Poul Weihrauch, Mars: Purpose Is Easy Until It’s Tested

0:00- We started a strategy that we need to move our purpose from sitting on a wall to decision making at the table. So a better world for pets had to be actively used in deciding what business we are in. - A purpose-driven company. Almost every great firm claims to be one. It's there in the annual report, in the CEO letter, on the website, often supported by posters decorating meeting rooms. And most teams nod along, never quite sure what leaders would do if they were really tested.

0:38But until tested, they store the slogans in the things we say file. I'm Jimmy Allen, and this is Founder's Mentality: The CEO Sessions. Poul Weihrauch is CEO and Office of the President at Mars. And you know Mars, but mostly from the checkout aisle. Snickers, the world's best-selling candy bar, M&M's, Twix, Orbit gum, you name it. It's a global snacking powerhouse. But the part of Mars you may not know is the one Poul helped build: Mars Petcare. Before taking on the group role, Poul helped transform Mars Petcare. He turned a legacy pet food business into a leader in pet health and pet care.

1:17During his time as president, the company doubled in size and tripled its organic growth rate. But that's the what. How he did it is extraordinary, and it begins in a graveyard. Well, that needs a little context. One of the reasons I was so excited to speak to Poul about the transformation is because of an amazing article by Professor Thomas Malnight at IMD. You'll find it in the show notes, but the short version is this. After touring the business in two thousand fourteen, Poul was convinced that Mars Petcare could be something much bigger than the sum of its parts. So over steak, fries, and Belgian beer, he and Malnight hatched a plan.

2:08Poul would take a group of next-generation leaders, who he called the Pathfinders, and he'd tell them, "Act as if you've been fired. Go out and study some of the fastest-growing companies in the world, and then come back and tell us what you found." Six months later, the Pathfinders came back with a brand-new vision for Mars Petcare. And Poul, well, he didn't just ask for a report. He asked the Pathfinders to help design part of an upcoming summit for senior leaders, and he said to them, "You show us what needs to change."

2:41- We were all summoned to go to a graveyard. And in this graveyard, they had made a complete dark room with tombstones everywhere, somber music, and a bit of skeletons hanging, and it said Blockbuster A kind friend of yours born this year, dead that year. Eastman Kodak, inventor of digital photography, died a year. And it basically said to us, "If we don't open up and don't change, somebody could beat us." So we all walked out of the service thinking, "Oh, we have to take this serious and change the way we operate." We didn't know that they had made the graveyard. And then we walked into how is our strategy going to change?

3:27How are we going to collaborate? And out of that we started a strategy that we need to move our purpose from sitting on a wall to decision-making at the table. So a better world for pets had to be actively used in deciding what business we are in. - I love this idea of the graveyard, the imagery, all of it. Here you've got these young people, they've traveled the world, they have their new ideas. So the purpose had to move from the walls to decisions.

4:01- Yeah. So one example of using the purpose as a decision-making criteria is to define the business we are in, Jimmy. When I go to the doctor, the doctor, she says to me, "Poul, you need good nutrition. You need access to good healthcare." So I dutifully do my annual health check, and I'm being told to exercise. It's fundamentally the same for cats and particularly dogs as well with the exercise. And we thought, hang on, that is a better world for pets, so we will only be in a business that led us up to the purpose.

4:34So we decided we have to get big in healthcare. Then we started analyzing the spend in healthcare and realized that the spend on healthcare would exceed food. So if we didn't make a substantial strategic switch here, we would actually lose our global leadership. Okay? And then we realized, oh, but a lot of data sits in diagnostics that can help inform us to make the best and most precise nutrition for our clients in the hospital. And coming out of the summit, we were lucky timing-wise that we then acquired VCA very quickly in the United States that had 1,000 hospitals and diagnostic labs.

5:14We bought a company called Linnaeus in the UK, AniCura in continental Europe, et cetera. So we got a lot of momentum of the energy. And the second thing they had designed was what unites the businesses other than the purpose. And what unites it is science. Food is the most important thing we can control for cats and dogs, and our job is then to offer the best available nutrition at all price points And likewise, the access to healthcare and the science and data became very important.

5:48Purpose, data, and science became the uniting factor which this group came back with. - The way you describe purpose is very similar to within Founder's Mentality we talk about it, which is every great company has an insurgent mission. They're almost at war against their industry on behalf of underserved customers. But we're talking there about founders. You had a business. You had a group of leaders that were not involved in the extraordinary exploration of companies, but are then being presented this incredible vision. For most CEOs, this is then the classic problem. I know where I wanna go, but I have a whole set of people that are involved in legacy businesses, all of which are profitable, all of which are helping me fund this beautiful future.

6:37How did you keep them on side knowing the reality that not everybody would be the perfect leader for the perfect new businesses you were creating? - This was very tough, and I would not say we got it perfect. In the beginning, the leadership team I ran had as a base the legacy business, so the first thing we did was to change our leadership team. The top team became heads of what was in essence four divisions, our legacy pet nutrition business, our Royal Canin business, and our veterinary business, and then we had a data business called Kinship, and later our diagnostics business.

7:17We did not have manufacturing because obviously you don't have manufacturing in a hospital, in a diagnostic business or a data business. So we moved manufacturing to where manufacturing was relevant, i.e., in the food producing businesses. And that was a big thing to do because we are a proud manufacturing company as well. Then we worked really hard on communicating the importance of each division. So as an example, we measure how many pets we touch in each division, and our legacy businesses at the time touched about 375 million pets out of the world's 800 million. Our hospital business, around 40 million pets. So our legacy business remained hugely important in terms of communicating to the pet parents. And in order to live up to our purpose, we have to touch the pet's parents and remove their pain points and make it easier for them to be a good pet parent.

8:16So the communication around the importance to the purpose, the investment level, they had to feel we didn't starve them to invest. Quote, one of the guys said, "Yeah, I just fund all your fun bit in the new businesses." Yeah. And so constant communication about how much capital allocation we made, how much we invested in marketing, and always put what was still today the biggest division at the forefront of our communication. Did we get it right?

8:46No. Will you still find a little bit of cynicism in a corner or two of those that have spent most of their career? I'm sure you will, because this tension of creating the new and retaining the old is a very, very difficult tension - Poul's navigating one of the hardest acts in business. Shift investment to new engines of growth while making sure the legacy business doesn't fall off a cliff. We call this the engine one, engine two problem. Engine one's the core.

9:16Huge business, but slower growth. Engine two's the new business, small but fast-growing. So how the hell do you shift investments towards engine two? Well, let's celebrate what Poul didn't do. First, he didn't underestimate the change challenge he was facing. All of his leaders needed to create the vision of what Mars Petcare could become, and all of his leaders need to experience the danger of not acting. So he inspired. He mobilized the pathfinders.

9:46They walked around a graveyard of companies that failed to embrace the future. They were future-oriented, outside in, head and heart. Second, he didn't dismiss engine one. Yes, the new service-oriented businesses of engine two were faster growth, and yes, they demanded investments, but engine one was critical to the future. And here, Poul did something remarkable. He talked about hidden assets. Yes, engine two had faster growth, but engine one had 10 times the customers of any of those businesses. Engine one served 400 million pets, and the sheer scale of this is key to communicating the future of Mars to pet parents.

10:28Of course, future growth matters, but current scale and reach matter, too, and Poul didn't forget that. He gave every leader a stake in the future. He gave every leader a role. You at some point in this journey faced what I call the dark period. And what I mean by that is you have seen the bold inspiration and then very quickly after you had to make a set of investments and you're beginning to pull the parts together that eventually will become this grand ecosystem My hypothesis is at that point, you then almost had to wait to see if all of the promise came true, meaning that a lot of these acquisitions need to be integrated. There was then complexity.

11:21Tell me how you as a leader handled that muddled period. - It was lots of problem. This was a time where we were fast into veterinary, but private equity was also fast, and our job was to get hold of the most priced assets, and you want to keep the founder of that business. And when you get hold of founders, it's maybe not always the case that you come and say, "Here's how we do certain things, and in order to get the bigger good, we need you to change a lot of things." And some of those founders really worked well, and others did not and were resistant, and that's very, very hard to manage in a big business. The other very difficult point is on data and data systems because when you acquire, you get different legacy businesses.

12:10So unless the data is on similar platforms that can speak to one another, we can't use a lot of the data activities, and that's a very hard piece of work that takes years. The reality is, for all the wonderful stories and podcasts you have about digital and AI, it still takes years to get some of this work done, in my experience at least. - The issue of ecosystem control and customer transparency turn out to be opposite missions, which is ecosystem control has you acquire a lot of companies, new data systems, many, many different views of who the customer is, and the need to give them a seamless experience requires one view of the customer. Have you cracked it yet?

12:54- No, no, I would actually concur with the view. Part of it is linked to organization. Our legacy business, Royal Canin, sells to pet specialty stores. We bought a super premium natural business called Champion Petfoods, Origin, Acana are their brands. They have a separate route to market. And then we have some small data-heavy businesses, and they have a direct go-to-market. What we have done in the short term is that we share all P&Ls, all activity levels and what have you with the customer. But if the customer gives us a call and say, "Can I see Mars?"

13:29The sad reality is we're probably sending four or five people. And here comes the question: Should you send one or should you have one that is a lead, or should you retain four or five to have the dedication of your business? We have a belief in Mars that focus wins over synergy. That can be challenged, and it may not be the same in all industries. But for all our work done over the years, at a corporate level, we believe our snack business is distinct, our pet business is distinct, our food business is distinct. We believe that the knowledge of the category has bigger value for the customer than the synergies that we could take behind the scenes. And at the end of the day, we want to grow the category, grow the business for the customer, and believe that that will create the best results.

14:18But the tension still sits there today, Jimmy. - I love that statement, but that's very clear to me when we're talking about the snacks business versus the pet care business. Within pet care now, I think some could argue that a better world for pets would be when I call, I don't get five and I don't get one, I get exactly the right person. You've lived it, and I'm sure there's a hat you wear which is totalitarian control, just get on with it, break what you need to do to create a single integrated view of the customer, and part of you that says, "Wait, I've got to take daily focus versus synergy decisions."

14:54You've clearly come down on I'm not gonna be totalitarian and break things. Why? - I think it comes to philosophy. So I'll give an example. Royal Canin is all about cats first, dogs first. It's precise nutrition, and therefore the model is often about a prescription. I go to the vet, let's say my dog is obese. The veterinarian will say, "You should really do something about that. We have a diet called Satiety." And that precision requires a strong respect for science and targets a particular price point because scientific products are expensive.

15:34A Pedigree family would typically be a family dog with love for the dog, and we just have a dog like any other member in our family. And the way you sell this is quite different. So we speak to quite different segments. And so what we do when we go to a customer, we retain that food philosophy because the way they drive their business is by bringing that philosophy to life in their stores. And if you are in a veterinary hospital, they only want to talk to the scientific guys.

16:03We call it sort of white coat. So they want a serious conversation. It's very different conversation you have than when I meet with a Walmart or a Tesco or - A Carrefour. So I think the lens you took is, at the end of the day, am I forcing synergy because it's good for Mars? Or am I forcing synergy because it's good for each customer segment? And the reality that you keep facing is any one segment enters in their language with us through a need that is dominant, and just making it a single view of the customer and that there's a Mars person they call feels more like cross-selling than serving their need in a way. And so I'd rather stick with the philosophy of how they came to us, even at the expense of having five Mars people potentially having to talk to them, but that's better than the artificial synergy that comes from taking away their specific need and turning it into a generic customer of us.

17:05- Absolutely, and if I could make another lens for it and take a finance lens on it, if we deliver this to the customer, we will grow faster Because our job is to get the customer to grow the category faster. If we take that as a premise and take a shareholder value return, 70% of shareholder value return over time comes from growth. So I would argue that yes, it's a food philosophy, it's a category view of how we grow, but it's also a financial strategy that will pay off over time. It may not pay off in the short term, but over time, if our customers grow faster with us, they will benefit, we will benefit.

17:43Financially, the equation works well. - And then the second challenge you raise is the founder dilemma, which is it's amazing and often renewing to acquire a bunch of founders because they bring entrepreneurial energy back into the company, and then you always face the issue of how much complexity do I absorb by learning from them and adopting their ways of working, and how much do I try to have them become the Mars way of working? Did that pressure ever come up?

18:10- Yes, it did. In our vets business, we had three big businesses in the US. We ran them distinct, and we got to a moment where we would have it under one leadership, and we actually appointed the head of our global veterinary business from one of the founder-led businesses to run it because this person's expertise was infinitely higher than ours. And I said to this gentleman, "One of your jobs is to protect the veterinary business against Mars, because we will all come and say, 'This is how we do it around here.'" And that around here was defined as the consumer goods business, and that might not be applicable to a veterinary healthcare business where we have 18,000 veterinarians employed that are motivated in a very different way from the 18,000 sales reps we have in our food business as an example. So yes, we have seen both.

19:02- I'd love to return for a moment. You gave a group of 30 people the best job in the world, which is spend the next six months doing nothing but learning how great businesses grow and come back and tell us what we should do. I know the main intent was to create a breakout strategy for Mars Pet Food, but there must have been a secondary one, which is you just started the greatest leadership development program I think I've ever seen. What happened to their careers?

19:28- Lots of them are still here and have grown in their jobs, and they became advocates. We got 20 of the biggest advocates for the strategy in the business. The second thing that happened, we thought, how can we make a leadership program that takes some of the best of this? So what we actually did afterwards was every six months, we picked another 20 people and put them in a group with three regions, three functions, and worked on a pain point. In the ecosystem, we identified six, seven pain points every six months that we needed to work on.

20:02Example, how do I improve the lifespan of a pet? And that has a food component, it has a data component, and it has a veterinary component. So we took a condensed version of it, and 10 years later, this program still runs. - We had a very interesting conversation with the founder of Mercado Libre, Marcos Galperin. He talks a lot about the organization of the future as one of constant mobilization and demobilization of teams. It feels like your Pathfinders program is that, in the sense that you are mobilizing small groups of people to deal with real pain points in the ecosystem. Has that influenced how you might wanna do that even more structurally?

20:45- I think, Jimmy, at its core, one of the struggles we have as corporations is we are organized in functions, but the value is created across all. And what you try and do with this is to break the functions, but also to enlighten how that value is created through cross-functional collaboration that takes an identified pain point in our case, or opportunity or whatever you want to call it, and say, "This is what we develop against," and then all functions have to ladder up and you accelerate.

21:20- This is remarkable. Poul embraced complexity in the name of the customer. Chapter one of the Mars Petcare story. Agree on a bold new vision of a company that provides integrated solutions for its customers and execute on that vision through a set of acquisitions. And chapter two could have been this. Fast integration. Create one company, one view of the customer, one data system, one dataset. Keep things simple. Give each customer a single integrated entry point to Mars. And I've worked on dozens of chapter ones with CEOs and mostly neatly to chapter two.

21:54String of pearls acquisitions followed by fast integration. But Poul didn't pursue fast integration. He avoided the siren songs of simplicity and control. He recognized that Mars had acquired pet businesses that sell to very different worlds. There's not one integrated customer experience because there's not one entry point to the company, and we build from there. Fast and full integration is only worth doing when it serves the customer, not when it serves the corporation. And one of the hardest things for any leader is restraint. Don't pursue a strategy that makes your job bigger or makes it more interesting.

22:34Don't integrate because it makes the headquarters' job simpler. Start with the customer. Where does integration add value to them? And where does separation matter most to them? But what happens when that customer lens costs you? And I mean really, really hurts the business. Few of us have had to face such a test. But Poul and his people were tested in the cruelest of ways I wanna turn to something. I love the vision, but often a company is best judged about whether they're purpose-driven, and yours is to make a better life for pets, when things are at their bleakest.

23:12And I'd love you just to talk for a moment about the cyberattack, because I think it's a really good example of what happens when things get bad. So can you just describe that for us? - Yes. The cyberattack you're referring to is the ransomware attack called NotPetya back in 2017. FedEx was hit, Merck, the American pharma company, Saint-Gobain in France, the construction company. So it was all industries. And at the time, I was on the board of Beiersdorf.

23:44And Beiersdorf, the CEO calls me, Stefan Heidenreich, and says, "Something is happening to our system. Are you guys okay?" And I said, "Yeah, I haven't heard anything." I put the phone down, and five minutes later I hear from Royal Canin that we have a massive issue. We have no idea what's going on. All 18 factories went down. After two days, we tried to produce the recipes that we could still remember because we have access to zero data. All 3,000 computers in Royal Canin were down. We even called retirees and asked them if they remembered recipes, and they came in and helped us with the mixing. It was beautiful that they came in and helped us, but we were in a massive crisis.

24:28This is a big business, and because Royal Canin produces life-supporting recipes for dogs that are hospitalized, it has severe consequences. And therefore, we were scrambling with a solution for this, and I'll never forget, I was at home on a Sunday, probably about a month into the crisis. We could see the stocks were just going down, and we were heading to a critical juncture. And Loic Moutault, our head of Royal Canin at the time, he calls me a Sunday, and he says to me, "Poul, you need to listen to me for five minutes and not say anything." He knows me well.

25:04"And then I have a mad proposal." And basically, what Loic said was, Hill's, our competitor, was not hit by the attack, and in order to live up to our purpose, a better world for pet, we have to go to our customers and recommend a Hill's diet where we can't supply anymore, and we have to do it now so that the pets remain alive. So we literally prepared a note for all the recipes to the veterinary hospitals. For this specific diet, we recommend that you buy Hill's colon. Loic, of course, said, "Are you in?"

25:42And we agreed that it was the only responsible way to be a purpose-driven company. It was the ultimate test of it, and if we put cats and dogs first, this is what you have to do. You don't need to question it. The fun story, Jimmy, at the end of the year, we got the factories back up, and what was amazing was normally when you don't supply to big customers, they give their penalty. They all waived their penalties. Our logistics firms offered to work without any supplement all weekends to be able to supply in the crisis. So somehow, this crisis just amplified the togetherness. That story for our veterinarians, for our associates, was such a strong manifestation about what it means to be purpose-driven - I've sat across from a lot of CEOs, and I cannot think of one who told their customers to go and buy a competitor's product. But Poul did in the middle of the crisis because the alternative was letting pets die. Guys, the customer lens isn't free, especially in the short term.

26:55Over the long run, the theory goes, leaders will be rewarded with customer loyalty. But on a daily basis, that customer lens can demand a high price, like sending your customers to competitors, knowing many might not come back. This is what it means to be a purpose-driven company. A real test comes, you pass. And that proves not only the strengths of the mission, but the qualities of its leaders Poul, you are talking about a lot of quite counterintuitive decisions.

27:31As you look back, what in your background prepared you for that approach? Where the hell did that come from? - The answer is, I probably don't know. I can give a few guesses. I think the job as a leader is to put the organization first, and then you put your team second, you put all your associates third, and you put yourself last. - But where did that come from? That's a very wise leader looking back at his career, but tell me where that, for you, came from.

28:00- I think it came sort of late, late 30s. I think important for me was to get children, because I think as a human being you get more into a more reflective mode. I did at least. I should speak for myself, not for others. And you start thinking about what shaped you, and how do you want to shape your children, how do you want to grow? And I think it has a lot of analogies to business. That self-reflection and immersion into, where did I come from? Who have I become?

28:29Where do I want to go to? In a way, that works for an organization as well. And I've just found the deeper I go into my own beliefs, the more I work on my self-awareness, the more I understand my trigger points, the more I explore the dark side of me, the bright side of me, the more I get a clarity of my own compass. And if the organization I lead can be driven forward from a place of authenticity, from a place that this actually matters, it's not just at the end of the year we have grown 8.7%, it is, how have we grown?

29:09How have we grown our people? And that deeply motivates me as a person, because I've seen my own growth throughout my career working for a fantastic company that had offered me growth opportunities that certainly as a 25-year-old I'd no idea I could get. So I think if you can get this symbiosis to work between your own self, your own growth, leading from a place of authenticity in a compass that drives you somewhere, I think you get the best out of it and you get the highest satisfaction out of it. That would be my guess.

29:46- Amazing. Amazing. So I'll now ask the corollary. We've investigated a lot that you've learned from the pet food side. You then became group CEO. Which of those lessons did you bring forward, and were there ones you had to shed? - Well, the one I had to shed was to be called Pet Poul. It went very, very quickly because I was known for that. The thing I really learned in Petcare was to manage a set of assets. That were very distinct because in a way we were in three industries, at least.

30:18So I really learned that I go in a meeting, I need not to ask that question, but ask this question. I really need to think about each meeting I go into, which business am I in to add value to that business? And the way you run a snacking business is very different. Even the way you sell chewing gum is different to the way you sell chocolate. The questions you ask in a business review have to be very distinct. So I think that's a big part of understanding how I avoid a conglomerate discount on Mars Incorporated and actually make it a real strength.

30:51- There is a humility that comes with what you're saying, which is I've got to do what's right for that business, not what's great for my ego, because it's not that I'm looking for value added that isn't there, for synergy that isn't there. I've got to constrain myself to what that business and its customers need. - Yes, absolutely. I mean, we might think as CEO, we are incredibly important at what have you, but trust me, the day we are out of the door, we are forgotten and it's the next person.

31:19So we just need to eat a little bit of humble pie and step back and think, Mars Incorporated is from 1911. It is going to survive without Poul, thankfully, and probably thrive. So having that sort of service mentality to the organization while I'm here is part of the important thing of being a CEO. My most important stakeholders is the people that work for me. There are 170,000 of them. And my job is to engage them. And they're my, even when I talk in the press, I will sit and prepare and, all the questions will come left, right and center.

31:54The ones that really read it are the ones that, that work for me. And they're probably the most important audience I have permanently. - That is one of the most powerful messages a company could hear from its CEO. With that message in mind, let's remind ourselves of what Poul didn't do. First, he didn't underestimate the challenge of moving from Engine 1 to Engine 2. Second, he didn't ignore slower growth Engine 1. Instead, he celebrated their hidden assets, those 400 million pet parents.

32:27This is a story of bold moves, and it's one of the great Engine 2 stories in business, but it's also a story of CEO restraint. And here's the third thing Poul didn't do. He didn't pursue fast integration. He embraced complexity in the name of the customer. While each business of course shared a single vision, Poul didn't rush to bring all the decisions, all the systems, all the views of the customer to the center to himself. And there are a lot of objective reasons to centralize fast.

32:59Simplicity, one view of the customer. And there are a lot of subjective reasons. Make the CEO role easier, bigger, more powerful. And many, many CEOs move fast to centralize. I mean, isn't that what great leaders do? Well, the answer is no. Great leaders put the customer before themselves. In fact, if we strip it all back, the lesson sounds almost old-fashioned. Leadership is service. Customer first, self last. Poul sends his customers to buy competitors' products because it was the right thing to do.

33:38In many companies, such phrases are filed away in the things they say drawer. Mars Petcare puts them in a very different drawer. The things our leaders actually do. Everything from today's episode and every episode is at bain.com/founders-mentality. And we'll be back in two weeks. Stay curious. Next time on Founder's Mentality: The CEO Sessions. - When we got to, like, 350 people, we started to attract talent from Silicon Valley talent who had worked at other founder-led businesses.

34:18And I remember a couple people saying many times in our San Francisco office, "Wow, it's so refreshing that you and Matthew still show up for work." I didn't really understand what they meant, and finally I was like, "What are you talking about?" And they're like, "Well, my last founder stopped showing up for work