Martin and Meyers had met in the Boston area, where Martin ran Tug-N-Tie Inc. and Meyers was abandoning plans to open his own public-relations firm. After hiring Meyers as a design engineer, Martin labored for two years perfecting, and patenting, Tug-N-Tie. Their approximately $500,000 in seed capital came from friends, family, and personal savings. As for the business, "it was supposed to be kept simple," Martin maintains. "Part of the company would act as a licensing entity, and the other would work on patent-related issues. But we never planned to get into manufacturing.
"The irony," he continues, "is that, for the first few months, Ken was actually opposed to launching Smartfoods. He was spending 100% of his time on Tug-N-Tie, and he was a genius at it. Unfortunately, we had a hard time generating much income. Big companies like Frito-Lay seemed to suffer from the 'not invented here' syndrome. So when we started making Smartfood, it had nothing to do with building a snack-food company, and everything to do with showing the industry, 'Look, this bag can work.' '
Another irony: Smartfood never did get marketed in a Tug-N-Tie bag. It was probably the wrong snack to stick in a resealable bag anyway. As Tom Protheroe had discovered, and thousands of consumers would soon confirm, few people opened a bag of Smartfood without devouring the contents in one sitting.
* * *
The Partner
Beginning in October 1984, Smartfoods Inc. launched a financing campaign that raised $44,000 from some of the same people who had backed Tug-N-Tie. The company then leased space in a peanut-processing plant and commenced production in May 1985. Sales for the first year were projected at $1 million -- ``very blue sky," Ken Meyers says, which is an understatement. Actual sales totals came up, oh, about $965,000 short.
"On the retail and consumer level," recalls Meyers, "the feedback we were getting was extremely good. People really liked Smartfood. Unfortunately, other factors came into play. I mean, you can't walk into a supermarket and expect a buyer to say, 'White cheddar popcorn? Great idea -- I'll take 50 cases.' It's a long, tedious process. 'Interesting product,' they'll say. 'Now tell me how you're going to service all my stores?' Or, 'Gee, this cheese popcorn of yours is terrific. Come see me in a couple of weeks, after I take it to my product-review board.' Maybe the product gets approved -- or maybe it doesn't. Under the best of circumstances, none of this is easy. When you're fighting the war with limited resources and no track record, it's tough. You can easily wind up where we did: on the bottom shelf, in back, behind the pole.'
Aside from marketing and distribution difficulties, there were unforeseen glitches in the manufacturing process. In the early batches, for example, the coating of cheese and oil on each piece of popcorn was so inconsistent that it affected the taste of the product. "Eventually," says Meyers, "we solved that problem through a combination of experience and improved technology.
"Moisture was the other key problem," he continues, "and that was mostly due to the fact that we were manufacturing in an unused corner of a small peanut-processing plant. See, peanut roasting releases a lot of moisture, which is OK for peanuts, but popcorn acts like a sponge. And this was in the summer, remember -- when it tends to be humid anyway. So it was coming out of the popper into what should have been a completely dry atmosphere and passing through some of the dampest square footage in New England. When we put that popcorn in a sealed bag, it was like closing it in a terrarium. Smartfood was supposed to have a shelf life of about 10 weeks, but after about 2 weeks a lot of it was turning soggy. We didn't solve that problem until we moved into our new facility [in May 1986] and built a climate-control system.'
Meanwhile, Smartfood was facing climate-control problems of a graver sort. The company was technically insolvent, Meyers says, with no cash reserves and a flat sales chart. Its bank, the United States Trust Co., was "concerned" about its modest debt exposure (a $20,000 term loan), and its accounting firm was about to issue a "qualified opinion" on the company's financial health. Adding insult to injury, a Midwestern distributor had recently absconded with $25,000 worth of product. Investors and directors alike agreed that things did not look good.
"From the first day Andrew and I talked about putting the product in a bag and calling it Smartfood," says Meyers, "I believed it would work. I honestly, truly believed that this effort, this product, was worth salvaging. Yet we'd bungled it. Probably my darkest day, the lowest point of my entire career, came in July [1985], when a bunch of us -- Andrew, [advisers] Tom Gregory, John Harrington, and I -- were sitting around a conference table, looking at the mess we'd made and debating whether to shoot the pony.'
* * *
The Buyer
Rich Savran is a buyer for Christy's Markets Inc., a 97-store convenience chain based in eastern Massachusetts, with outposts in Maine, New Hampshire, and Rhode Island. A popcorn fan himself (``I like to pop my own," he says), he joined the chain in 1986. "Smartfood was already in our stores by then," Savran recalls, "mainly because it was being distributed by Wise. Otherwise, we mostly carried name brands like Frito-Lay and Charles Chips. I can't think of any other independent [snack-food brand] on our shelves at the time, other than Smartfood. There was certainly no other 'premium' cheese popcorn around -- just the traditional cheese popcorn that everyone had always carried.
"But the product itself hadn't really caught on -- or so it seemed. We were actually thinking about dropping it when we suddenly started getting calls from some of the stores. They said they were hearing complaints from customers who couldn't find this product. 'We're selling 5, maybe 10 cases a week,' they reported. 'It's hard to keep it in stock.' '
