The world of snack foods is a Manichean struggle for the soul of your stomach. Do you reach for the tasty, high-calorie, additives-rich mozzarella sticks—or less processed, lower-calorie fruits and veggies? Inventure Foods of Phoenix isn’t picking sides. “We still believe in the ‘indulgent’ food business—it pays some bills, and we don’t want it to completely go away,” says CEO Terry McDaniel, 57. “But our focus— and most of our growth—has been the ‘healthier natural’ side.”
That side generates 80 percent of Inventure’s $253 million in sales. So-called healthier natural can mean just about anything: Rader Farms frozen berries sold in Costco and others; the Fresh Frozen Foods label, ubiquitous throughout grocery stores in the Southeast; smoothies mixes for Jamba Juice; and “totally natural” potato chips from Boulder Canyon.
While Inventure’s roots are in “indulgent” foods—Poore Brothers kettle chips as well as snacks for Nathan’s Famous, TGI Fridays and Vidalia Brands—that category is growing at 2.8 percent a year nationwide. Back in 2006, the company decided to branch out into healthier snacks, growing at 12 percent a year.
That decision was the second time that Inventure, confronting a critical juncture, made a tough, but correct decision. The first occurred 19 years ago when brothers Jay and Don Poore sold their eponymous potato chip company to a local investor.
Don, 75, retired in 1995. But Jay, 67, is still vice president of engineering at Inventure Foods. You can find him walking the floor of the Goodyear, Arizona, plant which can turn out 60,000 pounds of potato chips every day. One after another, 130-pound batches of fresh-peeled spuds smack into heavy-duty cylindrical slicers; hundreds of raw chips are flung into automated deep fryers the size of a Fiat 500 Sport.
Back in 1966, the brothers took jobs at Mira-Pak, a Houston company that built packaging machines for the snack food industry, eventually becoming engineers. After a short stint running their own parts and services firm for “bagger” machines, they partnered with Horace Groff, grandson of the founder of Groff’s Snack Food Company in Bowmansville, Pennsylvania, to produce a kettle-style potato chip. Groff’s of Texas launched in 1983. Relatively rare then, kettle chips were produced in smallish batches, turning out thicker and crispier, and carrying a more natural potato flavour than their mass-market cousins. “We figured it was niche—and a vacuum we could fill,” Jay recalls.
In 1986, the brothers sold to a partner, settled in Phoenix, found a decent plant at a good price and launched Poore Brothers Potato Chips. By the mid-1990s, the brand was generating almost $7 million in annual sales, led by the success of its jalapeño- and salt-and-vinegar-flavoured chips.
By then, the Poore Brothers had taken a good bite of the local kettle chip market, largely at the expense of Frito-Lay. “To do that is really hard,” says Mark Howells, then president of broker-dealer Arizona Securities Group. It took him a year to persuade the Poores to sell out to him and a group of investors. Jay wasn’t too sure: “We had everything we owned in this world invested into this company.”
The Poores finally sold for over $3 million, plus 150,000 shares each. Jay concedes they made the right choice, adding, “We were better technicians than businessmen.” Says Howells: “Everybody kind of got it—both they and us—that in order to go to the next step, there would need to be some cash infusions and some additional management in the company.”
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(This story appears in the 28 November, 2014 issue of Forbes India. To visit our Archives, click here.)