Feature: A Pirate Looks at $50 Million

By Robert Klara

To hear Robert Ehrlich tell it, the idea that made him a rich man came straight out of the trash.

It was 1986 and Ehrlich, who'd recently abandoned a disappointing career on Wall Street, had decided to sink his savings ($2,000) into the snacks business. The day in question found him at a processing plant in Easton, Pa., where the manager was giving him a tour. As he walked around the maze of fryers and extruding machinery, Ehrlich spotted a pile of misshapen corn puffs on the floor. Turns out that a few minutes earlier, someone assembling one of the air-gun nozzles had botched up, so instead of producing cute, uniform balls, the machine had belched out hundreds of strange, malformed shapes instead. "What's that?" Ehrlich asked, pointing to the floor. The guide began to apologize. "That's the garbage, we're not using that," he said. But Ehrlich was excited. "No, no," he interrupted, "Those are what I want!"

The factory dude didn't quite get it. Who could blame him? After all, all the plant's other clients insisted on uniformity. Curls, circles, half-moons, it didn't matter, so long as the machine made them all the same size and shape, hosed them with synthetic flavor dust, then shot them into a bag. The end. And so the day that it all went to hell—the day the machine spat out a bunch of deformed crap and some schmo forgot to sweep it all up—turned out to be a good day for Robert Ehrlich, who had a few other oddball ideas, too. Not only did he want all those gnarled shapes to be his new snack brand, he wanted cheddar cheese on them; as in real cheddar, the expensive kind. Later, Ehrlich also cooked up the catchy if slightly concupiscent name of Pirate's Booty, stuck a smarmy-looking buccaneer on a bag along with exhortations like "Shiver Me Timbers!" What did that have to do with a cheese puff? Nothing. Ehrlich just felt like it.

In case all this doesn't quite sound like your idea of research and development, well, that's just fine with Robert Ehrlich. If you're a traditional marketing or branding executive, he doesn't want to be like you, anyway. Pirate's Booty and the 40-odd other snacks made by Ehrlich's company Robert's American Gourmet are what he proudly terms "really whacked stuff." Dauntless, creative and inexhaustible, Ehrlich's cut from the same cloth as a Steve Jobs or a Larry Ellison—renegade idea men whose passion for the product makes up for a lack of polish. He's precisely the sort of R&D or marketing guy that a big packaged-foods company would kill to have. The only trouble is, Ehrlich would rather kill himself than work for a big company. Ehrlich's almost visceral anti-corporatism seems to come in part from the memory of his junior commodity trader days when the "big players" hung him out to dry by leaving him short on his trades every afternoon at 3. So he chucked Wall Street—and any respect for an "Inc." suffix along with it.

Today, Robert's is Ehrlich's ultimate revenge, a thorn in the paw of lions like Nabisco and Frito-Lay, and a high-margin machine that might technically be a corporation but sure as hell doesn't look like one. R&D? It's whatever pops into Ehrlich's head on a given day. Product names and taglines? He cooks them all up himself while driving, flying, sleeping—whatever. Package design? Ehrlich phones his cartoonist chum from Mad magazine and tells him what to draw. Focus Groups? Are you kidding? While Frito-Lay houses its 2,500 employees amid the lush lawns and fountains in Dallas' Legacy office park complex, Robert's HQ is a cinder-block box in suburban Long Island, N.Y., where Ehrlich's 15 employees leave their bikes in the lobby or jam with the guitars, keyboard and drum kit set up in the back. As Ehrlich summed it up: "We're not ExxonMobil, thank you very much. We don't want to be."

The beauty of all this is that Ehrlich's smugly slapdash style has created a $50 million empire that has, along the way, worked a kind of magic that even Disney's pirates can't: Ehrlich's turned the cheese puff into something chic. Pamela Anderson's been spotted with bags of Pirate's Booty in her shopping cart, as has Britney Spears (before the breakdown). In an interview with British gossip rag OK, actress Denise Richards described her daily diet as including half a grilled-cheese sandwich, yogurt and . . . a bag of Pirate's Booty.

"Robert's is brilliant and experimental and doesn't play by the conventional rules," observed Gary Stibel, CEO of Westport, Conn.-based New England Consulting Group. And as for anchor snack Pirate's Booty, well, "The damn thing is on fire."

Favorite Tings
Sailors (and Ehrlich is one) believe in something called dead reckoning, a gut sense of where you're going that some say can be trusted more than any map or instrument. Years ago, Ehrlich's dead reckoning told him that Americans were beginning to cast a dubious eye on stuff like maltodextrin and disodium phosphate (just two of the many ingredients required to produce neon-orange color cheese puffs) and would pay more for a snack food containing, uh, actual food.

"I'd go into the store and see a laundry list on the back of a bag of Doritos," said Ehrlich (who, incidentally, with his oval glasses and clean-shaven chin looks nothing like Blackbeard). "And I'd think, 'What the hell do you need all that for?'" So Ehrlich kept his formula simple. Eschewing seasonings with inexplicable names (who ever tasted a "cool ranch" anyway?), Robert's snacks feature flavors that people know: cheddar, spinach, broccoli. A little cornmeal, rice, sunflower oil, aged cheddar, whey and buttermilk are all that go into Pirate's Booty. Tings, another best-selling varietal, contain only cornmeal, rice, sunflower oil, yeast and salt.

But if the recipes are simple, the underlying issue isn't—not for Ehrlich, anyway. He cannot understand why, at a time when Middle America's eating organic and even Pat Robertson has admitted that global warming might be real, big-name snack brands are still using ingredients better suited to Three-Mile Island than the kitchen table.
"I bought this yesterday. Take a look at that ingredient list," Ehrlich said, grabbing a bag of Doritos and tossing it across his conference-room table. "That's not nacho cheese," he boomed. "It's cheaper to make a phony cheese with enzymes and all the other crap than to actually buy cheese at $2 a pound. Frito-Lay is living in the 1950s and, if you ask me, they really don't understand that this is the coming revolution." (A Frito-Lay rep said the company does not comment on competitors.)

It's fair to say that Ehrlich doesn't have a meekness problem, but about that revolution stuff? He's right. Robert's American Gourmet has planted itself squarely in the middle of what's probably the hottest trend in snacking since the invention of onion dip. While the $7.9 billion salty snacks category grew by a respectable 2.7% in the 52-week period ending in March, according to IRI, sales of all-natural snacks surged 20% between 2005 and 2007, according to market research firm Packaged Facts—and that figure doesn't even include receipts from Whole Foods Market (which, incidentally, is the store that put Pirate's Booty on the map.) Add that retailer's sales, and the growth figure for the category jumps to 30%. Ehrlich estimates that Robert's own growth has hit 20% this year alone.

"Robert's is very popular. They use real food, and we need real food," said Katherine Weiss, owner of the Healthy Snack Store in Spokane, Wash. "It's a fantastic selling product," added Chris Maher, owner of Snack Aisle.com, a seven-year-old online seller of all-natural munchies. I love the brand and how they market it. The packaging's fun and carefree."

Bagging It
Maher is saying more than he realizes. Robert's fun, carefree packaging is essentially all the formal marketing that the company bothers with, unless you count the 20 guys that Ehrlich employs around the country to dress up in pirate costumes and hand out free bags of his chips at grocery stores. "We do no marketing," Ehrlich said. "Zero."

That's not really true. Robert's American Gourmet does plenty of marketing; it's just all melted into the stew that is the look, taste and un-corporate swagger of the product itself. The snack bags sport a scribbled look that's reminiscent of a doodle pad. Robert's uses five mascots—a pirate, a beach bum, a shapely Vanna White-type lady, Albert Einstein and, of course, the pirate—and if the gaggle of characters violates the marketing law of one-brand-one-mascot, well, that doesn't bother Ehrlich. "I'm influenced by a lot of different things," he shrugged. "There's no real thought to it."

Actually, there is. The Einstein character's used to sell the "Smart" products while the dude with the shag haircut ("Yeah mon," he says on the bags) holds down the veggie line. Potato Flyers—a name Ehrlich said came to him as he watched the factory puffing machine in action shooting snacks into the air—get the pilot on the bag. But it's the pirate (complete with his parrot) who does the heavy lifting. As mascots go, a buccaneer is about all a brand could want, Ehrlich said, because everything that goes with a pirate—be it riches, plunder, adventure, contempt for authority or having his way with the young lasses—resonates with someone in every age group. "Those old icons—the Pillsbury Dough Boy, Tony the Tiger—c'mon, that's for kids," Ehrlich said. "This is more sophisticated."

Which works, Maher said, because the crowd that's into all-natural snacking is cerebral to start with, the sort of consumers who get the joke behind the hand-drawn pirate and goofy catch phrases. "Robert's made these consumers sophisticated," Maher said. "Pirate's Booty tastes great but it's a unique item that defined the category. The whole feel of the company is cool."

Ehrlich loves to toy with one-off ideas for chips that he admits would stay on store shelves for all of 10 minutes, but generate enough publicity to more than justify the effort. His current pet is Stem Cell Chips (in name only, not ingredients), an adieu he wants to bid the Bush Administration. Stem Cell Chips "would never make it to Safeway, but I would make it onto Good Morning America," Ehrlich said. And you damn well know he's right.

Indeed, Robert's biggest selling point isn't corn, it's corniness, as in the names of the snacks and the quirky word tags that adorn the bags like spitballs. Deceptively simple (and just begging to be made into off-color limericks), the names of Robert's many chewables include Nude Food and American Buds; Dude's Chips and Stealth Chips; Pirate's Booty and Fruity Booty; Chaos, Tings and Tubes. A bag of the Tubes carries the label, "For best results, put in your mouth." "Thar be good!" proclaims the Pirate's Booty Pirate, who also adds the obligatory "Yo ho ho."

"The ideas start here and I come up with the funny names," Ehrlich said. "You throw anything on the table and I'll give you a name for it in five minutes. There are no walls or boundaries for me."

That lack of walls and boundaries has made Robert's the one to beat, but it's also caused Ehrlich some problems. In 2000, the product-label watchdogs at the FDA sent him a letter pointing out that Fruity Booty's "Mostly Fruit" label couldn't stay on a snack that was, in fact, mostly puffed rice. (In 2002, the Good Housekeeping Institute also subjected Booty to a keel-haul over a low-fat claim that didn't hold up under lab scrutiny.) Questioned whether the "Good for You" tag on a bag of Tings is really meant to refer to a snack with 8g of fat per serving, Ehrlich reasoned that it's actually just a matter of semantics: "It's the way you have to say it," he explained. "You bought this bag—well, good for you!"

Follow the Pirate
Doubtless, Ehrlich has a sense of humor that health watchdogs do not, but that's also much of what makes Robert's brands unique, a gadfly to the bigger snack brands, and Ehrlich does not like the bigger snack brands very much. "They all follow each other," he said. "Utz, Herr's and Wise—boring, boring, boring—1950, 1950, 1950." Ehrlich reserves particular ire for Frito-Lay who, he's convinced, has built a basement room at its headquarters in which to house and study his products. "I represent the weirdness that they can't do," he said.

Hell knows they've tried. A Frito-Lay fruit-crisps snack called Flat Earth features the tagline "Impossibly Good" below a winged pig (meaning, no doubt, if pigs could fly). Ehrlich considers efforts like this laughable. "They're trying to be this little company," he said, "And it's not working." Ehrlich doesn't mean that in the fiscal sense. Frito-Lay is an $11 billion corporation that few would claim is not "working." But, he said, "They're not going to copy me because they can't capture this personality."

Maybe not. But they can simply capture another brand, which is exactly what Frito-Lay did in 1989 when it acquired Smartfood. And, it did it again in 1993 when it bought all-natural Miss Vickie's chips. Has Ehrlich's cell phone rung with buy-out offers from any big companies? "Oh yeah," he said. "We get calls all the time." But, sorry, Robert's American Gourmet is not for sale. "I love what I do," Ehrlich explained. "And I wouldn't know how to stop what I do. They'd have to put a straightjacket on me and use a lot of duct tape."

Some big snackers probably would like to see Ehrlich in the brig, but at the same time they know that he represents a trend they'd better get hip to, and fast. "Consumers are clearly more interested in, and demanding, healthier snacks," said a Frito-Lay rep, citing products like SunChips and Fritos, the latter a snack made with whole corn, corn oil and salt since 1932.

Ehrlich maintains that Frito-Lay is "afraid of me." Cannondale Associates managing director Ken Harris maintained that "Frito-Lay is afraid of nothing," and he's probably right. But, in Harris' view, the snack giant is "respectful" of Robert's, and has a keen sense of the market and of Ehrlich. "Watch what Frito-Lay's been doing lately," he said. "They're using natural ingredients and no more trans fats. They're moving more closely to Robert's positioning."

So is Herr's, the 62-year-old chipmaker based in Nottingham, Pa. Two years ago the company launched Herr's Natural, kettle-cooked chips that come in earthy flavors like sea salt and blue corn, all with no preservatives or artificial ingredients. All-natural snacking, said sales and marketing vp Daryl Thomas, "is not going to take over the world in a year, but it is growing. Consumers are finding it each day." Where does Robert's American Gourmet fit into that? "I admire them for traveling a different path in our industry," he said. "They identified a segment of consumers who were not having their needs met, and they responded."

Steady Course
Ehrlich has every intent to continue that response, too, though he admits a little more product streamlining might be a good thing: "I think we have 132 SKUs. That's too many. We need to focus." Other than that, Ehrlich has no worries. About the souring economy: "There's 300 million people in this country who are still going to eat," he shrugs. About increased competition: "Other companies have been jumping on the natural thing. But we transcend that. We're funkier."

And about where his next best-seller's going to come from, well, when your best marketing idea came from factory trash, the convenient truth is that inspiration lurks everywhere. "I'm always looking through the garbage because the mistakes are always the stuff other people don't want," Ehrlich said, "but I do."