Marvin Schwan and “Old No. 1”
Photo courtesy schwan’s company
The morning of March 18, 1952, broke full of promise in Marshall, Minnesota. It was the warmest day yet that month, the temperature peaking above freezing as Minnesota started its slog out of another long winter.
But as 23-year-old Marvin Schwan climbed into the 1946 Dodge panel van he’d recently bought for $100, he could have had no idea that he was about to make history.
After all, who could have known that a few gallons of ice cream delivered one late winter day would change the way Americans view, purchase, and consume food for the next six decades?
Schwan’s parents, Paul and Alma, had started the Schwan’s Dairy a few years before, not long after World War II ended. Their brand of ice cream became popular locally. Their son Marvin was a natural salesman—not a gregarious type but more genuine and unassuming, the sort of earnest Upper Midwesterner who listens to people, studies their needs, and caters to them. What Marvin had noticed was that, in the small towns north of Marshall (a rural western Minnesota farming hub not far from the South Dakota border), ice cream prices were 14 cents higher than they were at home. Perhaps if he brought his ice cream to the farmers, instead of hoping the farmers would come to him, they’d buy his product.
So he filled his van with 14 gallons of ice cream. The van had cracks in the floor, no heat, and no refrigeration (just dry ice). He drove north out of Marshall, into the patchwork quilt of corn and bean fields just starting to awaken for the spring. And Marvin Schwan, with his kind eyes and his warm handshake, started knocking on doors.
By the end of the day, he had sold all the ice cream.
“That day proved the concept,” Marvin said in a speech decades later, explaining the genesis of the business that would eventually have him ranked among the world’s richest people. “The next day, I loaded up a lot more. And that was the beginning of the Schwan’s ice-cream route system.
This is the old-fashioned story of the successful American businessperson: He (almost always a “he” back then) aspires to success, to make a nice living, so he can eventually support a wife and kids. He has an innovative idea. He believes in his idea so much that he invests a substantial amount of capital in that idea. And when that idea succeeds, he does not stay put, content with a small victory. He builds, and he builds, and he builds.
Schwan’s Company is now among the largest privately held companies in Minnesota, ranked one of the 100 largest in America by Forbes. The company’s down-home reputation is rooted in Marvin’s rags-to-riches story. Today, Schwan’s is synonymous with the three-quarter-ton truck Marvin bought in 1953. An example of Midwestern Americana, it was the company’s first refrigerated truck, and Marvin had it painted a creamy yellow. That color was later trademarked Inca Gold, and today the carrier is known around Marshall as “Old No. 1.”
In the decades since, the unpretentious company has nonetheless become a global force to be reckoned with, powerful in diverse markets. When Marvin decided to enter the frozen-pizza business in 1970, he placed an ad in The Wall Street Journal: “Wanted: Frozen Pizza Manufacturer.” Can you think of a humbler way for a huge corporation to break into the pizza industry?
After posting the ad, Schwan’s bought a frozen-pizza manufacturer in Kansas, in charge of Tony’s Pizza. With a portfolio of six frozen-pizza consumer brands today—able to produce about 5 million pizzas daily—Schwan’s is the second biggest frozen-pizza seller in the country. Those iconic trucks still make roughly 54 million stops annually around the United States (from more than 400 sales-and-distribution centers), but the delivery service on which Schwan’s was founded—with more than 4,000 trucks in the lower 48 states—comprises only part of the company’s operations today.
The inside of the modern Schwan’s trucks
Photo by Ackerman + Gruber
You may not know it, but the freezers in your grocery store, sitting at -10 Fahrenheit, are filled with Schwan’s products: Red Baron and Freschetta, Mrs. Smith’s and Pagoda, Tony’s and Edwards. The Freschetta pizza plant in northern Kentucky, one of more than 40 Schwan’s production lines across the nation, makes fresh dough in 15-foot KitchenAid-like mixers—“It was like going to the BFG’s kitchen,” one Schwan’s employee told me of visiting the Freschetta facility, referring to Roald Dahl’s The BFG (big friendly giant). The factory churns out tens of millions of frozen pizzas a year. Schwan’s plays a leading role in the school-lunch industry, too.
The company’s holdings are so vast that weather events halfway across the world can affect daily workings in Marshall: When a tsunami wiped out the vanilla crop in Madagascar last year, Schwan’s employees scrambled to find a replacement crop.
Schwan’s employs some 12,000 people around the country, and 1,200 of those are in Marshall (almost 10 percent of the town’s population.) One current Schwan’s employee who grew up in Marshall told me that when she was new on the job, a colleague mentioned that he remembered seeing her fall off her bike in elementary school.
Becoming a worldwide brand, Schwan’s has remained rooted in this type of small-town culture, even after Marvin died of a heart attack in 1993 at age 64. “He was like the Warren Buffett of the food industry,” says Stacey Fowler Meittunen, a longtime Schwan’s employee who is now senior vice president of product innovation and development.
But today, the food industry has changed, and every legacy company as big as Schwan’s has had to change with it. Innovative frozen-food companies have sprung up, such as Daily Harvest, a fruit-and-vegetable smoothie delivery company with investors including Gwyneth Paltrow and Serena Williams. Schwan’s has continued expanding over the past few years, acquiring a stake in Tru Shrimp, a Minnesota-based sustainable shrimp hatchery and farm; purchasing Better Baked Foods, Drayton Foods, and MaMa Rosa’s pizza; and investing in Raised Real, a subscription-based organic meal delivery service for babies.
It’s not as if the company is at the forefront of food innovation, always looking for the next moon shot—as in the recent boom in all things sustainable and organic. Instead, there’s a Schwan’s tradition of investing early in concepts that have already proven durable. (Kraft was the first company to sell a restaurant-quality frozen pizza in 1995, and Schwan’s followed with Freschetta in 1996.) “Marvin Schwan himself had this mindset about being first to be second,” Fowler Meittunen says. “That was the mantra: There’s less risk to being second, as long as you’re fast to being second.”
One new, seemingly promising market that Schwan’s hasn’t broken into is the fresh meal-kit delivery service. Meal kits have created buzz in the food industry over the past several years, but the truth is that they haven’t performed that well overall. Case in point is Blue Apron, the flagship meal-kit delivery service. It was the worst-performing major public IPO of 2017, its valuation dipping nearly 70 percent after its initial offering. Blue Apron’s biggest competitor, HelloFresh, went public last November. But recent headlines for HelloFresh haven’t looked good either. Like this one: “HelloFresh has a big profitability problem.”
As for the frozen-food company that Marvin started in small-town Minnesota nearly three-quarters of a century ago? Like the rest of the frozen-food industry, it’s doing pretty darn well.
Even as meal-kit delivery services attract Wall Street attention in the quest for the next industry disruptor, traditional frozen food has kept growing. Since 2013, the frozen-food industry has increased by about $500 million, according to the National Frozen & Refrigerated Foods Association. Consumption of frozen entrées rose 57 percent in the past decade and a half. And two factors have fueled this growth: convenience and value.
Photo by Ackerman + Gruber
As much as we tout fresh fruits, vegetables, and from-scratch meals, following through on preparing and eating them just isn’t feasible on a daily basis for many busy families. Fresh food spoils. And from-scratch meals take time. That’s why nearly everyone shops the frozen-food section of the grocery store. Literally: 99.3 percent of American households shop the frozen section at least once a year, some in a pinch and others every time they set foot in a grocery store. On average, we shop there every other week.
One sidelight of Schwan’s steady growth is continued interest from outside companies in acquiring the Minnesota-based brand. Amazon’s $13.7-billion acquisition of Whole Foods last year stirred speculation that Schwan’s could be sold next. Late last year, reports came in that Schwan’s had hired investment bank Piper Jaffray to weigh the company’s options. The report indicated that Schwan’s is valued at around $2.5 billion, with earnings, before interest and taxes, of about $260 million.
That report was sourced anonymously because the selling process is considered confidential. Asked about the report, a Schwan’s executive dismissed it as only speculation and said that such speculation about a potential sale merely points to the company’s continuing success.
If the process of a Schwan’s sale remains opaque, one thing is clear: The frozen-food legacy of Marshall cannot be understated.
Drive out of the Twin Cities and go west. Pass the glitzy shores of Lake Minnetonka. Rise and fall on the hills of Highway 7. Cross the Minnesota River and the Redwood River. Climb gently up Buffalo Ridge, the wind-swept rolling hills that pass through Lyon County, and enter Marshall, home of Southwest Minnesota State University, a big wind-farming operation, and a homey dive-bar-slash-music-venue called Fuzzy’s—where the imprint of Schwan’s Company is all over town.
“You go there and you feel like everyone knows each other, and probably they do,” says Giselle Restrepo, the senior manager of strategic insights and trends for Schwan’s.
Inside the walls of the Marshall-based company—with the main building, known as Corp 1, in the center of town, and a giant production, innovation, and development facility just outside city limits—all sorts of scientific equipment are at work, including a device that simulates frozen food being distributed on trucks or dropped on the floor, and one that simulates changes in altitude. Schwan’s facilities are filled with spiral freezers set at -45 Fahrenheit. A frozen pizza starts at room-temperature at the bottom, and then, after spiraling upward on a belt through a super-cold wind current for 45 minutes, the pizza becomes a final, frozen product. The scientists know that the faster you freeze food, the smaller the ice crystals will be, and the more “authentic” the food will taste at the end of the process.
All these gears and people work together to try to answer a next-to-impossible question that changes decade to decade: How does the American family eat?
World War II ushered in the advent of mass-produced food, and our standards were simpler then: safe, consistent, and from a big, trusted brand. Later, around the early ’90s, the fat-free craze meant new, artificial ingredients replaced naturally occurring fats in mass-produced foods. In the decades following, our ingredient labels became long and indecipherable. More recently, we have come to desire natural ingredients as well as authenticity in frozen food—the feeling that, although mass-produced, the food is hand-made, not manufactured.
Today, instead of tiny blobs of pepperoni on frozen pizzas, customers want wide slices of pepperoni and rough-cut vegetables, as if they were prepared in their very own kitchens. Packaging now features cutouts showing off the big, chunky vegetables, and ingredient lists have shrunk. A few years ago, Schwan’s dove into a company-wide initiative to make all foods using familiar ingredients, and the company has today eliminated from its products artificial trans fats, artificial food dyes, high-fructose corn syrup, and artificial flavors.
Adrienne Seiling, vice president of communications for the American Frozen Food Institute, reports seeing more of its members “emphasizing the nutritional value and taste of their foods by drawing comparisons to fresh products and being transparent with consumers about the recipe development process.”
A Schwan’s chef tests a frozen-food recipe
Photo by Ackerman + Gruber
Schwan’s has kept in the game by minding such shifts in consumer preferences. But answering the question of how the American family eats, and what the frozen-food industry can do to fit in, calls for a more in-depth, sociological look at why and when families rely on frozen food. Schwan’s and similar companies have learned that certain life stages trigger an uptick in frozen-food consumption in U.S. homes. One such stage is when someone is living on their own for the first time. Another is when someone gets a new job and is suddenly crunched for time. The third and perhaps most prominent is when children come into the picture.
In the years when parents have young children, they enter into something Schwan’s employees call “food prison”: The requested food every night from children with still-developing palates is something like chicken nuggets or hot dogs. (This writer and father of a 1-year-old and a 5-year-old can confirm that food prison is a very real thing, and mighty depressing.) “At a focus group, one mother of five told us, ‘I fear the question, ‘What’s for dinner?’ ” Restrepo says.
The convenience of frozen food is supposed to make that question a little easier to answer. But, thinking of those parents, Schwan’s is now attempting to take frozen food beyond the realm of pizza and chicken nuggets, to inject some cooking creativity into the frozen-food world. The company partnered with 13 award-winning chefs around the country as the Schwan’s Chef Collective—including Ann Kim of Minneapolis’ Young Joni, Jaime Malone of Minneapolis’ Grand Café, Jet Tila of Los Angeles’ The Charleston, and Adrienne Cheatham of Red Rooster in Harlem. It’s a brainstorming group for future frozen products.
Chef Collective member Todd Erickson, the co-owner and executive chef of two critically acclaimed Miami restaurants, grew up visiting his grandparents’ farmhouse in southeastern Iowa. His grandmother was a Schwan’s devotee, and when visiting, Erickson always requested Schwan’s peach melba ice cream. But even with this personal nostalgia factor, he was uncertain about his first endorsement coming from a big frozen-food company. Despite the many choices in the frozen-food aisle, a stigma remains.
“People think of pizza bites, or Birds Eye vegetables that are soggy and in those weird crinkle-cut shapes,” Erickson says. “The frozen-food aisle, I used to think it was junk food. But now, as a professional chef, you see there are many freezing techniques average people don’t know about. Every piece of sushi is frozen because of parasites. People think they’re going out for super-fresh sushi, but they are really getting a frozen product, with very few exceptions.”
A Schwan’s food scientist tests ice cream at the facility in Marshall
Photo by Ackerman + Gruber
During Chef Collective meetings in Marshall, Schwan’s development executives ask the chefs, including Erickson, to think about frozen food with no constraints. “What are you doing in your kitchens that are new and cool but not yet mass-produced?” For Schwan’s school lunch service, the collective has come up with new uses for Schwan’s Villa Prima pizza crust: Chefs take the crust, put it in a waffle iron, drizzle it with honey, and make a chicken-and-waffle sandwich. Erickson knows he’s not innovating haute cuisine with this work. He isn’t creating fine dining experiences that will win him a James Beard Award. But he is creating something with far greater reach, symbolic of Schwan’s mission: to take products we use in our everyday meals and stretch them into new, fun uses.
For Erickson, these idea sessions in Marshall represent Schwan’s formula for success in today’s food world: nostalgia plus innovation. His heart belongs to the peach melba ice cream from his grandmother’s house, but his mind pushes ahead.
“Frozen food is the original food preservation—it’s the oldest, and it’s the most natural,” Erickson says. “But this is a company that’s really looking toward the future and aligning with chefs who are doing the same things. And that’s so refreshing.”