This is a block of real cheese.
This is a slice of real cheese.
And this is a delicious slice of processed cheese — better known as
American Cheese or Kraft Singles.
Today, people from all over the world eat processed cheese every day.
And Americans consume on average 40 pounds each year.
In the past, that would have never been possible since cheese spoiled
very fast from not being refrigerated.
In fact, refrigerators didn't even exist at the time.
Because of this, businesses lost massive amounts of inventory and
profits — up until one, brave man made a monumental breakthrough in the industry.
This is the story of how a man stranded in Chicago used his last $65 and leftover cheese
scraps to build a billion-dollar empire.
James Kraft was born in 1874 in Fort Erie, Canada to farmers,
George Krafft and Minerva Tripp.
Growing up, James was expected to work hard and follow strict rules.
And after graduating from high school, he maintained those values by
working as a clerk at a general store.
James stayed at the general store for several years, but eventually,
he found himself wanting more.
So he packed his bags and moved to Buffalo, New York, to work as a secretary and
treasurer for the Shefford Cheese Company.
After only a year, James had proved himself worthy and became a partner in the business.
That same year, he was sent to Chicago to inspect a company branch.
While there, James received devastating news.
The other partners decided to dissolve their agreement.
While James was stranded with only $65 to his name, he decided to risk
starting his own business in an industry he already knew: cheese.
After renting a horse and carriage, James traveled to Chicago’s warehouse district
and bought stacks of wholesale cheese.
Afterward, he sold the cheese to stores around the city, saving them from making
the trip to the district themselves.
Six years later, James’ wholesale cheese business became so successful that he
managed to hire his brothers to help him.
Together, they incorporated as J.L.
Kraft & Bros.
Co and later shortened it to Kraft.
Little did James Know he enlisted help at the perfect time.
At the time, more Americans than ever were working long hours and
physically demanding factory jobs with less time to cook their meals.
This led to them turning to dairy products because of its many benefits, like being
packed with nutrition and cheaper and easier to find than staples like bread and eggs.
However, like most foods at the time, dairy, particularly cheese, was susceptible to
spoilage and could even lead to the deadly disease, tuberculosis . So while in demand
in America, businesses in the industry missed out on profits from losing cheese to spoilage.
Fortunately, a solution was being worked on halfway around the world.
In Switzerland, two cheese makers named Walter Gerber and Fritz Stettler were
working on a way to invent processed cheese so that the dairy product would be more
resistant to spoilage and last longer.
First, Walter and Fritz took some Emmental cheese and heated it to kill harmful
bacteria that could cause diseases.
This technique, pasteurization, was considered obscure at the time.
Walter and Fritz discovered that when applied to cheese, the fat and oil would separate
— leading to gooey gobs floating in liquid.
Fortunately, the two found a solution that would not only fix the problem,
but lead to them achieving their goal.
After heating their cheese, Walter and Fritz added sodium citrate and made a breakthrough:
the emulsifier not only kept the fat and oil together, but made the cheese more
resistant to spoilage and last longer.
To capitalize on their success, the cheesemakers sold their Swiss processed
cheese made with Emmental in small, tin cans.
Back in America, James realized that if he could find a way to make his own processed
cheese, his company could expand into the first national cheese brand and make a fortune.
James began experimenting by heating a jar to kill harmful bacteria and then
placed leftover cheddar cheese inside.
When that didn’t work, he tried sealing the cheese inside cans,
but that ended up failing as well.
Eventually, James turned to the same obscure technique that Walter
and Fritz had: pasteurization.
But like the two cheesemakers, James ran into the same issue of the fat and oil separating
— leading to gooey gobs floating in liquid.
Determined to succeed, James spent countless, sleepless nights trying to find a solution.
It wasn’t until two years later that he finally made his own breakthrough.
Like Walter and Fritz, James added an emulsifier, sodium phosphate, to his cheese
and discovered it also kept the fat and oil together and made the cheese more
resistant to spoilage and last longer.
Plus, it had incredible flavour.
After perfecting the recipe, James purchased his first factory and began
to sell his American processed cheese made with cheddar in small, tin cans.
While many consumers were still concerned about cheese spoiling, others
were eager to try James’ invention, and as time passed, interest grew.
Only one year after launching, Kraft’s sales rose from $5,000 to
$150,000 — prompting James to file a patent for his American processed cheese.
Fortunately, it didn’t take very long for it to be approved.
James could now focus on expanding nationally with ease.
However, it wasn’t long until all of that changed.
James, and every other American, would soon be shaken by unexpected news.
When the First World War broke out, President Woodrow Wilson proclaimed the U.S.
would remain neutral.
But after nearly three years, the U.S.
government announced America would enter the war and send millions of soldiers overseas.
The U.S.
military was so unprepared that finding a way to keep soldiers
from going hungry was a challenge.
To help the war effort, James reached out to the U.S.
government and offered to sell them his processed cheese.
They accepted James’ offer considering his cheese was packed with nutrition,
lasted longer than regular cheese, and was lightweight to ship.
By the end of the war, the U.S.
government bought 6 million pounds of Kraft’s processed cheese.
And when troops returned home, they wanted more of it — contributing to
Kraft bringing in $119 million in sales.
Soon after, Kraft began to expand across the U.S.
and build a presence overseas.
The war had unexpectedly helped James achieve his goal of Kraft being
the first national cheese brand.
But unbeknownst to him, it would also be the reason why his company
would soon struggle to stay on top.
When the U.S.
entered the war, President Wilson instituted a ban on alcohol to save the grain used for food.
And while intended to be temporary, the ban ended up becoming a national law.
Many breweries decided to shut down while others began to think of new products to sell.
Pabst, one of the largest breweries in the country, was among those
that refused to throw in the towel.
Pabst had been in the beer industry for decades and was being run
by the founder’s son, Gustave.
Gustave had tried to keep the family business going by selling an
oatmeal drink but it wasn’t enough.
Eventually, he made the difficult decision to close Pabst’s doors.
When Gustave’s younger, estranged brother, Fred, found out, he was shocked.
Although he had left Pabst years ago to pursue his own ventures, he was very sentimental and
didn’t want the family business to disappear.
So to his brother's surprise, Fred reached out and vowed to find a way to save the company.
Not long after returning to Pabst, Fred came up with an idea to save the company:
trying to make and sell processed cheese.
It was a brilliant idea considering if successful, Fred could make use
of Pabst’s farms, manufacturing facilities, and distribution network.
Fortunately, Fred did succeed and ended up making a processed
cheese product called Pabst-Ett.
Pabst-ett was available in cheddar, pimento, or Swiss and sold in crocks.
When Pabst-ett hit stores, consumers immediately loved it.
Pabst was quick to capitalize on the demand by releasing cookbooks with
different recipes using the cheese spread.
Within the first year of launching, Pabst-ett increases the company’s
gross profit to $22 million.
Around this time, James discovered what he considered a copycat of his invention and filed
a patent infringement lawsuit against Pabst.
Three years later, the lawsuit went to trial.
In court, Pabst argued that it wasn’t infringing on Kraft's patent since their
processed cheese recipe was different.
Still, after an eight month trial, Kraft won their case since it patented its processed
cheese method — as opposed to the recipe — and Pabst’s method was very similar to theirs.
Rather than boast about his victory, James made Pabst an unexpected
offer: granting them a license to use their patent in exchange for a fee.
Pabst put aside any bitterness and agreed.
From then on, Kraft tightened its grip in the cheese market by acquiring
competing products like Velveeta cheese, Philadelphia cream cheese, and when
the prohibition ended, even Pabst.
The company also continued to innovate with new products that became
household staples, most notably, Kraft Macaroni & Cheese and Kraft singles.
In the following years, Kraft had managed to control 50% of the processed cheese market.
And when the company went public, it raised over $8 billion — leading to their
IPO being the second largest in U.S.
history.
Kraft’s success then caught the attention of world-famous investor, Warren Buffet, who
spearheaded a merger between Kraft and Heinz.
Today, Kraft-Heinz is one of the largest food companies in the world and
people from all over continue to eat processed cheese on almost everything,
from burgers to macaroni and nachos.
In fact, Americans consume an average of 40 pounds of cheese each year.
And during the pandemic, the demand for non-perishables like Kraft products
were so high that the company had to keep some of their factories running
24/7 — contributing to Kraft-Heinz remaining a $40 billion global corporation.
This is the story of how a man stranded in Chicago used his last $65
and leftover cheese scraps to build the billion-dollar Kraft empire.
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