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