FAT SUBSTITUTE MADE BY P&G STIRS CONCERN, ENTHUSIASM

RUSSELL REDMAN

The media crunch around Procter & Gamble's new fat substitute, Olean, has bagged grocery buyers' attention but has left them wondering how far it might chip its way into the salty snacks market.

Several retailers told SN that Olean likely will shake up the salty snacks playing field, since a giant like P&G is behind it and Frito-Lay, the largest U.S. snack manufacturer, quickly decided to test its use.

Yet they also voiced concern that media reports of alleged side effects -- diarrhea, stomach cramps and loss of some nutrients -- in some people could lead many consumers to avoid Olean-laden snacks, which the Food & Drug Administration requires to bear a health warning label and be fortified with certain vitamins.

"I think [Olean] is going to have a mark on the business. I think it will add to it. I think people will go after it," said Rick Hagan, sales manager for Camellia Food Stores, Norfolk, Va.

Hagan, who handles direct-store-delivery sales for the chain, noted that low-fat and low-calorie snacks have carved a hefty niche, even though he initially believed those items wouldn't be popular with his customers.

"The only question there's going to be [with Olean snacks] is the price point," he said. "If we sell a 6-ounce bag of chips for 79 cents -- which is what it goes for in this market -- and they're going to want, say, $2.49 for [the Olean item], then it's definitely going to have some effect on how fast it moves out. But if they can get in where it's like $1.89 or $1.69, then they

should be in good shape."

A P&G spokeswoman said prices of snacks with Olean will largely be determined by retailers. "While we expect that products made with Olean will be priced at a premium vs. full-fat snacks, as many low- and no-fat snacks are today, each retailer will set its own shelf price," she said. "And we're confident that snack foods made with Olean will offer great consumer value."

Because P&G developed Olean, it almost follows that its influence on the salty snack category will be felt, according to James Jones, a grocery buyer at Ingles Markets, Black Mountain, N.C. "As big as they [P&G] are, I'd say it would have an impact," he said.

Still, without a product out on shelves, the fat substitute is not a factor, Jones noted. "I'm not going to be concerned about it at all really until I see them come in here with something. No one has shown us anything, and no one has talked to us about it," he said.

News coverage of Olean's alleged health effects in some people already may have tainted its potential for acceptance by consumers and snack manufacturers, said John McDade, category manager at Harvey's Supermarkets, Nashville, Ga.

"After what I heard on the TV, I would not touch it," he explained. "If I were Frito-Lay, I would not put it in with any of my stuff. I wouldn't cook anything with it [if] a customer might come back and sue me."

The salty snacks market probably won't be significantly affected by Olean, McDade said. "Unless P&G comes out with something that has it, I don't believe they'll be able to sell it to other [manufacturers]," he said.

Cincinnati-based P&G launched the no-calorie, full-flavor fat replacement Jan. 24 after the FDA approved its use in salty snacks and crackers. The company plans to use Olean -- the brand name for the actual ingredient, called Olestra -- in new versions of its Pringles potato crisps and to sell it to other snack makers. Frito-Lay, Plano, Texas, announced that it intends to test the substitute in some salty snack products this year. Those items have not yet been determined, a company spokeswoman said. Also, Nabisco plans to explore the possibility of using Olean in some cracker products, a spokeswoman for the Parsippany, N.J.-based manufacturer told SN. "The Snack Food Association believes that the approval of olestra has the potential to be a very significant step for the snack industry in terms of meeting consumer demand for snacks that are lower in fat and that meet their expectations for taste," said Jane Schultz, vice president of communications for the Alexandria, Va.-based trade group.

"We have confidence in the FDA that their decision is based on sound science and that the product is safe. And we welcome [Olean] into the marketplace," Schultz added.

The P&G spokeswoman said the company's research found that 2% of people report common digestive effects both with Olean snacks and with regular snacks.