Newman's Own nears $500 million mark, but feel-good success stings some family

When the CEO of Newman's Own, Mike McGrath, meets with retailers, he talks about all the great-tasting foods the company that bears Paul Newman's name makes, and there are a lot — the product line has grown from the original oil-and-vinegar salad dressing in 1982 to 324 products today. But lately he's changed his sales pitch to focus a little more on the fact that 100 percent of profits go to charity — the company will surpass more than $500 million in total giving this year.

"We put that in front of our retailers every time we meet with them," said McGrath, seated in his office at the Westport, Connecticut, headquarters of Newman's Own. "And they respond favorably, but honestly, a couple of them don't know who Paul Newman was. Some of the younger people are like, 'Was he a singer?'"

Just for the record, Paul Newman was an actor, a superstar one at that, who ruled the box office in his heyday in the 1960s and '70s with such iconic hits as "The Hustler," "Butch Cassidy and the Sundance Kid" and "The Sting." But millennials can be forgiven if they don't remember Newman, who passed away in 2008 and whose last onscreen appearance in a feature film was in 2002's "Road to Perdition." Newman would be just fine with the fact that's he's now known more for his philanthropy than his filmography and that his salad dressing has out-grossed his movies.

"I think he'd be really happy with the company and the foundation," said Bob Forrester, the president and CEO of the Newman's Own Foundation and the executive chairman of the food company. "He would really like the grant-making that was going on, and he would absolutely love the food."

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Last year the privately held company, which is celebrating its 35th anniversary, gave away close to $30 million to about 600 organizations after generating more than $600 million in retail brand sales. "Our goal is to make this a billion-dollar brand," McGrath said. "We've had a great bunch of years. The goal is to get that annual giving number up. That's what we work for."

To that end, McGrath has redesigned the packaging this year to emphasize the charitable giving — "It's what differentiates us," he says — and is expanding Newman's Own Organics with four new products in existing lines of pasta sauce, salad dressing and salsa, as well as a new line of organic mayonnaise. "That's a big area we're spending a lot of time on to make sure we're coming up with some great-tasting organic products," he said. "We started doing organic products 25 years ago, and when we talk to consumers, they remember that we created all these organic products."

It was Newman's oldest daughter, Nell, with actress Joanne Woodward, who convinced him that organic food was the fare of the future when she cooked him an all-organic Thanksgiving dinner in 1992. "Pop thought organic was the same thing as health food, which in those days didn't necessarily taste very good," said Nell, a biologist and environmentalist who now runs her own charitable foundation. "So eating a turkey with stuffing, petit pois, a beautiful salad and pumpkin pie and then telling him it's all organic, he learned it's just a growing methodology, not a form of cooking."

The first couple of products, Newman's Own Organics Pretzels and Fig Newmans, became the best-selling organic snack food and cookie soon after their introductions a year later. There are now more than 150 organic products, but Nell is no longer involved with the company, which became apparent two years ago when the company replaced the American Gothic-like photo of her and her dad on the labels with just Paul's picture.

"I'm really proud to have been a part of it," Nell says now, noting that the organics division generated $50 million for charity over her 21 years. "I'm just sorry they didn't want to continue to use that iconic, award-winning packaging, because my sister Lissy designed it and made our costumes, and Pop and I had such a great time doing that photo shoot, so it's sad to see that disappear, considering that was about half my life's work."

The division, which was based in California where Nell lives, was done under a limited licensing agreement with the expectation that when it expired, the line would be brought back into the fold, which it was in December 2014. Newman's Own was also making its own organic products, and there were license complications that would limit the ability of both companies to grow their product lines.

Although the youngest of Newman's five daughters, Clea Newman Soderlund, sits on the board of the foundation, some of Newman's children aren't happy with the lack of a larger Newman presence in the company or at the foundation, as well as skeptically viewing large increases in executive salaries and a new $14 million office building. "I feel like the Newman family has been taken hostage by Bob Forrester," the eldest daughter, Susan Kendall Newman, told Vanity Fair in 2015.

Nell has misgivings as well: "I don't think this is what my father would have wanted. He was a man of simple tastes, and he was a loyal to a fault. My dad did tell us we were all going to rotate on and off the board. I haven't been asked to join the board, but it's water under the bridge, unfortunately. I am disappointed. But such is the way of the world in big business. Time to move on."

Clea remains happy with Forrester's leadership. "My dad would just be honored that people are continuing to trust the products and buy them so we can support wonderful organizations. He came up with a model nobody ever thought of before, and that was so typical of him. We're at almost half a billion dollars in charitable giving from a lark. It was like a joke in the beginning."

Forrester's view is that Newman never thought the company or foundation had anything to do with his family. "It was for the public good. He organized his private estate so that ultimately 90 percent of that or more ends up in charity that each daughter will [control]. Susan never came and talked to me about anything. Families are complicated. I can't comment further than that. My job is to protect Paul."

Truth be told, Newman wasn't big on planning, which is evident by a sign that used to hang in his office and now hangs in the boardroom: "If we had a plan, we'd be screwed." He had only two guiding principles with regard to the company: Quality trumps profits, and all profits go to charity. Forrester and McGrath are charged with growing the company with the best-tasting products possible so the most money possible can go to charity, like the SeriousFun Children's Network, which was started by Newman and has served more than 730,000 seriously ill children and their families in more than 50 countries since 1988.

"Nobody in the food business gives 100 percent profits to charity," said McGrath, who has been in the business since the early '80s. "But the most important thing is what the product tastes like. The reality is, if the product didn't taste good, people wouldn't buy it and we wouldn't be talking about 100 percent profits to charity."

— By Tom Cunneff, special to CNBC.com