Wow! Chips Fail to Fatten up Bottom Line

Apr 03, 2002

Frito-Lay pulled Wow! chips from some grocers’ shelves in part of Massachusetts late last summer in what it calls a “reverse market test” to see whether shoppers would miss them. Touted as one of the greatest new snacks ever, its fat-free potato chip failed to fatten up the company’s bottom line, reports the Associated Press.

Shoppers bought more than $150 million worth of Wow! chips last year, says Frito-Lay spokeswoman Lynn Markley. Those kind of sales would be considered robust for many products and companies. However, Lay’s, Doritos and Tostitos chips each sold more than $1 billion last year, according to company figures. And Frito-Lay’s costs for Wow! chips are probably higher, speculate analysts, because the company must pay Procter & Gamble Co. a licensing fee to use its fat substitute, olestra.

Just a few years ago, Frito-Lay thought it could charge a premium for Wow! Instead, the chip’s sales have dipped due to an attack by health advocates and the changing palate of snackers. “It was going to be a revolutionary product,” said Caroline Levy, an analyst for UBS Warburg. “It never got off the ground, and it never will with that kind of a label.” The U.S. Food and Drug Administration required products made with olestra to carry a label saying they “may cause abdominal cramping and loose stools.”

Moderator Comment: Should Frito-Lay discontinue the
Wow! chips line?

If this were a smaller snack manufacturer, this wouldn’t
even be a question. The real issue here for Frito-Lay (and retailers) is would
the space dedicated to Wow! that is generating $150 million in sales produce
even more if replaced by something else. In many stores, the answer might very
well be yes. In many more, Wow! may deserve even greater space. [George
Anderson – Moderator

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