Tuesday, November 22, 2005

Pepsi keeps buying innovation This is not a big story, but it is indicative of how dominant oligopolies keep on buying innovative small companies to protect themselves from competition. The food industry is a great example, because most of us encounter it ever day at the market or convenience story. Frito-Lay, the division of Pepsico that dominates the salty snacks category with some 65% market share, announced it will buy Stacy's Pita Chips. The Massachusetts company is a leader in a small but growing category of "healthier" snacks, with lower fat and sugar. Pepsico has been pushing the supposedly healthy benefits of Tropicana orange juice, Baked Lay's potato chips, and other products, just to cover itself from charges that it sells only hi-sugar and hi-fat products. This small company started life as a push-cart sideline, and over nine years has grown to a company with $60 million in revenue and steady growth. By Frito-Lay, that's peanuts. But it brings the company's maturing lineup a new growth possibility, given Pepsico's distribution muscle. Pepsicohas been doing this for decades, with products like Sun Chips and Smartfood popcorn. Stacy's has been looking for a buyout for a year, Frito-Lay gives the founders a nice (undisclosed payday) and gives them an exit before the company's growth needs professional expertise. 8:46:08 PM

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