Brand Marketing Search Engine

Sunday, May 06, 2007

Brand People Failures: Guiltless Gourmet

Helping the competition

Although most people failures are a result of unscrupulous decisions or vicious personality clashes, on rare occasions people let their brands down despite having the best of intentions. This is what happened to Michael P Schall’s brand, Guiltless Gourmet, when he gave away the secrets of his success to his chief competition.

In the 1990s, Guiltless Gourmet was a small business success story which attracted a great deal of attention in its native Texas. The company, which made baked, low-fat tortilla chips, had evolved in the space of five years from being a home-based operation into a US $23 million business with a massive factory.

In addition to media support, the company also had endorsement from such lofty US health authorities as the Center for Science in the Public Interest, which supported claims that the Guiltless Gourmet range was a healthy – indeed ‘guiltless’ – alternative to other snack brands.

As is so often the case, Guiltless Gourmet soon became a victim of its own success. Frito-Lay, one of the largest US companies producing snack-food (and normally of the ‘guilt-filled’ rather than ‘guiltless’ variety) had watched the phenomenal growth of this small Texan company and wanted a piece of the action.

Schall, the owner of Guiltless Gourmet, had worked as a consultant for Frito-Lay, and had even invited the company to acquire the brand. But Frito-Lay hadn’t warmed to that idea. Instead, it wanted to create an entirely new tortilla brand to take on Guiltless Gourmet. And given Frito-Lay’s wellestablished distribution network, it wasn’t too long before its new product – low-fat Baked Tostitos – was available in supermarkets across the United States. Straightaway, Frito-Lay’s offering was chomping its way through Guiltless Gourmet’s market share. Within a year, Guiltless Gourmet’s revenues reduced to US $9 million, and the company was forced to shut down its factory and start outsourcing. Its workforce slimmed down from 125 to 10 employees.

Although it is easy to see this situation as unavoidable from Guiltless Gourmet’s perspective, there are always ways in which a brand can protect itself from outside threats. For instance, some have said that Guiltless should have broadened its product line into other relevant categories or outsourced production at an earlier stage.

There is also the issue of Schall’s decision to work with Frito-Lay as a consultant. When Business Week magazine enquired, Frito-Lay wouldn’t discuss the aborted buy-out nor the suggestion that it may have just been scouting for competitive intelligence. Of course, we can only assume that Frito-Lay are ‘guiltless’ but even they admit that the information provided by Guiltless Gourmet was helpful. ‘Guiltless Gourmet provided us with a great benchmark to get our product better-tasting,’ admitted Frito-Lay spokeswoman Lynn Markley.

Although Guiltless Gourmet’s low fat tortilla chips are still on sale, the future of the brand is still in doubt. Schall still believes the best route may rest with a buyout. ‘Our brand has great value,’ he told Business Week. ‘It would be good to become part of an organisation where that brand can be leveraged.’

Lessons from Guiltless Gourmet

  • Be aware that success breeds competition. Guiltless Gourmet’s success within a niche product category was inevitably going to catch the attention of larger rivals.
  • Have a Plan B. Brands need to prepare for such an eventuality and have a back-up plan.

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