Fizz & Chips

"Think Young" urged the Pepsi-Cola ad--and Herman W. Lay began thinking. Not about downing a soft drink but about acceding to a hard-to-resist proposal from Pepsi (estimated 1964 sales: $240 million) to merge with his Frito-Lay, Inc., which last year sold $184 million worth of such snacks as corn and potato chips, dip mixes, candied popcorn, pretzels and related products. At 55, Lay isn't so old. But Pepsi President Donald M. Kendall is only 43, and he is surrounded by a youthfully energetic executive team. "I like those fellas," said Lay. "I need the association of younger people."

Last week the two companies that have fattened on the American craving for fizz and chips decided to nibble on that $4.5 billion market together. Unless stockholders or the Justice Department disapprove, Pepsi will swap $213 million worth of its shares for all of Frito-Lay. Herman Lay will be chairman, and President Kendall the chief executive of a new company to be called Pepsi Co. Inc.

Pepsi has shown lots of sparkle in the 17 months it has been bossed by Kendall, a onetime fountain-syrup salesman. Last spring he introduced Diet Pepsi, which has since captured more than one-quarter of the low-calorie-cola market. He also bought a West Virginia firm that makes Mountain Dew, sugar-rich citrus soda whose slogan is "It tickles yore innards." Mountain Dew sales are up 150% since September.

Pushing himself at an innard-grinding pace, Kendall tells his aides that "if you work twelve hours a day, you finally get to be boss so you can put in 16 to 18 hours a day." The boss puts in his time in a Park Avenue sanctum that is littered with papers and empty Pepsi bottles. On a golden telephone, he often contacts Pepsi's 525 U.S. bottlers, all of whom he knows by their first names. If the Frito-Lay deal goes through, Kendall will be making many overseas calls. While Pepsi is sold in 107 foreign countries, Frito-Lay now sells in only three--an imbalance Kendall expects to correct.

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