The World's Oldest Start-Up

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The market and competitors
By many measures, Act II of the Tropic's story--year one of its marketing push--will be no less challenging than its protracted opening act. Ritthaler may well need that safari jacket. For in forgoing a commodity business and its inherent pitfalls, he's run headlong into a different set of problems in the archly competitive snack-food business, a jungle of an industry in which the challenges only begin with an 800-pound gorilla.

In the salty-snack business, Frito-Lay casts an intimidating, $10 billion shadow. The undisputed King of Chips has gobbled up foot after foot of supermarket shelves, typically commands entire rows inside vending machines, and rules supreme in other venues such as Subway sandwich shops, where franchisees can stock as many as 12 varieties of chips--all made by Frito-Lay. "I don't think yuca would be worth their time and effort," says Ritthaler, who believes his narrow niche will protect him from Frito-Lay's mass-market might. "There are too many other things they could do to get a faster return."

In the years it's taken Tropic's to ready its rollout, a key portion of the playing field has changed. Until recently, the natural-foods industry served as a low-cost-of-entry incubator for small companies like Ritz Foods. Those days are disappearing, if not already gone. "It's kind of like all bets are off," says Steven Hoffman, publisher and cofounder of Natural Business, an industry journal. For one thing, the number of new natural-foods products has soared, increasing competition. When Ritthaler first set his sights on yuca, the new-products showcase at the Natural Products Expo was just that, a single glass case. Today it takes several such cases to house all the wanna-bes. And the cases don't contain any of the favorite-son competition that's out there--the growing number of house brands now shelved at outlets like the Whole Foods Market chain. "There's such a plethora of new products and such a fight for shelf space. Just as that led to slotting fees in the supermarket industry, we're now seeing those kinds of things in the natural-products industry," says Hoffman. And there are fewer distributors. Industry growth has sparked the inevitable consolidation, concentrating entrÉe increasingly in the hands of two companies, Tree of Life and United Natural Foods.

The players have also changed as Ritz has ramped up. Goya, an established maker of ethnic foods, has introduced cassava (another name for yuca) chips in metropolitan New York supermarkets. In Ritthaler's neck of the woods, Florida, no fewer than three small food companies that sell primarily to the Spanish population, also through supermarkets, have expanded production from plantain chips to yuca chips. While none of those products is positioned as a premium chip, a well-established, high-end brand of nonpotato chips--Terra chips--already stares out at Ritthaler from the very shelves he covets.

Ritthaler may claim that he's not competing directly with Terra chips, noting that yuca chips make up only a small proportion of the colorful vegetable chips in the Terra bag. (The others are made from taro, parsnip, sweet potato, batata, and ruby taro, which is taro that has been dyed red with beet juice.) And it could be that Terra's success with regal retail price tags--the chips sell for as high as $4.79--will make it easier for Tropic's. Terra has done the groundbreaking work of establishing the premium-chip category. Generally priced at a dollar or two below the competition, Tropic's chips could look like a bargain.

But Tropic's will most certainly come face-to-face with Frito-Lay in vending, where space is just as tight as on supermarket shelves. Although vending operators are always looking for new products to enliven their displays and entice customers, they're more interested in counting profits. Margins and turns are what they're after. Frito-Lay's nationally branded products deliver for them, and rebate and incentive programs make them think twice about replacing a Frito-Lay bag with something else. A gourmet, premium-priced yuca chip probably won't be a slam dunk in vending, where research shows that the typical customer generally tries to buy the most product for the smallest number of coins.

Through the fall of 1998, as Ritz awaited its first major yuca crop to mature and be processed, the company kept its marketing efforts fairly low-profile. There'd been no point-of-purchase advertising--no mention of the health benefits, no pushing the taste advantage. Marketing director Robert Anderson and a second employee handled trade-show appearances, took out ads in magazines like The Gourmet Retailer, sent out sample shipments, and made preliminary sales calls. Anderson is an energetic 63-year-old. Ritthaler hired him because of his experience marketing a wide range of small, start-up products--everything from fresh pasta and a high-end frozen fruit bar to cocktail-table coin-operated video games. But with his yuca crops finally maturing in the fields, Ritthaler confides that he's about to add three more employees to the marketing force--the better to follow up on preliminary contacts with restaurants, food-service vendors, and a major airline.

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