Oberto and Frito-Lay clash over meat treats
Oberto and Frito-Lay clash over meat treats. Real-estate developers get creative.
Rami Grunbaum, deputy business editor, and Seattle Times Business staff
Popular local snack producer Oberto Sausage Co. says it's being jerked around by chip champion Frito-Lay, whose vast fleet of delivery trucks was supposed to give the regional "Oh Boy! Oberto" brand a big bite of the national market.
Trying to shake off the embrace of its huge partner, the Kent-based family firm filed a lawsuit earlier this month claiming that a nearly exclusive, decade-old distribution deal for its beef jerky and other products has left Oberto in a precarious position.
"In recent years Oberto's sales first stagnated and, more recently, have declined while those of its competitors have dramatically increased," says the lawsuit, filed in federal court in Seattle. "Oberto is losing money, losing its place in the market, and in imminent danger of becoming irrelevant as a national brand."
That's not what the company planned in 1999, when it heralded the Frito-Lay pact as its opportunity to become "the first national jerky company."
Its array of jerky and sausage products also grew — "one year they came up with Oberto meat chips," a bit of synergy that didn't work out too well, says Dan Malovany, editor of the trade publication Snack Food and Wholesale Bakery.
Oberto last year sold $63 million of its dried-meat snacks to Frito-Lay, which in turn sold more than $114 million to retailers.
Frito-Lay, a unit of PepsiCo with $11 billion in annual sales, believes Oberto "is a strong brand, and the brand has grown over the 10 years we've been in partnership," says spokeswoman Aurora Gonzalez.
Despite the dire language of the suit, Oberto's vice president for marketing, Tom Ennis, says that "the brand itself is very much a viable entity... (though) we have not been as successful as we'd like through Frito-Lay recently." The two sides will meet this week and Ennis hopes for an amicable settlement.
Convenience stores are the biggest sellers of beef jerky and similar meat snacks, and Frito-Lay is key to getting on their shelves. "It's a formidable distribution system," Malovany says.
But Oberto claims Frito-Lay has only put the company's products in 40 percent of such outlets, while competitors "enjoy distribution in 90 percent of this market." Those rivals are led by Slim Jims, made by agribusiness giant ConAgra, and Jack Link's, made by the Wisconsin company of the same name.
Oberto says sales through Frito-Lay have fallen below the threshold specified in their contract, so it wants out. Frito-Lay refuses to end the distribution deal, and asserts it has one year of exclusive rights to the Oberto products even after the agreement is terminated, according to the suit.
While dumping Frito-Lay, Oberto is devising a new multipronged distribution strategy using its own delivery service as well as wholesalers and distributors. That involves "substantial transition costs" and "many new contractual relationships" that are in jeopardy as long as Frito-Lay refuses to acknowledge the partnership is over, says the suit.
Whatever the reason for Oberto's sales woes, it's not the economy.
Last year the snack business grew by 3.9 percent, Malovany says, suggesting that even in hard times consumers reward themselves with "small indulgences." And this year, he adds, "snack sales overall are quite robust."
— Rami Grunbaum
Unsold real estate sparks creativity
Real-estate developers eager — desperate? — to boost sales in this snail-slow market are resorting to all kinds of novel incentives to get buyers to bite.
Thornton Place, near Northgate, made the biggest splash last month, telling prospective condo buyers it would make their mortgage payments for up to six months if they lose their jobs within a year.
Now comes this offer from Port Ludlow, the Olympic Peninsula resort/retirement community just across the Hood Canal Bridge.
Port Ludlow Associates says it'll sell you a new house listed at $699,000 for $100,000 less, or one listed at $379,000 for $260,000.
The catch? When you sell or refinance, the developer gets 50 percent of any capital gain.
This isn't the first "creative" incentive Port Ludlow Associates has unveiled. Earlier this year it offered to buy back some homes for full price if buyers changed their minds within three years.
Another lure: No mortgage payments until the bridge reopens after repairs, probably in June.
Miriam Villiard, Port Ludlow Associates' project manager, says the eight new houses to which one or more incentives apply have been on the market for one to three years.
The typical Port Ludlow buyer is either retired or close to it. But these days folks who might want to move there can't sell their city houses, Villiard says, so they're staying put.
Also, half of the community's buyers traditionally have come from California, she says, "and that's just dried up."
In Jefferson County, which includes Port Ludlow, single-family home sales were down 28 percent last year from 2007, according to the Northwest Multiple Listing Service.
The median price was 9 percent lower, the biggest drop of any county in the Puget Sound area.
— Eric Pryne
Comments? Send them to Rami Grunbaum: rgrunbaum@-
seattletimes.com or 206-464-8541
Copyright © 2009 The Seattle Times Company
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