The World's Oldest Start-Up

Anatomy of a Start-Up

Gerald Ritthaler had no idea that it would take 10 years to bring his tiny snack food company to life

Dressed in a safari jacket, the better to evoke the rainforest origins of his product, Gerald Ritthaler stood near his 10-by-10-foot booth in trade-show Siberia: a distant corner at the National Automatic Merchandising Association's gathering last October at Chicago's McCormick Place. He watched as vending-machine operators, snack food brokers and distributors, and plenty of competitors sampled his new chips.

If the scene is altogether common--a first-time entrepreneur glimpsing and gauging the early arc of his new business--there's also much here that's out of the ordinary. Call Ritthaler's company, Ritz Foods International Inc., with its five-person office in a bank building in Delray Beach, Fla., the un-start-up: slow, not nimble, to market; based on an unknown product and having an unusual (for these times, anyway) high-overhead corporate structure; guided not by youthful entrepreneurial energy but by a rather uncustomary, second-wind gust from a retirement-aged founder. Not to mention that it's a business bent on cracking an increasingly unfriendly industry.

Ritthaler, a 68-year-old former senior vice president in charge of taxes and international finance at Gulf & Western, believes he has his niche in the snack-chip marketplace. "Move over, potato," proclaim several of his prospective point-of-purchase materials. His chips, named Tropic's, are sliced not from spuds but from yuca, an ungainly root crop little known in the United States but one that he believes can be profitable, provided he takes an unusual step for a small business: vertically integrating the company. Running 180 degrees counter to today's trend toward low-overhead, virtual companies, Ritthaler is growing his own raw materials on a 5,000-acre company-owned and -operated farm in Venezuela. Just down the road from the farm is a propagation lab that's big enough to jump-start as many as 100,000 cuttings in sterile test tubes, as well as the company's climate-controlled greenhouses, which baby the young plants for another four weeks before they're planted. Thanks to irrigation installed last year, Ritthaler expects to have year-round harvests to supply the company's processing and packaging plant, which he just recently equipped with a fourth automatic bagging machine. There are 100 employees at the plant when it's in full production, and Ritthaler has 25 to 30 full-time field workers. He has made a partner of his general manager, Mara Cristina Gonzlez, who's in charge of administration.

Also staked to a share of equity is a trusted member of the Ritthaler family, Gerald's cousin's son Brent, who heads operations--a Renaissance man's job to be sure, even for someone who grew up drilling wells, fixing farm equipment, and helping to achieve record corn crops on a 2,000-acre family farm in Nebraska, for this job goes far afield of the fields. Brent Ritthaler created the spice mixtures for the various Tropic's flavors. He's learned from expert consultants about frying oils and temperatures. He designed the Tropic's package and even did the photography. One of his next challenges will be finding or, more likely, creating equipment to automate the processing of another, in-the-works product from this wonder root. In building a business around a single plant, the elder Ritthaler talks passionately of processing yuca (pronounced you ´-ka, not yuck´-ka) the same way a packing house processes pork--"right down to the squeal of the pig."

The concept
Ritthaler first envisioned yuca as the root of all earnings a decade ago, when a Venezuelan agronomist told him he'd found a way to triple the yields of this Central and South American food staple, which is a starch that's also used in textiles and food processing. His interest grew when he learned that most of the world's yuca is grown on small plots of land. He crunched some numbers. "I put it on paper. It pointed off the charts," he says.

The opportunity beckoned so brightly that Ritthaler decided to try his hand at a start-up. At various times during his career at Gulf & Western he'd occupied each of the four corner offices on the 37th floor of the company headquarters building, in Manhattan, and at one point he headed the largest corporate staff, some 130 employees. He sat in on annual business plan meetings for every division of the conglomerate, participated in acquisitions, and even served on the board of Cinema International Corp., a joint venture between Paramount and Universal. After leaving G&W, in the 1980s, Ritthaler managed overseas businesses divested from the conglomerate, some of which he and a couple of partners later bought. They ranged from auto-parts stores to industrial-hardware manufacturers and distributors. Still, he had virtually no start-up experience when, in 1988, he began growing yuca after purchasing a 300-acre farm in Venezuela. "Most of my corporate career I was a staff person," he says. "Now, when you're starting to create something, it's a good feeling."

The whole enterprise, Ritthaler admits with a laugh, "kind of took on a life of its own." He soon realized that farming yuca, even with the promise of higher yields, would leave him growing a perishable commodity that would be subject to price fluctuations, and that he'd be forever at the mercy of processors. Then, in 1990, he tasted a locally made yuca chip, and the path to profits seemed clear. He would take yuca from the field to the consumer by processing it as a healthful gourmet snack chip he could sell at a premium price. And Ritthaler's ace in the hole, his point of difference from other snack-food manufacturers, the key competitive advantage he would gain by vertical integration: a better-tasting chip.