OUTTAKE #10, Make a Lot of Something Out of Nothing

Jeno Paulucci was born in Aurora, Minnesota in 1918, to Ettore and Michelin Paulucci, who had emigrated from Italy six years earlier. His family was very poor even before the onset of the Great Depression, which hit when he was eleven.
When he was still very young, Jeno began contributing to the family by pulling a homemade wagon down to the railroad tracks where he could gather stray lumps of coal that could be used to heat the house. By the age of ten he was hawking fruits and vegetables at a local market, and at age sixteen he became a barker on Duluth’s produce row. In one legendary incident, Paulucci was able to sell eighteen crates of very brown bananas by shouting: “Get your Argentine bananas. You’ll never see bananas like this again.” The young man was such a loud and enthusiastic barker that the city of Duluth passed an ordinance banning barkers at fruit stands.
While serving in the military during World War II, Jeno noticed that his fellow soldiers loved Chinese food. When he returned home after the war, he found that the only canned Chinese food that was available was extremely bland. He also discovered that some local Japanese-Americans were growing bean sprouts, which were a major component of Chinese food. In 1947, noting that “You could buy mung beans at five cents a pound and turn it into eight pounds of sprouts," Paulucci decided to enter the canned Chinese food business. But he asked his Italian mother to help him spice up his product in order to enhance its flavor. He was unable to secure a bank loan to start up his business, so he borrowed $2,500 from a friend and started Chun King.
Paulucci’s philosophy of business consisted of the following two sentences: “Cut out the middleman,” and “Take advantage of waste.” In keeping with this philosophy, Paulucci traveled to Florida to visit farms, where he discovered that the celery was trimmed evenly in order to fit into crates for shipping. He contracted with celery growers to buy their celery-trimmings for a large discount. (These trimmings probably greatly enhanced the flavor of his chow mein, because the leaves at the top of the stalk are far more flavorful than the stalks themselves.) Celery is another one of the main components of chow mein, so armed with this substantial reduction in costs, Paulucci was able to undercut the prices of all his competitors. Paulucci’s company grew its own mushrooms locally, and when he realized out that though the mushroom compost was good for only one mushroom crop, the spent compost was still very good for growing other plants, Paulucci began selling the spent mushroom compost for potting soil, and made a big profit.
By the 1960s, Chun King was the leading brand of Chinese food in the United States, but the company was expanding so rapidly that quality control began to suffer. Eventually Chun King’s largest customer, a grocery chain called Food Fair, threatened to discontinue carrying the Chun King brand. Paulucci flew out to Philadelphia to meet with Food Fair’s head buyer. But when Paulucci opened a can to demonstrate Chun King’s high quality, he looked into the can and stared deeply into the bulging eyes of a large canned grasshopper. Before the client could see it, Paulucci reached into the can, removed the grasshopper, popped it into his mouth, chewed, swallowed, and smiled. Food Fair didn’t cancel the contract, Chun King kept growing, and in 1966 Paulucci sold Chun King to R.J. Reynolds for $63 million in cash.
Moral of the story: If you can figure out what to do with a material that everyone else throws away, you may become wealthy.


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