WOW! OLEAN CHIPS GET 'REVERSE MARKETING' TEST

Product Yanked From Shelves; Consumer Reaction Monitored

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NEW YORK (AdAge.com) -- More than four years after Frito-Lay launched its fat-free Wow! chips to great expectations, the now-niche brand is part of a "reverse test market" to determine consumer reaction to the Olean-based snacks being yanked off store shelves.

"Though they didn't say it in so many words, it seems the handwriting is on the wall [for Wow!]," said one retail executive in the western Massachusetts market where the PepsiCo unit pulled Wow! off the shelves.

Won't be discontinued
According to Frito-Lay spokeswoman Lynn Markley, the test was launched to "determine consumer preference for low- or no-fat snacks," including determining if the absence of Wow! would drive sales of its once-powerful Baked Lay's brand. She said the company has no intention of pulling Wow! entirely.

"Wow! sales were

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over $150 million last year, and it remains a stable and profitable business for us," she said.

But a stable niche business was never what Wow! was intended to be. The much-anticipated launch of the brand in March 1998 was expected to be a blockbuster for the company and a major profit driver, as the company forecast sales of the fat-free versions of Lay's, Doritos, Ruffles and Tostitos to top more than $400 million in the first year.

A bust for P&G
That lofty estimate seemed conservative by the standards of Procter & Gamble Co., which spent $1 billion over more than a quarter century on research and development for olestra (later renamed Olean), including more than a decade of attempts to win Food and Drug Administration approval. P&G and analysts initially predicted the ingredient could become a $1 billion-a-year business. But last June P&G wrote off its investment, and in February, sold the Cincinnati plant that makes Olean.

Frito's Wow! was a disappointment right out of the gate. Even in its launch year, Wow! was blamed for dragging down volume expectations for Frito-Lay North America from 7% to 8% to 4% to 5% and tempering profits from an anticipated 12% rise to an increase of only 9%.

$35 million push
That's despite $35 million in media advertising from Omnicom Group's BBDO Worldwide, New York, and an extensive sampling program intended to counteract consumers' growing skepticism regarding the taste of reduced-fat products. The aggressive marketing effort included a quickly developed follow-up campaign to the initial "One taste and you'll be a believer" tagline, offering the additional incentive, "Betcha can't taste the difference or it's free" along with $1 coupons.

Still, sales didn't improve. Information Resources Inc. data show that Wow! Sales reached a high of $277 million in supermarkets, mass outlets and drugstores in 1998 before posting double-digit declines in 1999 and 2000. For the recent 52 weeks ended Feb. 24, sales dropped a more modest 5.3% to $135.8 million in those outlets.

As for P&G's own Olean-based snack, Pringles Fat Free, sales topped $59 million in 1998 and have been declining ever since. IRI numbers show sales of the product for the 52 weeks ended Feb. 24 sank 12.2% to $26 million.

Frito-Lay had "been optimistic" in its projections, Ms. Markley admitted, but early on understood the consumer segment for the product and adjusted expectations.

"By anybody's estimation, Wow! did not live up to original expectations," said Ken Harris, partner at Cannondale Associates.

Warning label
The reason in part was timing, Mr. Harris said, as Frito-Lay's launch was delayed due to P&G's trouble getting Olean approved and opposition from the Center for Science in the Public Interest. A required package warning -- "This product contains olestra, which may cause abdominal cramping and loose stools" -- didn't help.

Because of the delays, Wow! did not reach store shelves until two years after Nabisco's Snackwells hit its sales peak of more than $600 million -- and just as consumer backlash against better-for-you snacks began.

Though Wow! was expected to drive incremental sales, it actually cannibalized Frito's Baked Lay's business, which fell from its sales high of $190 million in 1997 to as low as $54 million in 2000, according to IRI. Sales for the 52 weeks ended Feb. 24 of this year rose 16% to $64 million.

Staff writer Jack Neff contributed to this report.

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