An Analysis of the Market for Olestra-Based Potato Chips
Who wouldn?t want to munch on delectable potato chips all day without the
worry of adding extra inches to the waistline? This is the assumption the manufacturers
of Olestra-based potato chips are banking on. Olestra is a ?fake-fat?; it is a cooking oil,
made by a combination of sucrose and vegetable oil, whose numerous fatty acid chains
are indigestible by the human body. Therefore, it imbues potato chips with the same
flavor and texture as their full-fat cousins but diminishes the guilt factor substantially.
Olestra chips have zero fat and half the calories of the full-fat varieties (ACSH).
Obviously, this is quite an attractive prospect to chip producers, especially in the current
times where thinness and physical fitness reign supreme. Presently, there appear to be
three major potato chip brands using the fake-fat technology: Frito-Lay?s WOW! Chips,
Procter and Gamble?s Fat Free Pringles, and Utz Brand Yes chips (though Utz is sold
almost exclusively on the eastern half of the country). The market structure is a bit
interesting, considering that the Olestra oil is an innovation of Procter and Gamble alone.
Adding to this interest is the heated controversy surrounding the fake-fat chips, which has
undoubtedly had some effect on pricing and market behavior.
Before examining the market workings of today, it could perhaps be beneficial to
review a brief history of Olestra. Olestra is not a new fat substitute by any means;
Procter and Gamble scientists discovered it in 1968. They esterified eight fatty acid
residues to a molecule of sucrose, reasoning that the increased number of fatty acid
chains would help premature infants to absorb more fat. However, just the opposite
happened: they effectively created a molecule so large and fatty that was indigestible by
the body (CSPInet). This is because so many fatty acid chains are crowded around a
sucrose core that digestive enzymes cannot find a breaking point to separate them (FDA
Backgrounder). Realizing that opportunity was knocking at its door, Procter and Gamble
petitioned the FDA to approve Olestra as a fat substitute for shortening, fast food, chips,
and other products (such as ice cream) in May of 1987. This move garnered criticism by
the Center for Science in the Public Interest (CSPI), who claimed Olestra was
inadequately tested and caused numerous detrimental gastrointestinal side effects (CNN).
When the FDA raised similar concerns in 1990, Procter and Gamble narrowed their
petition to ?savory snacks?, which includes crackers, tortilla and corn chips, and, of
course, potato chips (CSPInet).
Procter and Gamble devoted extensive time and financial resources to its new
baby, concentrating on safety testing, product development, and marketing campaigns. It
applied for and received a special patent extension in the early 1990s (effectively
extending the life of its patent until January 25, 1998). It was...