Newman's Own: Preparing for life after Paul

Gates to give it all away

More Videos

Family businesses fight long odds

Two-thirds of family businesses fold before reaching the second generation, and just 12% make it to the third. Advance planning is the key to a lasting corporate legacy.More

(Fortune Small Business) -- What happens when a company's eponymous founder and celebrity spokesman transitions out of the business?

Executives at food company Newman's Own may soon be addressing that issue, as 83-year-old founder Paul Newman reportedly struggles with cancer. The actor told friends as far back as 18 months ago that he was battling the disease, according to the Associated Press. Recently, Newman pulled out of directing a stage production of John Steinbeck's Of Mice and Men. (Newman's representatives have avoided directly commenting on the actor's alleged diagnosis, deflecting queries by emphasizing that he is doing well and is "not going anywhere.")

Newman's uncertain health and advanced age raise questions about the strategic direction of the food company Newman launched in 1982, with a salad dressing first mixed in the basement of the horse barn on his Connecticut property. Today, the company has a staff of 28 and an independent management team. It also launched a spin-off, Newman's Own Organics, run by the actor's daughter Nell Newman. But Paul Newman remains tightly entwined with the brand image of his namesake company - his face is the logo on all of its products - and executives are tight-lipped about future leadership plans.

"When a celebrity dies without a plan, the company and product can die with him," says Les Banwart, vice-chairman of the nonprofit organization Aileron, which consults on issues of professional management.

In the early days, Newman's Own traded heavily on the image of the actor known for classic films such as Butch Cassidy and the Sundance Kid and Cat on a Hot Tin Roof. Shoppers thronged around store displays that boasted the banner: "Butch Cassidy is also a gourmet cook." More than 10,000 bottles of Newman's now-iconic salad dressing were sold in its first two weeks on the market - and after the national and international press came calling, so did the supermarket chains.

Newman's Own says it turned a profit in its first year. All of the privately held company's profits and royalties go directly to Paul, who has from the start distributed the money he takes in from the company to charities. In 1988, Newman launched his flagship charity, Hole in the Wall Camps, which brings together children with serious and terminal illnesses for a free summer-camp experience. (Paul's daughter Clea sits on the Newman's Own Foundation board, which oversees the charitable grants.).Today, Newman's Own is close to hitting the $250 million mark in charitable giving, says company spokeswoman Susan LaMontagne.

Nell Newman acknowledges that her father's identity was critical to the success of Newman's Own and its associated brands.

"We definitely rode on his coattails," Nell Newman says of Newman's Own Organics, which she launched in 1993 under her father's tutelage. Independently owned since 2001, her company operates as a traditional for-profit entity, paying Paul a royalty for the use of his brand and image.

"That opened doors for us, but it wouldn't have flown if we hadn't maintained the high quality of the final product," she says.

At Newman's Own, Paul Newman is still involved in product development, according to senior vice president of marketing Mike Havard. Paul stopped by the company's Westport, Conn., headquarters in December for the final taste testing of the new line of cereals.

"Paul went through every one," Havard says. "He loves to write the legends on the back of the bottles."

Whether a formal succession plan is in place is unclear. But most signs indicate that Newman has transitioned out of the day-to-day operations of the company.

"He's a taster," says Nell Newman. "We don't put him in the middle of the process because it can be tedious."

A board with a president and CEO oversees operations at the Association of Hole in the Wall Camps, although Paul Newman is known to spend many summer days visiting with the children who attend.

"That's what he wants his legacy to be - the camps," Nell Newman says. "I mean, wouldn't you have more fun hanging out with the kids versus hanging out with a bunch of executives?"

Succession experts point to the restaurant chain Wendy's (WEN) as an example of how celebrity brands can outlive their chief spokesman. Unlike Newman's organizations, Wendy's is publicly held, but founder Dave Thomas appeared in television commercials and was nearly synonymous with the brand.

After Thomas died of liver cancer in 2002, it became clear that the company had begun the process of succession long before the transition came to pass, says Matt Paese, vice president of succession management at consulting firm DDI. Wendy's board had in years prior already moved Thomas out of the operational leadership role and named a longtime veteran to the company's chairmanship. Wendy's survived Dave's passing with its sales intact: It reported revenue last year of $2.45 billion, up 19% from 2002.

"That's the rule for healthy successions," Paese says. "Start now. Meaning you never stop planning - it's not a static event."

Succession management consultant William Rothwell points to Gianni Versace's fashion house as another example of a successful handoff, one managed in particularly abrupt circumstances. After Gianni's murder in 1997, his sister Donatella stepped in as creative director and his older brother Santo became CEO. The company farmed out design responsibilities to another famous design house, and the brand survived.

"You have to preserve that level of confidence in the name," Rothwell says.

As for the future of Newman's Own, marketing VP Havard says the company has embarked on a "new strategic direction" and plans to expand into new food categories.

"We want to get into younger consumers," Havard says. "Those Baby Boomers that love Newman's Own - we want their kids to love Newman's Own, too."

Will Newman's stay in the family? Nell hopes Paul's two grade-school grandsons, Peter and Henry, will take an interest in the venture. Their mother, Lissy, designed the Newman's Own Organics label.

"They love Pops," Nell says of the grandchildren. "But it's a tricky thing to make that work with family businesses. It's difficult to tell how the next generations will perceive it when they don't have any relationship to the person who was ahead."

Meanwhile, Newman's book may help his story survive the ages. Publisher Nan Talese says Random House will soon be reissuing in paperback Shameless Exploitation in Pursuit of the Common Good, the book that Paul and Newman's Own co-founder A.E. Hotchner wrote about the company's start. (The title refers to the famously publicity-shy actor's take on the brand's marketing strategy.)

"It's an absolutely wonderful blueprint for starting a company just using your common sense," Talese says. "Paul's legacy is a whole new image of philanthropy."