Hot Potatoes
With designer spuds and a secret recipe, junk-food giant Frito-Lay has crunched the competition in the race to create the ultimate snack: a low-fat chip that tastes good.
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And the company is never satisfied. In the closely guarded research wing of the building known as the Potato Chip Pentagon—a visitor must be identified and checked by a security guard to get through the locked doors—a group of brilliant men and women with doctorates in synthetic organic chemistry and nutritional science toils into the night hoping to come up with the next best-selling chip. At a research facility in Wisconsin, the company has built several large greenhouses where scientists are constantly tinkering with potatoes, cross-pollinating them, cloning them, genetically engineering them, trying to create the perfect low-sugar potato (it’s the sugar, not decay, that creates the ugly brown spots on a chip).
The company’s theory is that while consumers know what they like, they don’t know what they might like. Besides Baked Lay’s, this year Frito-Lay will introduce a type of Cheetos that are in the shape of rectangular grids. There are plans for a product called Fritos Texas Grill (a corn chip that is less oily than the regular Frito and has grill marks), a new snack called Doritos 3Ds (a hollow triangle of puffed corn that comes in nacho cheese and ranch flavors), and chocolate-covered Rold Gold pretzels.
How did the world of salty snacks get so complicated? It was only in 1853, when railroad magnate Commodore Cornelius Vanderbilt, visiting a resort in Saratoga Springs, New York, complained that his fried potatoes were too thick. Irritated by Vanderbilt’s fussiness, the cook, a Native American named George Crum, sliced up a set of potatoes as thinly as he could, tossed them into boiling oil, fried them to a crisp, salted them, and gave them to Vanderbilt. His prank backfired. Soon “Saratoga Chips” were the rage of East Coast society, and eventually they made their way across the country. Dozens of small regional companies sprang up, mainly because potato chip manufacturing was such an easy business to start. All a person needed to do was hand-cook his potato chips on a kitchen stove, bag or can them, and then sell them around town.
In the thirties someone thought the country could use a different type of chip. Elmer Doolin, the owner of a struggling ice cream company, walked into a San Antonio restaurant and spent 5 cents on a small plain package of corn chips. Inspired, he hunted down the manufacturer, who happened to be a homesick Mexican who wanted to return to his native country. Doolin paid him $100 for the recipe, his handful of retail accounts, and his production equipment. Months later, Doolin began selling corn chips that he called Fritos out of the back of his Model T.
At the same time, a young entrepreneur named Herman Lay began selling his brand of potato chips out of his car in Nashville. Both businessmen were masters at buying smaller companies and adding products—Doolin tried selling a Frito peanut butter sandwich, and Lay sold fried popcorn called Lay’s Tennessee Valley Popcorn. The merger of the two companies on September 25, 1961, not only created a $135 million Dallas-based corporation that immediately dwarfed its competitors but also set up the first national distribution system for the company’s best-selling brands of chips—Lay’s, Fritos, Ruffles, and Cheetos—coast to coast. During the sixties, when the baggy-eyed actor Bert Lahr said “Betcha can’t eat just one” in television commercials for Lay’s potato chips, the public was captivated and Lay’s became a staple of American life.
In 1965 Frito-Lay and Pepsi Cola merged to form PepsiCo. But even as part of a corporate colossus, Frito-Lay employees were able to spot new snacks. In 1964 a Frito-Lay marketing vice president named Arch West noticed that people in Southern California were buying greasy bags of toasted tortillas. West thought Frito-Lay should have a similar product—a tortilla chip that could fit between the light Lay’s potato chip and the heavier Frito. He chose the name Doritos (“dorito” means “little gold” in Spanish). The company’s first television commercial for Doritos showed teenagers playing guitars as the announcer said, “What’s the biggest news since the Big Beat? Doritos are a swinging, Latin sort of snack.” For reasons no one can explain, kids loved the commercial. According to one history of the snack food business, when Doritos came out nationally in 1966, it almost overnight became America’s second most popular snack item (behind Lay’s).
Even when the phrase “junk food” became popular in the early seventies to describe salty snacks—Ralph Nader hosted a “Junk Food Hall of Shame” exhibit, and President Nixon’s adviser on food and nutrition publicly questioned the value of potato chips—Frito-Lay’s sales continued to explode. In the eighties, hungry for more market share, the company began introducing one product after another. First came Tostitos tortilla chips, another derivative of the corn chip; in 1981, after just one year on the shelves, Tostitos accumulated sales of $150 million. But there were just as many failures—O’Grady’s (a homestyle kettle-cooked chip), McCracken’s (a chip made from apple slices), Toppels (bite-size cracker-type snacks in four cheese flavors), Rumbles (bite-size granola snack bars), and Kincaid’s (a thicker and crunchier potato chip). According to one competitor, Frito-Lay was “just throwing everything at the wall to see what would stick.”
By the late eighties, “We were falling in our own doo-doo,” as a company official put it. The company was still profitable, but sales were falling in most areas, and competitors were catching up. To just about everyone’s shock, focus groups and taste tests showed that consumers liked Eagle Potato Chips better than Lay’s. Snacking is a fickle business. If a product doesn’t taste right, consumers quickly switch brands. After the company’s operating profits dropped 16 percent in 1991, more than 1,800 Frito-Lay employees were laid off nationwide. In a further slap at Frito-Lay, Eagle Snacks announced it would move its headquarters from St. Louis to Dallas.
Anxious directors on the PepsiCo board asked Roger Enrico, the Pepsi executive who had gained national fame leading Pepsi against Coca-Cola in the cola wars of the eighties, to come to Dallas to turn Frito-Lay around. As part of what he called the “PC Revolution,” Enrico cut out the coat-and-tie mentality, brought in a younger group of staffers, and demanded that all the products be updated. For the first time in 58 years, the Fritos bag was redesigned with brighter colors. The 27-year-old “Ruffles have ridges” advertising line was changed to “Get your own bag” (the ads for Ruffles featured characters making up wild excuses for why they couldn’t share their chips). And just as he had hired Michael Jackson and Madonna to promote Pepsi, Enrico went after celebrities for Lay’s and Doritos. As part of a $50 million campaign to introduce an improved Doritos, which were called “Nacho Cheesier,” George Foreman and his sons were hired to appear in a television commercial. And in the first new television commercial for Lay’s in more than a decade, Kareem Abdul-Jabbar made a bet with Larry Bird that he couldn’t eat just one Lay’s.
Combining the ad campaign with aggressive price-cutting tactics, Frito-Lay had regained its stranglehold on the snack market by 1992. With the introduction of a multigrain snack called Sunchips and a newly shaped Lay’s chip called Wavy Lay’s, along with low-fat Rold Gold pretzels and Baked Tostitos, the company’s sales were higher than ever. There was just one more thing to do—re-invent the potato chip.
AT THE START OF THE NINETIES, WHILE regional companies such as the Austin-based Guiltless Gourmet were having limited success selling their low-fat chips to health-conscious consumers, Frito-Lay’s research was showing that mainstream consumers disliked the products because potato chips without fat tasted like cardboard. “Yet even as our focus groups told us they hated low-fat chips,” said consumer insights vice president Snepp, “they also kept saying that they would do anything for a low-fat potato chip that had a decent taste. We realized that the one great place still left for us to grow was in potato chips.”
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