The CEO said Peatos was created as a slightly healthier snack food that would still have mass appeal. To do so, he said the company decided to name and market the snack in a way that would make it familiar to consumers.
A serving of Peatos has 4 grams of protein and 3 grams of fiber, compared to 2 grams of protein and less than 1 gram of fiber in Cheetos. Peatos also has slightly fewer calories, less fat and sodium than Cheetos.
Mr. Desai received the cease-and-desist request from Pepsi when Peatos went on sale at 2,000 Kroger Co. grocery stores in May. Peatos are sold there in the produce section, a coveted position as shoppers spend more time browsing for fresh food.
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Pepsi said in the letter to Peatos reviewed by The Wall Street Journal that the Peatos name is “confusingly similar” to and “dilutes” the Cheetos brand. Pepsi also said the tagline “tigers live longer than cheetahs” falsely implies that people who eat Peatos may live longer than Cheetos snackers.
Peatos has applied to trademark the tagline with the U.S. Patent and Trademark Office. Pepsi has said it will contest that application.
“Frito-Lay welcomes honest and fair competition. However, we cannot condone the misuse of our trademarks…and free-riding on our investments in the Cheetos brand to elevate yours,” said the letter signed by Pepsi’s senior marketing counsel, Jenny Allenbaugh.
Mr. Desai said he replied to the letter and that the two companies’ lawyers have been communicating via email since then.
Peatos’s board of directors wanted Mr. Desai to acquiesce to Pepsi and change the snack’s name. He worried some investors would pull out of the company.
“They thought I was crazy for antagonizing them,” Mr. Desai said.
Mr. Desai and his attorneys assured board members and investors that Peatos wasn’t violating trademark law and that they should fight back. But he said he is concerned about the cost of defending Peatos against litigation from Pepsi.
Peatos plans to start a crowdfunding site on Tuesday that will offer backers discounted cases of Peatos and branded merchandise in exchange for donations.
“They have way more money than us to tie us up with all kinds of litigation,” Mr. Desai said.