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.'
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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?
