CHIPING AWAY AT THE COMPETITION
For Margaret and Robert Garcia, carving out a top spot in the organic food industry was a natural
By BRIDGET McCREA

Bob and Margaret Garcia’s creative gears are always turning—even when they’re enjoying a romantic dinner together. Take the time in 1996 when the couple was seated at a waterfront restaurant in Puerto Vallarta, sipping margaritas and waiting for the waiter to deliver their first dinner course: tortilla soup.

When the bowls of soup arrived garnished with two delicate tortilla strips, a bright light bulb flicked on above the Garcia’s heads. “We looked at each other and said, ‘We can make these,’ ” recalls Bob. “So we did.”

If it sounds far-fetched for a vacationing pair of Americans in Mexico, think again. When the Garcias returned home to San Jose, California, a few days later, they began preliminary work on what would become “Salad Eatos,” a product manufactured by their firm, R.W. Garcia Co. Today, the Garcias’ crunchy tortilla strips are sold in the pre-packaged salad bags that are hawked in supermarket produce sections, and sprinkled on fast-food chain salads.

According to Bob, company president and CEO, Salad Eatos are just one example of how he and Margaret, who is vice president of sales and marketing, parlayed years of experience on the distribution side of the snack food industry into entrepreneurial success. Both received their basic snack food training by working as regional sales managers for the now defunct Standard Brands.

That job experience put the Garcias at the forefront of the snack industry, where they saw an untapped niche in the tortilla chip market. Back in the 1980s, few manufacturers bothered with such snacks and there was even less shelf space in the grocery stores allocated for them. The Garcias grabbed the opportunity and wound up on the leading edge of what would become a huge boom in the consumption of Mexican foods, both in the U.S. and worldwide.

“We decided that the only way to control not only the quality of the product, but the pricing of the product and the security of knowing it would be manufactured, was to do it ourselves.” —Bob Garcia, president, R.W. Garcia Co.

Humble beginnings
Armed with $1,000 in savings and a one-ton Ford van, the Garcias launched their own snack food distribution firm—with an emphasis on corn-based products like tortilla chips—in 1982. “We found someone to manufacture our product and rented a small warehouse,” recalls Bob, 56 and of Puerto Rican descent. “Then we got out there and started selling everywhere we could. Within three to four months we ended up buying more vehicles and hiring employees.”

Success may have come early for the Garcias, but complacency did not. It didn’t take long for them to realize that where they really wanted to be was on the manufacturing side of the business—a position that would allow them to control the quality, cost and ingredients of the products they were selling. “We needed more control over the products that were being manufactured for us, in terms of both quality and cost,” says Margaret, 52.
What happened next further cemented that belief, and even the “basic training” that they learned as sales managers in the snack category couldn’t prepare the Garcias for their next challenge. With a few different styles of chips selling well on the market, their manufacturer suddenly “hiccupped” and nearly put R.W. Garcia out of business.

“After going through a lot of misery and nightmares,” Bob says, “we decided that the only way to control not only the quality of the product, but the pricing of the product and the security of knowing it would be manufactured, was to do it ourselves.”

So they rounded up $300,000 in financing from friends, family and a well-placed angel investor and opened a manufacturing plant in 1986. It didn’t take long for Bob and Margaret to find out there was a huge difference between making and selling chips. “For two salespeople who thought machinery had a very long extension cord that gets plugged into the wall, it was quite an education,” says Bob. “It was also very expensive.”

For the next two years the Garcias wore two hats, operating as both a manufacturing and distribution firm. By 1988, they took off the hat that brought them to the business in the first place and focused solely on manufacturing.

“That was a major turning point that really benefited the company in the long run,” says Bob. “We saw manufacturing as the better way to go, so we separated our distribution company from our manufacturing company and spun it off.”

Slow, steady growth
Despite the hurdles thrown in front of them during their first decade in business, the Garcias have come out on top by carving out a niche in the high quality, all natural, organic food industry. Serving an international customer base, R.W. Garcia posted about $9 million in sales last year and expects $11 million this year. The company’s products are made from stone-ground corn and seasonings that are 100 percent natural, and include no additives or preservatives.

With 62 employees—most of whom were added slowly over the years, according to Bob—the company operates from a 40,000-square-foot plant in San Jose and a 30,000-square-foot location in Tampa, which opened in 1997. Bob says the second location was born out of necessity, mainly because R.W. Garcia was working with a number of large customers in Europe and needed better access to them.
“It’s considerably easier to ship from the East Coast to Europe, than it is to ship from California to Europe,” Bob explains. “We already had a customer base in place and a number of prospective customers on the hook, so we knew it was time to open a Florida operation to serve them better.”

Such attention to detail and customer service is precisely why Bob chuckles when you ask him how his small firm competes with the likes of Frito Lay. Put simply, it’s like comparing apples to oranges: There is no comparison. “No one can compete with the largest manufacturer of snack foods in the world,” Bob says. “Our core strengths are that we’re nimble, and focused solely on organics and natural foods. That’s what sets us apart.”

In fact, R.W. Garcia was the first company to introduce the popular organic blue tortilla chips to the mass market. Today, blue corn tortilla chips grace the shelves of mainstream supermarkets as well as natural food stores nationwide. “I don’t know anyone who makes more blue corn chips than we do,” says Bob.

But don’t expect to find the “R.W. Garcia” label on those blue chips, because you probably won’t find it. A full 70 percent of the firm’s products are private labeled, which means other companies contract R.W. Garcia to manufacture and package the goods under their own brand names. The other 30 percent of the company’s wares can be found under its own label in stores like BJ’s Wholesale Club and Stop & Shop on the East Coast, and Safeway Stores on the West Coast.

Remembering back to a time when organic or all-natural tortilla chips couldn’t be found on those grocers’ shelves, Bob says he and Margaret’s early insights went a long way in positioning their company in what is now one of the fastest growing food segments in supermarkets nationwide. Combine that with the fact that health food stores have become national in scope—building large supermarket-style stores that sell natural foods—and R.W. Garcia’s success path really comes into focus.

“If you go into some of the larger health food stores and look at their products,” says Margaret, “you’ll probably find that they trace back to us in some way or another.”

Elizabeth Fisher, president of Coast to Coast Organics in Warwick, New York, serves as a middleman between R.W. Garcia and many of those stores. She herself is a big fan of the company’s products. “They make the best tortilla chip that I know of, and I can’t keep my hands off of their newest innovative tortilla chip,” says Fisher, whose firm handles sales, marketing and outside consulting on the East Coast for several natural food companies.

Fisher says R.W. Garcia’s strength lies in its product quality, and the fact that the Garcias insist on using only pure, GMO-free (Genetic Modified Organism) corn in their snacks. She points to Stop & Shop and Hannaford Bros. as two retailers that have posted great success with the firm’s products, and adds that R.W. Garcia’s new “big paper bag” tortilla chip concept has been flying off the shelves at BJ’s Wholesale Club.

Acknowledging that large, multinational competitors like Frito Lay are vying for a piece—if not the whole enchilada—of this growing snack food category, Fisher says R.W. Garcia stands out because of its smaller size—something that consumers associate with better quality and attention to detail. “More consumers are making their own decisions based on perceived value,” says Fisher. “They see that value in a product that’s coming from a small company like R.W.

Garcia, with its high quality standards and small production batches.”
Where the Garcias also stand out is in their unwavering ability to sniff out new opportunities—like they did with the Salad Eatos—and rely on their instincts to guide them to new product ideas and market opportunities. They refuse to back down from challenges and instead prefer to meet and conquer them head-on. Before selling their organic products in Europe, for example, the Garcias had to undergo a rigorous Genetic Modified Organism process that traces each product to its individual ingredients’ original source to certify their organic status.

“We trace our corn back to the fields, we trace our growers and we trace our processors. We go all the way back through the entire line,” says Bob. “As far as I know, we’re the only tortilla chip manufacturer that does this.” That hard work paid off in 1994, when R.W. Garcia was licensed to export its products to the U.K. and Germany.

“R.W. Garcia took steps that no one else would, including extra risks and investments, to set the bar at the highest level of any corn tortilla chipmaker in the marketplace,” comments Dale Kamibayashi, vice president at organic food manufacturer Rapunzel Pure Organics in Valatie, New York. He has worked with R.W. Garcia in different capacities for about 10 years now, including selling the manufacturer’s product line to markets, and purchasing them for grocery chains where he was employed.

Kamibayashi says R.W. Garcia is the first to his knowledge to sustain and pass the GMO standard that Europeans so highly regard when it comes to organic foods. “They blazed the trail,” says Kamibayashi, “and set the bar a little higher for other manufacturers.”

Pioneering ways aside, Kamibayashi says smaller firms like R.W. Garcia still face challenges, particularly from larger competitors who want a piece of the all-natural and organic snack-food pie. “Frito Lay has entered with their own natural product line, with both blue and yellow chips as well as potato chips that are made of organic corn meal,” says Kamibayashi. “The challenge for the independent and smaller organic food manufacturers will be competing with corporations that can afford to throw money around.”

Confident in his own company’s ability to stand out without having to break the bank, Bob’s answer to the upswing in competition is straightforward: “Bring it on.” Looking back on R.W. Garcia’s year-over-year record sales, he says he’s more worried about the fact that the company is now “bursting at the seams” thanks to high demand for its products.

“Our record years have helped us fill our capacity to manufacture, so we’re now scouting out another plant location,” says Bob, who expects to break ground on a new site sometime in 2004, probably in Tampa and roughly twice the size of the firm’s existing Florida location. Within six months, R.W. Garcia also expects to release yet another line of one-of-a-kind specialty products, for which it is currently conducting marketing studies.

With four grown children who are not involved in the business, the Garcias also plan to enjoy their limited spare time playing with their three dogs, golfing, boating, gardening and squeezing in vacation time when they travel the world on business. They sneak away to their Oregon ranch whenever they can, and depend on that time away to relax their minds and allow more “Salad Eatos-type” business ideas to germinate.

Calling their competitive business environment a “constant challenge,” the Garcias say business ownership has afforded them a rich, daily education for the last 21 years. “If it’s not finance, it’s grappling with personnel management, learning new business techniques and how to tap new markets,” says Bob. “We’ve been in heavy study since day one, and hopefully we’ll be in heavy study for a long time to come.” HT