Goodbye, Oscar Mayer?

My bologna has a first name: It's H-E-I-N-Z

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As I write this, my refrigerator contains two packages of Oscar Mayer “Deli Fresh” turkey and two of roast beef. In my freezer are three packages of Oscar Mayer wieners.

It’s not just that I like to buy on sale. Oscar Mayer is ubiquitous. Its familiar yellow and red labels can be found in almost every grocery and convenience store. Oscar Mayer is practically a staple unto itself.

But it’s important to Madison for more than a quick sandwich. The 122-year-old company came to the city in 1919 and has been a key piece of the local economy ever since. We’ve been its headquarters since 1957. Could it ever leave us?

“There are people who say, you know, that’s in jeopardy,” says Ald. Larry Palm, who represents the district where the company resides.

Oscar Mayer is the largest manufacturer in Dane County. Sales of just its pre-made Lunchables are estimated to earn $1 billion a year for parent company Kraft Foods Group Inc. Even if you don’t eat Oscar Mayer products now, you likely did as a kid.

“It was the Epic of its day — except the employees stuck around for 40 years, bought houses and raised families,” says east-side historian Ann Waidelich.

“Generally a company the size and scope of Oscar Mayer brings a lot of family-supporting jobs to the area,” says Katy Pettersen, vice president of marketing for Wisconsin Manufacturers & Commerce.

Waidelich says there were over 4,000 office and plant employees in the late 1970s. There are now just 1,200, thanks to downsizing, but “the fact they have been here for so long is a testament to the company’s dedication to the community, and proof they have loyal employees dedicated to ensuring the company’s success,” says Pettersen.

That dedication to the community, though, will be tested as Kraft Foods prepares for a massive merger. The new company’s leaders could decide to move the Madison corporate offices or production facility.

“Hopefully that will not happen,” says Bob Drane, who worked at Oscar Mayer from 1979 to 1999. “But you never know. That’s just the way it works today. Everybody’s going to consolidate and downsize, and it’s a pretty difficult world to live in.”

Rumors of Oscar Mayer’s departure bubble up every few years. The possibility now seems more likely than ever, as H.J. Heinz Co. prepares to merge with Kraft. Warren Buffett’s Berkshire Hathaway is putting up some of the money, as is 3G Capital, which will take control of management. The deal is tentatively scheduled to conclude during the second half of this year, pending U.S. Securities and Exchange Commission review.

Alexandre Behring da Costa, 3G’s managing partner, will chair the new Kraft Heinz Co. Current Heinz CEO Bernardo Vieira Hees will become its CEO. Both men are Brazilian; 3G is a Brazilian investment firm based in Rio de Janeiro. Kraft Heinz Co. will be the third largest food and beverage company in North America and the fifth largest in the world. For now, Heinz is based in Pittsburgh, Kraft in Chicago. Word is that will stay the same, though SEC filings make no promises.

The proposed Kraft Heinz Co. will incorporate in Delaware.

“I think, typically, that kind of globalization has not been good for communities and workers. In some cases, it’s not even good for former owners,” says Chuck Collins, a great-grandson of company founder Oscar F. Mayer. “The greater the distance you put between owners and operations, the worse it’s going to be for everybody except absentee owners.”

Berkshire Hathaway and 3G have promised Kraft shareholders that they will cut $1.5 billion in annual costs to the combined company by the end of 2017. That’s a deep cut, even compared to Kraft’s price tag of $46 to $49 billion (accounts vary). To realize those savings, Oscar Mayer could be divested: sold off. Processed meat is not exactly on everyone’s menu these days, and CNBC predicted divestment last June, well before a merger was considered. “Kraft may divest Oscar Mayer,” the New York Post predicted in October. The Wall Street Journal suggested it in December. The merger was announced March 25.

Mayor Paul Soglin will not speculate. “The city is familiar with the merger involving Oscar Mayer,” he says. “We are excited to see what opportunities it could bring to the Madison region. I, and other city staff, are in contact with Oscar Mayer’s Madison leadership.”

In the 1980s, Oscar Mayer observed several trends: Processed meats were under attack for health reasons, following studies that linked consumption to an increased risk of cancer. Also, more and more women were working outside of the home, and they had less time to pack lunches. And kids found a day-after-day diet of cold cuts boring.

The company began an effort to “broaden and contemporize.” It acquired Louis Rich, a turkey company. It also began to study packed lunches, recalls Bob Drane, who served as head of strategy and new business development at Oscar Mayer. Lunchables were the result: a line of prepacked meals, with foods in separate sections — meat, crackers, cheese and other items — for a child to combine on the spot.

The tray was the key, the gimmick. It made the meal into a sort of game. “From the beginning, [health] was an issue,” Drane says. “I tried fruit mix. I tried white meat with no-fat items. None of the attempts to build nutritionally better better-for-you products have ever worked very well. So it is what it is.” Despite this, Lunchables have been made healthier over the years. Drane adds that they were never meant to be consumed every day.

Like them or not, Lunchables answered a need, and they were a stunning innovation when introduced to the public in 1988. In their first year, sales were $317 million. That they remain so popular may explain why Kraft doesn’t break out Oscar Mayer sales in its quarterly or annual reports, but includes Lunchables — along with cold cuts, bacon, liver sausage and so on — under the category of “refrigerated meals.”

The sort of innovation reflected in Lunchables has been key to the company’s success since its beginning.

Oscar Ferdinand Mayer was born in Bavaria in 1859. He immigrated to Detroit at the age of 14 and found work as a butcher’s apprentice. He moved to Chicago at 17 and briefly worked for another market.

The next period in Mayer’s life is skipped in many biographies and glossed over in others. In what would appear to be a backwards move, he went to work in Chicago’s Union Stockyards for five years.

Fans of Westerns adore the romance of cowboys driving steers down the long trail to railheads. Those cattle wound up in Chicago at what, essentially, was hell, for both animal and man. As anyone who has read Upton Sinclair’s 1906 novel The Jungle knows, the stockyards were a loud, roiling, manure-filled 375-acre collection of pens for beef, hogs and sheep waiting for slaughter. It also appears to have been critical training ground for Mayer, who worked there for the giant Armour and Swift meatpacking companies. They were to serve as examples to Mayer in the years ahead.

In 1883 Oscar and his brother Gottfried opened a meat market on Chicago’s heavily German north side. Ten years later came the Chicago World’s Fair. Countries around the world built their own representative buildings for the event, and the celebration helped popularize wieners, which Mayer served at a concession in Germany’s exhibit hall.

By 1900, the Mayers had 43 employees. Believe it or not, their success was due to what we now call “foodies.”
 “Meat was a commodity before that,” says Drane. Explains Collins, “It was not marked [with a label] and branded.” Then as now, if you wanted to know the source of your meat, you had to go to a trusted butcher.

Today, “Oscar Mayer” is a brand name. In 1904, the idea of branding anything at all was new. That year, however, the Mayers began selling their sausages and other meats under the name “Edelweiss.” It was an industry first.

“They basically vouched for their products,” says Collins. “So this wasn’t mystery meat. Somebody stood behind this meat and the claim. That was essentially what grew the company.”

Use of “everything but the squeal” in hog processing was a brag of competitor Gustavus Swift, but never of the growing Mayer family. The public, outraged over the working and sanitary excesses described in The Jungle — men fell into stockyard rendering vats and were unintentionally boiled down for lard — demanded government inspection. So did the Mayers.

“They were involved in lobbying for government regulation of the meat industry,” says Collins. “Oscar Mayer was on the right side of the whole USDA government inspection [movement]. They as a company, and family members as leaders, basically said, ‘We welcome oversight, regulation.’ And that distinguished Oscar Mayer from some of the other meat barons who were just, like, ‘business as usual.’”

Regular introduction of such innovation became a company hallmark: 1924, introduction of packaged, sliced bacon; 1929, placement of bands around wieners, identifying them as Oscar Mayer’s; 1936, introduction of a permanent parade float, the Wienermobile; 1940, a gnomish advertising character was made real in the form of “Little Oscar,” a little-person chef; 1942, quality control department established; 1949, plastic packaging introduced; 1959, “100% approval” from the American Humane Association for slaughter improvements; 1960, resealable plastic packaging; 1962, vacuum-packed bacon; 1971, another industry first, placing “open by” dates on packages.

Oh, and one more important date: 1919, the company’s first expansion — purchase of a small, bankrupt farmer’s cooperative meat packing plant on the outskirts of Madison.

The Madison plant was attractive to Oscar G. Mayer, son of the founder, Oscar F., because it was cheap. He saw it while visiting relatives, told his dad, and they bought it.

Over time, expansion continued beyond Chicago and Madison. Today there are seven Oscar Mayer plants, in California, Missouri, Iowa, Ohio and South Carolina. In terms of flexibility and future use, the Madison plant appears to be limited. According to Kraft’s 2012 SEC filing, “some of our plants are dedicated to the production of specific products or brands — our Madison, Wisconsin plant, for example, manufactures only Oscar Mayer products — other plants can accommodate multiple product lines.”

These days the Madison plant makes hot dogs, sliced turkey and ham, hard salami and liver sausage, says Doug Leikness, president of United Food and Commercial Workers Union Local 538. He represents 670 of Madison’s Oscar Mayer employees. The company’s official fact sheet claims that there’s an additional 530 headquarters staff here.

Employment peaked at 4,000 in the 1970s. The following decade saw a flurry of mergers that brought about giant food conglomerates that proceeded to gobble each other up.

In 1981, Oscar Mayer was bought by General Foods, which was acquired in 1985 by Philip Morris Companies, which acquired Kraft in 1988 and then shifted Oscar Mayer under that banner. Philip Morris changed its name to Altria Group Inc. in 2003, and Kraft Goods Global Inc. was spun off as an independent company in 2007. Kraft Goods Global then renamed itself Mondelez International and retained that name for operations outside North America while splitting off a freestanding company the same year, Kraft Foods Group Inc., for operations within the United States.

Until the mergers, Oscar Mayer was very definitely a family operation, thanks in equal parts to dedication and longevity. Founder Oscar F. Mayer died in 1955 at the age of 95. His son, Oscar G., died in 1965 at the age of 77. His son, also Oscar G., also lived 95 years, dying in 2009. They ran the company for decades, along with a welter of nephews, nieces, cousins and in-laws who are difficult to keep track of without resorting to diagrams.

The Oscar Mayer company “was a very family-oriented operation, and there was a culture very much attuned to that,” recalls Pat Richter, athletic director for the UW-Madison from 1989 to 2004. He went to the UW from Oscar Mayer, where he started in 1972. His last position there was vice president of human relations. (Incidentally, Richter credits his experience at Oscar Mayer and lessons he learned from Drane for his subsequent success leading UW sports.)

“You could just tell it was a great organization,” says Richter. “People had that certain sense of appreciation for others. It was basically the mantra that the family brought to the organization, and it was pervasive throughout the whole organization.”

All the Mayers shared several common characteristics. For example, they all started at the bottom, “on the line.”

“They did. That is true,” says Dolores Ebert, an employee who started in 1963 or ’64 and worked there for more than 30 years. And the Mayers “knew everyone by their first name. That’s pretty unique.”

“My own father worked, when he was in his 20s, on the line,” says Collins. The great-grandson of the first Oscar Mayer was born in Madison, lives in Boston, and directs studies of fiscal inequality at the Washington, D.C.-based Institute for Policy Studies. “My cousins who were in the [Madison] community worked on the line. Even the founder, Oscar F., always spent a day on the floor, partly because he understood, to be a good manager, you had to be really understand the business from the bottom up.”

Former workers tell the same story over and over: Any employee, from anywhere in the plant, could go up to one of the Mayers and share a problem. And it would get fixed.

“That’s just a remarkable, remarkable family, particularly around their business values and ethics,” says Drane. “They believed you not only needed to make money, you also had to really take care of your employees and your community.”

Care for others was codified in the family’s 11-word rule for living, passed down from generation to generation. Collins recalls it: “Lifelong personal development, generous consideration for others, do service to society.”

Though they have nothing to do with the company today, many Mayer family members still live in the Madison area. Their charitable works are legendary among company veterans, but also sketchy when it comes to details. The Mayers are all averse to publicity. This makes the extent of their philanthropy difficult to assess, except for two examples. They gave $250,000 to the Madison Civic Center, predecessor of the Overture Center for the Arts, and Collins, at the age of 26, donated $500,000 to several foundations.

“They were the ethical high ground,” observes Drane. “Giving something back to the community was an essential part of being an employee there.”

Perhaps the best tribute to the Mayers’ commitment to community is READI, “Retired Employees Are Dedicated Individuals,” an organization of former Madison employees founded in 1993 to keep in touch, says Ebert, “and to continue the volunteering and community support that was part of our lives at Oscar Mayer.” The group numbers 300 today, and it works with a broad variety of area charities, including the Salvation Army, Second Harvest Food Bank, Society of St. Vincent de Paul, and at events such as the Art Fair on the Square.

Which brings us to today.

Jim Aehl worked for Oscar Mayer from 1970 to 1996, heading the company’s public relations. He’s philosophical regarding the pending Kraft-Heinz merger and its potential impact.

“If you look at it from a layman’s point of view, when you have takeovers like that, things change and you reduce overhead, you reduce duplication,” he says. “If there’s somebody at Kraft, for example, who does the same thing that you have at other companies, then you say, ‘Well, do we need that other person or other department?’ That’s pretty normal stuff. You may be mad, but that’s what happens.”

The Kraft-Heinz merger has been fast-tracked. According to the Reuters news service, quoting Kraft CEO John Cahill, 3G first approached Kraft at “the end of January. The discussions picked up in the second half of February.” The proposed merger was announced March 25.

That same day, Reuters quoted food industry consultant Bob Goldin regarding 3G Capital, the prospective owner of Kraft and its subsidiary, Oscar Mayer. “Mature businesses look for cost cutting,” he said. “3G takes cost cutting to a different level.”

The current president of Oscar Mayer, Mark Magnesen, is known for his cost-cutting prowess. He was named president in early March. His undergraduate degree is in accounting, and his master’s is in management, marketing and strategy. He continues to also serve as executive vice president at Kraft, based in Northfield, Ill., near Chicago.

Magnesen’s LinkedIn profile says he lives in the “greater Chicago area.” Sydney Lindner, Kraft associate director of corporate affairs tasked with representing Oscar Mayer, wrote in a May 29 email that Magnesen “works in Madison but does not live in Madison.” On June 1 she corrected herself: “Mark has an apartment in Madison. He actually lives there the majority of the time.”

According to Magnesen’s official Kraft biography, he previously “led the finance functional work streams to prepare for and execute” the spinoff of Kraft from Mondelez. The bio also notes that at Kraft subsidiary Planters nuts, he “integrated Lean Six Sigma practices,” a trendy cost-cutting methodology that awards various “belts” to its practitioners, as in karate.

Given his background, a reasonable person might assume that Magnesen is preparing Oscar Mayer for a change of headquarters or even divestment from Kraft.

Neither the H.J. Heinz Co., nor 3G Capital, nor Kraft responded to requests for comment. Lindner had scheduled interviews with Oscar Mayer executives for this article, but she cancelled them on May 26, instead requesting that all questions be submitted in writing. Isthmus declined.

Also on May 26, four shareholder suits protesting the Kraft-Heinz merger were consolidated in a Virginia federal court. The lead plaintiff, Steven Leitz, alleges that the deal is “designed to ensure a transaction with Heinz on terms preferential to Heinz, and to subvert the efforts of [Leitz] and the other public stockholders of Kraft,” according to the website Law360. Stockholders also accuse Heinz and Kraft of failing to disclose required financial information. They protest that, by terms of the merger agreement, Kraft cannot entertain any other purchase offers.

Kraft bylaws were changed a month earlier to ensure that all litigation would have to be filed in Virginia. Virginia does not recognize class action lawuits; the four plaintiffs can sue only for themselves.

None of the plantiffs’ law firms responded to requests for comment.

So who knows what will happen? Ald. Palm suggests one future path. He looks at Lunchables, and notes that their content includes not just Oscar Mayer meat, but a cornucopia of other Kraft products. “It could become the Kraft Lunchable,” he says. And that’s one possibility: stripping Oscar Mayer of its most profitable line and selling what remains of the company.

Drane remembers when this sort of thing began, back in 1988.

“Kraft was very much into finance and profitability and margins and all of those things,” he says. “There was a definite cultural shift. A lot of that was going on with Wall Street. It was the age of corporate raiders, and the corporate raiders put really intense pressure on CEOs and boards of directors to generate rapid profit growth, quarter after quarter. That was probably the most noticeable and profound change that I experienced.

“And that’s the age that we’re now in, by the way. Right? It’s more savage capitalism than it used to be by a long shot.”