I did crop eating mac and cheese. I loved mac and cheese. Craft mac and cheese specifically as a kid. The thing I remember most is that I may or may not have at different points eaten entire boxes of it myself. Our colleague, Jesse Newman, covers the food industry. Craft mac and cheese was mac and cheese. There was no other. And that's the way it was for decades. Craft mac and cheese dominated the pantry aisle at the supermarket. Literally. You know, you walk down that aisle and there is the Craft mac and cheese section. There is that section that has the blue and orange boxes that is just, you know, the core of the grocery store. It's like the non-political big blue wall. Yes, correct. But these days, noodles of new competitors are eating into Craft's market share. And that blue wall is looking more like a rainbow. There are a lot more brands than there used to be. And now you've got Annie's mac and cheese. That's sort of a lavender color. You've got a new rival. Goodles. They've got all kinds of different colors. They've got a teal. They've got a red. So it's a much more diverse grocery aisle. So Craft was just king of mac and cheese for decades. And recently they have lost their grip on mac and cheese. And now Craft's big cheese status is under threat. This year, the company said it plans to spend more than $60 million to boost Craft mac and cheese. This story is really sort of the rise and fall of one of the world's biggest food companies. And how a company lost its way, tending to some of America's most iconic pantry staples like Craft mac and cheese. Welcome to the journal, our show about money, business and power. I'm Jessica Mendoza. It's Monday, February 2nd. Coming up on the show, how Craft lost its lock on mac and cheese. This episode is brought to you by Vanta. Security and compliance done wrong is a headache. Done right? You build trust and grow faster. That's Vanta. For start-ups, Vanta acts as your first security hire, using AI to get you compliant fast. For enterprises, it's your AI powered hub for compliance, risk and automating workflows. From start-ups like Cursor to enterprises like Snowflake, top companies choose Vanta. Do security and compliance right? Get started today at Vanta.com. At EDF, we don't just encourage you to use less electricity. We actually reward you for it. That's why when you use less during peak times on weekdays, we give you free electricity on Sundays. How you use it is up to you. EDF, change is in our power. How so to shift weekdays peak usage by 40% to earn up to 16 hours of free electricity for something to failure to track. How so to shift weekdays peak usage by 40% to earn up to 16 hours of free electricity for something to failure to track. Take us back to the beginning. What is the origin story of craft mac and cheese? So if you go way back, the mac and cheese story starts with a gentleman by the name of James L. Craft. Naturally. Craft was a cheese seller in Illinois. He started out selling cheese out of a horse drawn wagon as one did. I can hear the sort of like film reel in the background as your talk is. And our protagonist James Craft, he went on to make processed cheese and then to make mac and cheese. And so Craft Mac and cheese as we know it was introduced in 1937 when it was released. It cost 19 cents a box and it became wildly popular during the Great Depression and during World War 2. Craft Mac and cheese was marketed as a quick, tasty and affordable meal for busy families. And that's been the brand's message for decades. I have a problem. It's my husband. He comes home for lunch. There's an easy solution. Craft macaroni and cheese dinner. As time went on, Craft began marketing its mac and cheese to kids. The brand partnered with popular cartoons like the Flintstones, the macaroni made for the modern Stone Age family. Scooby-Doo. And Rugrats. Rugrats macaroni and cheese. Kids are Rugrats adventure. And that cheesy formula worked. Kids loved it and Craft kept its hold on the mac and cheese market. But as the 2000s became the 2010s, consumer priorities began to shift. People were turning to other brands in the mac and cheese aisle, like Annie's, which promised an organic alternative. People are looking for fresher food, healthier food. They want cleaner labels, simpler ingredients, and a lot of Crafts products, including Craft Mac and cheese, just comes to be seen as sort of the epitome of processed food. This was true of many of their brands. Think, Jello, Kool-Aid. We love them as kids, but a lot of parents were already reaching for healthier options. In the face of these bigger shifts in the food industry, Craft made a drastic move. In 2015, the company merged with another huge name and packaged food. Hines. And I really can't overstate how big a deal this is in the food industry. This is supposed to be sort of a new chapter for many of these brands. Executives at the time said that the merger was going to make the brands more relevant. It was really going to rescue what, you know, already at this time, in some cases, were, were ailing brands. One of the architects of the merger was a private equity firm called 3G, which was known for its strategy of aggressive cost-cutting. They pretty quickly start to eliminate a lot of jobs, they close plans, and it's the big change at the start of Craft Time's life. And did that strategy improve the business? So it did improve profits. Okay. Craft time starts to, you know, both the highest operating profit margin among food companies. However, 3G has a lot of critics. And among them, Wall Street analysts, former employees, you know, watchers of the industry, who all say that, okay, you cut costs, but you lose all kinds of institutional knowledge. You lose, you know, marketing capabilities. You lose expertise in research and sales. And, you know, a lot of people view it as they just really got the organization. And that they cut costs at the expense of future growth. Though profits were up, over time, sales declined. In 2019, Craft Hines was forced to write down the value of its assets by $17 billion, in part because of some accounting errors. At the time, Craft Hines executive said that the changes to the food industry had a stronger impact on the company's brands than they anticipated. The pandemic brought some relief. Consumers turned back to home cooking and nostalgic comfort food, including those beloved blue boxes. In 2020, the president of US Business at Craft Hines told investors that the company had online sales that totaled to nearly 90 million pounds of mac and cheese. He said that was equivalent to 41 statues of liberty. But even as Craft Mac and Cheese was seeing a surge, new competitors were eyeing the market. One of them was a former craft employee named Paul Earl. And around 2020, Paul Earl is on the hunt for his next project. And he told me that he's sort of wandering grocery stores in Chicago, trying to figure out what to do next. And he stops dead in the mac and cheese aisle. And there Earl had an idea. He bought a few brands of mac and cheese and took them home. He has his son, his young son, as a taste tester. They taste a sort of better for you version. It doesn't get great marks. And then they taste craft mac and cheese. And Paul Earl said, look, you know, it still tasted pretty good. And most of all, it just brought back really fond memories. There's a lot of nostalgia. But he thought himself, this is no healthier than it was when I worked at Craft Decades Go. And this light goes off for him and he says, I can do this better. And that is the beginning of a mac and cheese product, a brand called Goodles. And Goodles, as you might guess from the name, they pitch it as this really fun, healthier take on an old classic. They call it noodles good. Goodles launched in 2021. It cost more than twice as much as crafts. But it advertised itself as more nutritious with higher protein. And also, as more grown up, offering flavors like Parmesan and cacio a pepe. And names like shell a good and twist my palm. They hit on what they think is a really key insight, which is that mac and cheese isn't just for kids. They think there's a whole different group out there that is either secretly eating mac and cheese and this being sort of young adults. And so they target a very different population. And Goodles says, look, we're bringing in this higher income consumer, this younger consumer. It's exactly the type of consumer that grocery stores are trying to bring back to the center of the store. It's exactly the type of consumer that some of the incumbents are losing. To supercharge its launch, Goodles enlisted the help of Wonder Woman. Extremely excited to share these news with you. Actor Gal Gadot signed on as a Goodles brand ambassador, praising the mac and cheese to her millions of followers on social media. You asked, we listened. And now Goodles is starting to roll in shelves at target stores around the country. So look for us, take a selfie. How is Goodles viewed by craft hines executives? Were they like concerned about this new kind of upstart in their space? Executives weren't super worried initially. Now employees that craft hines, that was another story. That's after the break. Could AI help you do more of what you love? 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In the spirit of impartiality, I asked my husband to whip them up for me. When they were ready, he served them in two bowls and I tried each of them while blindfolded. Okay, I'm going to start with the right one. Okay, not on to the mac and cheese. You cooked them really well. Thank you. It's cheesy, it's a little salty, it's pretty creamy, the pasta's got like a nice texture to it. All right, and then we've got this one on the left. Bowl number two. Bowl number two. That's also really good. The pasta texture is a little bit different. It's almost like... I figured out which was which pretty quickly. Goodles had that slightly earthier texture to the pasta, while craft was sort of silky, but they did taste remarkably similar. They're both delicious, gotta say. But yeah, I could tell just from the texture immediately that this was slightly different. Craft Hines employees came to a similar conclusion, at least with Goodles' Chetty Mac flavor. When it first hit store shelves in 2022, employees set up their own taste test. Here's our colleague Jesse again. So the Chetty Mac, it was decided, tasted pretty good. On the other flavors, opinions varied. The sense was that there was more work that was needed. And it was particularly the texture that was described to me as a bit iffy. But it was pretty close to craft's nostalgic flavor. And the fact was that Goodles was just one competitor in a growing number of brands in the Mac and Cheese market. And that worried craft employees. They started telling executives at Craft Hunts, hey, you know, we might have a problem here. Every major retailer has a new Mac and Cheese brand. They've been dealing with competition from Annie's. And more broadly, they're seeing that consumers are, they're leaving the Mac and Cheese category altogether. They are turning to other quick foods like ramen, which comes on the scene with a lot of new, exciting flavors. And then Craft Mac and Cheese buyers are going to some of these less expensive store brands like, you know, say Walmart's great value. So there's signs of trouble in Mac and Cheese. And then there's Goodles. But Craft Mac and Cheese was still selling a billion dollars worth of product a year. And company executives had more pressing things on their minds. Other parts of the business were also struggling from Oscar Meyer to Maxwell House. According to Jesse, a lot of Craft Hunts products just happen to be on the wrong side of consumer trends. So I just want to say one other thing just to mention that is sort of going on holistically across the business. And this is a pervasive problem that I think gets in the way of Craft Mac and Cheese making more progress. And that is what I would just refer to as sort of like general corporate chaos. There's a lot of restructures. There's a lot of churn among employees. And what was described to me was how that really disrupted things. And, you know, it meant that there was like constantly new priorities. In the midst of all this, Craft Mac and Cheese continued to lose market share. Eventually, the company turned its attention to its blue boxes. And Craft Hines declared 2025 the year of Mac and Cheese. And they decided that, you know, flavors is a big part of the answer. And so they launched a bunch of new flavors. Some of them are limited edition like pizza and garlic Parmesan, pizza, pizza Mac and cheese, pizza, everything bagel. Got like hot honey. Wow. They really go hard on the flavors. The company also dialed up the cheese. It introduced a bigger box that said it can feed a family of five for two dollars. And it updated its packaging to show that the product doesn't contain artificial flavors, preservatives or dyes. But all that still hasn't been enough to turn things around, either for Craft Hines or its Mac and Cheese. And in September, Craft Hines announced that it was unwinding its merger and splitting up into two companies. And as for its Mac and Cheese brand. Between 2022 and 2025, they went from capturing 45% of American Mac and Cheese dollars to 39%. So they've lost a significant amount of Mac and... They've lost a significant amount of market share. So did the year of Mac and Cheese help at all? Through the year, sales were still down compared to the year prior. Now the company has said things are improving. They pointed to this four week period in November where sales were up. So they said, look, you know, things... We're not happy with where things are. But we are seeing progress. One executive at Craft Hines told Jesse that the company now knows its brands better than it's ever known them. And this year, the company plans to roll out a higher protein Mac and Cheese that it said will be more affordable than competitors versions. It's also working on a premium line with bolder flavors and fancier cheeses. Where did Craft kind of lose its way here? At the end of the day, it is a story of mismanagement and executives who missed signals and opportunities. They really rested on the laurels of these longtime brands that in fact no longer had the cache with consumers that they once did. So I think they missed an opportunity to listen to employees who were close to consumers and who were close to retailers who were saying this product needs an upgrade. And they thought that retailers wouldn't get rid of the blue box. And that's largely true. But as we've seen, they could sure shrink its presence on shelves if something better comes along. And something better will always come along because there are brands out there fighting to give consumers what they want. And if you aren't one of them, you're very vulnerable and best of luck to you. That's all for today, Monday, February 2nd. The journal is a co-production of Spotify and the Wall Street Journal. Special shout out to my husband, Dylan Lewis, for offering his culinary talents. Thanks for listening. See you tomorrow.
