Cat fight: Cheetos-maker Pepsi challenges orange snack rival
Battle with Peatos is fresh example of tension between big food makers, upstart brands
The maker of Cheetos says it is fighting a copycat.
PepsiCo Inc.’s Frito-Lay division, which makes the crunchy orange snack, has accused a new competitor called Peatos of trademark violations. Peatos is a skinny orange snack made from peas and lentils.
The manufacturer, World Peas Brand Peatos, received a ceaseand-desist letter from Pepsi in May claiming that the Peatos name, paw-print logo and slogan, “tigers live longer than cheetahs,” disparage Cheetos.
Pepsi didn’t respond to requests for comment.
Like other big food makers, Pepsi is losing market share to upstart brands that resonate with demand for more healthful or natural products.
“These small, niche brands are like a shoal of piranhas,” Pepsi’s Global Insights Director Maneesh Kaushik said at an event in France in June. “Every single bite doesn’t really hurt you, but together, they can really cause a lot of pain.”
Peatos has sold $5 million (U.S.) of its chips in the seven months since their debut. Nick Desai, chief executive of Snack It Forward LLC, which owns World Peas Brand Peatos, said he expects to reach $20 million in sales next year. Cheetos makes around $1.5 billion in annual sales in the U.S., according to data from market research firm IRI.
Mr. Desai said there was nothing wrong with riffing off of Cheetos’s name and marketing. “It just tells us that we’re on to something big,” he said.
The CEO said Peatos was created as a slightly healthier snack food that would still have mass appeal. To do so, he said the company decided to name and market the snack in a way that would make it familiar to consumers.
A serving of Peatos has 4 grams of protein and 3 grams of fiber, compared to 2 grams of protein and less than 1 gram of fiber in Cheetos. Peatos also has slightly fewer calories, less fat and sodium than Cheetos.
Mr. Desai received the ceaseand-desist request from Pepsi when Peatos went on sale at 2,000 Kroger Co. grocery stores in May. Peatos are sold there in the produce section, a coveted position as shoppers spend more time browsing for fresh food.
Pepsi said in the letter to Peatos reviewed by The Wall Street Journal that the Peatos name is “confusingly similar” to and “dilutes” the Cheetos brand. Pepsi also said the tagline “tigers live longer than cheetahs” falsely implies that people who eat Peatos may live longer than Cheetos snackers.
Peatos has applied to trademark the tagline with the U.S. Patent and Trademark Office. Pepsi has said it will contest that application.
“Frito-Lay welcomes honest and fair competition. However, we cannot condone the misuse of our trademarks... and free-riding on our investments in the Cheetos brand to elevate yours,” said the letter signed by Pepsi’s senior marketing counsel, Jenny Allenbaugh.
Mr. Desai said he replied to the letter and that the two companies’ lawyers have been communicating via email since then.
Peatos’s board of directors wanted Mr. Desai to acquiesce to Pepsi and change the snack’s name. He worried some investors would pull out of the company.
“They thought I was crazy for antagonizing them,” Mr. Desai said.
Mr. Desai and his attorneys assured board members and investors that Peatos wasn’t violating trademark law and that they should fight back. But he said he is concerned about the cost of defending Peatos against litigation from Pepsi.
Peatos plans to start a crowdfunding site on Tuesday that will offer backers discounted cases of Peatos and branded merchandise in exchange for donations.
“They have way more money than us to tie us up with all kinds of litigation,” Mr. Desai said.