Copyright 1998 The New York Times Company
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July 4, 1998, Saturday, Late Edition - Final


SECTION: Section D; Page 1; Column 2; Business/Financial Desk

LENGTH: 1542 words

HEADLINE: A Classic in Search Of Its Former Glory;
A Plaintive Cry From Consumers: Where Have the Peanuts Gone?

BYLINE:  By CONSTANCE L. HAYS

DATELINE: NORTHFIELD, Ill.

BODY:
   Poor old Cracker Jack. After more than 100 years in the marketplace, becoming the snack-food industry's version of a national treasure, it has been suffering a credibility crisis.

It starts with the peanuts. One consumer from San Juan Capistrano, Calif., complained in an April letter to the company that he had counted just five peanuts in his jumbo box of Cracker Jack. "Did the machinery goof up," he inquired, "or has the profit margin taken its toll?"

"How can you sell this as 'Original Cracker Jack,' " demanded a Florida couple, who wound up with no peanuts at all, "when it is only two-thirds of the original recipe?"

Plenty of letter writers criticized Cracker Jack for tasting stale or even burned. And then, the crowning indignity: "When I got home, I opened the box and searched, and searched and searched for my toy surprise," reported a woman from Omaha. "I got a different surprise . . . NO PRIZE inside."

Judging from the tone of the mail, Cracker Jack's image, an image historically so wholesome and all-American that it rated a mention in the lyrics of "Take Me Out to the Ball Game," appears headed the way of the daytime World Series game.

Reversing that downfall is the challenge facing Frito-Lay, the Pepsico division that acquired Cracker Jack from Borden Foods in October, as it begins an all-out effort to rejuvenate this venerable munchie.

At the moment, Cracker Jack represents a tiny part of Frito-Lay's business -- less than 1 percent of a projected $7.5 billion in 1998 sales -- but hopes are high. If all goes as planned, said Beth Struckell, a vice president in charge of Cracker Jack, by 1999 sales should be four times the current $45 million.

Frito-Lay expects to do this with new packaging, better distribution, marketing aimed at children and, yes, more peanuts. It vows to have better prizes, and to get them into nearly every box. But one thing it will not do -- fearful of alienating longtime fans -- is risk a New Coke-type fiasco by tinkering too much with the basic formula.

"The key thing is, here's a brand that's been around forever," said Bill Pecoriello, an analyst who covers Pepsico. "Frito-Lay is going to be able to leverage its distribution system, and it will also put its brand marketing behind it."

But first, Frito-Lay executives concede, they have to fix the quality issues and other problems dragging Cracker Jack down in the marketplace. In the year ending May 24, sales plunged 25 percent from a year earlier, according to Information Resources Inc., which monitors supermarkets, drugstores and mass merchandisers like Wal-Mart.

Still, Borden, which took over Cracker Jack in 1964, insists that its stewardship was actually pretty good. "We were proud of what we'd done with the brand, particularly over the last couple of years," said a spokeswoman, Lynn Anderson. "The technology we had in our factory was rather advanced in insuring that there was a prize in every package."

Many people at Borden's headquarters in Columbus, Ohio, were sad to see Cracker Jack sold, along with Eagle Brand Condensed Milk and some other well-known brands -- all part of a decision to focus mostly on pasta and sauces. "Our aim," Ms. Anderson said, "was to find somebody who could leverage the equity in the brand and for whom it was a good fit."

Cracker Jack's new owners, confident that their sprawling distribution network can easily deliver to stores of every size, say it would be unwise to mess too much with a product that had been a success for so long.

"Changing Cracker Jack would be the wrong thing to do," said Ms. Struckell, who clearly admires much of what its inventors and subsequent owners did to promote the snack, using everything from little plastic toys to coupons and children's clubs.

Cracker Jack, according to a Borden pamphlet, rose from the ashes of Chicago's Great Fire of 1871. F. W. Ruckheim, a German immigrant who was among the thousands who came to the city to help clean up the damage, began selling popcorn from a street corner in his spare time. By 1893, when Chicago held its first world's fair, Mr. Ruckheim and his brother, Louis, had come up with the recipe for a concoction of molasses, peanuts and popcorn that they hawked to millions of fairgoers. But it was not named -- legend has it -- until 1896, when a salesman sampled some and shouted, "That's a cracker jack!"

Around 1918, cashing in on people's patriotism, Sailor Jack and the rest of the packaging took on a red, white and blue color scheme. "In essence, we don't want to change," Ms. Struckell said. "We're not repositioning Cracker Jack."

Still, nostalgia alone will not quadruple sales next year, especially when only 7 percent of American households buy Cracker Jack, and do so, on average, fewer than two times a year, according to Frito-Lay's research. "Consumers told us the reason they didn't buy it was they couldn't find it or didn't see it," Ms. Struckell said.

Fixing the distribution problems will be relatively simple, given Frito-Lay's elaborate array of trucks, vans and salespeople who already know how to get products onto store shelves. So she and her Cracker Jack marketing team have zeroed in on improving quality, introducing a foil-lined, four-ounce bag along with the traditional one-ounce cardboard box.

The bag has been test-marketed in the Chicago and Dallas areas, and will be available nationwide by the end of this month. It is supposed to keep the popcorn fresher, Ms. Struckell said, and just in case, the freshness expiration date is clearly marked in the upper-right-hand corner.

The company has begun using puffier popcorn, although the coating for it has not been changed. There are more peanuts, at least 20 to a four-ounce bag, and Frito-Lay has even started packing the bags into shipping cartons upside down, which is supposed to increase the likelihood that the peanuts won't be concentrated in the bottom of the bag -- another thing that irritates consumers. "They liked that nut," Ms. Struckell said, "but they wanted more, and they wanted them distributed more evenly through the eating process."

Somewhat radically, Frito-Lay is trying to put Cracker Jack alongside Oreos and M&M's, not other brands of sweetened popcorn. Sales of popcorn snacks are growing, although still dwarfed by cookies and candy in the American diet, according to NPD, a research company. So Frito-Lay is seeing that it is placed not only in the snack food aisle -- in the Chicago area, it is hung on the sides of the big racks displaying Fritos, Tostitos and Baked Lay's -- but also in the candy section.

"It's a snackable treat, for hand-to-mouth, mindless nibbling opportunities," Ms. Struckell said. "People can continue to eat it and not feel satiated. If you eat a whole bag of M&M's, you feel disgusted with yourself." Ingredients like popcorn and peanuts evoke health to many people, while chocolate is clearly a high-fat, high-calorie choice, she added.

At the same time, much of the marketing will be addressed to young children, seeking to introduce them to a product many of them may not have heard of. Frito-Lay's "Planet Lunch" marketing program, which now consists of small bags of Lay's, Fritos and other salty snacks, will feature small bags of Cracker Jack before the end of the year.

Making Cracker Jack appealing to children is a project Frito-Lay takes extremely seriously. At a focus group in Northfield last month, a group of fidgety 7- and 9-year-old boys, several of them in Chicago Bulls T-shirts, were asked to rate a series of toys and activities the company may use for prizes. "Will this, like, affect the company?" asked a boy named Bradley, who, like the rest of the group, had a good time with a folded-paper racing car that could be blown around the conference table, but scorned a paper dog tag and a bookmark.

Such groups will eventually produce a list of possible prizes (the car is already included in some Cracker Jack packages), which will be tested again with other focus groups over the next several months. Prize quality is a chief concern: the idea is to create about five minutes of entertainment, which is not an easy task given the short attention span of America's savvy children. "It was an ongoing challenge," Ms. Anderson said of Borden's experience, "particularly when you consider what kids are confronted with in terms of stimulation on a daily basis."

Prize delivery is a separate issue -- and a thorny one. "The prize is part of the whole product expectation," said Ms. Struckell, who has been trying to minimize the odds of someone's not getting a prize. "We have been able to get the rate up to 99.7 percent," she said, "but that means 3,000 people out of a million aren't going to get that prize."

If Cracker Jack meets next year's optimistic sales goal -- 250 million bags and boxes -- that would mean 750,000 disappointed customers. "We will work to continually improve it," Ms. Struckell said.

Otherwise, that whole question set to music in the old Jack Gilford commercials -- "What do you get when you open the top and look inside and smack your lips and turn it over and spill it out?" -- will end with a different answer, one marketers won't find so appealing.
 

GRAPHIC: Photos: IN THE BEGINNING -- F. W. Ruckheim, a German immigrant, started by selling popcorn on the street, but he hit the big time at the 1893 Chicago World's Fair with his gooey concoction of molasses, peanuts and popcorn; EARLY 1900's -- Prizes were added to Cracker Jack boxes in the decade after the turn of the century. Baseball cards and score counters, books of songs, baby barrettes and whistles were designed to appeal to both adults and children; 1930's -- As a reaction to the Depression, Cracker Jack's largest marketing campaign, The Cracker Jack Mystery Club, ran from 1932 to 1936. The company also experimented with new products, like chocolate-covered Cracker Jacks, none of which ever reached the popularity of the original; 1940's -- Cracker Jack, left, joined the war effort, first issuing metal flag prizes, converting to paper prizes after metal was rationed and finally turning to plastic prizes in the postwar era; 1998 -- Cracker Jack's new owner introduces a redesigned box, a slightly different formula and new prizes in hopes of reversing a sharp slide in sales. (Source: Cracker Jack Prizesby Alex Jaramillo) (Naum Kazhdan/The New York Times)

LANGUAGE: ENGLISH

LOAD-DATE: July 4, 1998


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