oh interesting. So Lastic, which started as an sort of
a additional business on top of a creamery now would
(17:36):
actually include a dairy product in its line. Yeah, the
cheese didn't do well. The cheese company they acquired when
bankrupt and they dropped it. The olives actually did well
and they became a leading all of wine, and that
I have less it's less of a logical leap for me.
You know, olives and pickles. You often see them next
(17:58):
to each other in grocery stores because again, I think
a lot of people just sort of have that association,
even though it's a slightly different process pickling and the
process you have to make you have to go through
to make olives edible. But yeah, I can I can
see that the cheese is what it was sort of
like when we talked about how cheese save PBR for
a while. Yeah, well, I mean they also bought a
(18:20):
barbecue sauce. They're kind of buying all of these condiments
sort of things. So I guess some people view cheese
as a condiment. I view it as a staple of life. Yes, yes,
I think of as a lifeline. Also. I don't really
go into it in the notes because it's it's its
own story. But Campbell's did acquire Swanson, the company Swanson
um and that will factor in and just a little bit.
(18:42):
So in Campbell's consolidated the lastic division to New Jersey
and kind of hundred and forty jobs. So because last
had expanded out, they brought them all back together and
made I guess the production of it a smaller production.
I got you, Yeah, gotcha. And they also started to
(19:03):
look into other new ways to package and market pickles,
including the the pickles snack packs, and sandwich stackers. Yeah.
So these aren't like little pickle chips, like the little
round things if you pick if you cut a pickle
long way, you get a long slice. So it's a
cross section of a pickle. Yeah, And and so that
(19:24):
you know, they're basically trying to find new ways to
get people to buy pickles. You know, like I have
a jar of pickles in my fridge for whenever I
make a sandwich. How often do I make sandwiches? Okay, well,
now you need to buy them to put in your
kids lunchbox as a snack. And up again it worked.
It didn't work enough because Campbells was viewing Glassic as
(19:45):
an underperforming brand. Now in you had mentioned that Campbell's
had acquired Swanson, and in they thought, let's offload this. Yeah,
they tried to sell it, it didn't go as planned.
They so they decided to spin off all of their
quote unquote non strategic brands into their own entity. I
(20:07):
guess non strategic is the nice way of saying unprofitable, unprofitable, superfluous.
The Pickles, along with Swanson, Open Bit Barbecue, and a
few other specialty feuds feuds feuds, especially foods, were spun
off from Campbell's into Lastic Foods International, Incorporated, and then
(20:32):
they eventually became publicly traded. Now we got Lastic as
its own company again, and its own company with other
companies now lumped in underneath it. Yes, Campbell's reasoning behind
it was, you know, last Ach and Swanson are both
strong brands, their historically strong maybe they can turn around
(20:55):
under new management. This whole move was called a leverage spinoff,
which meant they incorporated the new subsidiary, and then the
subsidiary would take on the debt that Campbell's attributed to
those companies when they owned it as a way of
purchasing the division. So when last Signs and Swanson and
(21:16):
all that was spun off. They took on five million
dollars in debt. Seems like a pretty convenient way for
Campbell's to try and just shed some debt of its own. Yeah,
and and so they actually it was a whole big thing. Uh.
Lastic took them to court over this. They said they
were being fraudulent, that it was a a that the
(21:41):
debt transfer was underhanded, Yeah, that they used false financial
data to push the spin off and the debt transfer um,
and that by doing so they aided a breach of
fiduciary duty by the by Flastic Foods Internationals directors um. Yeah.
Plastic also said that Campbell's overstated plastics of value in
(22:03):
this transaction to get tax saving measures. And some people
said that it saved both Campbell's and Lastic taxes they
didn't have to pay UM, but it really didn't help
Plastic obviously. Yeah. So this is one of those things
where there were lots and lots and lots of articles
(22:25):
that were written about this particular controversy, I guess is
what we could call it. Yeah, because this was and
this was a big deal. You're half a billion dollars
in debt, I mean that's that's enormous and it's you
would think this is also a great way to uh,
to not just shed debt, but to scuttle a company
(22:46):
before it even gets a chance to get going. Well,
the courts ruled that Campbell's was on the up and
up in this spinoff, in this debt trade off, that
it was in fact liabilities costed the sale. Uh, some
other debt that maybe last took on after they became
an independent company, maybe close to the spinoff. But um,
(23:06):
you know, Lastic did file an appeal to that. Um,
there are a whole bunch of legal documents that you
guys can can go look at if you want more
information on that. But it kind of gets into the weeds.
You So we get to Lastic is an independent company
(23:29):
again and their sales are not exactly performing up to
what they were hoping. Yeah, pickle consumption was down by seven.
They were spending millions on advertising new products, and then
they did a hill Mary. So when Will wrote us
about this, he had mentioned that he had read about
(23:50):
Lastic pickles in the Walmart Effect book, and so he
thought it was a bigger story, and it certainly was.
But in Walmart started selling gallon jars of lastic pickles.
H they were twelve pounds ajar. Okay, twelve pounds for
for essentially a almost a bucket of pickles. How much
(24:12):
did they cost? Two dollars and nineties seven cents a jar.
So for less than three dollars you can take home
twelve pounds of pickles. Yeah. They they were testing this
this product, uh around three dollars maybe a little bit
more ajar, and then when it got released nationwide, they
(24:33):
dropped the price. Yeah. I mean part of the Walmart
effect is that Walmart is so focused on pushing their
brand of like the cheapest price that they hurt other
companies doing it. Um. So this was really a way
for Walmart to get people to come into Walmart stores,
not necessarily a way to work with a vendor. Yes,
(24:56):
now it did raise blastic sales immensely. Jars flew off
the shelves. They were selling eight jars a week. It
made up thirty of lastic business at the time, but
it was causing the millions of dollars in profit loss.
They're only making pennies on the jar if they were lucky,
according to fast company dot com, and their dropped their
(25:18):
profits dropped by or so. Yeah, I mean if you
if you end up cutting your the sale price of
your product that dramatically, then your profit margin gets razor thin.
And with something like pickles, that's not that's not a
comfortable line to ride, I imagine. No, plus it people
are buying your pickles at Walmart or Sam's Club or wherever.
(25:41):
They're not buying them at the grocery store where the
prices are higher in your profit marks, where the prices
are reasonable. So you know, and and beyond that, now
you have to get enough cucumbers to meet demand, right
because yeah, if it takes a lot more cucumbers to
if your if your jars are now twelve pounds each
instead of like a couple of pounds. Yeah, and and
(26:01):
so you've got this product that Lastic has spent millions
of dollars to convince people it's a premium product you
need to pipe pay premium price for, and they're selling
it on the super cheap Vlastic did ask Walmart to
raise the price of their pickle jars to like a jar,
so about fifty cents more so, and Walmart said that
(26:23):
if they raised the price on those jars, they would
stop buying any of other any other of Lastics pickle products. Yikes. Yeah,
they did eventually let Lastic raise prices, but by then
it was pretty much too little, too late. Yeah. So,
you know a lot of people will quote the Walmart
(26:44):
effect as being what did last Again, the experts that
I've read about, at least some of them have said
Walmart didn't do like you'd think it would be the
reason that Lastic went under. Um, it was really the spinoff.
It was the debt acquisition in the leverage spin off
that did the man. But this certainly didn't help. It
might have been the nail in the coffin, got you. Yeah,
(27:04):
that's exactly what I was about to say, the nail
on the pickle. We've got some more to say about
this story and to kind of wrap things up, but
before we get to that, let's take another quick break. Okay,
So the spinoff was sort of a death sentence for Classic.
(27:25):
The Walmart effect was a very kind of sad funeral
for the Classic. But here's the thing that's crazy about
that is this is a case where you have a
company that's on the brink of financial ruin, but it's
still crazy popular in its individual market. Yeah, they still
(27:49):
held the pickle market maybe. Um. You know, they're selling
tons of pickles, they just aren't making money on them.
So it's funny to think about. I mean, we've seen
this happen before too, but it's funny to think about
a company that on on paper, if you're just looking
at sales, like the number of products being moved. From
(28:13):
a sales perspective, it looks like it's doing incredible. But
then when you look at the cost of doing business,
the amount of profit per sale, you start to realize,
but this is not sustainable. It would be like a
company trying to create a loss leader, you know, a
product that they're selling below cost in order to sell
related products at a much higher premium, and then no
(28:36):
one buys the other products. They just buy the main thing,
and then next thing you know, you're out of business. Yeah,
well that's what Classic was looking at Um and Hines
was looking at Plastic because Hines didn't have nearly as
large hold on the pickle market in the relish market
at that time, and I'm sure they would relish the
idea of having more Yes, you've just peppered this with Oakes.
(29:00):
It's actually the pickle pepper relish market. I tried to
put a pun in their guys, but I didn't mention
the peppers. Uh So they wanted to. Hines wanted to
bank on this and get Plastic on the cheap so
that they could obtain Lastics market share. At the time,
Plastic was employing around five hundred and fifty full time
(29:21):
workers and then another four hundred fifty to five hundred
and fifty seasonal workers between their pickles and their open
pit barbecue. Um, Hines thought it got it's chance to
acquire them in two thousand one because Plastic did file
for bankruptcy bankruptcy protection um after they were unable to
make a ten million dollar interest payment. Wow, then I'm
(29:43):
sure that was alone to try and pay off some
of that debt. Yeah. They stated at the time when
they filed that Vlastic did that they had six hundred
and forty nine point nine million dollars in debt as well.
Just round that on up to six fifty and a
d thousand dollars between friends a lot. I will gladly
(30:03):
take that hundred six hundred, so essentially six million in debt.
How much do they have in assets? Four hundred and
fifty eight point three million, So I guess four hundred
fifty eight million, what's point three among friends? That's that's
not that's not great. That's that's a lower number than
the amount of debt. And their stock was down from
its high of four dollars and cents. So yeah, things
(30:27):
are bad. So Lassic and Hines are potentially going to
make a deal. What was what was Lastic hoping for? Like,
what what was their asking price? Well, they were going
to sell to Hines for a hundred million, And then
I heard conflicting reports. Some said that that deal fell through.
(30:49):
Others said that another another deal came in and another
party came in. Another party came in and kicked Hines out.
So Hines was going to buy for a hundred They're
going to buy the pickles and the barbecue sauce. And
then there was another food distributor, Canagra ConAgra that said
they were going to buy some of the other brands
(31:10):
in the spinoff, but instead Hick muse Tat and first
a firm that did yeah, a firm that did leverage
buyouts created a food division, and I'm sorry Hicks muse
Tat And first, yes, I want to make sure I
had heard that correctly. Yes, all right, So so they
(31:31):
do leverage buiouts, that's just that's just what their businesses. Yes,
and they offered three hundred and seventy million dollars cash
okay for Classic definitely higher than yeah, which meant they'd
get all of Lastics North America assets in the buyout,
you know, subject to approval, yeah, Lastic. But it also
(31:53):
meant that unlike secured creditors wouldn't necessarily get all the
money they're owed, um, and you know, shareholders may not
get anything. So Lastic did also work to get some
financing about twenty five million dollars to help pay those
suppliers and vendors that they owed money too as a
part of this. Now, I assume the acquisition went ahead
(32:13):
and went through. Yes, And afterwards Lastic Foods International change
your name to Pinnacle Foods, which was the divisions of
Hick Muse. First, Yeah, the bought Lastic Um. Pinnacle did
lay off a few people, like about seventy out of
three thousand or so. And and that's among all of
last Foods International's divisions, which did include Swanson and things
(32:36):
like that, right, not just the pickles but these other
companies that have been lumped under when Campbell's spun them off. Yeah,
but overall they were looking to increase production volume, ad workers,
and acquire more brands, and they did, in fact acquire
more food brands to put under that umbrella. Um. Then
in two thousand seven, Pinnacle Foods was acquired by the
private equity company Blackstone Group. So the people the fish
(33:00):
that eight last, it got eaten by a larger fish. Yes,
because as as the Phantom Menace taught us, there's always
a bigger fish. But as a subsidiary, So Pinnacle Foods
stays a Pinnacle Foods are about to go through. We're
going to just kind of breeze through the rest of
their history, but they continue to be a subsidiary throughout
all of this acquisition. They got listed on the New
York Stock Exchange under the Blackstone Group and made a
(33:22):
good chunk of money. Um. Then in two thousand fourteen,
Hillshire Brands tried to buy Pinnacle, but then that deal
got canceled and Pinnacle got a whole bunch of money
because the deal got canceled, Like the sale didn't go through,
so it was kind of recompense. They got interest around
a hundred and nine million dollars for and then in
two thousand eighteen, Canagra, who originally was going to buy
(33:46):
some of lastic foods brands, yeah, the stuff, the stuff
outside of the barbecue and pickles, yes, came in and
bought Pinnacle for eight point one billion dollars. Wow, it's
a lot of it's a lot of cheddar at the
food business. Very clever, and they pulled Pinnacle off the
New York Stock Exchange. Um. You know, ConAgra owns way
(34:08):
more than Clastic, way more than Swanson, way more than
Open Pit Barbecue. They have a mountain of food brands
that they owned. But they are still putting efforts into
lastic pickles. So flastic pickles still exists even though it's
gone through like multiple changes in ownership at this point. Yes,
and they're still coming out with new fun innovations okay, yeah,
(34:30):
like wind up pickles like no, no, no, okay. So
in April two nineteen, they announced that they were making
pickle chips out of real pickles, so not like the
little circles that you bind to put on your sandwich,
but like freeze dried pickle rounds that you eat like
a potato chiptcha Okay, all right. You know I was
looking at you like you were crazy, but then I thought,
(34:51):
wait a minute, fried pickles are a thing, and I like, good. Yeah.
When I heard this, I was super excited. I think
that would be my preferred way to eat a pickle.
You get all of the flavor of like a salt
and vinegar potato chip, but it's not a potato fun
fat guys, I can't really eat potatoes very well. And
it's also not as messy as eating a pickle, where
it's it's a challenge to bite into like a big pickle.
(35:14):
There's a challenge to bite into one of those and
not have it just erupt over everything. Um. So I
really feel like looking at lessons that this is. There
were certainly some missteps, like trying to get their pickles
into Walmart. There were mistakes, for Classic, but I feel
(35:34):
like a lot of it was just circumstantial and outside
their control. In some cases, like in the case where
their their supply the cucumbers, the price was increasing. There's
not a whole lot you can do about that. I mean,
you can raise the price of your pickles, but there's
going to come a point where you're going to reach
a tipping point where the consumer is not going to
be willing to pay the amount of money that you
(35:57):
need to charge if you want to keep your profit
margin to be the same despite the fact that your
raw materials the prices increased. And we've seen that happen
with lots of other stuff too, Like anecdotally here in Atlanta,
there used to be quite a few places that sold
Ostrich for Ostrich burgers, and I used to go and
get Ostrich burgers because I don't eat mammals, but I'll
(36:17):
eat a bird. And now no one sells them anymore
because the Ostrich farms. It was just came to a
point where in order to make profit they were going
to have to keep increasing the price of an Ostrich burger.
But if you increase it beyond a certain point, no
one's going to buy it because they'll they'll view it
as being too expensive, or so few people will buy
(36:40):
it that most of your stock will go as waste
because it will spoil before they can sell it. Same
sort of thing here. So I think in many cases
this was this was something that was largely unavoidable. Like
you know, we said they were selling hundred million dollars
worth of pickles every year, but their profit would come
in just a million dollars. I say just a million
(37:02):
dollars when you're talking about a whole company, that is
a pretty small profit. Yeah. I also I am I
am sad Ariel that you did leave out the peppers
earlier in that because you could have picked upun of
pickled peppers. Uh. Yeah, I thought about putting that in,
and I decided I was cooler than that. Jonathan. However,
lastics not that cool because bob Lastic created a book
(37:26):
of jokes about pickles. He did. It was a part
of their marketing campaign, which, by the way, pob Blastic
told Forbes in that a lot of their competitors were
manufacturing oriented and they were the opposite. They were marketers
who manufactured something to sell. I don't necessarily like obviously
there was a love of pickle there, but I mean,
(37:46):
you know, I think I think as we traced the
history of lastic pickles, it wasn't like they were marketers
who fell into a creamery. It was But I do
think it's funny that they said that they were coming
from it from a marketing endpoint. That and They're like, well,
we're great at selling stuff. Where are we gonna sell?
I know, pickles? Well, And in order to sell the pickles,
they came out with bob Lastics one hundred and one
(38:08):
Pickle Jokes and it sold a quarter of a million copies.
It's first year. Wow. Yeah, I guess people really like
a pickle pun. I guess we We've gone through quite
a few, and I am resisting the urge to make more.
They prefer a pickle pun. Yeah, that's a that's definitely
becoming a tongue twister. Listen, we gotta we gotta stop
(38:28):
before we pickle again. Perhaps, Okay, well, all right, enough alliteration.
We're gonna We're gonna say goodbye now. But if you
guys have suggestions like this one was a suggestion from
a listener, If you have suggestions, where can they send those? Two? Well,
they can send them to feedback at the Brink Podcast
dot show. Yep, And you can visit the Brink Podcast
(38:51):
dot show. That's our website where you'll find an archive
of all of our past episodes, a little bit more
information about us, and until next time. I have been
of them strict ones, and I've been aerial casting business
on the Brink is a production of I Heart Radio
and How Stuff Works. For more podcasts for my heart Radio,
(39:12):
visit the i heart Radio app, Apple Podcasts, or wherever
you listen to your favorite shows.
Business on the Brink News
Hosts And Creators
Jonathan Strickland
Ariel Kristen Kasten
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