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Who's Eating Whom?

Smartfoods Inc. is bought by Frito-Lay, which plans to market the company's cheese popcorn nationally.
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Last August we wrote about the astonishing success of Smartfood premium cheese popcorn in a story called "The Snack Food That's Eating America" (August 1988, [Article link]). That story now has a new twist: in January giant Frito-Lay Inc. ate Smartfoods Inc.

It wasn't a totally unexpected ending. The food industry is notoriously difficult for start-ups, and even in our August story, one of Smartfoods' distributors was speculating about what would happen if Frito-Lay bought the popcorn company. In addition, Smartfoods was already facing problems gaining distribution outside New England as its competitors discovered the new market.

By January those problems had gotten worse, not better. As a result, Smartfoods' shareholders voted nearly unanimously to accept Frito-Lay's offer, reported to be approximately $15 million. Cofounder and president Ken Meyers will remain with the company and report directly to Frito-Lay's president. "It's a dream come true for Ken," says Tom Gregory, a consultant and Smartfoods board member. "He always wanted to take Smartfood national."

Not everyone is so happy. Smartfoods' distributors supported an independent buyer -- and weren't pleased when his offer was rejected. Andrew Martin, who left the company after he lost the title of president, thinks the sale betrays Smartfoods' original ideals. "It's as if Ben and Jerry sold out to Pillsbury," he says.

There's a bright side for Martin and for Smartfoods' cofounder Ann Withey, however. Soon after the sale was announced, their current company, Annie's Inc., began discussing a new product with some former Smartfoods' distributors: Annie's All Natural Popcorn, a Smartfood taste-alike featuring a rabbit logo. "The rabbit is our pet and a good-luck mascot," explains Martin. "And we'll need all the help we can get, because we are up against Frito-Lay."

Then again, they've already gotten some help -- from Smartfoods. Withey, after all, was the company's largest shareholder (with 15.5% of the stock) and thus the major beneficiary of the sale. -- Teri Lammers

Last updated: Apr 1, 1989




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