In 1920, an 11-year-old boy built a stand to sell Pepsi out of it.
He enjoyed selling so much, he dropped out of school for it.
He grew up to be a great salesman, and eventually worked for large companies.
But when the Great Depression hit, he was laid off.
Jobless, he was forced to sell potato chips from his car.
He would sell them at grocery stores, gas stations, schools and
hospitals – anything to survive.
And he did this, every.
single.
day.
At the time, chips could only be sold locally.
They were in paper bags – and would go stale in no time.
But the boy wasn't only a great salesman, he was a brilliant businessman.
He discovered a solution that would revolutionize the chip industry.
This boy's name was Herman Lay, and his genius idea would lead him into founding
Lays – the chips we all know today.
This is the story of a boy who went from selling chips out of his car
to selling chips all over the world.
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Herman Lay was born in 1909 in Charlotte, North Carolina.
When he was only 11, he started selling Pepsi-Cola from a homemade
stand in his family’s front yard.
Herman charged only five cents while the baseball park across
the street cost 10 cents.
His stand was so successful that he managed to hire other kids to work for
him, while he delivered newspapers.
After graduating from high school, Herman attended Furman University
on an athletic scholarship.
But after two years, he decided to drop out to work instead.
First, Herman and a friend invested $100 each to sell ice
cream along a parade route.
Unfortunately, the route changed at the last minute, and two were left
with nothing but melting ice cream.
Afterward, Herman worked a number of odd jobs before snagging a salesman
position for the Sunshine Biscuit Co.
At the time, Sunshine Biscuit was one of the biggest cookie makers in the
U.S., and already known for inventing the precursor to Oreos, Hydrox.
Herman was sure to make good money.
But his time at Sunshine Biscuit was cut short.
When the Great Depression hit, Herman was laid off.
Desperate to find a new job, Herman searched through newspaper ads for work,
and wrote to hundreds of employers.
After his 200th letter, Herman finally received an offer, but was
more disappointed than excited.
The offer was a position as truck driver for the Barrett Snack Food Co.
At the time, the salty snack business barely existed.
Companies like Barrett offered few products like potato chips,
and were struggling to make sales.
Meanwhile, the candy business was thriving.
Many Americans were looking for cheap meals to feed their families
and relied on bars like “Chicken Dinner” and “Meal for Your Mouth.”
Herman didn’t believe there wasn't a future in potato chips,
and would have preferred to be a salesman than a truck driver.
He hesitated to accept Barrett’s offer, and by the time he did, it was too late.
The position was filled.
Fortunately, Barrett offered Herman a position as an extra salesman instead.
From his car, Herman would sell potato chips to grocery stores,
road stands, gas stations, and anywhere else he could think of.
Later that year, Herman managed to borrow $100 to start his own distribution
company and take over a small warehouse.
He finally got his first step up in the business.
He also continued to work with Barrett and was given his own territory.
Herman didn’t know it at the time but remaining a business associate would later
lead to a once in a lifetime opportunity.
With his own company, Herman would spend all day selling potato chips, sleep
in whatever town he ended up in, and then start over again the next morning.
His new sense of freedom pushed him to work hard.
By the end of the year, his company managed to expand its
territory and increase profits.
And just three years later, it was able to hire over 30 employees
and produce its own snack foods.
Herman's hard work had already paid off.
From then on, business was seemingly going well — up until a tragic event
ended Herman’s relationship with Barrett.
Barrett’s founder passed away and the founder’s family wanted to sell it off.
In search of a suitable owner, the family looked to their business
associates and reached out to Herman.
They offered to sell the company to him for $60,000.
The amount was 12 times Herman's life savings.
He wanted to take on what was a once in a lifetime opportunity, so he asked
dozens of people for help but had no luck.
Not wanting to pass up the opportunity, Herman took on a risk that could
have crippled him for years: taking out a $30,000 bank loan.
Afterward, he convinced Barrett to accept what he had and
take the difference in stock.
Luckily, Barrett agreed and Herman renamed the company to H.W.
Lay.
To pay off his debt, Herman decided to try and find a way
to sell potato chips nationally.
It had yet to be done by any company since it was difficult to
preserve and ship potato chips.
At the time, potato chips were simply dipped out of a barrel,
placed in paper bags, and sealed with paperclips — which made them prone
to becoming soggy, stale or spoiled.
Fortunately, it wasn’t long until Herman discovered advanced solutions
to preserve and ship potato chips.
First, Herman leveraged a technology used to preserve photographs and stamps to
create a special bag and seal: glassine.
Glassine was not only resistant to moisture, dust and grease but helped
keep the potato chips stay fresh longer.
Later, Herman developed a machine to automate the process of packaging
multiple potato chip bags at once.
To succeed in selling potato chips nationally, Herman and his team
traveled to different regions and observed dozens of convenience stores,
grocery stores, and supermarkets.
The goal was to come up with a strategy to take over half of
their customers within a week.
By the end of the year, Lay's was selling its potato chips in 10
states, from Florida to Wisconsin.
Their aggressive business approach paid off.
However, Herman would soon learn there are some things you can't prepare for.
America entered the Second World War.
And Lay's was forced to shut down.
To conserve resources for the war effort, the U.S government banned
factories from producing items that they classified as non-essential.
Among the nearly 300 item list...
was potato chips.
Herman was taken aback.
He believed potato chips should be classified as essential since they
were resistant to spoilage and didn’t require refrigeration or cooking.
And for these reasons, Americans could rely on potato chips as a readily
available source of energy if there was a bombing or blackout during the war.
Determined to convince Congress, Herman reached out to food industry
lobbyists to plead his case.
Several months later, Herman finally received news that potato chips
would be reclassified as an essential item — saving not only Lays but
the entire potato chip industry.
By the time the war ended, Lays became the second largest food company in the U.S.
Meanwhile, Frito held the number one spot.
The company first took off after the founder, Charles Doolin, invented a
machine with a hammer to mass-produce corn chips and then differentiated
his flavor from competitors through growing his own special corn.
Later, Frito experienced even more success when it used leftover
powdered cheese from the war to make tasty, puffed corn chips: Cheetos.
For years, Frito and Lays had been growing their markets at a distance,
one in the East and one in the West.
Now, their paths were about to collide.
One day, Herman discovered that Charles wanted to open a Frito
factory in Lays territory.
Instead of finding a way to bar him, he invited him to meet and suggested
they find a way to work together.
Charles agreed to the idea and the two drew up an agreement.
Under the terms, Lays was granted the rights to become an exclusive manufacturer
and distributor of Frito products in the East, and both companies were free to
sell their products in the same stores.
Lays’ sales soared to $16 million and Frito’s to $26 million.
Herman and Charles managed to grow Lays and Frito rapidly — thanks to
their mutually beneficial agreement.
However, as the years went by, Herman found that there was
little room left to grow since his agreement with Charles barred him
from expanding into the Southwest.
Herman decided to introduce a new product to increase sales
while respecting the agreement
At the time, America was in an economic boom, and people had money to spend.
This led to them wanting to buy more varied products, especially since
they were limited during the war.
Many companies jumped on the demand by introducing new products with
different flavors, colors and textures.
Sensing a huge opportunity, Herman played with different chip seasonings.
He and his team came up with a mix of paprika, tomato, garlic, and
mustard seed oil — resulting in a taste that was similar to barbecue.
Herman decided to take a chance on the seasoning and use it to launch
Lay’s first flavored potato chips.
Fortunately, they were an instant hit given barbecue was already a
popular flavor amongst Americans, and allowed Lays to expand to 30 states.
Meanwhile, Frito’s sales soared even higher than before — an
over 70% increase when compared to nearly two decades before.
However, it soon faced a tragedy that all the money in the world couldn’t save.
Charles suddenly passed away from a stroke and heart attack at age 56.
By this time, Frito and Lay had a very close working relationship.
Herman suggested to Frito executives that they merge companies.
The Frito executives agreed.
The joint company was renamed Frito-Lay and Herman was appointed CEO.
Herman’s first order of business was to finally sell Lays nationally.
At this time, television was the latest technology.
Herman decided to make use of it, rather than rely on traditional advertising.
More than half of U.S.
households began to own a TV and there were only a couple of networks
available — resulting in many Americans paying attention to the same things.
In addition, there had yet to be any snack companies that were
advertising on the small screen.
Herman decided to capitalize on the missed opportunity by releasing
ads with Lays’ catchy new slogan, “Betcha Can't Eat Just One.” These
ads featured comedian and Wizard of Oz actor, Bert Lahr, who would always
unsuccessfully eat just one Lays chip.
Within that same year, Frito-Lay's sales exceed $180 million, and
finally, Herman achieved his goal of selling Lays nationally.
As Lays became a household name, the company struggled to keep up
with the demand for their products.
Instead of pouring money into new factories, Herman reached out to
one of the best-known brands in the country — Pepsi-Cola — and
successfully negotiated a merger.
Under the joint company, Frito-Lay remained independently operated and
Herman was appointed as chairman.
Now, Lays not only had the resources to keep up with the demand for their products
but to expand worldwide.
Within the first year of the merger, PepsiCo’s revenue soared to over $600 million.
From then on, the conglomerate continued to grow as Frito-Lay launched and acquired new products
and expanded to over 200 countries.
Today, Frito-Lay is one of the largest snack food companies in the world
and dominantes 65% of the market, with Lays being listed as the best potato chip in the U.S.
The company is also PepsiCo’s most profitable division, accounting for half of its $12.2 billion in sales.
This is the story of how the founder of Lays went from being an 11-year-old kid who sold Pepsi-Cola for five cents
to being the CEO of a worldwide snack company — worth over $16 billion.
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