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Using the Net to Stay Crisp


Jack Landsman faced a mystery worthy of the ex-cop he is. The vice-president for key accounts at Utz Quality Foods Inc., the nation's No. 3 maker of salty snacks, had arranged a pre-Super Bowl blowout at Safeway supermarkets: $4.99 barrels of party mix, cheese balls, and pork rinds displayed just inside the door of 127 stores near Baltimore and Washington. In a town painted Ravens purple, it was a guaranteed hit. But on Jan. 18, three days into the promotion, Landsman had a problem. Daily figures for three Safeways in Columbia, Md., showed that two of them had sold 25 and 40 barrels of cheese balls, respectively. But the third store showed a string of zeroes. No cheese balls. No pork rinds. Just an incomplete pass.

Landsman solved the mystery of Store No. 1370 with a tool he didn't have while walking a West Baltimore beat: the Internet. Store No. 1370, and about 10 others, had no barrels: Landsman hadn't ordered enough. As simple as the problem was, Landsman wouldn't have spotted it until after the Ravens' victory parade if not for the UtzFocus sales-tracking system, installed in 1999. With UtzFocus, all he had to do was use his Web browser to check overnight sales reports stored on a server. After that, he called a supervisor to find out why his drivers hadn't made the delivery. "We're kicking butt for a reason," says CEO Michael W. Rice's son-in-law, Dylan Lissette, 29, the company's marketing manager. "We know what's going on in the stores."

The lesson of Utz is simple: A company need not be a giant to get a giant boost from the Internet. Spending about $30,000 on software to create UtzFocus, and hiring one new person to run it, has made Utz a savvier chipmaker. The $200 million family-owned company is gaining share in segments dominated by Frito-Lay, whose North American sales of $12.7 billion command a market share of 59%--and rising. Utz's 12% jump in sales to supermarkets and convenience stores last year was about three times the industry's growth--and 1 1/2 times Utz's own growth in the late 1990s. Chief Operating Officer Rick King says half of the acceleration in Utz's 2000 growth, or about $2 million in sales, is due to the Net.

For years, Utz executives confess, a culture so cost-conscious that even the executive suite has linoleum floors forced them to put off investing in technology. Instead, they tried to keep up with Frito by buying new fryers and faster packaging machines. Rice didn't have a computer until 1996, and secretaries made do with typewriters whose sole concession to the New Economy was screens that displayed a sentence of text at a time to fix mistakes. Rice, 57, is the grandson of Bill and Salie Utz, who founded the company after Bill quit a job at Hanover Shoe Co. in 1921. But the company's real info-tech apostle is Lissette. "We're a Pennsylvania German-Dutch company where there are certain things we've always done," Lissette says. "And there's a fear of technology, until you find someone who will shepherd it."

In Utz's case, new technology is about taking information the company already had and letting more people use it easily. Since 1982, the 500 driver-salesmen who deliver Utz's snacks to stores have used handheld computers to upload daily sales data to headquarters. But the only department that used the information on a daily basis was accounts receivable. Sales got sketchy reports weekly but received detailed data only once a month. What did people know in between? "Not a lot," Rice confesses.

Lissette and Vice-President for Sales and Marketing Tom Dempsey convinced a mostly fiftysomething management team that better, faster business information was as essential as making cheaper chips. The duo insisted they needed to create UtzFocus to give daily sales breakdowns, product by product and store by store. They needed reports that were easy for computer-fearing sales people to fetch from a database with a Web browser and easy for executives to tailor for client presentations. And they needed the reports by 2 a.m., in time to let warehouse supervisors fix problems with drivers who arrive as early as 3:30 each morning.

Now, from North Carolina to Massachusetts, the drivers who deliver Utz's chips and pretzels are being more closely watched. As a result, missed deliveries can be corrected, and laggard stores can be targeted for special attention. Smart promotions can be repeated, while losers are quickly winnowed. And poor coordination between sales and production can be tracked down and fixed in a flash--as Landsman did with Store No. 1370.

As Utz executives rarely tire of saying, theirs is a pretty simple business. They make a small number of products--potato chips alone account for almost 65% of revenue--and they have only a few major tactics to goose sales. There are supermarket circular advertisements, on which Utz spends 4% to 6% of sales. And there are "endcaps," the industry term for big displays at the end of a supermarket aisle that draw impulse buyers. It can cost nearly $10,000 to rent endcaps throughout a grocery chain for a week. And when Utz has the endcap at a chain such as Safeway or Giant, the leaders in its core Washington-Baltimore market, sales in each store can rise by as much as 40%.

Making sure that this happens is the job of UtzFocus. The system gives the managers a tool to ride herd on Utz's drivers, whose execution of sales promotions is vital to company strategy. "When something isn't working, it's usually not the store. It's usually our person," Lissette says. "A lot of times, it's: `I didn't know a Safeway promotion was going on.' Or: `I didn't have any on my truck."'

The difference is felt all the way to the bottom of Utz's organizational chart. Employees like Gene Alvarez, a Pine Brook (N.J.) supervisor who fills in on routes when his charges are out, says the Net system generates more questions than ever from management about why sales in specific stores aren't better, and about how drivers are doing their jobs. "I don't like computers," he jokes. "Too incriminating." On the bright side, the drivers' pay is a 10% commission on sales, so they have a stake in the system's success.

Even though the system's original function was to keep closer tabs on the drivers' day-to-day execution, Utz quickly found other ways for technology to help them. Since competition for space in store circulars and endcaps is keen, quick sales data help execs adjust. If Utz can't get a chain to advertise a special on its flagship product--the 5.5-ounce bag of chips--the data let managers craft counterproposals to promote pretzels in weeks when Frito-Lay commands the potato-chip spotlight.

Or Utz can take a more innovative approach. The snack food company, like its competitors, is trying to persuade supermarket chains to give it space in circulars for a percentage of the sales a promotion produces--rather than a flat fee of up to $10,000 a week. That helps Utz cut the risk it takes in choosing sales tactics and helps keep spending on circulars close to 4% of sales. The key: UtzFocus lets sales executives generate data to persuade supermarkets they'll make more money sharing risk with Utz than by taking the up-front fee. Acme Markets is testing risk-sharing promotions now.

With sales info getting better, now Utz is trying to improve its command of production data. Since the mid-1990s, Utz has been buying machines equipped with monitoring capabilities to slice, cook, spice, and bag potatoes. The company is getting ready to hook it all up to its in-house intranet. The new system will zap a report to managers every minute--compared with the previous once or twice in a 12-hour shift--giving them details such as how many chips the main factory's seven lines are making, the usage of potatoes and flour, and even how close the chip-slicing machines are coming to the ideal thickness of 0.057 of an inch.

One big goal of automating the factory: to trim costs from excessive inventory of plastic bags. Utz spends 5% of sales on bags alone. Tying production more closely to UtzFocus data will let the company keep down inventories of bags that can reach several months' supply. Since finished chips rarely stay in Utz plants more than a day, inventory gaps like that stand out like cheese powder on a white shirt.

Even a smarter Utz won't dominate like the Ravens' defense while Frito-Lay is around, but Web-savvy management gives this underdog better odds. And you need not be a detective to figure that out. By Timothy J. Mullaney


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