🍬 PEZ: The Cigarette-Inspired Candy | 10

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Jack, I have a confession to make.

This is a safe space.

Well, Jack, I've got a PBAD.

Okay.

Okay.

What does that mean?

A peanut butter addiction.

Every day at 4 p.m.

on on the dot, I need to have peanut butter in my body.

It's actually kind of like a peanut butter happy hour, you could say.

How does your wife react to that?

She's learned to live with my addiction, Jack.

It's so funny, Nick.

I'm a hoarder.

Like, that's my addiction.

Yeah.

I got 12 pieces of lumber just in case I can use it at the perfect moment at some point.

Well, Jack, maybe you could build me a shed for my peanut butter.

Because, Yetis, people, they got habits.

Yeah, some habits are good, Jack, but some habits of us hominids, they're bad habits.

So quitting bad habits has actually become a giant industry.

And take the granddaddy of all bad habits, smoking.

Smoking.

Even after decades of smoking decline, the smoking cessation industry cleared more than $28 billion in 2023.

Jack, could you sprinkle on some context for us, please?

That's twice as big as the global market for lipstick.

Now, whether it's gum or patches or nicotine-free vapes, there are a lot of ways for would-be quitters to quit.

But one of the original products to quit smoking was invented half a century century before Nicaragua or Nicoderm and 88 years before the very first jewel.

Besties, the miracle cure for smoking, is still around, but it's not behind the pharmacy counter.

You're gonna find the first cure for smoking in the candy aisle.

That's right, today's story is about the tiny pastel candy with the dispenser we can't stop playing with, Pez.

If I can only have one food for the rest of my life, that's easy.

Pez.

Troy-flavored Pez.

I mean, Jack, think about the Pez dispenser.

It kind of functions like a lighter, right?

It's shaped just like a lighter.

And that is because the Pez candy has got smoking roots.

Pez candy got its start in the late 1920s, but the iconic Pez dispenser would wait more than 20 years to come in for the assist.

Because as everyone knows, Pez is half toy, half candy.

It's the centaur of sweets.

They sell around 5 billion individual Pez candies every year.

That's one and a quarter sleeves of Pez for every man, woman, and child in America.

Which is so fitting, Jack, because despite being marketed to kids for a generation, Pez started out as a product for grown-ups.

And despite being around for almost 100 years, Pez is having a TikTok-fueled Gen Z moment today.

You can credit some of that excitement to Pez's passionate fans in the collector community.

These self-described Pez heads can spend thousands of dollars for rare Pez dispensers.

I mean, the Pez is like the only candy with a robust secondary market.

That's thanks to many, many character collabs that Pez has brokered over the years.

They partner with Disney and DreamWorks, Marvel and DC Comics, Star Wars and The Simpsons.

But when we say this story as characters, we're not just talking about your favorite Buzz Lightyear Pez dispenser.

No, we're not.

The Journey of Pez features real-life characters like an anti-smoking Austrian germaphobe and a Holocaust survivor turned British spy and a Midwestern machine operator better known as the Pez Outlaw.

It's a story about pivoting customer habits instead of fighting them.

And it's a story about how to turn your product into a full-blown experience.

Nick, let's load this Pez dispenser up.

Wait a minute.

How do you load this in again?

I haven't opened one in a while.

Jack, that's exactly why Pez is the best idea yet.

From Wondery and T-Boy, I'm Nick Martell.

And I'm Jack Kruvici-Crammer.

And this is the best idea yet.

The untold origin stories of the products you're obsessed with and the bold risk-takers that brought them to life.

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Yetis, you're sitting in a picturesque cafe in Vienna, Austria.

And this place is buzzing with conversations of architects and artists, composers, and capitalists bent over coffees and a little bit of schnapps.

And Jack,

do you smell that?

Freshly baked apple strudel on the way to your table right now.

Pretty, pretty good.

This is 1927, and the air, it is filled with more than just chatter about Venies politics.

It's also filled with smoke.

The haze from the cigarettes, the pipes, and the cigars looms like a mountain fog over all the tables and the apple strudel.

And one man cannot stand it.

Edward Haas III.

Edward has run a successful family business here in Austria called the Edward Haas Company.

And they make a special kind of baking powder invented by his grandfather, Edward Haas I.

But Ed III, he is the star of our story because Edward III is the one who really took this company to the next level.

They not only survived, but thrived during World War I after Ed invented the world's first ready-made cake mixture.

By the late 1920s, Ed Haas Company has several factories across Europe.

Everything's looking pretty great, except that whole smoking thing.

Yeah.

The habit is suddenly everywhere.

Ed can't stand it.

The cigarette boom Ed is seeing is thanks to the invention of rolling machines in the late 1800s.

After thousands of years of people smoking tobacco, mass-produced cigarettes are suddenly cheap, portable, and plentiful.

During World War I, American soldiers are provided cigarettes by the military as part of their daily rations.

Now, we should point out that people didn't know back then that smoking causes cancer.

So Edward's beef with smoking, it's that he thinks it's gross.

If you offer him a Cuban cigar, he's probably going to take it personally.

So bad smells and tobacco stained fingers get him itching for some soap.

Edward really wants to find a way to cure people of this filthy habit.

And so he lands on a minty clean solution, which drum roll please is, you ready for this, Jack?

Peppermint.

lozenges.

Yeah, exactly.

Peppermint lozenges.

Losanges.

Yes, peppermint lozenges.

You heard that right.

There we go, man.

Edward is mostly thinking about a repetitive oral fixation.

Instead of reaching for a pack of cigarettes, the would-be smoker can instead reach for their tin of mints.

He knows he can't stomp out this bad habit.

So instead, he's going to try and pivot what you would do when you feel the urge.

But before he can make these curative candies, there's one major challenge he still has to solve.

A peppermint puzzle, if you will.

Or Jack, a sugary cipher, if you will.

I will.

Let's hear it, Nick.

In Ed's day, baking peppermints is really expensive.

The recipe involves pouring natural peppermint flavoring into boiling sugar solution.

But peppermint oil is pricey and it evaporates at a high heat.

So the manufacturing process actually burns off half your supply of peppermint.

Imagine if Spotify lost half their songs just to stream them.

Yeah, the math wouldn't math.

So Edward, he wants to do do better, and he decides to hire a chemist named Dr.

Ortner to fix the problem.

So they together develop a process for cold pressing the peppermint into a nice tablet form.

So basically, they're milling granulated sugar into a much finer powdered sugar.

And this makes the sugar more absorbent and easier to press into a solid.

This new powdered sugar, it's the consistency of that sand that's perfectly powdery to build like a perfect sand castle.

I can feel it as you're describing it, Jack.

And when that powdered sugar mixes with the peppermint oil, it retains more of that natural flavor.

Then it's pressed by machines using thousands of pounds of pressure and cut into lozenges.

And voila, peppermint candy at like half the cost.

That is a profit puppy.

Now, Ed just needs a new name for this minty new candy he created.

He goes with the name Pfermintse, which is pepper and mint in German, okay?

But he uses an acronym to make it easier to to say because even for Germans, Pfermintze is hard to say.

He goes with the first, the middle, and the last letter of the word Pfeffermintse.

P

E

Z

Pez.

Interesting way to abbreviate a name.

Now, Bestie is when you think of Pez 1.0, get those multicolored bricks out of your mind.

Because this first batch is round, not square.

Oh, and instead of ejecting them from like Batman's neck or whatever, they come in two ordinary forms.

A simple foil-wrapped roll like Lifesavers or a small pocket-sized tin like Altoids.

And Edward, he starts sharing these pez drops with friends and colleagues.

And you know what they think?

They can't get enough of them.

So he buys a former belt factory in what's now the Czech Republic and converts it into candy production.

And this is where the peppermint magic will happen.

Peppermint magic, the candy, yes, not the nightclub in Reno.

Great point, Jack.

So to market this product beyond friends and family, Edward decides to to lean hard into the anti-smoking angle.

He even decides to verb his product with slogans like, smoking prohibited, pezzing allowed.

This is wild.

Ubering, Airbnb being, pezant.

100 years prior to all of our verbing.

Edward is definitely marketing these things to grown-ups.

He even runs print ads that play up the fresh breath angle for kissing.

So it's like there was kissing, there was Frenching, there was necking, and then there's pezzing, like that kind of a thing.

Edward goes even further, and he actually hires young women to hand out free samples of this Pez candy in public places.

He calls them Pez girls, and these Pez girls become a staple of Pez's core marketing strategy for decades to come.

So, Nick, you're saying the very first Pez dispensers were people?

Forget Stranger Danger.

Edward is like, free candy, just take it.

We got nice ladies handing it out.

Pez uses sex appeal to get people to stop smoking.

They're turning the tables on big tobacco.

And this guerrilla marketing, it works.

And soon, the Pez drops are taken off.

Pez, the candy, is the world's first ever commercialized product to help people quit smoking.

But Nick, you know what they say?

Mo Pez, Mo problems.

That's true, Jack.

Because as demand for Pez climbs, Ed tries to meet it with automation.

The round Pez requires hand packing by factory workers.

That takes hours.

So Ed changes the peppermint shape to be more machine friendly.

And that is how we get the brick-shaped tablet that we know and love today.

But then production stops abruptly for reasons you may have learned about in history class.

In 1938, the German Reich annexes Austria in something known as the Anschluss.

Like it or not, Austria is officially part of Hitler's Germany.

And by 1939, World War II is tearing through Europe.

Haas's factories have to shut down.

But by 1948, they're mostly up and running again.

They don't know it yet, but the Edward Haas Company is about to hit on a new idea that changes everything.

So, Jack, we mentioned earlier that Edward Haas III is kind of a clean freak, maybe even a germaphobe.

It's like dipping a chip.

Dip the chip once and end it.

And the thing is, he thinks that the Pez 10, you know, one of his main products, is very unsanitary.

Because if you offer your buddy a mint, suddenly their paw is all up in your candies, man.

It's like the original super spreader event.

Meanwhile, think about cigarette packs.

You know, the bad habit Pez is supposed to be replacing.

Right.

With those, you just tap the bottom of the box and a cigarette pops out.

You only touch the one that you're taking.

You can even dispense them with one hand.

Like the dirtiest habit has a surprisingly sanitary element to it.

So our buddy Edward, he's craving that smooth, one-handed action for his product that the cigarette has.

And that's when he decides to hire an engineer and inventor named Oscar Uxa.

And besties, Oscar's previous claim to fame is ironic for a guy working on an anti-smoking device because Oscar designed a self-closing one-handed lighter back in 1934.

A lighter for smoking cigarettes.

He figures this is exactly the guy he needs to design his mint dispenser.

He wants to capture the tactile feeling of lighting up while saving your lungs and be a win-win.

I mean, Jack, you got to celebrate the win-wins.

Sure do.

Well, Oscar Uxa, he designs a mint dispenser that looks like,

you know, I'm looking at it right now and Jack, it looks like a lighter.

And it's got a flip top, which uses springs to push out the mints one at a time.

time.

It's basically the Pez dispenser you know and love minus the Bug's bunny head.

And just like Pez dispensers today, Oscar's dispenser holds 12 Pez tablets at a time.

The official name is the regular.

And honestly, again, Jack, I mean, this thing, it looks like a lighter.

Ed introduces this new lighter candy dispenser thing to the world at the 1949 Vienna Trade Fair.

Now, if Pez was popular before when it was sold in rolls and tins, with this new dispenser, it takes off.

Get this.

Pez starts shipping regulars by the millions.

And Ed has to build a second factory just to keep up with demand.

By 1951, they're exporting Pez to other European countries.

They're selling Pez-specific vending machines to handle all of it.

And they end up shipping 40,000 of them in one year.

It's kind of cool because a Pez-specific vending machine?

Yeah.

The irony is that a Pez dispenser is kind of already a Pez vending machine.

This is pretty metajack, but this is a vending machine within a vending machine.

It also really goes to show something Nick and I say all the time.

Your packaging, it matters so much.

Yes, yes, yes, yes, yes, it does.

In fact, a 2018 Ipsos poll showed that two-thirds of Americans agree a product's packaging influences their decision to buy.

And when it comes to buying gifts, that number goes up to eight and 10.

Like we say, the packaging is the product.

And Ed knows this.

The Pez dispenser turns his product into an experience.

Now, we should point out, Jack, that Ed has already got an Austrian patent for this Pez dispenser.

But since this Pez is about to become like one of Austria's biggest exports, he goes ahead and files for an American patent as well.

He figures, hey, it's time for this little smoking stopper to hit the USA.

Now, Arnold Schwarzenegger is only two years old at the time, but Pez is paving the way for a future of Austrian exports.

But unbeknownst to Eddie, his Pez product is about to hit a wall the size of the Marlboro man.

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Yetis, look both ways before you cross the street.

You're on 7th Avenue, Midtown Manhattan.

You're in in front of a newsstand.

You already bought your Packer Wrigleys and you already got your New York Times.

It's in your hand.

Maybe you got the New York Post if you're looking for a good sports page.

Mind you, this is 1955.

So that sports page is pretty juicy.

Three of the New York pro baseball teams have made the World Series in the past two years.

Jack, amazing time for American baseball.

Terrible time for American lungs.

Because the mid-1950s is the absolute apex of smoking in America.

Around 45% of the adult population smokes.

So if you're at a newsstand with a quarter to burn, you're probably buying a pack of six.

And as you make your purchase, Yetis, you see hidden under the latest issue of Life magazine, a rack of unusual looking plastic gadgets with the name Pez spelled out in big blocky letters.

Three flavors reflecting what Europeans think are American tastes.

Peppermint, lemon, and chlorophyll mint.

One second, let me whip out my biology textbook.

Jack, chlorophyll mint?

What's going on there, man?

It doesn't sound like a flavor I want to try.

No, it sounds like a flavor that photosynthesizes.

But either way, Eddie, if you're like most American consumers at the time, you're not giving Pez a second glance.

And that is a problem that's causing the Pez Haas Corporation to scratch its collective head.

At this point, the company has successfully placed Pez in 34 countries around the world.

Okay.

They're selling Pez in Afghanistan, in Cuba, and in the Congo.

But in the U.S., the candy is dangerously close to flopping.

Brutal.

Europeans may be willing to trade their smokes for peppermints, but 1950s America is wrapped in the tanned, muscular arms of the Marlboro man.

Yeties, remember, half the country smokes these cigarettes.

So, like the metric system, room temperature drinks, and the music of David Hasselhoff, Pez is working everywhere except America.

No one is interested in Edward's nerdy little candy dispenser.

They just want to light up and smoke away.

Well, Nick, no one except for one man.

His name is Curtis Alina.

He's Edwards' new vice president of U.S.

operations, and this guy is not a quitter.

Jack, can you give us a quick debrief on Curtis?

Curtis spent his childhood growing up in Vienna, just like Ed Haas, living on the same street as Zygmunt Freud.

Remember, Yetis, Curtis is coming up in the 1940s when the Austrian government becomes a puppet to Berlin.

So he and his family, who are all Jewish, are persecuted.

His mother and his three siblings, they actually don't survive the Holocaust.

But not only does Curtis survive, he gets scooped up by the British OSS, their version of the CIA, when his concentration camp gets liberated.

Before the war is over, Curtis becomes trained as a spy for the Allied effort in the war.

After the war, he ends up in New York City, and a friend puts Curtis in touch with a fellow Austrian named Edward Haas III.

And Eddie and Kurt, they hit it off.

Eddie loves him.

And so he hires Kurt at Pez, where Kurt starts working his way up the corporate ladder.

By 1955, Curtis is 33 years old and in charge of Pez USA, which remember, is struggling due to the whole anti, anti-smoking thing.

So they need to pivot this business to succeed in America.

And that's when Curtis thinks, what if we embrace our product's product's candy DNA and start appealing to children instead of adult smokers?

Hello, children.

How would you like a chlorophyll mint?

First thing they got to do is come up with some kid-friendly flavors.

They got to capri sun this thing.

They need orange, they need strawberry, they need wild cherry, because you got to have an adjective with kid flavors, Jack.

But fruity flavors, that's not going to turn around everything with Pez America.

Yeah, because it's not like the candy sector is easy to break into.

Good point.

The 1950s is seeing an explosion of brands and innovation in the candy aisle.

You got hot tamales, you got Tootsie Rolls, you got peanut MMs, you got peeps.

Peeps filed away for a future episode.

Let's make a note.

Noted.

And in a world where you can suddenly buy glittering marshmallow chicks, what chance does a tiny candy brick shaped like a vitamin really have?

Not even a Flintstone button.

Don't even get me started, Jack.

Well, Curtis, he sees the writing on the wall.

This candy, it's got no chance alone.

But they do have this unique dispenser thingy.

That's a differentiator.

So, Yetis, we do not know which employee at Pez USA dreams up dispensers that look like cartoons, but we do know that Curtis Alina makes the case to the big boss.

And over in Austria, the big boss, he takes his anti-smoking mission very seriously.

This whole company's mission is about saving lives.

And fresh breath.

But Curtis, he urges Ed to let him develop this idea.

And eventually, Ed relents.

Sales in the US are that abysmal.

He figures, I don't know, like, what the heck?

It can't get worse.

Let's give it a shot.

So Ed gives Curtis the green light.

Go ahead, make some Pez dispensers that look like toys.

And which are the first two that he makes, Nick?

What are they, Jack?

Two characters that 1950s children will recognize, they'll understand, and they'll adore.

A robot and Santa Claus.

They're pretty different from the modern version.

Yeah, yeah.

These things are like tiny, tiny, hard plastic pinatas.

They're full-body statuettes with candy inside, and they'll spit out a candy if you push them just right.

I mean, Jack, these first Pez dispensers, they kind of look like something TSA would confiscate.

Like, you are not getting through airline security with this thing.

They cost 25 cents a piece, and they come with two rolls of candy each.

Altogether, that's about three bucks in today's money.

Jack, it sounds like a deal until you figure out that a candy bar in the same era costs a fifth of that price.

I mean, hey, these things are candy and toys, right?

So Pez is leaning into the toy angle to justify that higher price.

And in the next year, 1956, they add a space gun dispenser that literally will shoot the Pez at you at like 12 miles per hour.

It's actually part toy, part candy, part weapon.

Like we said, the Pez, the centaur of the confectionery industry.

But this ray gun, it increases the price even higher.

Oh, brutal.

They have to sell it at 49 cents, which is twice as expensive as the Santa Pez dispenser.

And you know what, Yetis, this isn't price gouging.

It's just that these toys are like way more expensive to manufacture.

This new concept of the Pez gun toy combo, it is crushing their margins.

And that's a huge problem for Curtis Alina.

He's put his professional reputation on the line for these things.

He needs them to sell like hotcakes.

He needs them to make the company profitable.

But unfortunately, they don't.

Now, Curtis Alina knows that toy-like dispensers are the key to selling Pez to the youth market.

But let's talk about the unit economics here, Jack.

Since manufacturing costs are really high, customers are balking at 50 cents for a candy delivery system.

Plus, I bet those Pez tablets are a huge pain to pick out of the carpet after a bunch of brothers have a shootout with those Pez guns.

Well, that's when Curtis and his team have their aha moment.

What if we combine our regular Pez dispenser, the one that looked like a lighter, but we add a cartoon character at the top?

It's a real chocolate and peanut butter moment.

These two ideas go together perfectly.

Beautifully.

The dispenser has that satisfying tactile feel that made the original dispenser so successful with Europeans, and the cartoon character makes them fun for American children.

This design can also be manufactured for a lot less money per unit than the ray gun or the robot.

And since the dispenser bodies are now pretty much the same, it's less work to update the designs.

They're figuring out their pest supply chain.

More standardization equals more efficiency.

Just ask for a motor company.

The first character dispenser that we know hits shelves in 1957.

And it's not Snoopy and it's not some cool superhero either.

They launch it in the fall and so they go with a Halloween witch just in time for spooky season.

Seasonality, it sells baby.

If you want to make cash, look at a calendar.

And this one sells for 25 cents, including two Pez packs.

They got the price point down by 50%.

Well, whether it's the fresh new design, the scary witch, or just the fact that the kids like Halloween candy coming out of somebody's neck, this Pez takes off.

Curtis Alina sees wholesalers and brokers lining up outside the Pez warehouse just to scoop up their supplies.

But it isn't until the next year that Pez hits hockey stick growth.

In 1958, they licensed their first character, one that's been a major player, not in one, but two past episodes of this series, the best idea yet.

Don't say Popeye.

Popeye.

Are you kidding?

Popeye?

How is he in all of this?

Our favorite Sailor Man boosts Pez sales and validates the Pez brand to other companies with IP to license.

Casper the Friendly Ghost soon follows.

And in 1961, Curtis lands the ultimate character licensing deal, Mickey Mouse.

Mickey Mouse.

Pez is getting Disney money, baby.

That kicks off a partnership with the entire Disney universe that still thrives today.

And Pez goes all out.

They're doing dozens of dispensers from Donald Duck to Pinocchio.

And today, Pez has made more Disney character dispensers than any other license.

But this partnership with Disney doesn't stop Curtis from making friends all over Toy Town.

The list of licensing deals Pez will score over the next 70 years, it's enough to make Legos jealous.

We're talking Looney Tunes, Dreamwork, Star Wars, The Simpsons, from Marvel to DC Comics to real-life sports heroes.

If you've got IP, then Pez wants to talk.

This is how Pez builds its brand equity and its profile throughout the 60s and 70s.

The VP of Pez America, Curtis Alina, is getting so many licensing deals, it seems like high time to build up their U.S.

base of operations.

So far, Pez America has been importing their products from Europe, but in 1973, they get their very own U.S.

Made in America factory, which cuts down the shipping time on all those Popeye Pez's.

And they build that factory in Orange, Connecticut.

Remember that detail.

It's going to be a huge factor.

And besties, from this time onward, Pez kind of has things figured out.

Got it down.

Your product then versus now doesn't look super different.

Except in 1987, Pez pursues an innovation that's kind of a minovation.

It's a mini innovation, but it completely changes the product.

Pez gives their dispensers feet, which gives them shelf life, literally.

You can now put a Pez on your mantelpiece to show it off and it will stay there.

And that just creates value out of nowhere.

And to keep sales going, all Pez Pez has to do is keep making new characters to tie in with pop culture.

As long as culture keeps evolving, Pez dispensers will too.

So when Edward Haas III, the Pez inventor, sadly passes in 1986, he leaves behind a secure legacy.

But Edward could not have possibly predicted what his invention would inspire next.

So Bestie's funny thing, but back in college, when Jack and I walked into the same freshman year dorm as roommates, we actually had one thing in common.

Seinfeld DVDs.

Yeah.

I had season three, you had season four.

Perfect.

Good thing we didn't have the same season, but there's one episode Nick and I watched a dozen times and we'll never forget.

Season three, The Pez Dispenser.

The one where Jerry ruins George's girlfriend's recital by putting a Tweety Bird Pez dispenser on Elaine's leg.

You know what I'm talking about?

She couldn't contain herself and George's girlfriend is furious.

Spoiler, George doesn't end up with her.

You're the the one.

No, it was an accident.

It wasn't my fault.

It was Jerry.

Jerry put a piss dispenser on my leg.

You put a piss dispenser on her leg during my recital.

I didn't know she would laugh.

Jack, you and I laughed about this episode, but here's what we didn't know at the time.

That single Seinfeld episode had the biggest sudden impact on Pez's sales of anything in history.

When NBC aired that episode in 1992, Pez's sales spiked to $18 million that year, a company record.

And by the way, Jeff, that's just $18 million in primary sales, like sales that went directly to Pez.

In the secondary market, Pez starts popping, baby.

People start buying and selling rare collectible Pez dispensers on their own, like before eBay was even a thing.

If you can get the Tweety Bird Pez dispenser, congratulations, you can now retire.

The 90s are actually going to become the decade of collectibles.

It is.

Swatch watches, Magic the Gathering, Beanie Babies, Pokemon, Tamagotchi's, Pez is at the forefront of this secondary market collector trend.

Pez gets so popular, they even make the cover of the Forbes collectibles issue.

There's a whole subculture of obsessed collectors trying to snatch those rare Pez dispensers.

They call themselves Pez heads,

and they take their passion very seriously.

So, Besties, whether or not you are a Pez head, Jack and I would like to go visit a toy fair somewhere in Middle America, 1993 you are walking past tables of figurines vintage board games and racks of comics sealed in that neat plastic sleeve stuff well toward the back of the room sits a burly man in a bucket hat and he's surrounded by little plastic toys he's got big glasses and a long bushy beard he's not santa his name is steve glue but soon he's going to take on an alter ego as the pez outlaw the pez

Outlaw.

That sounds like an IP deal.

The lawyer should have written up for a Pez dispenser.

Steve is actually a machine operator from Michigan with a side hustle.

He collects and resells those cereal box toys.

You remember the offer on the back of the cereal box?

Yeah, free decoder ring with a proof of purchase.

Yeah, yeah.

Well, these decoder rings and x-ray specs are what Steve sells at these toy festivals.

Steve is scavenging thousands of old cereal boxes at his local recycling plant.

And then he clips off the box coupons and mails them back to Kellogg's.

And then four to six weeks later, the toys pour into his mailbox in rural Michigan.

But at Kellogg's, they're like, why are we sending so many toys to rural Michigan?

What's going on over there?

Well, Jack, lately, the cereal companies have gotten wise to Steve's scheme.

So from now on, there's a tiny disclaimer on every box.

Limit one item per customer.

We see that disclaimer all the time.

It's thanks to Steve.

Yeah.

So as Steve sits at his folding table at that Midwestern toy fair, he's selling off the very last batch of his inventory as he plots his next big side hustle.

Suddenly, he spies something that will change his life forever.

A nearby Pez head is selling Pez dispensers for 25 bucks a pop and Steve does a wah wah wah wah double take those things are like one dollar at the store so he sidles on up to this dealer who explains that some pez designs are discontinued or they are only sold outside of the United States.

Yeah, remember how Pez now has that U.S.

factory in Orange, Connecticut?

We made a note of it yet.

Well, they've also got factories in Europe.

And building that American plant effectively split Pez USA from Pez International.

They're two separate companies now.

Pez International has global distribution rights except in America.

The head of Pez USA, Scott McWinney, more on him later, by the way, exercises a ton of control over which designs get made in the USA factory and which ones don't.

Meaning, foreign Pez dispensers like Japan's Kyoro-chan caramel parrot bird Pez or Australia's emoticon Pez become big ticket collector items here in the United States.

Jack, this is toy arbitrage.

Usually we see arbitrage in the finance industry, buying an asset in one weaker currency to then sell at a higher price in a stronger currency.

So these dealers' words, they captivate Steve.

There are overseas factories with gobs of Pez dispensers unavailable in America.

If he can bring them stateside, then he can make a fortune.

Then his new friend gives Steve one more critical lead because the Pez factory he wants, it's in Slovenia.

So Slovenia, which is pretty far from mid-Michigan, is where he's gonna go.

A little getaway to the 1990s war-ravaged Balkans.

That is when Steve hops on a plane taking his son Joshua, who's barely a freshman in college.

Awesome move dad, by the way.

And when they arrive, they don't have a tour guide in Slovenia and they don't speak the language of Slovenian and they have absolutely no plan in Slovenia.

All they got, Jack, is a Slovenian dictionary, a warehouse address, and a new taste for Balkan sausage.

This could get dicey now.

Well, Jack, it does kind of get dicey because they actually get laws trying to find this factory and they almost drive across the Croatian border.

They literally get stopped by armed guards and somehow Steve talks his way through all of that.

But Jack, finally, finally, after this long epic journey, Steve and Joshua arrive at the warehouse.

Steve barges in and he makes an announcement.

He's from America, he's got money, and he wants to buy some Pez dispensers.

Here's my duffel bags.

I'm not leaving until they're full.

And Yeti's, what happens next is so incredible, we wouldn't believe it ourselves if we didn't hear it from the mouths of the U.S.

Customs Agent and Steve Glue himself.

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Besties, against all odds, Steve Glue, the Pez Outlaw, and his teenage son, Joshua, have just made it to a Pez factory in Slovenia and he just announced himself as an American interested in buying their Pez dispensers.

This guy has zero creep to him.

He just barges right in.

But unbelievably Jack, it works.

Remember, this is three years BE before eBay.

Americans trying to buy discontinued or rare products just isn't that common.

Plus, Steve is fearless.

He loads up several duffel bags worth of dispensers and rolls right back to the airport and through customs with some unusual looking checked luggage.

Now, ordinarily, I guess you would say this is trafficking, or you would say this is illegal.

Yeah, technical details.

Yeah, but once again, Steve has accidentally found a loophole because while Pez has all of its dispensers' trademark, the company failed to register that trademark with the US Customs and Border Protection.

Apparently, Pez didn't hire enough warriors.

So, customs just let Steve and Joshua pass right through.

And at the next toy fair, Steve makes bank.

Now, Steve might not have broken the law by importing these dispensers, but it is still illegal for Steve to distribute these dispensers in the United States.

Only Pez Incorporated can do that.

So Steve is a literal outlaw.

Steve is the Pez outlaw.

And for the next decade, Steve travels back and forth between Eastern Europe and America.

And Jack, how many times do you think Steve makes that trip specifically to Slovenia?

Two trips per decade?

20 times?

70 different times.

Repeat, Steve flies to Slovenia on 70 different occasions.

And each time he packs his suitcase with $20 bills, totaling just under $10,000, which is the most you can travel with without declaring it to customs.

And for his return flight, he doesn't have that cash anymore.

Instead, he has 10,000 PES dispensers.

Steve's moving so much product, he quits his machinist job and starts dealing Pez full-time.

And Yetis, he makes more than $4 million selling these Pez on the secondary market.

Jack, I got to ask you to sprinkle on some context to compare that to the real Pez business.

At this point, Pez is selling $18 million per year.

So Steve's illegal Pez reselling business is equivalent to almost a quarter of Pez's entire annual revenue.

And with that booty, Steve helps his son buy a house, he pays for his daughter's college, and he supports his wife, Kathy, who's got a chronic illness.

But the Pez Outlaw's actions, they aren't going to go unnoticed because the president of Pez Inc., Scott McWinney, he is watching.

And Scott has got his own self-appointed nickname, the Pezident.

And the President of the United States is furious.

Yeah, he is.

He's not going to let the Pez Outlaw get away with this.

Now, yadis, we know what you're wondering because we were wondering it too.

Why doesn't Pez just involve the the authorities and stop this Pez outlaw?

This is getting crazy.

For that, we'd have to ask the office of the Pez Adams, Scott McQuinny.

Now, Scott isn't a fan of Pez's secondary market.

He thinks all this hype around Pez collecting, it incentivizes theft.

He even puts a fence around his factory's dumpsters to keep scavenging Pez heads out of their garbage.

Scott obviously wants the Pez outlaw to be stopped, but it's not as simple as having the local cops bust him at the next toy fair.

The real boss move is to cut Steve off from his supplier.

So that's when the Pez president calls up headquarters in Austria and alerts them to their mutual problem.

And word goes out to every single Pez employee, whoever's helping Steve, stop it or you're going to lose your job.

So the next time Steve goes to Slovenia, he's not welcome.

He's not allowed in the building.

Nobody at Pez Slovenia will even look at the guy.

because he's been blacklisted.

So Steve's business has just been shut down.

But that's when Steve hatches a wild new plan.

He sets up a company to design and order his own dispensers from Pez.

Steve will give his designs to the broker.

Then the broker will order the dispensers from Pez themselves.

So that they're actual Pez dispensers.

Apparently, Steve posed as a German candy manufacturer who plans on selling the Pez over in Taiwan.

Okay, but Jack, they're never going to actually end up in Taiwan, right?

They're going to reroute all those Pez dispensers to the middle of Michigan, where Steve's going to continue his scheme.

As long as Pez doesn't have a rigorous know-your-customer policy, this thing's going to work.

So, here's what Steve does next: he comes up with some wild designs that Pez would never have come up with.

There's a black skull, a psychedelic hand, there's even one creepily holding an eyeball on top of the Pez dispenser.

It's just the kind of edgy dispensers that are going to command top dollar in the resale market.

Oh, and Jack, speaking of money, Steve puts a quarter million dollars of his own money into this scheme, paying $5 each for 50,000 dispensers.

And he plans on selling each of those dispensers for $25 each.

So Jack, could you run the profit math for us over there?

That's a 5X markup.

Yeah, he could walk away with $1.5 million on his quarter million dollar investment.

Steve thinks this is his best idea yet until one day Steve goes online.

and almost faints from shock.

Right on Pez's website is a brand new section called Misfit Dispensers.

Misfit dispensers.

Oh, no.

They're exact replicas of all the designs he has been planning to sell.

Oh, that is brutal.

Steve immediately faxes his toy broker and asks, what the heck is going on?

Oh, I love an emergency fax jacket.

It turns out they've been tricked.

Steve says that the toy broker told him the right hand knows what the left is doing.

Steve can't believe it.

Steve's been bamboozled.

And yes, that is a technical legal term.

And Pez didn't sue him for copyright infringement.

Pez did something way worse.

They knocked off his knockoffs before he could knock them out.

It's a knockoff, knockoff.

And if you're the customer, why would you buy a shady version from some guy in an alley named Steve when Pez is selling the exact same thing?

Pez destroyed Steve's business and Pez did it with a smile.

So Steve's got no choice.

He tries to sell his inventory, dropping the price to move the product.

But Pez just drops their prices too.

They don't care about making a profit on this Misfit collection.

No.

The whole business exists just to drive Steve out of business.

Forced to sell dispensers for just two bucks each, Steve recovers less than half of his investment, plunging himself and his family into six-figure debt.

The Pez outlaws' reign has come to an end, but his legend lives on.

Because a Playboy magazine article featuring Steve will spawn a Netflix documentary in which Steve not only appears, but he plays himself in the reenactments flying back and forth 70 times to Slovenia.

But Jack, this episode of the pod, this is about Pez.

So where do we leave Pez's business at the end of this story?

They're selling about 75 million Pez dispensers per year across 80 countries around the world, as well as 5 billion individual Pez candies.

And with around 900 employees, Pez is almost twice as big as Aurekola and more than four times bigger than Bazooka.

And instead of resisting collector culture, Pez is now embracing it.

Their website features a page called Collector's Corner with fun facts, rare finds, and listings for upcoming Pez Head conferences.

Jack, if you can't pivot them, join them.

So, Jack, now that you've heard the story of Pez, what's your takeaway?

People don't pause habits, they pivot them.

The initial brilliance of Pez is that it transferred the underlying energy of smoking into a healthier, alternative habit.

Pez asked users to pivot their smoking habit, not get rid of it.

Yeah, pivot it, not get rid of it.

Jack, you see this in other business examples too.

Like remember we did that story on our show about Target adding Starbucks cafes to their stores?

People are already bringing coffee with them when they shop.

You may as well just provide that service in your own business.

That's what they did.

If Target asked shoppers to stop bringing your coffee into the store, shoppers might have gone somewhere else.

Instead of killing that habit, Target embraced it.

They hugged the habit because people don't pause habits, they pivot habits.

Nick, what about you?

What is your takeaway from Pez?

Turn your product into an experience.

You know, like we've said sometimes the packaging is the product.

Like we did the episode on the McDonald's Happy Meal.

Perfect example of that.

10-year-old me was loving that box, but the Pez dispenser is more than just a package.

It turns the product into an experience.

And that is the differentiator because there are a million candies out there that are 99% sugar, exactly the same flavor and ingredients as Pez.

But the Pez dispenser, that sets them apart, turning their candy interactive and actually kicks off an entire trend of experiential sweets designed for kids that include fruit roll-ups, fun dip, even those candy necklaces, dunkaroos, dip and dots.

Jack, the kind of candies that you don't just eat, you have a play date over.

Mom, I'm going to Jack's.

He's got dip and dots.

So, Yetis, now let's dispense some sweet, sweet facts in our favorite part of the show.

Oh, yeah.

The best facts, yeah.

The part of the show where we squeeze in the surprising details and figures that we just couldn't fit into the story.

Pez uses an average of 100,000 pounds of sugar every week to produce their candy.

That's the equivalent of 10 African elephants or one blue whale.

Mostly that tells me that blue whales are freaking enormous.

Now, Yetis, Pez has pesified plenty of famous film characters, but did you know that it took 20 years to create the first star wars pez a new hope came out in 1977 but the first star wars pez debuted in 1997 yeah they did make a han and chewy twin pack in 2018 though we should point that out for all the pez heads out there in 2010 edward haas iii was inducted posthumously into the candy hall of fame Other inductees include the founder of the Mars Candy Company, Frank Mars, and his friend and colleague Milton Hershey of Hershey's.

Okay, just a thought, make a note of those names, Jack.

Feels like a story for another god.

And finally, we have some bad news.

Yes, we do.

That viral TikTok hack you may have seen about how you load the Pez in one easy step by loading it through the feet.

You go right through the feet and boom, the whole Pez is loaded without losing a Pez.

Sadly, it doesn't work.

That's gonna break Tweety Bird's feet.

And since Tweety Bird is worth like $30,000 on eBay, you don't wanna mess with her feet.

And that is why Pez is the best idea yet.

Jack, watch your bare feet on that carpet over there.

Because on the next episode of The Best Idea Yet, we're talking Lego.

Lego.

Oh, wow.

I just stepped on one.

Follow The Best Idea Yet on The Wondery app, Amazon Music, or wherever you get your podcasts.

You can listen to every episode of The Best Idea Yet early and ad-free right now by joining Wondery Plus in the Wondery app or on Apple Podcasts.

Before you go, tell us about yourself by filling out a short survey at wondery.com slash survey.

The best idea yet is a production of Wondery hosted by me, Nick Martel, and me, Jack Kravici Kramer.

Hey, if you have a product you're obsessed with, but you wish you knew the backstory, drop us a comment.

We'll look into it for you.

Oh, and don't forget to rate and review the podcast.

Five stars, that helps grow the show.

Our senior producers are Matt Beagle and Chris Gauthier.

Peter Arcuni is our producer.

Our senior managing producer is Nick Ryan, and Taylor Sniffin is our managing producer.

Our associate producer is H.

Conley.

Research by Samuel Fatzinger.

This episode was written and produced by Katie Clark Gray.

We used many sources in our research.

A few that were particularly helpful were Pez, From Austrian Invention to American Icon by Sean Peterson.

The history of Pez, timeline featured on Pez.com.

And the 2022 documentary, The Pez Outlaw, by Side Stilt Films, starring Steve and Kathy Glue.

Sound design and mixing by C.J.

Drummeler.

Fact-checking by Molly Artwick.

Music supervision by Scott Velasquez and Jolena Garcia for Freeson Sync.

Our theme song is Got That Feeling Again by Blacklack.

Executive producers for Nick and Jack Studios are me, Nick Martel, and me, Jack Ravici-Crammer.

Executive producers are Dave Easton, Jenny Lauer-Beckman, Aaron O'Flaherty, and Marshall Louie for Wondering.

Wondering, Wondering, Wondering.

Hi, I'm Denise Chan.

host of Scam Factory.

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