(FORTUNE Magazine) – MARS INC. is the black hole of the packaged goods universe -- so powerful and large that it influences all the other objects in its system, yet so secretive and dense that not so much as a lumen of information ever emanates from the dark center of the company in McLean, Virginia. Mars is composed primarily of candy, pet food, rice, and electronics sold in more than 25 countries by about 50 business units. Last year revenues eclipsed $7 billion. Four of the ten biggest-selling chocolate candies in the U.S. are Mars brands. Snickers is by far the most popular chocolate bar, though it has been slipping, and M&M's peanut and plain are in third and fourth place. Milky Way is eighth. Beneath that chocolate shell is the world's largest pet food company, which generates a Saint Bernard-size $3 billion in sales. Kids and dogs have done their bit to turn the publicity-averse Mars family, who own the company, into the richest Americans. Their net worth, by FORTUNE's estimate, is $12.5 billion.

But the Mars universe isn't expanding as it used to, and the marketing giants now cruising through its galaxy are causing some perturbations in its businesses. It lost the clout of being the biggest planet in the American candy cosmos when Hershey Foods acquired the U.S. confectionary division of Cadbury Schweppes in August, pushing Hershey's market share to nearly 44%. Now Hershey and others are successfully attacking Mars' 37% market share. Nestle SA drew about even with Mars in Britain by grabbing Rowntree in July. Each company now has roughly 25% of the market. Kal Kan, Mars' U.S. pet food division, is losing nearly $50 million a year. Mars Electronics, a small subsidiary, is expected to lose a not so small $20 million this year. Mars' unique culture may be melting in the hands of the company's co- presidents, Forrest Jr. and John Mars, whose slightly nutty leadership seems to lack vision. Forrest Jr. faces a potentially expensive split from his wife to take up with a female business associate. The settlement could also force a partial breakup of the company. Valuable executives have fled, unhappy about Mars' strategic direction. Says one evacuee: ''Do you know what happens when the fiberglass on a Corvette begins to crack? There's no way to stop it. Well, there are hundreds of stress cracks in that organization.'' The stress is greatest at the top. Martians say that behind their united front, Forrest Jr., 57, and John, 52, wage an unspoken war for control of the company that is played out in countless collisions among their satellites in management. The traditional characterizations of the two brothers -- Forrest, the more sociable despite some eccentricities, and John, the brooding bad guy -- may be only half correct. According to former and current employees, the two have taken one aspect of Mars' culture, egalitarianism, to a new level: They treat everyone like vassals. Whatever their abilities, ''neither of these guys is equipped to run a multibillion-dollar company,'' says a former high- ranking manager. Like most of the 40 people interviewed for this article, he spoke anonymously for fear of retribution from the family. Curiously, many expressed great affection for a company they think has taken a bad turn. Mars refused requests for interviews with its executives. FATHER-AND-SON relationships in this family, as in other family dynasties, have never been simple. It is accepted as gospel within the company that the brothers labor to escape the influence of their innovative father, Forrest Sr., 84. Not an easy thing. The elder Mars used to call his sons from his retirement headquarters near Las Vegas to harangue them about their shortcomings as managers. Forrest Sr. established the modern Mars and its culture in the mid-1960s after gaining control of his father's company. That Mars, Frank, had sent his son packing in 1932, when he gave Forrest Sr. the foreign rights to manufacture Milky Way, and announced: ''This company isn't big enough for both of us. Go to some other country and start your own business.'' Nearly 60 years later, the brothers are bringing the circle full round. They are acquiring Ethel M Chocolates, the firm begun by Forrest Sr. in his retirement to make liqueur-flavored chocolates. Ethel M was Forrest Sr.'s mother, whom Frank left to marry another girl named Ethel. John's son, Frank E., now works at Ethel M. All together, John, Forrest Jr., and their sister, Jacqueline Mars Vogel, 48, have enough children to start a softball team. Several are now orbiting through the company. Those little suns and moons may frustrate managers with eyes on the top and names that aren't Mars. When Forrest Sr. took over Mars Inc. in 1964 he immediately ripped out the elaborate offices of the then senior managers. It was his first act in establishing a culture of egalitarianism and individualism that is unique in American business. Workers were called associates, everyone from the president down punched a clock, and punctuality was rewarded with a 10% daily bonus. The pay was tops and the company went to extremes to take care of its employees. To this day, says a company brochure: ''No one at Mars has an office. No one.'' Traditionally, desks are spread across a floor wagon-wheel fashion, with the higher-ranking executives toward the middle and their troops behind them. Such an organization was designed to smash any barriers to communication and to inhibit narrow functionalism. The money saved on fancy offices went into the plants, where only the best equipment technology could provide would do. Forrest Sr. was obsessed with quality and cleanliness. ''Their dog food plants are cleaner than some | hospitals I've been in,'' says an advertising executive who has seen them. A management consultant once watched in awe as a candy plant dumped a quarter of the day's production because part of a scraper was missing and might have gotten ground up in a chocolate bar. The company also became phobic about publicity. The family explains that they sought privacy so as not to distract the consumer's attention from the Mars brands and to allow the company the freedom to operate out of the limelight. Over the years this trait has evolved into a cult. Photos of the family are virtually nonexistent. One photographer who tried to catch the senior Mars at a fund-raising dinner in Washington a couple of years ago suddenly found himself enveloped in a cloth thrown as he was about to snap the shutter. Mars executives are forbidden to have their pictures taken for publications. In an embarrassing and costly mistake, the company refused to permit M&M's to appear in the hit movie E.T. The Extra-Terrestrial. Hershey gladly stepped in, and a star was born in Reese's Pieces. Now that storied culture is eating its young. The company always pushed responsibility on its greenest recruits, moving them often to give them the broadest exposure to business. There were no road maps, just destinations, and managers were free to get there however they thought prudent. ''It used to be, just tell me how much you want to make and how much you want to grow the business,'' says one former star. The aspirations of dozens of highflying executives are now being throttled back by a slowing growth rate and an organizational overhaul begun in the mid-Eighties that eliminated and demoted some layers of management. Mars has focused its attention and money on expanding the sales of its existing brands rather than developing fresh ones, especially in the chocolate bars. Despite attempts to decentralize, the decision-making power became concentrated in the few big brands. Managers complain they were left with responsibility but no authority. Nor is the company as high a payer as it used to be. ''People are saying, 'Let me add this up: No offices, no support staff, I punch a clock, I work in out-of-the-way locations, and now I'm not getting a premium,' '' reports one associate whose tally came up short. Running this cranky chocolate factory is one of the more eccentric management teams in business. Forrest Jr. and John took over as co-presidents from their father in 1973, and while there is general agreement in the company that John is the brighter, Forrest is more voluble. Veterans take his tirades in stride, although some hapless managers are bawled out in front of their subordinates. They are less fond of his propensity to belch, pick his nose, or take off his socks and shoes during meetings. One co-worker found this package quite alluring, and now Forrest Jr. is ending his 32-year marriage to merge with a 30-ish Mars associate. While in most companies the boss's personal life is just juicy gossip, a Mars divorce could mean a huge settlement. Mrs. Mars might even lay claim to parts of the company since Forrest Jr.'s wealth is so tied up with it. Younger brother John has never been mistaken for a talk show host. An extremely shy engineer who would rather listen than speak, he has spearheaded the company's efforts toward total automation. Says one of John's former colleagues: ''John sees people as a necessary evil. If he could run the company without them, he would.'' But others say that beneath the harsh technologist is a likable man who lets down his guard only in private meetings with the very few managers he trusts. Within the company the common assumption is that John will take control of Mars from his brother when his father dies. Both brothers believe in unostentatious living: John visited one plant in his Winnebago and camped out in the parking lot. The rivalry between the two is divisive. ''I've seen it happen countless numbers of times,'' says one victim of the internecine struggle. ''Forrest will pick one of John's guys and say, 'He spent $1 million last year and look what it got us. Nothing. Fire that jerk,' and it happens.'' Disagreements between the family and the professional managers over the company's direction have caused some defections in a firm that traditionally suffered from little turnover, at least of the voluntary variety. ''I am pulling people out of Mars left and right,'' says one busy headhunter. Ove Sorensen, who led the business development team at Mars, fled to PepsiCo over philosophical differences. ''We disagreed on where to take the whole and the parts'' is all Sorensen would say, and said it all. Several members of his group left too, a blow to a company that truly needs some new products. Most of the management of Mars Electronics left within the past year and a half, unable to convince the owners it was time to change strategies. The candy business has a new boss, William Hellegas, who took over this year ^ from Howard Walker, who retired after his second stint as the big M&M. Walker had replaced his successor, Alun Jones, whose 12-month tenure ended in 1984. The departure of Claude Eliette-Hermann, a highly esteemed executive who ran the company's pet food operation, has also been attributed to friction with the owners. ''Certainly not,'' says Eliette-Hermann, from his new post as president of the Chanel SA in Paris. He says the opportunity to work for Chanel in his native France was too bonne to turn down. VIEWED AGAINST the quantum changes in the candy and pet food industries' competitive structures, Mars' culture and management seem locked in a time warp, trapped in maturing businesses and unable to grow or buy new ones very successfully. The cult of privacy, designed to ensure freedom, now acts as a barrier too. Potential acquisition candidates take a gander at the organization and bolt. Mars has to buy companies with superb products, Forrest Jr. once said, because all the people will leave when the acquisition is completed. In its last acquisition, Dove International in 1986, Mars made a profitable small company a big loser in short order. It saw Dove, the Chicago manufacturer of high-priced ice-cream-on-a-stick, as a ticket to the freezer, a venue that could house other frozen eats. With thoughts of expanding Dove's distribution, the company built a huge 150,000-square-foot addition to Dove's lone plant, and equipped it, Mars-style, with the best money could buy. Although an outstanding product, the high-priced Dove fights in the upper end of the crowded novelty section of the freezer where players are happy with 1% market share. ''It is not a Mars business,'' says one of the naysayers. The company may make 3 Musketeers and Snickers ice cream bars to take up the slack in the Dove cote. Other growth opportunities have been botched. The company's foray into salty snacks, Snackmaster, is foundering because Mars had no experience distributing these products. Mars Electronics, originally a manufacturer of coin changers, branched out into hand-held scanning devices as well as radar for small boats with a product called Vigil. After several years of losses the company shed Vigil. The candy business continues to get more bitter than sweet for Mars. In the past 12 months sales of Mars' confectionary by U.S. candy and tobacco wholesalers, a leading sales indicator, decreased 0.4%, compared with Hershey's 7.2% increase, according to ICC Accutracks, a market research firm. The bar wars have been raging on and off for years between Mars and Hershey -- and they are on again. The two companies are chasing market share and each other, spending record amounts for trade discounts and promotions. Hershey's stunning deal to buy Cadbury's U.S. candy division for $270 million in cash and $30 million in debt -- ''right out of the blue,'' says the CEO of a competitor -- makes its chocolate bar arsenal more formidable. Cadbury's brands -- including Peter Paul Almond Joy, Peter Paul Mounds, and York Peppermint Pattie -- account for 8% of the U.S. market, making Hershey king of the nation's sweet tooth. More important, the acquisition gets Hershey distribution muscle. Although the top 20 brands dominate sales, most consumers don't decide what to buy until they are staring guiltily at the goodies at the counter. The manufacturer who can command the most shelf space with the most variety will get the most business. New and bigger players are also entering the game. Jacobs Suchard, the $4.1 billion Swiss candy and coffee combine, last year bought E.J. Brach & Sons, a big seller of hard candy. Helped by its other brands -- Toblerone, Andes Candies, and Cote d'Or -- Suchard is beginning a major push to expand its U.S. business. Leaf Inc., now owned by the Finnish firm Huhtamaki Oy, has assembled five U.S. candy companies in five years. ''It is going to be a donnybrook,'' says Dave Herriman, vice president for grocery operations at Giant Food Inc., a supermarket chain. Outmaneuvered in the acquisition market, Mars has been been slow to whip up new confections that could enhance its position. In the early and mid-Eighties the company embarked on an ambitious effort to develop half a dozen new products annually and to introduce one or two a year. The labor produced one new entry, and a good one: Skittles, a fruit candy that went on the market in 1982 and now has sales of about $90 million. The business development group looked at new ideas for both candy and snacks. ''I saw some excellent products get put back on the shelf for emotional reasons,'' notes a former Mars manager who had access to the group. ''Emotional'' is a code word that means the brothers didn't like the ideas. Asked at a trade show this summer what new bonbons the company might be announcing, a Mars representative responded, ''We introduced Kudos a year and a half ago.'' A variation of Quaker Oats' Dipps chocolate-covered granola bars, Kudos is second in a category where total sales have stalled at about $275 million a year. Mars is testing a peanut butter and cookie number called PB Max that, say trade sources, is being heavily promoted. The company faces a problem in developing new sweets. It is a production- driven concern that expends its efforts increasing consumption of its core brands, not new ones or even line extensions. The most critical internal measure by which managers are judged is return on total assets. Mars optimizes its return from manufacturing a limited number of very simple products on a massive scale. For example, its 3 Musketeers, Snickers, Milky Way, and Mars bars are ''chocolate-enrobed'' products, to borrow the industry's stilted terminology, built around a common shape with a nougat or caramel center. The volumes are so huge that Mars can run, say, Milky Ways, through dedicated manufacturing machinery 24 hours a day. To meet the company's extraordinarily high manufacturing and marketing levels, any new brand would have to generate sales of $50 million to $100 million in about two years. Many companies set their sights on $25 million in sales for new products. The danger is that when production volumes flatten, as they are doing now on Snickers, a low-cost facility can lose that status quickly. Asks one frustrated ex-candy man: ''How much nougat can you shove down people's throats?'' LONG BEFORE it was fashionable, Mars went global, moving products across borders, and it had few competitors. But Forrest Sr.'s dreams were always haunted by Nestle. Should the Swiss giant ever turn its mass in his direction, he thought, life would no longer be a bowl of M&M's. When Nestle bought Rowntree two months ago, and with it about 23% of Britain's luscious $3 billion chocolate market, Forrest's nightmare came true. Mars is now looking up at Nestle's mountain of $24 billion in sales and marketing power. In Europe, where Mars has a 17.3% share of EEC confectionary sales, candy consolidation is being spurred by the prospect of the unified market of 1992. Nestle, which also owns Italy's Perugina candy company, is busy stuffing its mouth with smaller European companies. Its rival, Jacobs Suchard, lost out in the bidding for Rowntree but has swallowed six other confectioners, including Cote d'Or and Van Houten. Analysts believe that Mars' position on the Continent has been weakened by its inability to acquire companies. One potential marriage, with Tonnema in Holland, was stonewalled by that firm's dissident shareholders. While Nestle is unlikely to improve much on Rowntree's position in Britain, there's work to be done on the Continent. Says Ralph Kaner, a Rowntree director: ''Nestle will make our products available in outlets where they weren't available before.'' The Swiss sugarplum fairy will also give Rowntree ''money patience,'' as Kaner so wonderfully describes it, and enhance Rowntree's research and development. The problems of no new products and no new acquisitions afflict Mars' other big business, pet food. Its U.S. subsidiary Kal Kan has 9% of the market. In struggling to hang on to it, Kal Kan illustrates the tactical advantage of acquisition over marketing in the big leagues of consumer products. Last year, boosted by its acquisition of Gaines Pet Foods, Quaker Oats rocketed past Kal Kan for the No. 2 spot behind Ralston Purina. With 18% of the bowl in ''wet'' dog food -- industry-speak for canned -- Kal Kan is second behind ALPO, which Grand Metropolitan, the $9.5-billion-a-year British conglomerate, acquired when it bought Liggett Group in 1980. Carnation, acquired by Nestle 3 1/2 years ago, would like to paw Kal Kan's second place in wet cat food. Kal Kan has been spending heavily for advertising and promotional discounts, in essence giving the product away to gain share, a tactic Mars explicitly abjured in the past. Last year Kal Kan spent its way to a deficit of $49 million on sales of $460 million. This year and next, company executives expect similar results, and Kal Kan is likely to be in the doghouse until 1992. The trade calls the giveaways ''investment spending,'' but Mars may lose $200 million without significantly improving Kal Kan's market position. That's because some of the newer players have pockets just as deep. Says ALPO President Franklin Krum: ''Grand Met has told us that they aren't going to let us be anything less than No. 1. If we have to go to the well, we can go to the well.'' Had Mars spent the $225 million to acquire Gaines Pet Foods, as Quaker Oats did last year, it could easily have overtaken ALPO. Quaker bought Anderson Clayton & Co. and sold every piece of it except for Gaines Pet Foods, which controls more than 10% of the dog food market. Quaker's logic was simple, says Douglas Mills, an executive vice president: ''We felt we had to improve our overall market position. Marginal brands aren't going to get the shelf space. | The ability to determine your destiny is greater in a No. 2 position than in No. 5.'' Mars hopes that a bit of globalization can get its pet food business to sit up. In the U.S. the company is slowly supplanting the Kal Kan label with two of its successful Eurobrands, Pedigree and Whiskas. The dog food is now called Pedigree Kal Kan. At first the Pedigree name was small and inconspicuous on the label; now it has overtaken the Kal Kan name. Eventually Kal Kan cat food will become Whiskas. Although the strategy is designed to reap globalization's rewards of simplicity and efficiency -- Pedigree will have one advertising slogan worldwide -- Mars is taking on the double-edged risk of hatching a new brand while at the same time suffocating a known one. ''Their goal is to put globalization to the purest test,'' says an advertising executive who worked on the account. It is no wonder that Mars is importing these two names: They are not only Europe's leading pet foods, they also represent a segment of the company that doesn't seem to have made a major mistake in decades. Forrest Mars Sr. created the canned pet food business in Europe before World War II and waited a dog's age for the market to develop. Until a decade ago most Europeans fed their pets table scraps. In canine-crazed France, for instance, only 21% of dog owners bought canned food in 1975; by 1985, 60% did. Today, Mars pulls sales of about $2.5 billion out of Europe, where its share in most countries starts at 50% and leaps over the moon. Effem (as in F.M., or Forrest Mars) GmbH, the West German subsidiary, claims 75% of the German market, the biggest in Europe. THOUGH ITS difficulties are serious, Mars is still an extremely powerful marketing force and protects its turf like a fighting cock. Last year the company spent $300 million flogging its products domestically, and it ranks among the top 30 advertisers. Fortunately for Mars, the physics of consumer brands has a lot in common with Newton's first law: A brand in motion tends to stay in motion. With names as powerful as Snickers, the inertial force is enormous. Even if Mars did nothing, it would still have a solid position for a number of years. Though insiders insist the company has big plans for growth, the possibility of Forrest Jr.'s enormous divorce settlement and the demands of the next generation could place a premium on just letting the profits roll in. But when Forrest Sr. dies, John could be free to assume control and permit Forrest Jr. to look after his new family. The experience of Mars is, in fact, not unlike that of many other companies whose once remarkable cultures had to reformulate to match the changing environment. The Mars of the Seventies was fabulous. But now it must face the Nineties -- or recede into them.

CHART: NOT AVAILABLE CREDIT: SOURCE: FORTUNE ESTIMATE CAPTION: THE UNIVERSE OF MARS TOTAL SALES $7,360 MILLION DESCRIPTION: Total sales from Mars' candy, pet food, food and electronics divisions in United States and international market; Three photographs: Mars candy bar; can of Kal Kan Pedigree dog food; box of Uncle Ben's rice.

CHART: NOT AVAILABLE CREDIT: PHOTOGRAPHS BY ZEVA OELBAUM SOURCE: ICC ACCUTRACKS, BALTIMORE, MARYLAND CAPTION: TOP SELLING CHOCOLATES IN THE U.S. DESCRIPTION: Ranking by sales ending in June 1988, June 1987; Color photograph: Snickers candy bar.