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MARKETING

The Snack Food That's Eating America
 

A portrait of the marketing strategy, research, and development of Smartfood popcorn.
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Portrait of a very hot product

Most people view product as the one aspect of a business over which they have absolute control -- unlike capital, say, or employees. But most products I have seen develop a life of their own, beyond anyone's power to control. Just look at this innocent little snack called Smartfood, which has managed to reroute the lives of everyone drawn into its orbit. -- J.P.K.

* * *

Let us strip away the mystery right here and get down to what we're really talking about. We're talking about cheese popcorn. In a bag. Good popcorn, to be sure. Premium-quality, white Kentucky-kernel popcorn, seasoned with aged cheddar cheese. Wholesome, natural, no artificial preservatives or coloring. Clever packaging -- ever see a snack food in basic black before? -- complete with cute little messages from the manufacturer. Very zippy, very hip. But, nevertheless, cheese popcorn.

And let us further reflect upon how this particular cheese popcorn came to be. It did not come out of the R&D department of Borden or Frito-Lay. Years of expensive consumer testing did not produce this popcorn, which, if truth be known, was originally intended as mere bag filler for a new concept in snack-food packaging. No, this popcorn came from Ann Withey's kitchen stove. Withey, 21, perfected the recipe after fooling around with dozens of different combinations of ingredients. She then fed the results to her 29-year-old husband, Andrew Martin, and their 26-year-old friend and business associate, Ken Meyers. Martin and Meyers thought it tasted swell. They also thought it would make a very smart idea for an all-natural snack food -- so smart they decided to name it Smartfood.

What none of them knew was that they held in their hands a product most entrepreneurs only dream about -- a product so sensational, so right, that it had the potential to utterly transform not only their lives but the lives of hundreds of people they didn't even know. Before long, investors would rush in to finance it, competitors would scramble to imitate it, distributors would alter their product mix to carry it, and even the giants in this $8-billion industry, the ones spending millions each year to develop and market new snack foods, would be forced to sit up and say: Who are these guys?

But all that was down a long and winding road. At the time it was just . . . cheese popcorn. Even the black bag came later.

So did the message.

* * *

The Distributor

Tom Protheroe is sitting in his cramped office at Hartford Snack Distributors Inc., a Connecticut-based snack-food distributorship he took over in 1975. Strewn about him are the bags and sacks and cellophane-wrapped morsels of a junk-food vendor's livelihood. Protheroe, 52, is explaining, insofar as explanations matter, how he, a grown man with children, could gain (and later shed) 37 pounds of excess body weight by consuming two four-ounce bags of cheese popcorn a day for -- gulp -- 18 months. The word that comes up most often is "addiction.'

"In my 30 years in the business," avers Protheroe, "I have never -- never -- seen a snack-food item catch on like Smartfood has. This stuff is completely addictive. It flies out of my warehouse. I've probably carried a hundred or so snack-food lines over the years, and believe me, of all those, Smartfood stands alone. It has fundamentally and absolutely changed our business.'

Changes in his own waistline notwithstanding, Protheroe's perspective on the Smartfood phenomenon is keener than most. Four years ago, he was sitting in this same office at the end of the day when two strangers appeared. One of them was Andrew Martin, a dark-haired, bearded man with pixie eyes, a beguiling smile, and a degree in economics. Martin's professional credentials included driving a New York City taxi for four years and working for a research group investigating U.S. defense-technology transfer to the Soviet Union. The other was Ken Meyers. Boyish and fair-haired, Meyers, a former journalism student, had played press secretary to a Connecticut congressman before fleeing Capitol Hill in search of "something I could sink my teeth into." Hardly a likely pair to be interested in the snack business, but you never know.

"The first time they just wanted to talk about the snack-food industry in general," recalls Protheroe. "I really didn't think much of it. They were asking things like, 'If we came up with an unusual snack item, what would we do next?' A few weeks later they turned up again, only this time they brought a bag of cheese popcorn.'

Protheroe was polite. He explained that he already carried a line of cheese popcorn -- the orange-yellowish variety that had been around for years -- and that there was no such category as "premium cheese popcorn. "Funny thing was," he smiles, "while I was sitting there, I ate my way through the whole damn bag.'

On their next visit, the discussion became more focused. Protheroe lectured them on operating costs, profit margins, and how to set up a store-door delivery system. Reading through their business plan, he alerted them to potential problems with quality control and suppliers. When he'd finished, they showed him a mock-up of the first Smartfood bag. It featured a coal-black background with a bright green cornstalk and neon-yellow kernels spilling out of the top -- a piece of true pop art. (To this was later added a note on the back from the founders. "Unlike naughty junk-food companies who do mean and nasty things to their popcorn," they wrote, "we treat our kernels with the love and respect that real food deserves.')

Protheroe didn't know quite what to make of the packaging, either. "It looked weird," he says. "I mean, a black bag? People in my company thought we were crazy, that we'd never be able to sell a four-ounce bag of popcorn for $1.39 no matter how good it tasted. But I wasn't so sure.'

* * *

The Founders

Andrew Martin swears to this day that it was the Tug-N-Tie resealable bag -- not cheese popcorn -- that initially fueled his entrepreneurial ambition. "Building a business around Smartfood didn't excite me at all," he says. "What Ken and I were focused on was coming up with a vehicle to launch Tug-N-Tie. See, for all the money companies like Frito-Lay had spent trying, nobody in the snack-food industry had ever come up with a reclosable bag that was, one, cheap to produce, and two, easily adaptable to existing technology. Everyone we talked to told us that resealable bags were a potential gold mine if we could solve those problems. So it seemed logical that the market for Tug-N-Tie would be enormous -- maybe $30 million a year in royalties.'

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.' '

With any new product, you look for repeat business, but suddenly here were new customers coming in and asking for it all the time. And it wasn't long before other companies started coming out with their own versions of cheddar-cheese popcorn. When you see something like that, you know they're rushing to fill a whole new niche. Why the sudden interest? I really don't know. People were obviously looking for a snack that wasn't pure junk food, and Smartfood fit the bill. Plus, of course, the packaging was unique. I think at least part of the response had to do with this small company, not one of the conglomerates, saying it wanted to do something different and doing it.'

* * *

The Adviser

A battle-scarred veteran of the software industry, Tom Gregory stumbled upon cheese popcorn through his association with John Harrington, president of the Frontier Group, a Boston-based financial consulting firm that did private-placement stock offerings for small companies. Most of its clients, like Smartfoods and Tug-N-Tie, were high-risk ventures trying to raise capital in the $250,000 to $500,000 range: too little to interest venture capitalists, yet attractive to the "wealthy and sophisticated" private investors Harrington specialized in soliciting. After Frontier Group signed on in May 1985 to help recapitalize Smartfoods Inc., Gregory came in as an adviser, rewriting the business plan upon which two rounds of offerings were based, pulling in $200,000 and $225,000, respectively.

"At the time I got involved," recalls Gregory, "Smartfoods was at the edge of a financial precipice. It was a good example of a company that got as far as it could with its original capital base and then faltered. I really loved the product, but it was clear to everyone -- including Andrew and Ken, who were both very good marketers -- that we needed more marketing horsepower if we were going to do anything about increasing consumer awareness.'

Lacking money and expertise, Martin and Meyers were pretty much inventing their marketing strategy as they went along. The company spent nothing on traditional advertising. There wasn't even much nontraditional advertising. Instead, the snack food was handed out free at youth-oriented events like road races, beach parties, and ski meets. And it was not uncommon to ride the chairlift at a major ski resort like Killington, Vt., and see a six-foot bag of cheese popcorn schussing down the slopes.

Oddly enough, these techniques were beginning to work. At any rate, they got people talking, and Smartfood soon developed a word-of-mouth reputation that money couldn't buy. Sales for the fiscal year ended June 30, 1986, rose to $550,000 -- up from $35,000 in fiscal '85 -- as first one and then a whole string of New England supermarket chains fell in love with the shiny black bag. Distributors who'd spurned Smartfood only months before suddenly found they couldn't keep it in stock. The shortage, in turn, drove consumer mania higher, making Smartfood an object of cult worship.

Even Gregory concedes, moreover, that the initial success of Smartfoods owed much to the absence of "marketing horsepower" in the company. "We had both the opportunity and the need to be very unconventional. Our only hope was to go around the competition and approach the marketplace almost as an exercise in guerrilla warfare.

"What Smartfoods really did was innovate the obvious. It took an existing product and packaging and marketing concepts and improved on each of them. When people in the snack-food industry look at it today, they slap themselves on the forehead and say, 'Why didn't I think of that?' '

* * *

Withey and Martin had married in the summer of 1984, with Meyers serving as an usher at the wedding. Soft-spoken and almost painfully shy, Withey played no role in the management of Smartfoods (``I don't really like business," she explains) other than serving as the company's largest single investor, holding approximately 35% of the equity in her own name. She was around, however, when the cheese began to hit the fan in early 1986.

"Annie and I decided to go to Hawaii and cool out for a while," recalls Martin, seated next to Withey in the living room of their Hampton, Conn., farmhouse. "We were gone for 10 days. The day we got back, there was a board meeting in Boston. It was funny, because I remember walking past a lobby newsstand and seeing a front-page headline in The Boston Globe about Marcos stepping down. We hadn't been reading any newspapers, so it was a complete surprise to us. I said something to Annie about it, and then we walked into the conference room. I picked up a copy of the agenda. The first order of business was a vote on Andrew Martin's resignation as president of Smartfoods. The second was a vote on Ken Meyer's nomination to replace me. My first reaction was, 'Well, I guess Ken's cast his lot with Gregory and Harrington.' My second was, 'Hmm, this is a pretty rotten way of finding out about it.' '

Meyers has a somewhat different recollection. He points out that Martin had already agreed to step aside as Smartfoods' president more than six months earlier to concentrate his energies on Tug-N-Tie. Indeed, Meyers had been acting as chief executive officer since the fall of '85. He also says he tried to contact Martin and Withey before the meeting, but they were unreachable -- and then they showed up at the meeting an hour late.

Whatever the circumstances, the meeting opened a breach that proceeded to grow wider and wider. Martin blames it on success. "Once success came to Smartfoods," he maintains today, "it only intensified the conflicts that were already there. Each side was claiming responsibility for the product's success, but it was really the product that was driving all of us along. People were at each others' throats. It was like, 'Whoa, what happened to all that love and respect we've been talking about?' "

These days, Martin and Withey talk a lot about love and respect, which does not stop them from making inflammatory comments about "Ken losing his soul." They are also prone to make inflammatory comments about other Smartfoods board members. Martin describes one as a controller at United Technologies Corp. (U.T.), a military contractor for which he had such antipathy that he fired off a letter asking U.T.'s chairman to intervene. Another, says Martin, runs a large real-estate development company and is a former CIA employee to boot. To hear Martin tell it, the presence of such people was a nightmare come true, as if William Casey and General Westmoreland had signed up to do Smartfood TV commercials.

"Smartfoods was a popcorn company, for God's sake," Martin says, shaking his head, "and here you had ex-CIA people and military contractors coming on board. I mean . . . " His voice trails off.

In fact, his nightmare was at least partly the product of an overactive imagination. The "military contractor" is actually an accountant with Pratt & Whitney Aircraft, a U.T. subsidiary that makes airplane engines. One of the original backers of Smartfoods, the man had been elected as a director at the first shareholders' meeting, when it was agreed that the initial group of investors should have a representative on the board. As for the "ex-CIA" person, it turns out that he was a communications specialist in the army -- and never worked for the CIA.

Yet there's no denying the depth of the anger and hurt that accompanied the breakup of the partnership. "I'm grateful to Smartfoods, and I'll tell you why," says Withey. "It finally opened my eyes to what business is all about. Here was this product we'd come up with -- a natural product, a fun product -- and it brought out the worst in everybody. We lost a real good friend because of it. We had all these outrageous demands made on us on our way out the door. But the worst -- the worst -- was when Ken went ahead and took my name off the bag, like I was no longer part of that company. Of all the hurts, I cried the hardest over that. Business or no business, that just wasn't right.'

* * *

Joseph P. Pellegrino first met Andrew Martin and Ken Meyers in 1984. "We got involved with them on the Tug-N-Tie bag," says Pellegrino, who at the time was president of The Prince Co., a $200-million, family-owned pasta-maker, which has since been acquired by Borden Inc. "Ken was based in our factory for about a year, I believe, working out all the problems they were having with the technology, and we wound up using Tug-N-Tie on our 16-ounce bag of Dutch Maid noodles. The bag worked well, and Prince still uses it. I was very impressed with both Ken and Andrew. They seemed like a couple of characters, but I also thought they had a lot of integrity. And it took guts for them to come out with this new popcorn and stick it in a black bag. My own kids went crazy over it.'

About a year ago, Pellegrino says, Martin showed up at his office with another idea: pasta-based snack foods. At the time, Pellegrino assumed that Martin was developing the product for Smartfoods, where he was still a director. (Martin resigned from the board in September 1987.)

"I'd already been fooling around with pasta snacks," says Pellegrino, "selling them through our Christmas catalog, taking them to trade shows, that sort of thing. The products got great reception, but nobody had put anything like that on the market. When Andrew announced that he wanted to sell pasta snacks, I said great, we would too. I think that's when I found out about Hampton Hill.'

Briefly touching upon his departure as president of Smartfoods, Martin outlined the shape of the new company he and Withey were starting, Hampton Hill Inc. Capitalized with $450,000 in seed money, it would, Martin said, be a marketing-driven firm, not a manufacturing concern. And it would be committed to supporting social and environmental causes they deemed worthy -- committed up front, that is, with a percentage of gross revenues (not profits) earmarked for charity, so that consumers and charities alike could appreciate the connection. He and Pellegrino thereupon worked out a production deal making Prince the exclusive manufacturer of Hampton Hill's first products: a boxed macaroni dinner (Shells & Annie's Cheddar) and a cheese-flavored pasta chip (Zeuschips).

"It wasn't so much the causes that attracted me," says Pellegrino, who admits that saving the Brazilian rain forests is not his number-one charity. "It was the fact they wanted to do something. Certainly there aren't too many companies out there willing to commit a percentage of their revenues the way they do, and I admire them for it.'

From the outset, Hampton Hill targeted 2% of sales of Shells & Annie's Cheddar to a 4-H camp for needy children, with a like percentage of Zeuschips revenues going to an organization working on saving the rain forests, one of Withey's passions. Similarly, the company's latest product, a pasta chip called Good Idea, supports the Earth Island Institute, a militant environmentalist group. Each package carries a message, and the message, broadly speaking, is this: the planet is being raped; the needy are being ignored; we all have an obligation to do something; even buying snack food can help.

As for Smartfoods, Pellegrino thinks the going may get tough. "If I were Smartfoods, and I had the best [white cheddar-cheese] product -- which I believe they do -- I'd be careful. As I see it, the biggest barrier for Smartfoods won't be consumers; it'll be the supermarkets and distributors. Once you awaken the big guys, you can have problems dealing with the trade. Greed becomes a big player. The message they'll be hearing is, you can buy our product cheaper and make better margins on it.'

* * *

The Competitor

The year Smartfood was invented, The Bachman Co. was celebrating its centennial anniversary in the business, having been purveying its own line of snack foods since 1884. The company, based in Reading, Pa., had distribution mainly in East Coast markets from Maine to Delaware. When Smartfood appeared on the horizon, says Bachman director of marketing Karen Fidler, it didn't take long to recognize the new product's potential, or to desire a share of its market.

"We'd been making regular popcorn and [orange] cheese popcorn for a long time, and both lines were growing continually," says Fidler, "but it wasn't until Smartfood came on the market that the New England niche for white cheddar-cheese popcorn was created. Not that Smartfood's success surprised us. New England has always been a strong market for cheese snacks, and it tends to be upscale as well. But with their zany packaging and everything, they just took the market by storm. Consumers seemed to be having a love affair with it. Naturally, we felt that with our brand name we could compete against them well. So we had our R&D people develop a competitive product." The result was Bachman's own white cheddar-cheese coated Superior Premium Air Popped Pop Corn, introduced in October '87.

Though quick to respond, Bachman was not the first snack-food company eager to join the Smartfood hit parade. Imitators had begun to appear as early as July 1986; Meyers now estimates that there are 12 to 15. Some, like Cape Cod Popcorn, compete head-to-head in the New England area, where Smartfood has 75% of its sales and a 50% market share. Because The Cape Cod Potato Chip Co. is owned by Anheuser-Busch's Eagles Snacks line, one of the major national players in the industry, its challenge is probably a taste of popcorn wars to come.

Smartfoods takes all challenges seriously. When Keystone Food Products Inc., in Easton, Pa., tried to jump on the bandwagon by rolling out a cheese popcorn in a black bag with splashy graphics, Meyers responded with a trademark-infringement lawsuit, forcing Keystone to make packaging changes. Bachman hasn't quite crossed that line, but it comes close. The front of the bag shows a pale green cornstalk and white kernels set against a dark metallic blue background. On the back is a peppy little note from the manufacturer. "Each specially bred, moisture-perfect Bachman kernel is suspended in space and bounced off pillows of hot air until it reaches the ideal popping temperature, when it explodes into a tender, fluffy super premium morsel.'

* * *

The Product

Tom Protheroe reaches into a filing cabinet drawer and holds up a handful of invoices. Last year, he explains, Hartford Snack sold more than $1 million worth of Smartfood in Hartford County alone -- at a gross profit of $350,000. These are numbers to make a distributor's eyes dance. "We have a hell of a deal here," he says, fanning the air with the papers. "It's like something from heaven -- the Disappearing Black Bag Syndrome.'

There is another syndrome Protheroe has mentioned: the "rubber truck" syndrome. It results from the fact that any given truck can only hold so much product: when one category swells, others must necessarily contract. Smartfood's popularity has caused it to swell to one-third the capacity of the trucks operated by independent Wise distributors such as Hartford Snack. This has made the distributors happy -- and profitable -- but it has not made Wise very happy at all. With so much truck space being devoted to cheese popcorn, says Protheroe, Wise figures the rubber truck syndrome has set in, and some distributors are carrying fewer Wise products. So, in Protheroe's words, the company has "put the kibosh" on its distributors in an effort to limit their sales of Smartfood outside New England.

He does not consider this a smart move by Wise. "The thing they're not recognizing is that we've gotten a whole lot of accounts basically because of Smartfood. It's been a foot in the door for a lot of Wise products that weren't moving well otherwise.'

Nevertheless, Wise's action has caused problems for Smartfoods. Although the distributors are independent, they are not free agents. Protheroe, for example, is a board member of the Direct Store Delivery Association (DSDA), a group of 42 Wise-affiliated distributors servicing the eastern seaboard from Florida to Maine. Through the association the distributors operate, he says, as a "contiguous group of entrepreneurs who respect each others' boundaries" and offer "no strain, no pain, no hassle" to the manufacturers. "That's especially crucial with perishable items like Smartfood," he notes, "which take special handling and promotion. The DSDA almost agreed to take Smartfood on in the beginning and didn't. Had they done so, Smartfoods might be a $50-million company today, and the DSDA would be very powerful.'

As it is, however, the DSDA is not about to thumb its nose at Wise, so Smartfoods has had to rely on other, smaller distributors outside New England. As a result, says Protheroe, "they're not even scratching the surface of their potential in New York City, for instance, where you've got to cover the major [grocery] chains. That's hard when you're dealing with smaller independents.

"It wouldn't surprise me," he adds, "if [Smartfoods] gets to the point where the old guerrilla tactics don't work anymore, and Ken's board forces his hand. I like Ken a lot. He's done a super job building that product and that company. No competitor is even touching Smartfood in this market. But his investors may decide they don't want to sit on their money anymore and sell the company. That could get interesting.'

It could get real interesting if Hampton Hill succeeds with its planned roll-out of Annie's Original, a Kentucky-kernel popcorn flavored with aged white cheddar cheese. While Smartfoods tries to solve its distribution riddle, Hampton Hill is already old friends with the DSDA and Wise. In the truck-to-shelf wars, that could be a powerful alliance.

It could also pose an interesting dilemma for Protheroe. "I don't quite know what I'm gonna do," he admits. "Andrew and Ann gave me equity and put me on the board of Hampton Hill. I think the world of them, and their pasta chips, which I think have even more potential than Smartfood. But another cheese popcorn? That's a pretty wild idea. If carrying [Annie's Original] means I can't handle Smartfood, I'm losing my most profitable item. And if I don't carry Annie's Original, I could be shooting myself in the foot." He grimaces. "On the other hand," he adds, "if Smartfood sells out to Frito-Lay or something, and I can't carry that, well, I'd sure like to have another premium cheese popcorn. . . . '

If you think that's confusing, try this. Hampton Hill plans to package its seven-ounce bag of Annie's Original in a Tug-N-Tie resealable; Ken Meyers owns 5% of Tug-N-Tie. Smartfood is the one of the largest selling snack-food products in New England; Ann Withey owns 16% of Smartfoods. So, if the two products wind up side by side on supermarket shelves this fall, Meyers will have a stake in every bag of Annie's Original, while Withey and Martin will be profitably tied to each black bag of Smartfood.

They planned it this way, right?

Last updated: Aug 1, 1988




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