The Crisp Wars represent a slice of British cultural history. The business lesson is that success in these markets demands genuine skills of brand and category management
Every man, woman and child in Britain spends, on average, about £50 a year buying 150 packets of potato crisps. A typical packet contains around 200 calories, mostly carbohydrate and fat, and is a staple item in a school lunch box.
Jamie Oliver launched a televised crusade to teach children to eat more nutritious food. This led the government to appoint Dame Suzie Leather to bully the nation into better eating habits. Last week, she demanded that crisps be banned from the nation’s schools.
Globalisation is only slowly eroding national differences in eating habits. In the US, crisps are known as chips and may be made from corn rather than potato. Chips in Britain are what Americans call French or freedom fries, according to inclination. After several beers, British consumers eat these doused with salt and vinegar wrapped in old newspapers. These are Anglo-Saxon tastes. Crisps eaten in Britain account for about half of total sales within the European Union. Southern Europeans might munch on an olive, while only a Belgian would snack on frites with mayonnaise.
Dame Suzie’s enemy is the Pepsi Cola Corporation, global market leader in crisps and chips. PepsiCo’s US dominance was achieved in the 1960s when it acquired Frito corn chips and Lay potato chips. In Britain, PepsiCo emerged as the clear winner of four decades of crisp wars last month. The only remaining substantial rival called in administrators.
Crisps are a product of bad times. Elmer Doolin of Texas and Herman Lay of Nashville both launched their chip businesses in 1932 in the depths of the Great Depression. The popularity of crisps in Britain dates from postwar austerity, when butchers sought substitutes for scarce meats. For my generation, the packet of Smith’s crisps with a portion of salt wrapped in blue wax paper is an indelible childhood memory. The groundsman sold crisps to schoolboys in sodden sports kit, the crisps soggy and the salt caked. The salt could never be dispersed evenly without breaking the crisps.
In 1961, Imperial Tobacco, diversifying in response to the health concerns over their principal product, purchased Golden Wonder and the first crisp war began. The new owners invested in technology and in brand advertising, creating crisps in many flavours and packaging that repelled moisture. Within a few years, Golden Wonder had displaced Smith’s as market leader and those blue packets of salt had disappeared.
In 1986, Imperial was acquired by Hanson, which quickly disposed of peripheral businesses. Golden Wonder was bought at auction for a price far higher than the previously estimated value of the business. The purchaser was Dalgety, better known for its animal foodstuffs. PepsiCo instead bought a smaller company, Walkers, and the second crisp war broke out. Walkers received technological and marketing support and, when a fire disrupted Golden Wonder’s production, gained the market leadership it has since retained.
Dalgety concluded that selling products for humans was hard, limited its investment and finally sold Golden Wonder to a management buyout. That was the moment PepsiCo chose to launch an iconic advertising campaign, featuring Gary Lineker and other football players. In 2006, the Golden Wonder team retired to the dressing-room.
The business lesson of the crisp wars is that success in these markets demands genuine skills of brand and category management. Two large companies that had acquired these capabilities in other markets were able to deploy them rapidly and decisively in the sale and distribution of crisps in Britain. The apparent market dominance of Smith’s and Golden Wonder disappeared in the face of this assault.
Imperial Tobacco and PepsiCo supported their strategies with investment in brand advertising, technology and new plants, but the amounts involved were not large in relation to the size of either these companies or the market they served. Effective business strategy matches organisational capabilities to market opportunity. In different phases of the crisp wars, first Smith’s, then Golden Wonder and finally Walkers had the strategy for the times.