Herr Foods: Chipping away at the competition

"We do focus groups with college students, interviews with everyone from kids to moms buying for the family, and we get input from our suppliers," Thomas continues. "We have 1,500 employees, who are also consumers and moms and dads, so we always are soliciting ideas from them. I think you really need an organized effort, with suggestions programs for your employees, planned research with consumers and dialog with your suppliers soliciting their thoughts."

Those sources combined have yielded 800 new product ideas for Herr's over the past two years, all of which go to concept testing with consumers and, depending on how they score, into prototypes that are again evaluated by consumers.

Marketing and product development are really everyone's job at Herr's, Thomas says, and he sees a 50-50 partnership between his marketing department and R&D. "They've got a lot of great ideas way beyond just the flavor of the product," he says.

While structure is important, so is speed to grab an opportunity. "No one five years ago could have predicted the environment we're in today," with growing consumer concern about obesity and carbohydrates. "Really, the challenge is to stay nimble and flexible and talk a lot to consumers to stay connected to the marketplace."

When Herr's saw the low-carbohydrate diet craze boosting sales of pork rinds, it cranked up production in that category. Likewise, the company has tapped the growing market for such products as soy crisps and ConAgra Foods' Slim Jim meat snacks by using its direct-store delivery system to distribute other companies' products.

But the company tries never to put too many of its chips on any one bet. "I think the reality of the [low carb] trend is less than the perception," Thomas says. "There really is a significant interest out there. Baby boomers have steered the course of public sentiment since they came on the scene, and the front edge of baby boomers is turning 58, so they're getting to that stage where their metabolism slows down a little bit.

"But it's dangerous to paint the consumer with one big brush," he adds. "We've had success with soy crisps, meat sticks and pork rinds. And we've seen a little softness in pretzels, which had been the snack of choice for dieters. But potato chips are still growing, too."

So while Herr's keeps an eye on the low-carb movement, it's also been launching new flavors to support its core potato chip business. These are the kinds of audacious flavors you won't see from a buttoned-down Frito-Lay: potato chips in ketchup flavor (co-branded with Heinz), salt-and-pepper, honey barbecue and steak & Worcestershire.

Thomas also expects the growing Hispanic population to keep the tortilla segment relatively strong and spawn wider adoption of new forms, such as guacamole chips, salsa & lime, Mexican cheddar with black bean and Nachitas, which are mostly nacho cheese but with a blend of Mexican spices added.

Innovation goes beyond products
Just as Herr's keeps an open mind for a wide variety of consumer trends, it also keeps its eye on a variety of retail formats. Though it's a only regional brand, Herr's has gained wider distribution via club stores, "certainly beyond our DSD [direct-store devliery] area," says Thomas. And it's been among the early players in developing business with the fast-growing dollar-store channel , which, despite being a limited-assortment format, can still find room for regional brands willing to meet their needs for smaller packs and specific price points.

"They've realized there's a regional preference, and naturally, when you open a store, you want to fit with that market," Thomas says of the dollar stores.

Herr's also has a history of innovation when it comes to packaging and production issues. In 1974, it was among the early adopters in the shift from glassine to foil bags, which blocked light and kept the chips fresher.

In 1983, when Pennsylvania began considering new waste restrictions on food processors because of environmental concerns, founder Jim Herr arrived on a novel solution by buying 1,000 acres of farmland near the Nottingham plant and reaching a deal with a couple to establish the Herr Angus Farm.

The 600 steer there were fed potato peels and rejected products from the plant mixed in their feed in accordance with recommendations by a veterinary nutritionist. Today, the farm also produces wheat, soybeans and corn, some of which is fed to the herd. Wastewater from the plant is trucked there for irrigation.

Today, the company is run by Jim's son, J.M. Herr. Ed Herr, a younger brother of J.M., sees the same spirit of finding innovative solutions to whatever problem arises auguring well for Herr's future generations, too. "There are so many diverse flavors and interests," he says, "that there are always going to be opportunities to grow your business through traditional and emerging snacks."