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Olestra chips going on sale nationwide

Published Sep. 12, 2005

Lay's, Ruffles and Doritos chips with the olestra fat substitute are about to go on sale nationwide, after test-marketing in Indianapolis the past year won over consumers.

The olestra versions will have the word Wow! after the product name on packages, said analysts. That will distinguish them from chips without the no-fat, no-calorie oil substitute approved for use in salty snacks two years ago by the Food and Drug Administration.

PepsiCo Inc. is depending on new products from its Frito-Lay Co. to boost annual earnings-per-share growth to 15 percent after two years of declining profits. The olestra products carry a profit margin of 35 percent, wider than the 20 percent margin for other chips.

"The domestic Frito-Lay business is the engine that drives Pepsi's growth," said Credit Suisse First Boston analyst Martin Romm, who rates Pepsi stock a "hold."

PepsiCo's shares fell 75 cents on Friday to $36.12{.

The olestra rollout may begin as soon as next week, said Sanford C. Bernstein & Co. analyst William Pecoriello, who estimates olestra chips will generate $400-million to $500-million in sales their first year.

The olestra products "taste just like the original," said Pecoriello, who surveyed 300 Indianapolis residents in August and found 90 percent couldn't tell the difference.

The olestra rollout comes as Frito-Lay is also introducing two other new products: Lay's deli-style potato chips and Doritos 3D's.

The new Lay's product is 20 percent thicker than regular chips. The new Doritos chip _ advertised during the Super Bowl _ is puffier.

Procter & Gamble Co. of Cincinnati, Ohio, spent 30 years and more than $200-million developing olestra. It's a synthetic chemical with no calories or nutritional value. It can cause gastrointestinal distress in some people.

_ Information from Times files was used in this report.