Technicolor Chips, Naturally

All entrepreneurs, of course, have a dream but, for 37-year-old Carolina Echenique, it is literally true. A dream inspired her to launch Tika, the company that now exports red, purple and yellow chips, made from native Chilean potatoes and other vegetables, to France and, soon, Spain and the United States.

It was in October 2008 that she dreamt of making brightly-colored chips. So vivid was the dream that, the very next day, she resigned as a lecturer at the agronomy schools of two Santiago universities and, in the garage of her house, started experimenting.

Potatoes were the obvious choice. But she also tried lots of other vegetables – eggplants and radishes among them – before settling on two varieties of potato – one red and the other purple – grown in southern Chile around Puerto Montt and on the island of Chiloé as well as three varieties of sweet potato and one of beetroot.

By November 2009, she was ready to go and hasn’t stopped since. It wasn’t long after the chips appeared in delicatessens, up-market restaurants and hotels in Santiago that she got a call from the Jumbo supermarket chain asking to place an order – a request that, worried about her production capacity, she initially turned down – and other supermarkets soon followed. 

“Now, I’m everywhere,” says Echenique. Tika chips are, indeed, on the shelves of 700 points of sale along the length of the country and, although around three times the price of traditional chips, not only in high-income neighborhoods.

Their expansion to a more mass market was helped last year when the company decided to cut its prices by 22 percent – a drop of 1,000 pesos (around US$2) on the largest 212-gram bag. “We wanted to take advantage of the scale economies that were appearing as sales volume increased to extend our reach,” says Echenique.

Timing appears to have been part of the secret of the success of Tika chips. As people became more interested in healthy eating – itself a sign of Chile’s growing prosperity – Tika filled a niche, until then largely empty, by providing a natural snack that is, at the same time, easy to serve, tasty and visually attractive.

“People want a snack that’s really natural, without colorants and chemicals,” says Echenique. “And, except in the case of the two potato varieties where we add a tiny bit of low-sodium salt, the only sodium is what comes from the vegetables.”

Supermarkets like them too, according to Echenique. The margin is attractive, she says – although unwilling to go into details – and the turnover fast.

Exports have followed, first to Uruguay starting in mid-2011, and, because they are sold there in duty-free shops, that also opened the door to the Brazilian market. “We didn’t target Uruguay, they contacted us through our website,” reports Echenique.

Another contact through the website added France to the list – where they are sold in the Galeries Lafayette and Le Bon Marché stores in Paris – while, in Spain, they are poised to appear in the Repsol convenience stores and, in the United States, in duty-free shops and a number of other outlets in California and Florida, thanks to Echenique’s participation in a tour organized by the ProChile export promotion agency.

Growth prospects

Echenique is loath to give sales figures. She says, however, that, at the company’s plant in Quilicura, a suburb of northern Santiago, its 35-strong workforce currently turns out some 20 tonnes of chips a month or, in other words, the equivalent of around 95,000 of the 212-gram bags that sell for just under 3,000 pesos in Santiago supermarkets.

Partly because it has been light on investment, the company has been profitable from its first month, she says. She bought its first machines in auctions and the initial investment was just US$10,000, partly a loan from her husband – “every cent paid back” – and partly raised by Echenique herself by selling some jewelry.

Since then, apart from seed capital of some US$65,000 which the company received from the government’s Economic Development Agency (CORFO), its growth has been financed out of cash flow. Only recently has it taken out its first bank loan in order to increase working capital.

Eighteen months ago, Echenique was joined in the company by Rodrigo Gutiérrez, a cousin of her husband, who had just finished an MBA at Babson College in the United States. That has helped, she says, by freeing her from the financial and administrative part of the business.

But, with sales tripling last year and, helped by (still small) exports, projected to increase four-fold this year, Tika is growing at a dizzying speed. Fast growth is complicated, admits Echenique – “frightening and motivating at the same time”.

One concern is that the company depends crucially on its supply of vegetables, produced mostly by small farmers – “who are growing with Tika,” says Echenique. But, apart from their capacity to keep pace with the company, there are the vagaries of the weather and the seasons.

Frying vegetables to produce chips isn’t that straightforward. Changes in their humidity or starch content can make an enormous difference to the final result. “Any company’s chips are quite different depending on the season,” says Echenique.

Then, of course, there’s the risk run by any successful product – being copied. So far, Tika doesn’t have any real competitors in Chile, says Echenique, and potential rivals – like the Terra chips that began to be imported from the United States soon after Tika’s launch – aren’t as “natural”, she argues. They have, in fact, helped, she says, by expanding the supermarket space allotted to natural snacks where, before, “we were alone against the traditional giants”.

But Tika is still vulnerable. Chips can’t be patented – “it’s like trying to patent a hot dog,” says Echenique – and only one of its processes has intellectual property protection.       

She is not, however, deterred from what she describes as her “adventure”. If all goes according to plan, a whole new line of Tika products, comprising seven different snacks, will hit the supermarket shelves in August. No details are as yet available but rumor has it that they will see the company branching out from vegetables into seeds.

Ruth Bradley is a freelance journalist based in Santiago and a former editor of bUSiness CHILE.