What Potato Chips Can Teach Entrepreneurs?

Frito Lay Employment - What Potato Chips Can Teach Entrepreneurs?

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What Potato Chips Can Teach Entrepreneurs?

America, and the industrialized world, is saturated with cheap, convenient, pre-packaged snack foods. These tasty treats are available in sweet, salty, chilled, or warmed styles and presentations. None is more popular, and ubiquitous, than the potato chip.

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Frito Lay Employment

The potato chip in America was historically a very local mom and pop business until the 1930's. The end product, the potato chip crisps; were very difficult to ship, cope and preserve without industrialized containers techniques. Prior to the invention of coated bagging components, chips were made in local kitchens and sold in a few local stores, typically out of barrels. As soon as the barrels were opened, and the shop owner scooped the sold product for the consumer, air entered the barrels and the potato chips became stale. Consumers of these chips were taught to heat the chips at home before serving to mitigate the lack of freshness.

This type of trade was sufficient for a local assistance business model, but it did not allow for economies of scale or national distribution. In addition, each town and region industrialized a favorite type of chip that enjoyed local popularity only. The chance was ripe for an entrepreneur to join and commercialize the snack business in a major way and revolutionize the category.

That entrepreneur was Herman Lay. Mr. Lay was a route salesman for the Barrett Food business of Atlanta. He sold the Barrett brand of potato chips in an assigned territory in Nashville, Tn during the 1930's. He was a natural sales talent, industrialized and swiftly grew his territory and soon hired route salesmen to work for him. The owners of Barrett noticed his success and offered to sell Herman Lay the whole business. He struggled to cobble together financing. This was at the height of the depression. Somehow, a combination of loans, savings and adored stock was assembled and the 0,000 selling price was secured.

The new business immediately changed the name to the H. W. Lay, Company. Mr. Lay recognized that mechanization was indispensable to develop his distribution and lower costs. He invested every dollar of behalf in self-contained potato processing machinery that took a whole potato and produced a concluded chip. The crisps were then packaged in the new non-permeable bags that insured freshness for the product as they were shipped and sat on store shelves until purchased and consumed.

The onset of World War Ii proved most profitable for the salted snack industry. Chocolate and sugar were heavily rationed during the war and products that utilized these ingredients became rare and high-priced until the war was complete. Salt, however, was never rationed and the availability of salty snacks made them the adored option of consumers seeking a quick treat during the war. In addition, these salty snacks were consumed in huge quantities by the troops.

Lays Potato Chips and snacks became ubiquitous on store shelves in the American south during and after the war. The business bought up small, under-capitalized competitors and vast aggressively. eventually the H. W. Lay business purchased the Frito business of San Antonio, Texas. Frito had perfected the production of a corn chip which we eat in huge quantities to this day. The combined Frito Lay business became the strongest national salted snack producer.

Frito Lay and a estimate of regional brands dominated the salted snack type through the post-war years. The straightforward potato chip was basically unchanged in appearance, flavor and consistency, except for adding new tastes such as garlic, green onion and bar-b-cue. The industry seemed to have settled into a maturing, slow growth category, with little entrepreneurial opportunities for new offerings. However, the most entrepreneurial buyer product business in the world, Cincinnati's Procter & Gamble (P&G), is all the time seeking to cultivate and grow new product niches. They had their corporate eye on the snack industry and, in particular, the P&G management felt they had identified a chink in the armor of the potato chip producers.

That chink was in packaging. Potato chips had been sold since the late 1930's in flexible, pliable bags. While this insured freshness, it made breakage an issue. Consumers taking part in focus groups had told P&G that they did not like the small, cracked, broken pieces of chips that settled in the lowest of the bags. Research and amelioration at P&G began to work on an respond to the problem.

P&G is supreme for its creation of Brand Management. Brand management enables the responsible team assigned to each definite product to treat the brand as a stand- alone business and behalf town for the Company. The success of this management style is legendary and has been studied in business Schools and adopted by many other businesses. The Brand management principles encourages each team to pursue aggressively new product adaptations and inventiveness.

P&G Research and amelioration for the Company's food group worked on the potato chip scheme throughout the 1960's. Their respond to the qoute created a fantastic example of how an entrepreneurial firm, or individual, can behalf immensely from a convergent product innovation. The innovation that became a billion dollar brand, and revolutionized snack food marketing, was the introduction of Pringles.

P&G obviously did not invent potato chips or salty snack foods. However, by adapting the classic potato chip in form, taste and presentation they created a novel, blockbuster brand that is sold to millions of buyer nearby the world every day.

Pringles are 42% potato. They are formed by mixing potato flakes with liquid slurry and then dried to form each chip into an approximately perfectly selfsame curved oval crisp. The genius of Pringle's lies in the cylindrical cardboard tube invented for P&G by Fredric Baur. The Pringle crisps are stacked inside the tube so there is virtually no breakage of the private chips. The tube closure is a snap on plastic lid. Pringles was test marketed in 1968 and consumers were enthusiastic. The product has been constantly improved and over 40 flavors have been added to the original style. Many of these flavors are sold in definite countries or regions to suit prevailing taste preferences, such as jalapeno in Mexico and Cajun in Louisiana.

Entrepreneurs are driven to seek and create "divergent products". The invention of disruptive "divergent products" such as the light bulb, the cotton gin or the internal combustion engine is the "Holy Grail" that these visionaries seek to exquisite and leverage to fame and fortune. However, the most often realized and realistic road to success is to create a niche product improvement. Seek existing products and technologies and recognize needs that are not being addressed by these products. The creation of novel "convergent products" that simply add incremental benefits and small performance enhancements can consequent in huge profit.

Procter & Gamble has built the largest buyer product business in the world and one of the most admired innovation factories by seeking both "divergent" and "convergent" opportunities. Pringles is an example of a huge "convergent product" innovative success. The history of P&G is rife with examples of new "convergent product" successes. The "divergent product" innovations are fewer and harder to Seek and bring to market. This is a great business that looks for chance in any place it can find it.

Entrepreneurs should take note of this process. Frito Lay is today owned by PepsiCo. The evolution of this great brand owes much to the straightforward drive and foresight of H. W. Lay. He took a straightforward product that suffered a poor distribution model and turned the chance into heavy wealth. P&G took the breakage qoute possible in bagged potato chips and through innovation in recipe and containers created a huge worldwide success with the introduction of Pringles. P&G and H. W. Lay are examples of the elegance of straightforward ideas. Remember the old axiom: Kiss = Keep it straightforward Stupid! The best ideas are often the most obvious.

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