Janesville59.8°

Axium looks to cash in on its chips

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JAMES P. LEUTE
November 19, 2008
— There are no Super Bowl ads, celebrity spokesfolk or company jets.

But there's a nice view of the bowling alley next door, jokes Jerry Stokely, president of an area company that's dipping its chip into the $12 billion domestic market for chip products.


Axium Foods, based in South Beloit, Ill., is a division of McCleary Inc., which for nearly 50 years has been making snack foods sold under store labels or by other companies.


Axium is making a push into the market with its own snack foods label: Pajeda's.


Company officials believe they've got a quality product that fills a price niche—somewhere between the store brands and the industry's big boys.


"We know that we're good at making a really good product," Stokely said. "Frito-Lay dominates the industry, and we know we can't compete with them.


"But we can leverage our strengths at being able to make a really good product at a low cost."


While the lack of a large marketing budget helps keep Axium's costs low, it also makes it difficult to promote the product around the country.


"We're looking at different marketing techniques to get the product to market, but it's something we've never had to do," Stokely said. "We're feeling our way through the marketing skill sets."


Pajeda's are available in several markets, primarily through smaller, independent grocery chains. In Janesville and Beloit, they're on the shelves at Woodman's.


National distribution, however, is spotty, said Cindy Kuester, the company's sales director.


Pajeda's are available in 11 varieties, including three products similar to Frito-Lay's Cheetos brand. Pajeda's tortilla chips are available in several different flavors, as well as a party mix.


The products sell for $1.59 a bag compared to $3.99 for a similar size Frito-Lay product, Kuester said.


Pajeda's, which account for about 10 percent of Axium's production, are bagged in one size only. That eliminates the cost of marketing the same product in three or four sizes.


"We characterize it as a high-value product at a low price," Stokely said. "We can cross borders with lower costs and still continue to make our private label brands, which Pajeda's doesn't compete with.


"This is a niche, and the business model is out there."


But a niche product and its business model mean little if the product's quality is not top-shelf, he said.


He pointed to the U.S. debut of the Yugo subcompact auto as "the standard bearer for how not to do it.


"For there to be value, the quality must be at or ahead of national standards," Stokely said. "That's a commitment of all our employees for all of our products.


"When was the last time you had a bad Snickers bar?"


Axium employs about 100 people in three shifts at the plant just across the state line. Raw materials, primarily corn and flavorings, come from local farmers and ingredient companies.


"Ultimately, we will look at success for Pajeda's in terms of market share," Stokely said. "We don't have any illusions of grandeur in taking Frito-Lay's place, but we think it's feasible to get 20-25 percent of the market of people at median income levels."


The goal, he said, is to provide long-term security for the company's owners, employees and suppliers while delivering value to consumers.


"The struggle is getting people to try it," said John Murphy, Axium's operation manager. "It's been pretty clear that there's a loyalty once we get people to try the product."



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