Frito-Lay History

Frito-Lay History

The Frito-Lay Story

In 1932, two young entrepreneurs independently started two separate companies that were thousands of miles apart. Both men had the same objective in mind, and both shared the same basic business philosophy: "Provide the customer with a product of the highest quality and value; sell it for a fair profit; and make service a fundamental part of doing business."

Elmer Doolin of San Antonio, Texas started his company by purchasing the rights to a then unknown corn chip product that he would make famous.

Herman W. Lay of Nashville, Tennessee developed his business by selling a product that was familiar to people in his region, but later would become America's favorite potato chip.

These two savvy businessmen, who transformed a small, fragmented portion of the food business into the large, flourishing world of snack foods, created an industry based on unrivaled customer service and superior products.

The Frito Company

In 1932, Elmer Doolin entered a small San Antonio cafe and purchased a bag of corn chips to eat with his sandwich. Little did he dream this savory chip would become one of the nation's most popular snack foods.

Mr. Doolin, who was the operator of the Highland Park Confectionery, was looking for another investment to add to his ice cream and snack business, which was caught in a price war and showing little promise. He learned that the manufacturer of the corn chips was eager to sell his small business and return home to Mexico. For $100, Mr. Doolin purchased the recipe, 19 retail accounts, and the manufacturing equipment, which was a converted hand-operated potato ricer.

Mr. Doolin established his new business venture in his mother's kitchen. Since there was no money for hiring employees, Mr. Doolin, his mother, Daisy Dean Doolin, and his brother, Earl Doolin, made the Fritos at night by hand-rolling the stiff masa dough and thinning it with water, cooking the corn chips (Mrs. Doolin was the first Frito cook), then packing the Fritos in 5¢ bags, which was the only size marketed at that time; the family's production capacity was about 10 pounds per hour. Mr. Doolin's days were spent distributing Fritos to his accounts from his Model T Ford, seeking new accounts, looking for reliable sources for quality corn, and washing and grinding the corn by hand. Total sales ran from $8 to $10 a day; profits averaged about $2 per day.

Within months, the company experienced phenomenal growth. The "factory" was moved from Mrs. Doolin's kitchen to the garage, then to a duplex next door. In 1933, the brothers increased Fritos production from 10 pounds to nearly 100 pounds an hour after designing a "hammer" press, in which the cutter was hit with a hammer to cut off the Fritos at the appropriate length. The accelerated growth in production resulted in lines operating in Houston and Dallas by year-end, and the moving of The Frito Company headquarters from San Antonio to Dallas due to the city's central location and better availability of raw materials. In 1937, a The Frito Company opened its Research and Development lab — the first of its kind in the industry — as a result of Mr. Doolin's search for reliable sources of higher grade corn. Other products were added; Fritatos Potato Chips (later simplified to Ta-Tos) were introduced in 1935, followed by Fritos Peanut Butter Sandwiches and Fritos Peanuts in 1937. Mr. Doolin's and his brother's ideas and mechanical engineering talents were shared once more as they designed and constructed automatic presses and better cooking vats as the company, which now employed hundreds of people by the late 1930's, rapidly expanded. In 1941, the company opened its Western Division in Los Angeles with two sales routes; these routes, which grew to 20 by year-end, became the prototype for The Frito Company's "store-to-door" distribution system.

During World War II, The Frito Company, as did other companies, experienced shortages, rationing, and loss of man-power. Throughout the war, however, tastes of home were remembered as Fritos were eaten by hungry G.I.'s., and every Frito employee called to service was guaranteed a job after the war by Mr. Doolin.

In 1945, as American returned to peace-time, the country experienced a booming population, a new-found prosperity, and a large consumer demand for products. To meet this demand, The Frito Sales Company was established, which separated sales from production activities. The Frito Sales Company was formed to convert product distribution to company-owned routes, and its Sales Engineering Division was charged with analyzing the sales potential of different trade areas and designing the routes accordingly. This outstanding distribution system, which is still in use today, allowed each truck to service a route and deliver Fritos directly to customers.

Expansion by the Frito National Company continued with the issue of six franchises in 1945. The first of the FRITOS® franchises was offered to The H.W. Lay Company of Atlanta, GA., and would be the start of a partnership that would change the shape of American consumer goods marketing. When Hawaii was issued a FRITOS® franchise in 1947 along with six additional U.S. franchises, national expansion and international distribution - Mr. Doolin's bold vision of global marketing for his company – was realized. Three years later, in 1950, FRITOS® were sold in all 48 states, and, by 1962, they were sold in 48 countries.

The Frito Company issued its first public stock offering in 1954, with sales that year reaching $21 million. In 1956, in a move to consolidate its national distribution and create the first national snack food company, The Frito Company started buying back franchises and acquiring regional snack food companies.

Under his imagination and leadership, Mr. Doolin changed a small, kitchen-operated business into a multi-million dollar company. At the time of his death in 1959, The Frito Company produced over forty products, had plants in eighteen cities, employed over 3,000 people, and had sales in 1958 in excess of $50 million. Today, FRITOS® Corn Chips rank among the top 10 salty snacks in the United States.

The Lay Company

In 1932, Herman W. Lay began his potato chip business in Nashville by delivering snack foods from his Model A Ford touring car. Like Mr. Doolin, he also had tried his luck in the ice cream business. Mr. Lay and a friend had planned to sell ice cream along the parade route at the 1928 Democratic National Convention in Houston, Texas. Their business venture failed when the parade was rerouted and their ice cream stand was left on a deserted street.

After a variety of jobs, the then 24-year-old Mr. Lay was hired as an extra route salesman to sell and make deliveries for the Barrett Food Products Company, an Atlanta, Georgia manufacturer of Gardner's Potato Chips. Later that year, he took over Barrett's small Nashville warehouse as a distributor, using his Model A car as a delivery truck and $100 in capital. Mr. Lay received a weekly allotment of potato chips and a cash allowance; the job paid no salary, just an advance against his commission on sales. He now had a job, his own territory, and a business to independently run.

As his territory expanded, his profits rose. He hired his first salesman in 1934, the same year that his H.W. Lay Distributing Company became a major distributor for the Barrett Food Products Company. Three years later, Mr. Lay had 25 employees and had moved into a larger manufacturing facility where he produced popcorn and peanut butter sandwich crackers.

A representative of the Barrett Food Company contacted him in 1938 with an offer to sell Mr. Lay the company's plants in Atlanta and Memphis for $60,000. Unable to raise but $5,000 from investors and associates, he borrowed $30,000 from a bank and persuaded the Barrett Company to take the difference in preferred stock. Mr. Lay moved his headquarters to Atlanta, replaced the Barrett signs with "H.W. Lay Co., Inc." signs on October 2, 1939, and remained as president and chairman of the board until 1961.

When he formed the H.W. Lay corporation in 1939, Mr. Lay had fourteen trucks covering the Nashville - Chattanooga area. Expansion was also a vision for Mr. Lay, who, over the next few years, purchased the Barrett manufacturing plant in Jacksonville, Florida, and additional plants in Jackson, Mississippi, Louisville, Kentucky, and Greensboro, North Carolina. He retained the Gardner trademark of Barrett Food Products until 1944, when he changed the product name to Lay's Potato Chips and introduced "Oscar — the Happy Potato" as its advertising symbol. In 1945, Mr. Lay signed an exclusive franchise agreement with The Frito Company to manufacture and distribute FRITOS in most of the sales territory covered by The H.W. Lay Company.

In 1949, the company established a research lab to develop new products. The purchase of two other snack food companies, the Richmond (Virginia) Potato Chip Company and the Capitol Frito Corp., increased his product line and distribution area in the 1950's. By 1956, H.W. Lay & Company, now publicly-owned, was the largest manufacturer of potato chips and snack foods in the United States; it had more than 1,000 employees, plants in eight cities, and branches or warehouses in thirteen others. Its primary product, LAY'S® Potato Chips, is America's favorite potato chip.

Frito-Lay, Inc. Is Formed

In 1945, the Frito Company granted H.W. Lay & Company an exclusive franchise to manufacture and distribute FRITOS® Corn Chips in the Southeast. As the two companies worked toward national distribution, a close business affiliation developed which eventually resulted in a merger. In September 1961, just 29 years after the founding of both companies, The Frito Company and H.W. Lay & Company merged to become Frito-Lay, Inc., the largest snack selling company in the United States.

Frito-Lay and Pepsi Join

In February 1965, the Board of Directors for Frito-lay, Inc. and Pepsi-Cola announced a plan for the merger of the two companies. On June 8, 1965, the merger of Frito-Lay and Pepsi-Cola Company was approved by shareholders of both companies, and a new company called PepsiCo, Inc. was formed. At the time of the merger, Frito-Lay owned 46 manufacturing plants nationwide, had more than 150 distribution centers across the United States, and was listed on the New York Stock Exchange. In 1998, PepsiCo acquired Tropicana; and in 2001 acquired The Quaker Oats Company.