Eliminate the friction… That is what Lee Marshall did time and time again to keep Wonder Bread and Hostess at the top. Even taking pointers from milk.

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Dave Young:
Welcome to The Empire Builders Podcast. Dave Young here with Stephen Semple. And I seem flustered because usually, Stephen hits the record button, I get a five-second countdown, and right during that, he tells me what we’re going to talk about. And he said nothing this morning. He said nothing. He just got this smug grin and didn’t say a god dang word. What’s going on, Stephen?

Stephen Semple:
Well, so I want to ask you this. Can you finish this phrase, the greatest thing since?

Dave Young:
Sliced bread.

Stephen Semple:
There you go. Sliced bread. The greatest thing since sliced bread. That’s what we’re going to talk about today.

Dave Young:
Okay.

Stephen Semple:
Sliced.

Dave Young:
Bread.

Stephen Semple:
Yeah. And specifically, the first bread to be sold nationwide pre-sliced was Wonder Bread, which was done back in the 1930s. But the earliest record I could find for sliced bread being sold was Kleen-Maid Bread from Chillicothe Baking Company in 1928. I managed to find this little obscure newspaper ad talking about that. But basically, the first nationwide company to do it was Wonder Bread. But Wonder Bread was first introduced as non-sliced on May 21, 1921, by the Taggart Baking Company in Indianapolis.

Dave Young:
I mean, I think about that, and you’d have to have a pretty dang good knife to slice a freshly baked loaf of Wonder Bread.

Stephen Semple:
Yeah, it was actually quite a technological challenge. But what was going on, if we think back to the early 1920s, is supermarkets were exploding on the scene, and that was really changing the way people shop. They are now going to one place to buy food, where traditionally they went to a baker for bread, they went to a butcher for meat, et cetera, et cetera, et cetera. Now they are going all to one place. Also, larger, regional, and national players started to emerge instead of everything being local.

And we are also having the Industrial Revolution coming on the scene. So this heavily impacts bakeries. You start seeing bakeries starting to have factory-style production. So industrialists start looking at bakeries. And mergers start to form. And we start seeing all these mergers going on and these national bakeries come on the scene.

There’s this gentleman, Lee Marshall, who’s heading up Continental Bakery, and he starts to consolidate all sorts of bakeries under his brand. Here’s the problem. He’s so good at it that he gets nailed by antitrust and they actually break up Continental Bakery.

Dave Young:
Break up big bread.

Stephen Semple:
Yeah, big bread. But at this point, Lee knows where the industry is heading, and he sees that there’s this big pivot towards white bread. White bread at this point had traditionally been seen as a luxury item for the rich because the process of making the wheat for it was quite difficult until it was able to be industrialized. And he comes across this bread, Wonder Bread, made by Taggart Bakery. And in 1925, he bought Taggart Bakery. And it also came along with Hostess. So it was Wonder Bread and Hostess. But the Wonder Bread’s unsliced. And here’s the problem, Wonder Bread is incredibly soft. It’s this soft, light bread that gets kind of butchered when you start trying to slice it.

Dave Young:
Yeah. Like I said, you better have a laser-sharp knife.

Stephen Semple:
Yeah. He decides what he’s going to do is he’s going to create the technology for slicing this bread. And yeah, it’s super sharp steel, tons of trial and error. The technology was actually quite revolutionary. But it suddenly made bread super convenient because even a kid could just take out a slice and make themselves a sandwich or whatever. And sales rise 300% with the introduction of sliced Wonder Bread.

Dave Young:
That’ll pay for the slicing machine.

Stephen Semple:
So along comes 1936 and most bakeries have adopted this technology, and 90% of commercial breads at this point are sliced. But here’s the next challenge. So white flour used to be a delicacy, and now it’s widely available and it has become super popular. But the problem is all the nutrients are stripped away in the process of making white flour. And a disease called pellagra, which is basically a deficiency of vitamin D, starts becoming a really, really big problem. It’s actually one of the most severe dietary deficiencies in American history. And white bread comes under attack. And it’s the 1930s, which is a period where there’s lots of research starting to go into nutrition. And Wonder Bread sales start to tank.

Dave Young:
Okay.

Stephen Semple:
But Lee Marshall notices something. And he notices that vitamin D is being put into milk at this time.

Dave Young:
Yes.

Stephen Semple:
And he asked the question, “Why not bread?”

Dave Young:
Why not? I know the word. It became a part of the label. Right? It’s enriched bread.

Stephen Semple:
Right. So he saw this huge opportunity, and again, cutting-edge technology, and he launched an enriched Wonder Bread with eight added nutrients, Vitamin D of course, being one of them.

So Wonder Bread is now being seen as a healthy food. And within a few years, 75% of all breads are now enriched. 1942 comes along, World War II breaks out, food supplies become a challenge, and Lee Marshall is recruited by the government to manage food supplies. And supply shortages create these huge problems, but also opportunities. So one of the brands that they had, remember when they bought Wonder Bread, they also got Hostess?

Dave Young:
Hostess. Yeah.

Stephen Semple:
Well, one of the things was Twinkie.

Dave Young:
Okay.

Stephen Semple:
Twinkie has been around for 17 years, but Twinkie was originally, instead of it being vanilla cream, which it is today, it was bananas that were in it. But bananas became in really short supply, so they replaced them with vanilla cream. And suddenly, Twinkie sales exploded because everybody actually liked the vanilla cream better than the bananas.

Dave Young:
Yeah. Just give me something sickly, sugary sweet.

Stephen Semple:
Yeah. Now, what really caught me about this whole story was how innovative Marshall was. He saw the pivot of the white bread. He purchased the white bread. He suddenly said, “Let’s make this more convenient,” and he did the slicing. Then white bread comes under attack and he does the enrichment to it. Well, he had one last really big innovation. So it’s 1948 and TV is exploding onto the scene. So what does Marshall decide to do? He advertises on TV things like Twinkie and Snoballs, Wonder Bread being the big one, aimed at children on the Howdy Doody show in December of 1947.

Dave Young:
Wow. That is early TV.

Stephen Semple:
Really early TV. And also this whole idea of, “Look so many places. Well, it’s the parents who buy, so you target the parents.” He’s like, “No, I’m going to target the children. And if the children want Wonder Bread, the parents are going to buy Wonder Bread.” It’s so often we forget about the influencers, right?

In the Howdy Doody show, the products are injected right into the show and eventually, you see all sorts of other food companies do this. Eventually, everyone’s doing it. And by 1995, Continental Baking was sold, the Hostess brand, for $550 million. But I found it really interesting. You just looked at bakeries and Wonder Bread and you would not normally think of innovation when looking at a product like that.

Dave Young:
You know what you also don’t think about is this was a high-end product that the rich were buying.

Stephen Semple:
Yeah. White bread was a luxury good.

Dave Young:
Yeah.

Stephen Semple:
Initially. Yeah.

Dave Young:
And poor people are using just plain old flour and making their own.

Stephen Semple:
Frankly, eating a healthier product.

Dave Young:
Exactly. Yes.

Stephen Semple:
Ironically.

Dave Young:
They just had to bake it themselves and slice it themselves.

Stephen Semple:
Yeah.

Dave Young:
Yeah.

Stephen Semple:
But Lee Marshall was interesting because even the whole idea of enriching the flour, he got the idea from looking at milk. Said, “Well, this is interesting. Look, they’ve done this with milk. Why can’t we do this with bread?” So it’s this whole idea of looking outside and being innovative and making the product more convenient by pre-slicing it and then being an early adapter of advertising on television, the kids. Just lots of little things he did.

Dave Young:
I mean, here’s a guy that’s just open to innovation. Right?

Stephen Semple:
Yeah.

Dave Young:
He didn’t get stuck in the, “Well, that’s the original recipe and that’s how we make it. And maybe we package some vitamin D supplements along with it or something, but we’re not changing the recipe.”

Stephen Semple:
Right.

Dave Young:
So even the slicing, you look at that and say, “Oh, well, this falls along with just helping people realize how fresh and good it is. If we slice it, then what??

Stephen Semple:
Right.

Dave Young:
Right. You remove the friction for people.

Stephen Semple:
Yes.

Dave Young:
And that’s what slicing a loaf of bread does. As you said, it makes it easy for a child to reach into the bag and grab a couple of slices of bread, and off they go.

Stephen Semple:
And off they go.

Dave Young:
And you go through bread a lot faster if you let your children just open the bag and grab some bread.

Stephen Semple:
Yeah, absolutely.

Dave Young:
Smart guy. This is a smart guy.

Stephen Semple:
Absolutely. Yeah. Again, what I found interesting about it is you wouldn’t normally look at a product like Wonder Bread and go, “Wow, there was actually a fair bit of innovation and smart moves and things along that line.” You don’t think of it that way today, but in the early days of Wonder Bread, they did a bunch of really interesting, innovative things.

Dave Young:
Yeah. Ahead of their time. It’s a wonder they didn’t invent the iPod.

Stephen Semple:
But they are the greatest thing since…

Dave Young:
Sliced bread. And peanut butter. I mean, because where are you going to put peanut butter except sliced bread?

Stephen Semple:
Well, and if you remember when we did the episode, I forget which number it was, but we went back and took a look at the father of peanut butter. He changed the packaging of peanut butter when they launched Skippy to make it easier for kids to get the peanut butter out because of noticing that what kids were now doing was making their own peanut butter and jam sandwiches.

Dave Young:
Yeah.

Stephen Semple:
Yeah.

Dave Young:
I think that’s a story worth remembering, and it’s worth thinking about in your business when you start looking for friction between your product, your servicing, and your customers.

Stephen Semple:
Yeah, how to make it easier.

Dave Young:
How to make it easier, make it better for them, make it more convenient, make it so they buy more. All of those things.

Stephen Semple:
Yeah, absolutely.

Dave Young:
It’s a cool story.

Stephen Semple:
Absolutely. It was not an easy piece of technology. It took them a number of years to get it figured out.

Dave Young:
Have you ever seen one of those machines? I’ve seen them on How It’s Made, or you could go to YouTube and type in the bread slicing machine. I’m sure you’ll find 50 videos that show it. But yeah, a whole array of razor-sharp knives going a hundred miles an hour and bread being just lobbed through them basically.

Stephen Semple:
And then the machine even has to be able to slide it into the plastic bag and seal the bag. It’s really quite something else. Yeah.

Dave Young:
I’ve always been fascinated with the food processing process. I know a guy who we’ve had just brief conversations. He’s a Wizard Academy guy and one of our whiskey sommeliers. He sells machinery that can deconstruct chickens and pigs.

Stephen Semple:
Oh, wow.

Dave Young:
You know?

Stephen Semple:
Yep.

Dave Young:
All that. It’s like, “Oh, fascinating things, this whole notion of lowering the friction.”

Stephen Semple:
Yeah, and how you take things apart and put them back together again. All right, cool. Thanks, David.

Dave Young:
Thank you, Stephen. Great story.

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