Frito-Lay offers local potato chips

Recently Frito-Lay started a campaign in the United States to show consumers where their bag of Lays Chips was manufactured and even where the potatoes for that specific bag were grown: the Chips Tracker (no longer available).
 

In the ads that are part of this campaign, Frito-Lay features potato farmers growing their chips potatoes in California, New England, Texas, Michigan and Florida.
 
A Category Leader

Frito-Lay has always surprised me in a positive way in how they pick up trends and implement them, mostly before others do. They truly behave as a category leader. They are also good in communicating what they do to their customers and the world at large. Given their size, this should not come as much of a surprise, they can afford a good PR team.

Let’s look at Frito-Lay’s record:
 

• Frito-Lay brought “light” (OK, that wasn’t a success),
• they brought healthy oils,
• they were the first to calculate the carbon footprint of potato Chips.

More recently they brought:
 

• an entire new frying technology resulting in better low fat potato chips,
• they are bringing energy savings and alternative (solar) energy and
• biodegradable packaging.

By any standard I would call Frito-Lay's focus on health and environment an impressive record and not just "greenwashing" or good PR. Most recently Frito-Lay brought "Locally grown and produced" potato chips. However, Frito-Lay's "local" initiative did not get a warm reception everywhere.

How to interpret "Locally Grown and Produced"

I think the problem is that the ”Local” concept is interpreted in different ways:
 

1. If “local” to you also means that farms and processor have to be small, Frito-Lay, with a global market share of the snack market of close to 30% does not come close and never will be a "local" manufacturer. Interesting detail: Did you notice that the farms profiled in the Frito-lay ads are NOT small? In fact they all seem large...


2. If you feel that “local” also means that production has to be organic and in every way sustainable, than most of Frito-Lay’s farmers probably still have a long way to go.


3. However, if you look at “local” in a more strict sense as minimizing the carbon footprint and environmental impact by reducing transportation distances and optimizing logistics, than Frito-Lay’s Chips certainly fits the "local" label.

The Logistics of the Potato Processing Chain

Let’s look a bit more in detail at the logistics in the potato processing Industry. Since we focus on local, let me start by sharing a well kept secret of the potato processing industry. ALL potato processors source their potatoes locally, with very few exceptions.

Most potato processing factories are located right in the middle of potato growing areas. The reason is basic economics: It is expensive to transport potatoes over long distances. Furthermore,  transportation is detrimental to the quality of the potatoes, resulting in extra losses during the production process. There is even an extra advantage if potatoes are processed within 24 hours after harvest, since any bruising resulting from harvesting will not develop into black spots.

But the logistics not only comprise the transport of the potatoes to the factory, there is also the transport of the product to the consumer.

Here we see huge differences between potato products, mainly based on shelf life and density:
 

• Potato starch and dehydrated potato products like potato flakes and potato granules represent "potato in its most concentrated form" and are transported all over the world. Much of the potato starch in North America originates from Europe and China even found it necessary to slap an anti-dumping tax on European potato starch to reduce its import.


• Frozen French fries are exported all over the world as well, but transport and storage is more expensive, since the product needs to be kept frozen and you are also transporting considerable amounts of water.


• Potato chips on the other hand are not transported too far: Shelf life is limited and you are mainly transporting air. Risk of breakage further discourages transportation over long distances.

 Compare the location of the French fry factories in North America (All manufacturers) with the distribution of Frito-lay’s Chips factories:

Frozen french fries can be transported much easier than potato chips, therefore the french fry factories are located where it is least expensive to grow and store (fall) potatoes.

On the other hand, Frito-lay's potato chip factories (represented by a bag) have a nice geographic spread to be minimize transportation of the products to all customers.
 And this is why most smaller potato chips manufacturers do not distribute throughout the whole of North America: a small Canadian Chip company proudly mentioned that they sourced all their potatoes within 30 kilometers from their factory. Good! In the next sentence, they announced that they would expand their product distribution to entire North America…. Ouch!

The conclusion not everyone might like is that large companies with multiple factories have a definite advantage in optimizing their product logistics and can be more "local" in the narrow definition (3) I offered at the beginning.

Case and point made by Frito-Lay in their "Chip Tracker" campaign.