Frito Lays
Outline
Introductions Case summary and key facts - Summary + Financial Main issues for decision maker Analysis and class discussion of main issues Our recommendations Class recommendations
1. Grow established Frito-Lay brands through line extension 2. Create new products to meet changing consumer preferences and needs 3. Develop products for fast-growing snack food categories 4. Reproduce Frito-Lay Successes in the international market
Background Information
Frito-Lay Brands include: Lays, Ruffles, Fritos, Doritos, Tostitos, Cheetos, Rold Gold, Funyuns Accounts for 13% of sales in U.S. snack-food industry World leading manufacturer of snack chips Recorded $3.5 billion in sales in 1990 in U.S. Acquired Smartfood brand popcorn in 1989 #1 ready-to-eat popcorn brand in the U.S. Sun Chips Less sodium than most chips 50% lower in saturated fat than other chips No cholesterol
Development of Sun Chips
Frito-Lay first explored possibility of multigrain snack1976 1970 1974 1978Harvest Project 1981 1983 1985 Sun Chips 1988 multigrain1989 snack introduced
.
Sun Chips named assigned to a line of corn chips
.
O'Grady's potato chips test marketed
.
. .
Prontos, a multigrain snack, was introduced Prontos withdrawn from distribution
. . . .
Premarket test shows Sun Chips (corn chips) potential of withdrawn Sun Chips Frito-Lay decides to focus on established brands (Cool Ranch Doritos)
Frito-Lay Considerations
Planning Considerations Timing: first-to-market advantages Capacity: needed assurance adequate manufacturing was in place Strategy Considerations Increased advertising and merchandising spending Larger package size Flavor extension
Pre-Market tests April 1989
$113M 1st year sales volume prediction Natural Flavor & French Onion best options combination with cannibalization rate 42%
Test Market Oct. 9, 1989
Minneapolis St. Paul, Minnesota Metropolitan area test site – social economic profile representative of whole US; 2
Introductions Case summary and key facts - Summary + Financial Main issues for decision maker Analysis and class discussion of main issues Our recommendations Class recommendations
1. Grow established Frito-Lay brands through line extension 2. Create new products to meet changing consumer preferences and needs 3. Develop products for fast-growing snack food categories 4. Reproduce Frito-Lay Successes in the international market
Background Information
Frito-Lay Brands include: Lays, Ruffles, Fritos, Doritos, Tostitos, Cheetos, Rold Gold, Funyuns Accounts for 13% of sales in U.S. snack-food industry World leading manufacturer of snack chips Recorded $3.5 billion in sales in 1990 in U.S. Acquired Smartfood brand popcorn in 1989 #1 ready-to-eat popcorn brand in the U.S. Sun Chips Less sodium than most chips 50% lower in saturated fat than other chips No cholesterol
Development of Sun Chips
Frito-Lay first explored possibility of multigrain snack1976 1970 1974 1978Harvest Project 1981 1983 1985 Sun Chips 1988 multigrain1989 snack introduced
.
Sun Chips named assigned to a line of corn chips
.
O'Grady's potato chips test marketed
.
. .
Prontos, a multigrain snack, was introduced Prontos withdrawn from distribution
. . . .
Premarket test shows Sun Chips (corn chips) potential of withdrawn Sun Chips Frito-Lay decides to focus on established brands (Cool Ranch Doritos)
Frito-Lay Considerations
Planning Considerations Timing: first-to-market advantages Capacity: needed assurance adequate manufacturing was in place Strategy Considerations Increased advertising and merchandising spending Larger package size Flavor extension
Pre-Market tests April 1989
$113M 1st year sales volume prediction Natural Flavor & French Onion best options combination with cannibalization rate 42%
Test Market Oct. 9, 1989
Minneapolis St. Paul, Minnesota Metropolitan area test site – social economic profile representative of whole US; 2