Potato Chips Raise the Bar

It all started with two men and a sack of potatoes.

In 1923 from the basement of a Birmingham Hills Grocery Store, Mose Lischkoff and Frank Mosher concocted a kettle-cooked potato chip with a “golden flake.” Today with a 12-state market base, cult-like following, and 24-year sponsorship of “The Bear Bryant Show, ” Golden Flake Potato Chips are spuds on a roll.

Mose and Frank’s fledgling company, Magic City Foods, experimented with other products, including horseradish, which never caught on — perhaps Golden Flake Horseradish just doesn’t ring. But Golden Flake Potato Chips ring loud and clear — to the tune of $50 million annual chip sales — the biggest chunk of the snack food company’s total net sales of $136.2 million in 2012.

The name was changed to Golden Flake Inc. in 1956 and became a wholly-owned subsidiary of Golden Enterprises Inc. (NASDAQ: GLDC) in 1977. In 2013, the 90th birthday of the chip that roared, 1, 000 employees work with 100 million pounds of potatoes every year.

“I used to say we were recession proof, ” says Golden Enterprises CEO and President Mark McCutcheon, whose business card reads “Chief Potato Peeler.” After the deep-fry depths of the current recession, he adds, “Now I say we are recession resistant.”

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Golden Flake products have a second place market share everywhere sold, second only to Frito-Lay. “People know us for our seasonings, ” McCutcheon adds. “And, yes, some of our products have an almost cult following” — especially in places where unobtainable.

The CEO tells of a Californian frantically calling the Birmingham factory, inquiring where “Sweet Heat” Barbecue Potato Chips could be found. Unfortunately, Golden Flake isn’t in the Golden State. “The guy had tried a bag while visiting the South, ” McCutcheon recalls, “and wanted more. We are only in 12 states, so lots of people order over the Internet.”

Of the dozen state markets, Alabamians buy the most, followed by Mississippi. But the company is making headway in Texas and the Carolinas. “The problem with potato chips is they don’t travel well, ” says McCutcheon. Our products have about a 500-mile trucking limit. After that, you really need additional cooking facilities.”

You should see the one in Birmingham, or better yet, taste it.

“Try this, ” says factory tour director Delores Smith. “I think you’ll like it.” She serves a fresh basket of cheese curls, scooped from a yellow river of crunchiness, cascading from conveyer belts and basted in cheese. “If we could sell potato chips and cheese curls hot from the oven, we would all make a fortune, ” laughs McCutcheon.

Tasting one fresh from the assembly line, exploding with flavor and dissolving in your mouth, you might ask, “Are you hiring?”

“Unfortunately, we do not need a taster, ” says McCutcheon. “Our lab does quality control.”

In another factory section, chips with purpose, in various production stages, march across the room, guided by machinery. Like a beautiful butterfly emerging from a cocoon, such is the metamorphosis of an ungainly potato. But only a special potato, anything else is a dud spud.

“We use chipping potatoes, ” McCutcheon explains, potatoes that are “specially grown and contracted for the potato chip industry.” Chipping potatoes are almost as round as a baseball, so they’re easier to slice. But more important, they have very low sugar content.

“That’s why we don’t use russet or table potatoes, ” the CEO continues. “Idaho’s russets, the kind you serve at home, are high in sugar. Sugar makes the brown spots on a potato chip” — the bane of a product called “Golden Flake.”

Typically within two eight-hour shifts, Birmingham’s snack food leader receives about nine truckloads of potatoes. After weighing, inspection and lab analysis, each truck trailer is tilted, pouring 48, 000 pounds into a hopper for storage or live cooking.

And then the magic happens.

“It’s an automated process, ” explains company spokesperson, Julie McLaughlin. “After the potatoes are poured from the truck to bins, they are peeled, washed, sliced, fried and bagged, ready for shipment.” From peeler to bag takes about 5 minutes.

The preferred practice is cooking straight from the truck. But sometimes storage is required. “It’s expensive to store potatoes onsite; many companies don’t do it, ” says McCutcheon. His does. The Birmingham facility can house 18 million pounds of potatoes onsite.

Golden Flake lives by and displays the Golden Rule above a hallway door: “Do unto others as you would have them do unto you.” But an unwritten theme is “Thou shalt not live by chips alone.” Last year, for instance, Golden Flake also sold $26 million in pork skins.

“It’s a hot market and may one day replace potato chips in popularity, ” says McCutcheon. “Pork skin products are in such demand it is increasingly more difficult to source for our finished products.”

The same and similar pork products supply gelatin for Jell-O, medical gel caps and gummy bears. As a result, there is gold in pork, making skin acquisition fiercely competitive.

Raw skins come to Birmingham in a disc or wafer-like size, not as skinned hogs. The finished product is second only to potato chips in Golden Flake sales. Tortilla chips are third. Cheese puffs and curls place fourth, bringing in $10 million annually.

On today’s visit, cheese curls, potato chips and butter puff corn are being produced. “We will pick up the production later, when we make cheese flavored puff corn, ” a worker shouts over whirring machinery. The slower process machine only kicks out 110 bags per minute.

Golden Flake makes dozens of flavors, ranging from barbecue, hot and spicy, dill pickle, sour to sweet, so what’s the number one customer favorite? “Plain” laughs McCutcheon. “Just like vanilla is the customer favorite of Baskin-Robbins ice cream, plain chips are our biggest seller.”

But there’s more to the chip than meets the dip. Most people assume the biggest time of year for Golden Flake munchies is July 4th, summer vacations, through Labor Day. Wrong.

“We do as much business during the Christmas season as we do in the summer, ” Golden Enterprises’ “Chief Potato Peeler” explains. “Dipping chips are hot sellers during the holidays.”

And the number one day for Golden Flake snack consumption? Super Bowl Sunday. Sales increase 20 percent during Super Bowl week.

Another big season is hurricane season. Golden Flake wishes no harm but a north Alabama snowstorm or south Alabama hurricane can send sales through the roof. “Snack food becomes survival food during a weather crisis, ” says McCutcheon. “I’ve watched from my window as truck fleets headed to Mobile before the storm was over.”

But Mother Nature can cause a crisis in the snack food business, too. Potatoes are grown only six months a year. Dig them while the digging is good.

Golden Flake has sources across the U.S. Too much rain, drought, a Florida freeze, cause sleepless nights. Most employees, especially finance, sales and marketing, are self-taught meteorologists. Weather and farm reports are checked daily, especially for potatoes and corn (for cheese curls and tortilla chips).

But overall, life is good in the potato chip/pork skin/cheese puff and curls business. It helps when the target market age ranges from three to 97.

As McCutcheon speaks, down the hall, in the plant, potatoes cook, cheese paints curls, corn is puffed and pigskins fry. Outside, another 18-wheeler leaves Birmingham for parts unknown to let the chips fall where they may.

Emmett Burnett is a freelance writer for Business Alabama. He lives in Mobile.

text by Emmett Burnett

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