Doing company-by-company re-search often involves a lot more than reading sales figures, profit-and-loss statements, and interviewing executives. Sometimes, you have to sink your teeth into the product -literally. Rob Henderson, a food-industry analyst at MFS, found that out when Frito-Lay, a unit of PepsiCo, was preparing to introduce a new line of potato chips with a zero-calorie fat substitute, called ol-estra.
Even before the first bags of chips landed on store shelves, articles in the press suggested that products containing olestra tasted bad and caused indigestion.
Partly because of this publicity, Frito-Lay was keeping the testing of its new product under tight wraps. It wouldn't even send Henderson a supply so he could test them himself. However, Mr. Henderson and an associate did some digging and found out that one of three Midwestern cities being used as a test market was Cedar Rapids, Iowa. He then found a grocery store manager in Cedar Rapids who was willing to send several cartons of the new chips to MFS headquarters in Boston.
Then, the testing began. In addition to eating more than his share of the new chips himself, Henderson set up a blind taste test with 45 MFS employees. When they were asked to taste a regular Frito-Lay potato chip and one fried in olestra, only 38% of the testers could tell any difference, and no one complained of indigestion.
I became confident that the company had a new generation of products that could drive future earnings," Henderson said. "I don't think many other analysts anticipated that. Too many were relying on those news reports that were critical of olestra.""
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