Salt Sugar Fat: How the Food Giants Hooked Us
Author:Moss, Michael

chapter nine

“Lunchtime Is All Yours”

In the summer of 1988, an assembly line clattered to life at Oscar Mayer in Madison, Wisconsin, just off Packers Avenue as it skirts the eastern shore of Lake Mendota. It wasn’t much of an assembly line, more cobbled together than engineered, and set up not in the vast processing plant where 1,800 workers turned out cold cuts, ham, and hot dogs but in the company’s headquarters building, up on the seventh floor.

There, in a large open space the company’s research and development staff used to test food ideas, a crew of twenty men and women took up positions alongside the makeshift conveyor belt. At first blush, what came down the line was unremarkable: little white subdivided plastic trays, so small and light they flitted rather than bumped along. Behind the workers were tables piled high with the product waiting to go into the trays: sliced bologna.

Bologna was a signature item for Oscar Mayer, but over the years it had been steadily losing appeal with the American public, in part because of its hefty loads of saturated fat and salt. The company had always sold it by itself, in the deli meat section, sliced in half-pound packs. On these trays, however, the meat would play a less prominent role. It became a component, one among many, slipped into a package that didn’t suggest meat as much as it signaled fun. The trays had compartments, and the workers started off by tucking eight pieces of bologna into one of the slots. Down the line, each tray also received eight pieces of yellow cheese, eight butter crackers, and a yellow paper napkin. The trays were then sealed with plastic, wrapped in a school bus–yellow cardboard sleeve, and packed into cartons for a journey that, if all went well, would take them from warehouse to distribution center to grocery stores across America, where they would get stacked in the meat-section coolers.

Standing off to the side, the man responsible for this product, called Lunchables, watched the crew with a measure of trepidation. For two and a half years, Bob Drane had led a team of food technicians and designers on a long, difficult quest to invent these little trays. At one point, Drane’s team hid out in a hotel meeting room they dubbed the “Food Playground,” where they gathered for days on end with bags of groceries and art supplies, snipping and taping and tasting their way to the perfect marriage of package and food. Now, as the first trays rolled off the line, Drane worried that they’d gotten it all wrong.

Drane had been Oscar Mayer’s vice president for new business strategy and development since 1985. He had been through enough launches to know that the odds of success were long. In the great churn of processed food merchandising, 14,000 newly hatched products show up every year in the grocery store, each of which typically carries between 15,000 and 60,000 items; two of every three products will fail to last a few months. One in ten of those that do survive will achieve what the industry views as a modest success: $25 million in annual sales. All in all, inventing processed foods is a bit like drilling for oil: The big money is made through the endless pumping of mediocre wells, knowing that occasionally, a gusher will come along.

As it turned out, Drane was right to worry about the rollout of Lunchables, but not for the reason he thought. The trays did not get yanked immediately from the stores: They flew off the shelves. The sales of Lunchables were phenomenal from the start, hitting $217 million in the first twelve months. Grocers scrambled to make more room for them in their coolers, and Oscar Mayer’s salesmen, who at first had refused to pitch the puny 4.5-ounce trays, rushed back to Madison clamoring for more and more trays, as fast as the line workers in the factory could get them out.

Drane’s problem lay in trying to balance the books. While sales were spectacular, so were production costs, as Oscar Mayer struggled to expand its modest factory line to keep up with the deluge in orders. The trays were priced as low as $1.29, and the more they sold, the more money the company lost. The first year’s tally for Oscar Mayer? A net loss of $20 million.

“There’s a huge, huge scramble going on,” Drane told me one afternoon in his home office in Madison. “How can we produce millions of these units at a reasonable cost? Because while we thought we knew how to do that, the truth is, we didn’t. Oscar is making hot dogs and bologna and stuff like that, but it has no experience with assembly operations, where you’ve got a tray and you fill up the tray and do all that kind of stuff. As we start to roll out with this thing, there is an awful cost structure, with huge amounts of waste. The red ink at the bottom line is piling up, and my bankers are sitting across from me every single day, saying, ‘What’s going on here? You’re having a lot of fun selling lots and lots of volume to consumers but we’re not making any money, and what are you going to do about it?’ ”

Those bankers, as Drane referred to the company’s accountants, would soon grow even more worried. A few months after the launch, Oscar Mayer merged with Kraft, where a cadre of Ivy League bean counters seemed to have one overriding thought: Blow this project up and shut it down before they all lose their jobs. Drane was asking for ten new production lines at $3 million each to meet demand, and the money men were terrified that the trays would turn out to be a short-term fad. If the sales crashed, they would be left holding more than a product that never turned a profit; they would own multiple factories with now-useless manufacturing lines.

At this point, Drane packed up his data and flew to New York City, where he appealed to a far different breed of executive: men who had seen some difficult product launches in their day and had laughed in the face of catastrophe. These were the leaders of Philip Morris, whose recent purchase of Kraft and General Foods had put hundreds of grocery items into their hands, more than fifty mega-brands in all. Bob Drane’s little trays were now their little trays.

The head of Philip Morris was Hamish Maxwell, a pack-a-day smoker who was viewed as a master tactician in marketing cigarettes. As the chief executive of the newly merged company, he needed to know that Lunchables had serious long-term prospects. A stickler for details, Drane walked Maxwell through the early sales data showing that more than half of the buyers were returning for more, which, for new grocery products, was about as good as it ever gets. At the end of the meeting, Maxwell turned to Drane and told him to worry no more.

“The hard thing is to figure out something that will sell,” Maxwell said. “If you’ve got something that’s selling, you’ll figure out how to get the cost right.”

So Drane walked out of the Philip Morris headquarters building on Park Avenue with the money he needed to expand and streamline the production and boarded the Philip Morris helicopter, which would take him back to the airport. The aircraft was parked at a heliport on the edge of Manhattan, for easy access by the tobacco executives, and it rose up over the East River with the city unfolding below him. “On the way out to New York, there had been a daily pounding from the Oscar Mayer sales force. ‘Hey, you finally got something right and everybody wants this and all you are telling us is you can’t achieve the production. We are really getting ticked off, and you are about to lose this thing,’ ” Drane said. “And now, instead of coming back with my tail between my legs, I’m up in the helicopter looking down on the Big Apple, feeling pretty good.”

Whether they fully realized its potential or not, the tobacco men in the coming years would do more than merely hand over the cash to exploit this gusher called the Lunchables. They would help turn the trays into a processed food colossus, one that would break industry records by soaring to nearly $1 billion in annual sales. The little trays, by transforming bologna into a product kids were suddenly clamoring for, would also accomplish one of Drane’s own goals, which was to save the jobs of the Oscar Mayer workers who made the fat-laden meats that were running afoul of the public’s concern for its health.

Lunchables, however, would play a part in exacerbating those same health concerns. The trays created an entirely new category of food, one that exposed Americans, especially young kids, to the thrills of fast food that heretofore were the purview of restaurant chains like McDonald’s and Burger King. Back in the late 1980s, when Lunchables were first introduced, food manufacturers—despite their push for more convenient foods and their heavy reliance on salt, sugar, and fat—had not yet realized that they could mimic the fast food chains by making whole meals that were ready to eat at school, on the go. Even more remarkably, these fast food wonders could be sold through the grocery store and without the need for a microwave oven. “Chilled prepared foods,” this category was called, and it took the Lunchables to turn this light on. But the grocery makers embraced this conceptual breakthrough at the very moment when the power of these foods was becoming all the more problematic for consumers. Obesity began surging, and Bob Drane, who fathered the Lunchables with the best of intentions, would eventually have to face what he had wrought.