Belgian Chocolates

What Potato Chips Can Teach Entrepreneurs?

By: Geoff Ficke

America and the developed world is saturated low prices, 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 as chips.

The Crunchy America has historically been a mom very local companies until the pop 1930A € ™ s. The final product, the chips potato chip have been very difficult to ship, handle and store without packaging techniques advanced. Before the invention of components coated bagging the chips were made in local kitchens and sold at some local stores, usually in barrels. Once the guns were opened, and the store owner has won the product sold to consumers, air entered the barrels and chips potato has become obsolete. Consumers of these chips have learned Chip heat the home before serving to overcome the lack of freshness.

Such trade was adequate for a company local service model, but it does not allow for economies of scale or national distribution. In addition, each city and each region has developed a preferred type of chip that has a local popularity. The opportunity was ripe for a contractor to build and market the company collation of a significant and revolutionize the category.

This contractor is Herman Lay. Mr. Lay was a route salesman for the company Food Barrett Atlanta. He sold the brand of chips Barrett in a territory assigned to Nashville, TN for the 1930A € ™ s. It was natural route salesmen selling talent, developed and grew rapidly in its territory and soon hired to work for him. The owners Barrett noticed his success and offered to sell Herman Lay the whole matter. He struggled to cobble together financing. It was at the height of the depression. In a way, a combination of loans, savings and preferred shares has been assembled and the price of $ 600,000 sale was guaranteed.

The new company immediately changed its name to HW Lay Society. Mr. Lay acknowledged that mechanization is necessary to expand distribution and cost. He invests every dollar of profit in self-processing machine of potato contains a potato that has been set and produced a smart finish. The chips are then packaged in bags of new non-permeable to the freshness insured product because they were shipped and sat on store shelves until purchased and consumed.

The beginning of the Second World War proved most profitable for the industry the salty snack. Chocolate and sugar were heavily rationed during the war and products that used these ingredients became scarce and expensive to the war was over. Salt, however, has never been rationed and the availability of salty snacks make it the preferred choice of consumers looking for a quick treat for the war. In addition, these savory snacks were consumed in large quantities by the troops.

Lays Potato Chips and snacks has become ubiquitous on store shelves in the American South during and after the war. The company has bought small, undercapitalized competitors and expanded aggressively. Finally, the HW Lay Company Frito bought the San Antonio, Texas. Frito had developed the production of a chip corn that we eat in large quantities for this day. The combined Frito Lay Company became the largest national salty snack producer.

Frito Lay and a number of regional brands dominated the salty snack category by the post-war. The single chip potato has been virtually unchanged in appearance, flavor and consistency, with the exception of the addition of new flavors such as garlic, onion and green a bar-b-cue. The industry seemed to have settled into a slow growth in mature categories, with limited possibilities for business for new bids.

However, the most entrepreneurial company of consumer products worldwide, Cincinnatiâ € ™ s Procter & Gamble (P & G) is always looking to cultivate and develop new niche products. They had their eyes on business industry snacks and, in particular, the P & G management felt they had identified a flaw in the armor of producing potato chip.

This flaw was in the package. Chips potatoes had been sold since the late € ™ s 1930A in soft, flexible bags. Although freshness guaranteed, it is a broken item. Consumers who take part in focus groups told P & G they disliked not small, cracked, broken pieces of chips that are installed in the bottom of the bags. Research and Development at P & G began working a response to the problem.

P & G is famous for his creation of management mark. Brand Management allows the team assigned to each specific product to treat brand as a stand-alone business and profit center for the Company. The success of this management style is legendary and has been studied in business schools and adopted by many companies others. The brand management system encourages each team to aggressively pursue new product adaptations and inventiveness.

P & G research and development for the Companya ™ € s food group worked on the project through the chips 1960A € ™ s. Their answer to the problem created a wonderful example of how an entrepreneurial company or individual, can greatly benefit a convergent product innovation. Innovation has become a billion dollar mark, and has revolutionized the marketing of snack foods, was the introduction of Pringles.

P & G has obviously not invented chips or salty snacks. However, adapting chips in conventional form, taste and presentation, they created a novel of the Blockbuster brand that is sold to millions of consumers around the world each day.

Pringles are 42% potato. They are formed by the mixture of flakes of potato with manure liquid, then dried to form each chip in an oval curves almost perfectly identical crisp. The genius of Pringlea € ™ s is located in the cylindrical cardboard tube invented for P & G by Fredric Baur. The Pringle Chips are stacked inside the tube, so there is virtually no breakdown of individual chips. Tube closure is a snap on plastic lid.

Pringles test was marketed in 1968 and consumers were very 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 countries or regions to suit prevailing taste preferences, as in Mexico jalapeno and Cajun Louisiana.

Entrepreneurs driven to seek and create â € œdivergent productsâ €. The invention of disruptive œdivergent productsâ € â € such that the light bulb, the gin cotton or internal combustion engine is the â € € œHoly Grail that visionaries seeking to develop and capitalize on the fame and fortune. However, most often made and realistic road to success is to create a niche product improvement. Explore products and technologies existing and identify needs that are not addressed by these products. The creation of a novel œconvergent productsâ € € which simply add additional benefits and improvements in performance can result in huge profits small.

Procter & Gamble has built the largest consumer product company worldwide and one of the plants most admired for innovation in seeking both â € œdivergentâ € € and â € œconvergentâ opportunities. Pringles is a great example of a â € œconvergent innovative € Producta success. The story of P & G is replete with examples of new â € € Producta œconvergent success. The â € œdivergent Producta € innovations are less numerous and more difficult to discover and bring to market. This is a great company that looks for opportunities wherever he can find.

Contractors should take note of this process. Frito Lay is now owned by PepsiCo. The evolution of this great brand owes much to the single drive and vision of HW Lay. He took a simple product that has been a model of distribution of poor and occasionally in an immense fortune. P & G has taken the problem in breaking bags of chips and through innovation in the recipe and packaging has created a huge worldwide success with the introduction of Pringles.

P & G and HW Lay are examples of elegance simple ideas. Remember the old axiom: KISS = Keep it Simple Stupid! The best ideas are often the most obvious.

About the Author

Geoff Ficke has been a serial entrepreneur for almost 50 years. As a small boy, earning his spending money doing odd jobs in the neighborhood, he learned the value of selling himself, offering service and value for money.

After putting himself through the University of Kentucky (B.A. Broadcast Journalism, 1969) and serving in the United States Marine Corp, Mr. Ficke commenced a career in the cosmetic industry. After rising to National Sales Manager for Vidal Sassoon Hair Care at age 28, he then launched a number of ventures, including Rubigo Cosmetics, Parfums Pierre Wulff Paris, Le Bain Couture and Fashion Fragrance.

Geoff Ficke and his consulting firm, Duquesa Marketing, Inc. (www.duquesamarketing.com) has assisted businesses large and small, domestic and international, entrepreneurs, inventors and students in new product development, capital formation, licensing, marketing, sales and business plans and successful implementation of his customized strategies. He is a Senior Fellow at the Page Center for Entrepreneurial Studies, Business School, Miami University, Oxford, Ohio.

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