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What Can Teach Entrepreneurs potato chips?

By: Geoff Ficke

America and the developed world, with cheap, cheap, packaged saturated Snacks. These treats are sweet, salty, cooled or heated, designs and presentations. None is as popular and ubiquitous as the potato chips.

The potato chips in America was historically a very local mom and pop business until 1930. The final product, the potato chips potato chips were very difficult to ship, deal with and retain, without advanced packaging techniques. Before the invention of the coated components bagging chips were made in local kitchens and sold in some shops locally, usually from drums. Once the barrels were opened, and the shop owner drew the goods sold to the consumer, was the drums and air The potato chips were stale. Consumers of these chips have been taught to soften the chips at home heat before serving out the lack of freshness.

This type of Trade was the appropriate service for a local business model, but it did not allow distribution Economies of scale or nationally. Also develops each city and region a popular type of chip that local popularity enjoyed only. The opportunity was ripe for an entrepreneur consolidate and commercialize the snack shop in a big way and revolutionize the category.

The contractor was Herman Lay. Mr. Lay was a route Seller for the Barrett Food Company of Atlanta. He sold the brand Barrett of potato chips in an assigned area in Nashville, TN during the 1930s. He was a natural Sales skills developed and grew quickly and soon hired his territory to work route salesman for him. The owner of Barrett noted 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 preferred shares mounted and the $ 600,000 sale price was assured.

The new company immediately changed the name in the HW Lay Company. Mr realized that mechanization was necessary to expand its distribution and lower costs Lay. He invested every dollar of profit in self-contained potato processing machine, took a whole potato and produced a finished chip. The chips were then packaged in the new impervious bags that insured freshness for the product was shipped and when she sat down on the shelves until purchased and consumed.

The outbreak of the Second World War proved most profitable for the salty snacks industry. Chocolate and sugar were strong during the war and products, these ingredients were scarce and expensive until the war ended rationed exploited. Salt, but was never rationed and the availability of pastries made them the preferred choice of consumers from a quick treatment during the war. In addition, these savory snacks were consumed in large quantities by the troops.

Lay's potato chips and snacks were on store shelves everywhere in the American South during and after the war. The company bought small, under-capitalized Competitors and expanded aggressively. Finally, the HW Lay Company bought the Frito Company of San Antonio, Texas. Frito had to produce a corn chips that we eat, in large Quantities perfected to this day. The combination of Frito Lay Company, the strongest national salted snack manufacturer.

Frito Lay and a number of regional brands dominate the salted snacks category by the postwar years. The simple potato chips was essentially unchanged in appearance, taste and texture, except for adding new tastes like garlic, spring onions and Bar-B-Cue. The industry seemed to have settled into a maturing, slow growth category with limited business opportunities for new offers.

But most corporate consumer product company in the world, Cincinnati, Procter & Gamble (P & G), is always looking to maintain and grow new product niches. They had believed their corporate eye on the snack industry, especially the P & G's management identified a chink in the armor the potato chip manufacturers.

The gap was in the package. Potato chips since the end which was founded in 1930 sold in flexible, flexible bags. During this assures freshness, it did break a problem. Consumers, in focus groups had P & G said that they do not like the small, cracked, broken pieces of chips, which settled did in the bottom of the bag. Research and development at P & G began a response to circumvent the problem.

P & G is famous for his creation Brand Management. Brand Management enables the responsible team assigned to each product, the brand as an independent Companies and profit centers to treat for the company. The success of this management style is legendary and has been studied in business schools and made friends with many other companies. The brand management system encourages each team to aggressively pursue new product ideas and adaptations.

P & G research and development for the company Food Group worked on the potato chip project in the 1960s. Your answer to the problem created a wonderful example of how an entrepreneurial company or individual, can benefit immensely from a convergent product innovation. The innovation, which became a billion-dollar mark, and revolutionized snack marketing, was the introduction of Pringles.

P & G does not seem to invent potato chips or salty snacks. However, created by adapting the classic potato chips in shape, taste and presentation they sold a novel, blockbuster brand that millions of consumers around the world every day.

Pringles potato is 42%. They are formed by mixing potato flakes molded with liquid mud and then dried to each chip in an almost completely identical crisp curved oval shape. The genius of the Pringle's is located in the cylindrical cardboard tube P & G invented by Fredric Baur. The chips are stacked Pringle in the tube, so there is virtually no breakage of the individual chips. The tube closure is a snap on plastic lid.

Pringles was test marketed in 1968 and that consumers were enthusiastic. The product has been improved steadily and have over 40 flavors been added to the original style. Many of these flavors in certain countries or regions will be sold in order to suit contemporary taste preferences, such as jalapeno in Mexico and in Louisiana Cajun.

Entrepreneurs are driven search and create "divergent products." The invention of the disturbing "divergent products" such as the light bulb the cotton gin or the internal combustion engine is the "Holy Grail", that to perfect these visionaries and leverage to seek fame and fortune. But the most often realized and realistic path to success is to create a niche product improvement. Explore existing Products and technologies and to identify needs that are not addressed by these products. The creation of the novel "converged" products that just add incremental Advantages and small performance improvements result in huge profits.

Procter & Gamble has the largest consumer goods companies in the world and integrated one of the most admired innovation factories in search of both "divergent" and "convergent" opportunities. Pringles is an example of a huge "Convergent product" innovative success. The story of P & G is full of examples of new "converged product" success. The "divergent product" Innovations and less difficult to discover and bring to market. This is a great company that can provide for the possibility to be found everywhere it looks.

Entrepreneurs should be aware to take part of this process. Frito Lay is now part of PepsiCo. The development of this great brand owes one way and the vision of HW Lay. He took a simple product that suffered a bad distribution model and turned the opportunity into immense wealth. P & G has the failure problem inherent bagged potato chips Created and innovative formulation and packaging a huge worldwide success with the introduction of Pringles.

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