Analysis of the Market for Olestra Based Potato Chips Essay -- Busines

An Analysis of the Market for Olestra-Based Potato Chips Who wouldn?t want to munch on delectable potato chips all day without the worry of adding extra inches to the waistline? This is the assumption the manufacturers of Olestra-based potato chips are banking on. Olestra is a ?fake-fat?; it is a cooking oil, made by a combination of sucrose and vegetable oil, whose numerous fatty acid chains are indigestible by the human body. Therefore, it imbues potato chips with the same flavor and texture as their full-fat cousins but diminishes the guilt factor substantially. Olestra chips have zero fat and half the calories of the full-fat varieties (ACSH). Obviously, this is quite an attractive prospect to chip producers, especially in the current times where thinness and physical fitness reign supreme. Presently, there appear to be three major potato chip brands using the fake-fat technology: Frito-Lay?s WOW! Chips, Procter and Gamble?s Fat Free Pringles, and Utz Brand Yes chips (though Utz is sold almost exclusively on the eastern half of the country). The market structure is a bit interesting, considering that the Olestra oil is an innovation of Procter and Gamble alone. Adding to this interest is the heated controversy surrounding the fake-fat chips, which has undoubtedly had some effect on pricing and market behavior. Before examining the market workings of today, it could perhaps be beneficial to review a brief history of Olestra. Olestra is not a new fat substitute by any means; Procter and Gamble scientists discovered it in 1968. They esterified eight fatty acid residues to a molecule of sucrose, reasoning that the increased number of fatty acid chains would help premature infants to absorb more fat. However, ... ...98. http://www.acsh.org/publications/story/olestra Annual Report: Pepsico Corporation. ?1998 Annual Report.? 1998 http://www.pepsico.com Annual Report: Pepsico Corporation. ?1999 Annual Report.? 1999 http://www.pepsico.com Annual Report: Pepsico Corporation. ?2000 Annual Report.? 2000 http://www.pepsico.com Baumol, William J. and Alan S. Blinder. Economics: Principles and Policy. Fort Worth: Harcourt. 2001 Center for Science in the Public Interest. ?A Brief History of Olestra.? 2000. http://www.cspinet.org/olestra/history.html CNN. ?FDA Panel Generally Endorses Safety of Olestra.? June 17, 1998. http://www.cnn.com/HEALTH/9806/17/olestra.fda FDA Backgrounder. ?Olestra and Other Fat Substitutes.? November 28, 1995 http://www.fda.gov/opacom/backgrounders/olestra.html Olean. ?Answers to Questions about Olean.? Procter and Gamble. 1998 http://www.olean.com