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FRITO-LAY

HISTORY:

The Frito Company

Charles Elmer Doolin, manager of the Highland Park Confectionery in San Antonio,

purchased a corn chip recipe, a handheld potato ricer and 19 retail accounts from a corn

chip manufacturer in 1932 for $100, which he borrowed from his mother. Doolin

established a new corn chip business, The Frito Company, in his mother's kitchen. Doolin,

his mother and brother produced the corn chips, named Fritos, and had a production

capacity of approximately 10 pounds per day. Doolin distributed the Fritos in 5 bags. Daily

sales totaled $8 to $10 and profits averaged about $2 per day.In 1933, the production of Fritos increased from 10 pounds to nearly 100 pounds due to the

development of a "hammer" press. By the end of the year, production lines were operating

in Houston and Dallas. The Frito Company headquarters also moved to Dallas to capitalize

on the city's central location and better availability of raw materials. In 1937, The Frito

Company opened its Research and Development lab and introduced new products including

Fritos Peanut Butter Sandwiches and Fritos Peanuts to supplement Fritos and

Fritatos Potato Chips, which had been introduced in 1935.

In 1941, the company opened its Western Division in Los Angeles with two sales routes,which would become the prototype for The Frito Company's distribution system. In 1945,

The Frito Sales Company was established to separate sales from production activities and

meet the demands of an expanding population. Expansion by the Frito National Company

continued with the issue of six franchises in 1945. In 1950, Fritos were sold in all 48 states.

The Frito Company issued its first public stock offering in 1954. At the time of Doolin's

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. By 1962,

Fritos would be sold in 48 countries.

H.W. Lay & Company

The invention of the potato chip is often credited to George Crum in the late 19th century.

In the 1920s salesman Herman Lay sold the chips in the Southern U.S out of his car. In 1932

Lay began a potato chip business in Nashville, Tennessee. Lay was hired as a salesman for

the Barrett Food Products Company, an Atlanta, Georgia manufacturer of Gardner's Potato

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Chips, and eventually took over Barrett's Nashville warehouse as a distributor. Lay hired his

first salesman in 1934, and three years later had 25 employees and a larger manufacturing

facility where he produced popcorn and peanut butter sandwich crackers.

A representative of the Barrett Food Company contacted Lay in 1938, offering to sell

Barrett's plants in Atlanta and Memphis for $60,000. Lay borrowed $30,000 from a bank

and persuaded the Barrett Company to take the difference in preferred stock. Lay moved

his headquarters to Atlanta and formed H.W. Lay & Company in 1939. Lay later purchased

the Barrett manufacturing plant in Jacksonville, Florida, and additional plants in Jackson,

Mississippi, Louisville, Kentucky and Greensboro, North Carolina. Lay retained the Gardner

trademark of Barrett Food Products until 1944, when the product name was changed

to Lay's Potato Chips.

Lay expanded further in the 1950s with the purchase of The Richmond Potato Chip

Company and the Capitol Frito Corporation. By 1956, with more than 1,000 employees,

plants in eight cities and branches or warehouses in thirteen others, H.W. Lay & Company

was the largest manufacturer of potato chips and snack foods in the United States.

Frito-Lay, Inc. and PepsiCo, Inc.

In 1945, the Frito Company granted the H.W. Lay & Company an exclusive franchise to

manufacture and distribute Fritos in the Southeast. The two companies worked towards

national distribution and developed a close business affiliation. In September 1961, The

Frito Company and H.W. Lay & Company merged to become Frito-Lay, Inc.

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 and had more than 150 distribution centers across the

United States.

Today, PepsiCo is organized into four divisions: Frito-Lay North America, PepsiCo Beverages

North America, PepsiCo International and Quaker Foods North America. Although products

sold in North America under the Frito-Lay brand name are also sold internationally,

international sales are reported by the PepsiCo International division.

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