WATERTOWN - The bag of chips in your pantry may have a Watertown connection to CSS Farms, a company that grows and provides chip potatoes to Frito-Lay.
"We got in with Frito-Lay somewhat by accident," CSS President Milt Carter said. "We grew some chip potatoes in 1988 and (Frito-Lay) just happened to be dealing with really bad drought in the Red River Valley of Minnesota and North Dakota that year. At the time, 60 to 70 percent of all chip potatoes were grown in the Red River Valley on dryland. We had pivot irrigation of potatoes that year and they really needed potatoes. The next year, we did the same thing."
Today, CSS Farms is one of six potato growers to provide Frito-Lay, producing 12 percent of the company's potatoes. It was the drought in the Red River Valley that started the relationship and it was the higher quality product and more reliable growing process that built the relationship between Frito-Lay and CSS. Carter said after a few years of droughts in the Red River Valley, the company decided to transition to irrigated ground that was less dependent on rainfall.
CSS Farms expanded its operations in 1993 by raising potatoes in Kearney, Neb., for the Frito-Lay plant in Topeka, Kan. CSS Farms has its corporate offices in the Airport Industrial Park in Watertown, but the potato growing has moved to locations including three in Kansas, two in Texas, three in California and one each in Washington and Florida.
In addition to working with Frito-Lay, CSS Farms has expanded its business to producing "Tasteful Selections," a baby potato business CSS has worked on for the last couple of years that produces potatoes as small as .75 inch to 1.75 inches in diameter. Carter said the idea for the product came after he was invited to join the U.S. Potato Board on a trip to England in 2002 to see what Europe was doing with potatoes. The English had been producing baby potatoes, called salad potatoes, for 15-plus years and Carter thought it was a good product to introduce to the U.S.
"I saw that and I said that is something that we should be doing in the United States," Carter said. "It hits a lot of the things you need. No. 1, they are small and, secondly, because they are small they are easy to cook because they cook quickly and evenly."
The Tasteful Selection potatoes come in a variety of one, two and three bite sizes and come in yellow, white, red and purple. The potatoes are sold in one and a half pound bags and are available in 7,500 stores nationwide.
"I had no idea how hard it was to get a product into a grocery store before this," Carter said. "You have to convince them to take the product. They don't like to add SKUs so you have to convince them that they are going to make more money, then you have to qualify from a credit standpoint, then you have to get audits done for good agricultural practices and all the food safety stuff. It's just a heck of a process. It's not unusual to take six months from the time you convince someone at the top to take the product before the product is in distribution."
Carter said his goals are to continue to expand and diversify his products and double in size, making it a $100 million company. He said now, 80 percent of the income comes from Frito-Lay, which he said is a great company but there is only so far they can go with it.
"Frito-Lay has a really dominant market share, they've got 70 percent market share, which is kind of unprecedented for a branded food product," Carter said. "The chances for them to increase their market share substantially is not real great, so there just isn't a lot of growth potential in that industry."
Carter said one way CSS is looking to diversify is sweet potatoes. He said sweet potato consumption has doubled in the U.S. in the last 10 years. Carter said CSS Farms grew a test acreage of sweet potatoes and in 2011 it grew 300 more acres for delivery to Lamb Weston in Louisiana, a division of ConAgra foods.