‘Hey Chester, we did it better…’ PeaTos closes financing round, launches ‘intentionally provocative’ new campaign
PeaTos has “outdone the current incumbent heavyweight and market monopolizing leader Frito Lay [owned by PepsiCo] with brands like Cheetos and Funyuns with an alternative the market has been craving,” according to a press release from PeaTos' brand owner Snack It Forward.
CEO Nick Desai told FoodNavigator-USA: “The goal is to go up against the 800lb gorilla in the category… but it’s pretty lighthearted.
“People talk a lot about the Frito-Lay cease and desist letter [sent by PepsiCo/Frito-Lay's lawyers to Snack it Forward in early 2018] but that was mainly about the tagline we were using [‘Tigers live longer than cheetahs,’ which PeaTos removed in late 2018] and the settlement [in which no money changed hands, according to Desai] was not at all restrictive to our overall marketing effort.”
He added: “There’s nothing illegal about taking on a competitor. If anything, these guys need more people going up against them. Think about it. Amazon has something like 40% share of the US e-commerce market and people are talking about breaking it up; Frito-Lay has something like a 65% share [of the US salty snacks category] and no one is talking about breaking up Frito-Lay.
"We’ve got billboards in the Pacific Northwest but it’s a national digital campaign timed to coincide with the launch of PeaTos in Costco stores."
‘E-commerce sales are just exploding’
PeaTos are available in around 4,700 stores including Kroger, Safeway, Sprouts, and Costco and sold online at Peatos.com and Amazon, said Desai, who recently acquired the BetterSnacks.com domain name for a “five-figure” sum (which is currently redirecting to Peatos.com but will in future become more of a destination site for a wider range of products from PeaTos and non-competing snack brands).
“The biggest advantage of direct to consumer is that you are building direct relationships with your consumers. By far our biggest sellers are our variety packs, and we’re getting average order values of $28 and we’re selling a lot of subscriptions.”
He added: “E-commerce sales are just exploding, and that’s not at the cost of [bricks & mortar] retail. It’s now about 40% of our business. The only area that’s been hurt [by COVID-19] is foodservice – offices, airlines and so on, but that was not a huge part of our business."
Asked about the retail environment right now, he said: "A lot of retailers put off category reviews and resets and store execution has been suffering, and there will probably be more SKU rationalization, but I don’t think PeaTos will suffer because we always designed our brand for the mainstream consumer. We are not a niche natural brand, so if they cull some SKUs, they will go after the more niche brands first.”
PeaTos on track to double sales this year
Made from pea and lentil flour, fava bean protein, pea fiber, high-oleic safflower oil, rice, and seasonings, PeaTos extruded snacks target mainstream consumers that want the taste and texture of Cheetos (which are denser and crunchier than puffs), without the empty calories, said Desai, hence the new strapline ‘Junk food without the junk.’
Launched in early 2018, PeaTos classic cheese crunchy curls have 4g protein [twice that of Cheetos], 3g fiber [three times that of Cheetos] and 130 calories [vs 160 for Cheetos] per serving with no synthetic colors, flavors or added MSG, coupled with less fat [8g vs 10g] and less sodium [200mg vs 250mg], said Desai, who says the brand is on track to double sales this year.
Funding round
The PeaTos brand - which is backed by some high-profile food industry veterans including Lenny & Larry's CEO Apu Mody (a former president of Mars Food North America) - has just closed a Series A funding round for about $3m said Desai, who says some new items currently in development will launch next year.
“Cumulatively we have raised several million, but I won’t get into exact numbers.”
Attorney: 'It would cost them about $3m to go the distance with someone like PepsiCo'
So what do legal experts make of the new PeaTos ads? is this just a bit of fun, or could the brand get into hot water?
Kevin Bell, partner at Arnall Golden Gregory LLP, told FoodNavigator-USA: "Some of it depends on the parties’ settlement agreement... It puts PepsiCo in the position of either taking it head on again or alternatively, ignoring it because they don’t want to appear that PeaTos is worth fighting with or a threat. PeaTos is trying to garner attention and some market share by keeping themselves in the press and making themselves edgy."
"If this got into litigation and PeaTos had to disclose internal marketing strategies, my guess it would not bode well for them – and it would cost them about $3m to go the distance with someone like PepsiCo."
A trademark dispute between Cheetos and pulse-based rival PeaTos was “amicably resolved” in late 2018 after the latter agreed to remove the tagline, ‘Tigers live longer than cheetahs’ from its packaging and website.
“I was a little bit surprised by how offended they were, but everyone was reasonable and we have removed the tagline,” said CEO Nick Desai, who said no money had changed hands.
