(FORTUNE Magazine) – TO STEAL, and mangle, a phrase from Churchill, Mars Inc. is an enigma inside a mystery tied up in a bright candy wrapper. We are all familiar with its branded products -- Snickers, M&M's, Milky Way, maybe even with its Pedigree pet food. As a global marketer, Mars spends millions to keep their names before us. Yet the privately owned company otherwise stays hidden beneath a shell thicker than any candy coating: it grants no interviews, allows no pictures of executives. The enigma hints of contradiction, even weirdness. The company pays lavishly but runs a pinchpenny operation. Mars is family-owned, run by John Mars and Forrest Mars Jr., but the family has more in common with someone like Howard Hughes, in his last years, than with Sam Walton. Of late, with the brothers pushing 60 and beyond, observers of Mars say the company is headed for a change of ownership. The most glaring current mystery surrounds the change in the company's performance: For three years now Mars has been quietly but dramatically yielding market share in both its U.S. and Western European candy businesses. Its pet food business, the biggest in the world at about $4 billion in annual sales, is bleeding money in the U.S. and slowing down in Europe, even in such strongholds as Germany, where Mars has had an incredible 80% market share. The numbers tell part of the story: in the 12 months ended in May, Mars gave up 1.4 market share points in the $10 billion U.S. confectionery business, according to Goldman Sachs. Over the past two years Mars has coughed up about three market share points -- a lot of M&M's. With annual sales estimated at $13 billion, the company still remains an enormous power in confectionery, pet food, and a collection of other food and food-vending businesses -- Uncle Ben's rice, for instance -- worldwide. Mars has sales aplenty, but the company seems to be fresh out of ideas, and its go-it-alone strategy -- this is not an outfit into idea-sharing or strategic alliances -- isn't producing results. Says Gary Stibel, who runs the New England Consulting Group: "Mars has not done as good a job at managing its brands as its competitors; that includes not being aggressive in some areas, being too aggressive in others." The company's new-product-development record is dismal, and the lack of hit products inhibits growth. Mars has long been fanatical about quality control and manufacturing efficiency -- humans taste-test the pet food -- but there don't seem to be any miracles left in process technology. The company's sales and marketing arms have not been able to take up the slack. Strangely, all this bad news has Mars competitors worried. Why? Because to other candy and pet food venders, Mars is the worst, most feared enemy -- totally unpredictable, capable of anything. "At a certain point they have to defend their market share," says an executive at Hershey, his tone seeming to say: "Don't they?" Indeed, in a letter to FORTUNE, the company acknowledges competitive losses, but asserts that "1994 shows that we are well on the way to recovering market share." For instance, sales of Snickers surged 14% in the past six months, aided by a big advertising campaign built around the company's sponsorship of the World Cup soccer championships. Mars says that in the past 12 weeks sales at M&M/Mars, the U.S. candy division, were up 9.3% ahead of total industry growth. Adds an executive from another rival: "I fear them even more as a competitor now. They don't play by the same rules as everybody else."

By "they" competitors really mean John Mars, 59, and Forrest Mars Jr., 63, the barmy billionaire brother act that runs the company with varying degrees of vision, intuition, intelligence, and ineptitude. It is from the brothers, really, that all the mysteries of Mars spring. One reason competitors aren't breathing any easier may be that, so far, the Mars brothers have shown few signs of worry, and even fewer signs of wavering from their basic strategies. "Yes, they've lost share, but I suspect they don't care," says a consultant who has worked for the company. The reason: they have bigger, arguably longer- term things in mind. Like some roving missionary, the company seems obsessed with its strategy of global expansion: finding converts to its brands in new country after new country, not worrying about those in existing markets whose faith has lapsed. "You've got to understand," says one of the former Mars executives who talked to FORTUNE, "these guys play for the long haul and they aren't afraid of anybody. That is really the way they capitalize on opportunities." But how can a company create capital for growth initiatives if its profitability is < being hurt in its home markets? Thus, the question really being asked today by those who compete with, or do business with, Mars is this: are we witnessing a work of strategic genius or are the mad-scientist owners letting the business slide as they chase dreams of global conquest? Of this much, we are absolutely certain: The Mars boys ain't saying. The men who occupy Mars's headquarters in McLean, Virginia, are at least as secretive as their neighbor, the CIA, and better at it, given the way moles have tunneled through that federal agency. For all the company's secretiveness, within industry circles the Mars brothers' reputation as executives is legendary. When FORTUNE published a story last year entitled "America's Toughest Bosses" and neglected to mention the two, a Mars executive begged to differ: "The CEOs you profiled are Barney compared to the bosses of Mars Inc.," he wrote. "Forrest E. and John would make your group of tough bosses look like kindergarten ((teachers))." Says one executive evacuee of Mars: "Senior managers are scared of the Mars boys. They are like Russian czars, dictatorial in spirit and manner. There's a court around them. You don't pick a fight with John or Forrest, despite what they say. The Mars brothers are shits." Forrest Jr. is a mouthful of gasoline in search of an ignition source, and he can find it in the smallest disappointment. He has a habit of blowtorching managers in front of a roomful of colleagues. Fear of Forrest fires has built a culture that can only be described as every man for himself. A former executive recalls being left for kindling at one of his first meetings because his superior, who knew a crucial piece of supporting information, would not dare come to his rescue once Forrest commenced a tirade. Brother John is usually described as the brainier of the two, but is also said to be extremely uneasy with people and possessed of a lack of patience similar to, if less vocal than, his brother's. A kinder analysis? "They enjoy running their business very much. And they think of it as their own money," says a former executive, who also believes Forrest's bark to be far worse than his bite. Why would anyone want to work for such a company? Money, for one. Mars manages to attract high-level talent by paying salaries often twice what competing packaged-goods companies offer. "Where else can a 25-year-old make $70,000 a year?" asks one who did. In Britain, where brand managers typically earn 35,000 pounds annually, Mars pays 70,000 pounds. Says another former sales executive: "At that pay scale you've got to be willing to take a lot." It's not clear, however, that Mars can continue to pursue this anodyne for the irascibility of its owners. In an era when most branded-goods companies are cutting staff to lower costs, Mars finds itself bloated with an inordinate number of six-figure salaries. So about a year and a half ago Mars offered U.S. employees an opportunity to cash out of the company in a voluntary separation agreement. The Mars brothers' attitude toward money is yet another example of their penchant for contradiction. For all the big salaries they dole out, they are incredibly penurious about almost everything else. On a visit to Britain several years ago, for example, Forrest was enraged to learn that Mars executives had company cars at their disposal -- a common managerial perk in that heavily taxed nation -- and quickly disposed of them. Their traveling habits add to their legend. When the two visit the company's pet food plant in Melton Mowbray, two hours outside London, they usually drive up in a rented subcompact car such as a Ford Fiesta. They are not beneath using discount coupons for hotel stays.

THE BROTHERS' disdain for ostentation has become such a part of company culture that for the occasion of their visits, British managers routinely dress down in a sort of reverse royal treatment -- rolling out the brown carpet. "You go through your closet and pull out the most threadbare suit you can find," says one veteran of the drill. Much of the brothers' attitude toward such things can be traced to their tutelage by their father, Forrest Mars Sr. In 1964, Forrest the elder bought the candy company his father, Frank Mars, had founded in the Twenties, then merged it with the company he had founded in 1940 after he became estranged from his family and moved to England. Forrest Sr.'s company made M&M's. When Forrest Sr. wrested control of Mars Inc. from other family members and investors in 1964, his first act was to destroy the fancy corporate surroundings. Ever since, Mars has practiced an open-office policy for everyone. Indeed, in its egalitarian Hackettstown, New Jersey, operations headquarters, there are no private offices. Desks are arrayed from the center of the floor in descending order of rank through "zones" of management: lower- ranking zone fives are typically brand managers, while zones one and two ^ are accorded to senior executives. And try this out in your own office: salaries for all occupants of each zone are posted. The company has no special parking spaces and no executive dining rooms or washrooms at any of its locations. Sure, much of this stuff is weird, but it's always worked before. So why are the time-honored methods of the Mars brothers now not working? Probably the most basic explanation is that Mars has ignored some fundamental changes in its competitive environment over the past five years. For one, the candy industry has experienced dramatic consolidation, with food monsters such as Philip Morris, Nestle, and Cadbury Schweppes gobbling up smaller competitors like so many gumdrops. And all these competitors are bombarding Mars with new offerings, then overmatching it in ad money. Hershey in particular has beaten Mars like a gong with new-product innovation and marketing. In the past three years, Hershey has scored hits with the introduction of products such as Hugs, a white-chocolate version of the chocolate Kiss, and NutRageous. Hershey is now introducing Nuggets, a thick chocolate bar.

WITH such aggressive marketing, along with acquisitions, Hershey has wrested the U.S. chocolate crown from Mars, increasing both its market share and profits in a flat market. It bought Cadbury's U.S. confectionery operation and two other brands. Competitors such as Nestle, which bought the top-selling Butterfinger brand, have been active too. Mars stood pat, watching Hershey push to a nearly eight-point market share lead. Meanwhile, in Europe, Philip Morris not only bought Jacobs Suchard, a leading European chocolatier with sales of $3.9 billion, but then added Freia Marabou, a Scandinavian company with $900 million in sales. Cadbury bought Chocolat Poulain in France, and several other European outfits. Even Hershey, an also-ran outside the U.S., purchased Italy's Sperlari from H.J. Heinz and Overspecht, adding about $165 million in sales. These companies are pouring out new bonbons, even as the total European market stagnates. As a result, Mars has lost share in western Europe. In Germany, for instance, its market share has faded from 30% in 1991 to 26% last year in the candy bar category, according to industry sources. Nor has Mars reacted well to innovations taking place along the retail and wholesale distribution chain, where consolidation has shifted power to the hands of big supermarket chains and discount stores, as well as a few megawholesalers. These retailers and wholesalers, not to mention consumers, have forced branded-good makers to reengineer their marketing and logistics, trying to strip out costs and bring more value to the table. Mars is adjusting, but in the process has enraged some segments of the trade by making abrupt policy changes that reduce retailers' profits. Mars's most persistent problem has been an inability to supply enough product to meet the orders it takes. In the parlance of the trade, Mars has a poor "fill rate." Says one insider familiar with the problem: "They have formed task force after task force to deal with the issue, but they just waste their time and money." The reason most often cited for Mars's distribution problem is its long-held policy of maximum asset utilization or, as some put it, beating its plants to death. The company is obsessed with asset utilization, to the point that the sales force is allowed to sell beyond capacity, even in peak periods. And Mars managers toe the line on this policy, knowing that their monthly pay packets rise and fall based on a computed return on total assets. Mars has also alienated any number of retailers and wholesalers by eliminating promotional money -- special discounts -- in favor of what is called "dead net" pricing. These funds, say $3 on a case worth $100, represent a major source of profit for the big wholesalers that employ forward buying: the practice of stockpiling huge amounts of deal merchandise for later sale at regular prices. Mars's move to dead-net pricing is in tune with contemporary global marketing practices. In fact, the company has done particularly well with warehouse clubs like Costco. But it approached the issue with its typical lack of diplomacy, simply withdrawing its promotional spending program cold turkey. Says one distributor: "They said, 'We are not going to spend any money with you; you are now just flow-through agents.' Well, there's a little company called Hershey out in Pennsylvania." That little company has been more flexible in its promotional spending. Another problem at Mars, cited by nearly every former Mars executive interviewed by FORTUNE, is the belief that the brothers' imperialist approach to management stifles all independent risk taking or thinking at the company, whether on the invention of new brands or the acquisition of other companies. And Mars clearly needs some new thinking: Of late it has been regarded as pathetically uncreative, particularly for a privately held business not shackled by the quarterly tyranny of Wall Street. The company has resorted to flinging line extensions into the air like so much confetti. The result: additions such as Almond M&M's or ice cream novelty knockoffs of each candy bar, products that have barely budged the sales needle. Milky Way II, an effort to produce an oxymoronic low-fat candy, died a miserable death but is now being revived as Milky Way Lite. Another bon bomb, P.B. Max, the company's answer to Hershey's popular Reese's Peanut Butter Cup, was just taken off life support and is being removed from the marketplace. To solve its new product problems the company recently named Ton Van Elst, a Dutch executive, to head up innovation efforts, according to industry sources. For all its problems, the Mars culture still displays great abilities as a field organization. Forrest Sr., a meticulous engineer, spent decades in Europe patiently developing the brands. He started a pet food industry long before most people in those countries would even consider feeding Fifi out of a can. His kind of pioneering required an organization that could take an expansion strategy and execute it without much help. Says one global competitor: "One thing Mars does better than any public company is understand the true importance of the international markets." Adds a former European executive of Mars: "Mars's real strength, to their credit, is excellent on- the-ground operations. You can go back to a market three years after it opens, and their brands have distribution on a wide scale." Mars was an early entry into the Russian market, and today the fruits of that groundwork are evident. From Moscow to St. Petersburg, kiosks bearing Mars products dot the landscape. The company advertised so heavily in Russia that Snickers has easily become one of the best-known American brands in the country. Last year the company shipped some 100,000 tons of chocolate into Russia, according to one analyst at Salomon Brothers. And then came the real miracle: Mars actually got its money out of that country. According to a number of sources, the "Russian bonus," as it became known, bailed the company out in 1992 and 1993, keeping factories humming all over Europe and the U.S. in the face of lagging market shares there. Mars also recently agreed to invest $100 million to build several factories in the town of Stupino to make pet food, candy, and human provender. The Mars brothers aren't just believers in global expansion, however. They also are unrepentant practitioners of global marketing, the theory that because we live in a homogenizing universe, many products can be sold the same way everywhere. One world, one brand, one message. That's why Mars has heavily backed such global sporting events as the World Cup and the Olympics. This simplicity of sell generates savings in advertising, packaging, distribution, and staff.

But global branding and its kin, Euro branding, has not proved to be a marketing cure for every product. It works for a product like Snickers because the brand's promise -- Snickers satisfies hunger toothsomely -- has universal application. Other forays on the international front have not fared well: Mars is just beginning to recover from John Mars's creation in 1992 of a so-called pan- European management structure, which was built on the idea that the company could run the same marketing program in Spain as in England, say, without maintaining separate marketing staffs in different countries. Many marketers still argue that European consumers are much less homogeneous than EC politicians might lead people to believe -- even when it comes to pet food. The program disrupted the entire organization.

ADDING TO the mess, say those who were on the scene, was brother Forrest's apparently arbitrary insistence that the company change the color of all the labels in the Whiskas cat food line to purple. The company, like its competitors, had traditionally used different color bands on the cans to denote different varieties: green for rabbit, red for beef. But to Forrest, building a block of color in the manner of a Coke, a global marketing paragon, made more sense. It didn't to European cat owners. The brothers further compounded their problems by refusing to invest money in new European pet food products and again found themselves behind the innovation curve. The results of all this were abysmal. In Britain, market share for the company's Whiskas brand cat food plummeted from 45% in 1989 to about 27% in 1994, before the company could apply a tourniquet. Sources say the unit earned 55 million pounds on 455 million pounds in sales in 1990, then plunged into the red by 1992. It eked out a small profit last year. The same global marketing strategy failed to stanch red ink at Kal Kan Foods, the U.S. pet food division. Over the past decade, Kal Kan brands have been changed to Mars's global brands -- Pedigree dog food and Whiskas and Sheba cat foods. The Pedigree change was brilliantly executed. But Kal Kan's big cat food brand, Whiskas, has turned into, well, a dog, with Mars losing half its market share in the transition. Last year brought more failure in the launch of Expert, a dog food designed to compete against the so-called scientific brands -- almost health food for your pet -- such as Iams and Colgate-Palmolive's Hill's. With infantrylike precision, Mars rolled the product across every supermarket in the country, creating special displays for stores. It also ignored the basic fact that consumers who purchase this type of product do so in pet shops and veterinary offices, not supermarkets. Industry experts say Expert is an unmitigated disaster that has cost the company at least $50 million. Competing pet food makers only shake their heads in wonder at the way Mars continues to lose money at Kal Kan. Says one pet food foe: "They are an enormously tough competitor. And they stick with it; but the downside is that they throw good money after bad. No publicly traded company would ever stay in a business that long and lose that much money." Any analysis of Mars always turns to the brothers and then inevitably turns into armchair psychology in search of some explanation for the enigmatic. They are the sons of an impossibly demanding father in Forrest Sr., about 90, whose single-mindedness built Mars into a powerhouse. But the elder Mars harangued them mercilessly and continuously, even in his retirement. Now in frail health, he lives in North Miami, Florida. The legacy of this abuse, goes the general view, is that the two brothers have worked like dogs -- and treated their employees similarly -- to prove to the old man that they are worthy successors.

IN THE PROCESS, John and Forrest have chewed up quite a bit of executive talent. And now that they are getting on in years, the question of what comes next is beginning to be asked around the company and the industry. Recently they named Graham White, head of Mars Canada, as company president. White has been described as a nice guy with a solid general-manager background by Mars standards. "The brothers are confident that Graham understands them," says an insider. White is the third president this decade, however, and the revolving door in the Mars executive suite is a serious issue. Departing executives, without rancor, openly question whether the brothers have the will or the vision to lead the company into the next decade, or at least until the next generation can take over. So who will succeed them? One possibility is that the company will be sold. Mars is wholly owned by John, Forrest Jr., and their sister, Jacqueline, but it's not as simple as it sounds. Both Forrest Jr. and Jackie have been to divorce court, and the dissolution of their marriages could yet come to bear on the company's future. Forrest is now remarried to a former lower-level Mars manager he met at the company's snack division -- a "zone five," sniffs one observer. Estimates of the divorce settlement with his former wife vary from $50 million to $800 million. Sister Jacqueline Mars Vogel last year splashed briefly into the tabloids with her divorce -- her second -- which is being loudly contested by her ex, a former boot salesman named Harold. He signed a prenuptial agreement that left him without a major share of the fortune, but he now claims that somehow in the bliss of pending matrimony Jackie neglected to tell him about the odd billion dollars in company stock she had tucked away, a disclosure required by New Jersey law. When Vogel's lawyer demanded to know the value of the company, he was told that the figure was not known, and not ascertainable. Here's some help: candy companies or brands have been selling for a multiple to sales of around 1.4. Grand Met recently sold its Alpo brand pet food, a No. 5, for 1.1 times sales. Mars Inc. is worth at least $15 billion. With family matters unsettled and the business under pressure, Mars now faces a critical period of uncertainty. New president Graham White is in all likelihood merely buffing the chair until one of the next generation of the Mars family inherits the Milky Way mantle. Which one of the ten Mars children that might be, and when, is unapparent because none of them have ever distinguished themselves, even though some are reportedly moving up the ranks. More important, if Mars continues to lose share in its mature markets, there could be less out there to run. Is it possible that the brothers' inability to hold together a management team, their failure to innovate, and their grating personal style are finally wearing down a once invincible foe in its industry? Says a competitor: "Their own hubris is their downfall. They are arrogant, and when arrogance exceeds your intellect you've got trouble."

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