New World Pasta Company Business Information, Profile, and History

Company Perspectives:

The pasta companies from which New World Pasta was formed were built upon a firm commitment to quality and value. These principles helped establish the companies in strong market positions within their individual regions.

History of New World Pasta Company

New World Pasta Company is the leading manufacturer of dried pasta in the United States. It sells a variety of long-standing regional brands of pasta, including American Beauty, Skinner, Prince, Creamette, Ronzoni, San Giorgio, and Mrs. Weiss. The company also manufactures pasta for private labels and sells pasta and pasta products to institutional customers such as hospitals and prisons and to the restaurant industry. New World operates five manufacturing plants located in Winchester, Virginia; St. Louis, Missouri; Louisville, Kentucky; Omaha, Nebraska, and Fresno, California. The company also manufactures two brands of pasta, Catelli and Lancia, sold in Canada, and owns two Italian brands, Monder and Albador. New World was formed in 1999 out of Hershey Food Corporation's pasta division. In 2001, New World combined the former Hershey operations with most of the pasta division of Borden. The company is privately held, with about 85 percent in the hands of New York-based investment group Joseph Littlejohn & Levy. An additional 11 percent is owned by the company's largest grain supplier, Miller Milling Company of Minneapolis.

A History of Small Regional Brands

New World Pasta began in 1999 as a private company that had previously been the Hershey Pasta Group, a division of Hershey Foods. Hershey, known for its chocolate and confections, formed the Pasta Group in 1984, but it had been buying up small pasta makers since the mid-1960s. The pasta industry went through rapid consolidation in the mid-1980s, as many large food companies, including Borden, General Foods, and Coca-Cola, echoed Hershey's strategy and snapped up small independent noodle makers. These larger food companies gained market share by acquiring brands with strong regional followings, but no manufacturer succeeded in rolling out a truly national brand. The brands that today make up New World Pasta all began as family-run companies which marketed inside fairly small geographic areas and often claimed intense customer loyalty.

Pasta was known in Italy from at least 1000 A.D., and during the 15th and 16th centuries it was manufactured throughout a growing region by specialized guilds. The making of pasta was increasingly mechanized in the mid-19th century, and in the early years of the 20th century mechanical dryers produced a new kind of hard pasta that could be shipped abroad. As Italians immigrated to the United States, their new homeland became a huge market for imported pasta. In 1913, Italy exported some 70,000 tons of pasta, most destined for the United States. Around this same time, Italian immigrants began setting up their own pasta factories in cities around the country. San Giorgio Macaroni Company was founded in Lebanon, Pennsylvania, in 1914 by a young Italian immigrant named Girolamo Guerrisi. Guerrisi came to the United States when he was 22 years old and worked in the fruit business. Within two years, he had saved enough to buy the Keystone Macaroni Company in Lebanon. He renamed it San Giorgio, and it operated as a regional brand until it was acquired by Hershey in 1966. Another New World Pasta brand, American Beauty, was founded in Kansas City in 1912. Italian immigrant Rocco Sarli began the company, calling it at first the Kansas City Macaroni and Importing Company. In 1916, Sarli's company merged with the Denver Macaroni Company, which used the American Beauty brand name. The Kansas City Macaroni Company developed a large market during the Great Depression, at which time it had the single largest geographic distribution of any American pasta brand. In 1947, the company changed its name to American Beauty. It went on to open new manufacturing plants in Los Angeles and Salt Lake City, and by the mid-1960s American Beauty ran eight plants throughout the West and Midwest. The company remained in the hands of two founding families, the Sarlis and the Vagninos, through the mid-1960s. In 1977, it was sold to Pillsbury, and in 1984 Hershey acquired it.

The Prince brand was founded at almost the same time as American Beauty and San Giorgio, also by Italian immigrants. Gaetano LaMarco, Guiseppe Seminara, and Michele Cantella, who all hailed from the same village in Sicily, went into business together on Prince Street in Boston in 1912, forming the Prince Macaroni Manufacturing Company. Prince Macaroni had a thriving market in the Italian immigrant community in North Boston. The company expanded in 1917 into a seven-story building which included a railroad yard so that trains bringing grain could unload right inside the factory. Over the next twenty years, the company continued to expand, and in 1939 Prince moved again to a new facility, this time in nearby Lowell, Massachusetts. In 1940, another Sicilian, Guiseppe Pellegrino, began working at Prince. Pellegrino's wife's family had run a pasta factory in Brooklyn, New York, but it was destroyed by fire. Pellegrino was apparently so taken with Prince's fancy new Lowell factory that he moved into it while he saved up enough money to buy the plant. Pellegrino bought a controlling interest in Prince in 1941 and moved to expand its markets outside Massachusetts. During the early 1950s, virtually all of Prince's advertising was in Italian-language newspapers. Pasta was marketed as an ethnic Italian food. It had not yet crossed into the American mainstream and was in fact somewhat looked down upon as a cheap and filling food until its image began to change around the 1980s. Prince, though, began to reach out to non-Italians with radio ads in the 1950s. In 1969, it came up with a memorable television spot featuring a little boy running through his Boston neighborhood to the slogan "Wednesday is Prince spaghetti day." Prince acquired other pasta companies and increased its market well beyond the Boston area in the 1970s. It remained in the hands of the Pellegrino family until 1987.

The Creamette brand of macaroni was first manufactured by the Minnesota Macaroni Company, which was founded in 1916 in Minneapolis. James Williams eventually bought the Minnesota Macaroni Co. with his brother and redesigned the macaroni to have a thinner wall and larger center hole. This new macaroni, named Creamette, cooked faster than other brands, and it became a popular brand across the Midwest. Creamette was run by the Williams family until 1979, when it was sold to Borden.

Skinner was the second pasta brand that Hershey acquired. This company too was founded early in the 20th century, in 1911, in Omaha, Nebraska. The company was formed by two brothers with the not very Italian sounding names of Lloyd M. and Paul F. Skinner. The Skinner brothers made a variety of food products at their company, including what is considered the first powdered fruit drink mix, called Quick-Ade, in the 1920s. The Skinners also pioneered the well-known American breakfast cereal Raisin Bran and manufactured this until 1963, when the company sold its cereal business to the Uncle Sam Breakfast Food Company. The pasta business continued to be run by one of the brothers, then by his son, Lloyd E. Skinner, who took over in 1950. Lloyd E. Skinner led the company in the acquisition of several other regional pasta makers in the 1960s. In 1979, Hershey bought Skinner Macaroni and merged it into its San Giorgio Macaroni unit. Eventually Skinner and San Giorgio formed the core of the Hershey Pasta Group, which was run by C. Mickey Skinner, a cousin of Lloyd E. Skinner. C. Mickey Skinner ran Hershey's pasta business until 1997, when he retired. He came out of retirement in 1999 to run New World Pasta.

Hershey's Pasta Division in the 1970s-80s

These various pasta manufacturers were similar in many ways. Most had been selling pasta under one or two brand names for a long time and had strong customer loyalty for a product that changed little over the years. Consumers were so used to their favorite regional brands that it was very difficult to bring in new brands. Prince, which by 1979 had sales of $100 million and was one of the top three regional pasta makers in the United States, had tried to move into upstate New York in the early 1960s, buying the Meisenzahl Macaroni Co. in Rochester. Meisenzahl had a 25 percent market share in the upstate region. When Prince put its name on the Meisenzahl product, the result was a financial disaster. Even though Prince had a strong following in Boston and other parts of the Northeast, people in upstate New York apparently were unwilling to try it, and the Meisenzahl customer base disappeared.

Nevertheless, many larger food companies had their eyes on the pasta market, seeing great potential for growth. Per capita consumption of pasta in the United States doubled between 1950 and 1980, with most of the increase beginning in the mid-1970s. By 1980, average consumption was about ten pounds per person annually, and food industry analysts thought that figure could go up. Pasta sales could also spur other food business, because it was usually eaten with sauce and cheese. An article in Forbes (March 17, 1980) claimed that for every dollar's worth of pasta sold, another $8 to $10 of trimmings were rung up, and the potential market for pasta and pasta-related food items was at that time estimated at almost $10 billion. This potential brought several large contenders into the pasta field, including Pillsbury Co., Coca-Cola, Borden Inc., General Foods, Foremost-McKesson, Inc., and British food giant Ranks Hovis McDougall Ltd.

Some of these companies entered the pasta market only to drop out after a few years. Hershey Foods was one of the few to persist. Hershey had built its reputation on chocolate, but it branched out into other foods, buying San Giorgio Macaroni Co. in 1966. In 1979, it bought Skinner Macaroni and merged it with its existing pasta unit to form San Giorgio-Skinner Inc. In 1984, San Giorgio-Skinner became an operating division of Hershey under the new name Hershey Pasta Group, led by C. Mickey Skinner. That year, the Hershey Pasta Group acquired the American Beauty brand from Pillsbury. Pillsbury had bought the family company in 1977 and closed some of its plants. When Hershey took over the company, American Beauty still had three plants in the West, where it was a leading brand. By the late 1980s, Hershey's pasta brands were contributing almost 10 percent to the company's overall revenue, and sales had risen steadily. Hershey's three brands then controlled about 18 percent of the U.S. pasta market.

Hershey had become the nation's second-largest pasta maker, behind Borden, and there were fewer independent pasta companies left. Two of the biggest pasta makers in the Northeast, Massachusetts-based Prince and New York-based Ronzoni, had been bought up in the 1980s, with Ronzoni going to General Foods in 1984 and Prince to Borden in 1987. In 1990, Hershey Pasta Group acquired Ronzoni from General Foods for an estimated $80 to $86 million. This deal brought Hershey's share of the U.S. pasta market to around 27 percent, close behind Borden, which had just over 30 percent. By 1990, Hershey ran five pasta plants, and it sold a total of nine brands.

Consolidation in the 1990s

Hershey continued to acquire regional pasta companies in the early 1990s. It bought two Ohio manufacturers in 1993, the Ideal Macaroni Co. and the Weiss Noodle Co. The pasta division discussed rolling out one national pasta brand but never did. C. Mickey Skinner, chief executive of the pasta group, claimed in an interview with Milling & Baking News (December 2, 1997) that "pasta products purchased today are the same that a mother or grandmother purchased. As long as you provide good, consistent quality at a reasonable value, customers are not likely to change." Though Hershey standardized the raw materials and thickness of a new brand when it acquired it, the company continued to market under the original pasta name. It was not a market category that accepted much innovation, and Hershey's efforts to bring out a microwaveable pasta, for example, did not meet with much success. In some parts of the country, Hershey brands competed directly with each other. For example, in New York, Ronzoni had long been the leading brand, while muscling in on it from the number two spot was another Hershey product, San Giorgio.

Hershey built a new manufacturing plant in Winchester, Virginia, in the 1990s, giving it one of the most modern pasta factories in the world. However, it faced increased competition when a venerable Italian pasta manufacturer, Barilla, decided to build its first plant on American soil. Hershey was able to build some additional business by manufacturing pasta for private label customers and by making pasta for ingredients in boxed meals sold by other food companies. Pasta consumption in the United States continued to grow throughout most of the 1990s, reaching around 19 pounds per capita annually by 1997, up from about 11 pounds in the mid-1980s.

Creation of New World Pasta

C. Mickey Skinner retired from Hershey in 1997, leaving the leadership of the Hershey Pasta and Grocery Group to Jay F. Carr. Hershey had become the leading pasta manufacturer by that year, but sales were beginning to stagnate. Sales of pasta overall in the United States dropped about 2 percent in 1998 and again in 1999. Hershey stopped putting money into promoting pasta sales, and other general factors contributed to a lessening of the product's popularity. C. Mickey Skinner, looking back on the drop in an article in Supermarket Business (February 15, 2000) claimed that the popularity of low-carbohydrate diets had put many consumers off pasta. Moreover, the end-of-the-century stock market boom years enabled more people to eat out in restaurants, crimping grocery sales. For whatever reason, the Pasta and Grocery Group was not doing as well as it had, and in 1999 Hershey Foods decided to spin off the division and concentrate on its core confectionary business. The last available sales data estimated the pasta unit had brought in around $400 million in 1997. In 1999, Hershey agreed to sell the division for $450 million to a group of investors led by the New York firm Joseph Littlejohn and Levy. The new private company took the name New World Pasta, which included all the previous Hershey pasta brands and manufacturing facilities. C. Mickey Skinner came out of retirement to head New World.

The company worked quickly to reverse the fall-off in pasta sales. New World had just over 26 percent of the United States pasta market, and the company initiated new marketing drives to increase its business. New World began promoting its products jointly with Ragu pasta sauce and began bringing out a wider variety of noodle shapes. The company initiated a sophisticated management tool that it said could analyze a supermarket account and recommend what mix of pasta brands the store should carry. And because intense brand loyalty made it difficult to extend marketing of its brands geographically, New World increased production of its non-branded, private-label products. Hershey had not been particularly interested in this end of the market, but New World pursued it as a growth area.

Skinner led the company through its first year then resumed his retirement. The new chief executive was John Denton, who had previously served as CEO of the snack food maker Snyder's of Hanover. In July 2001, the company announced that it was spending $43 million to buy Borden Foods' remaining pasta business. Borden had long been Hershey's prime competitor in the pasta industry, and it held the formidable Prince brand, Creamette macaroni, and several other regional brands. Borden, like Hershey, had decided to get out of the pasta business altogether, and it earlier sold seven brands to competitor American Italian Pasta Co. New World acquired five regional U.S. brands in the deal, plus two more in Canada and two in Italy. The transaction also gave New World five pasta factories, two in the United States, two in Canada, and one in Italy. Altogether, the business New World bought from Borden was estimated to bring in about $210 million. This left New World the undisputed leader in U.S. pasta sales, and revenue was expected to rise to around $500 million. By mid-2002 the company was still integrating and restructuring the Borden business, adding plant capacity and predicting moderate future growth.

Principal Competitors: American Italian Pasta Co.; Barilla S.p.A.

Chronology

• Key Dates:
• 1912: Prince Macaroni is founded in Boston.
• 1914: San Giorgio Macaroni Company is founded.
• 1966: Hershey begins acquisition of regional pasta companies with purchase of San Giorgio.
• 1979: Hershey buys Skinner Macaroni.
• 1984: Hershey acquires American Beauty and forms Hershey Pasta Group.
• 1987: Borden buys Prince.
• 1999: New World Pasta is founded when Hershey spins off its pasta division to an investment group.
• 2001: New World Pasta buys up the remaining pasta business of Borden.