Frito-Lay, Inc. Case Study

Marketing Strategy

Case Study

Frito-Lay, Inc.

Introduction

The purpose of the all-day meeting was to prepare a presentation to senior Frito-Lay executives on future action pertaining to the brand. After a test-market for Sun Chips was successful in Minneapolis, Frito-Lay, Inc. is now trying to determine what their next step is. They have to make a decision to either: continue the premarket test, expand the test to other geographical areas, introduce the product nation wide, or modify the strategy.

Background/Strategic Issues and Problems

The snack chip category is very competitive. As many as 650 snack chip products are introduced each year by national and regional brand companies. Frito-Lay, Inc. is a worldwide leader in the manufacturing and marketing of snack chips. Sun Chips Multigrain Snacks is a crispy, texturized snack chip consisting of a special blend of whole wheat, corn, rice, and oat flowers with a lightly salty multigrain taste and a slightly sweet aftertaste. The product contains less sodium than most snack chips and is made with canola or sunflower oil. The chip is approximately 50 percent lower in saturated fats than chips made with other cooking oils and is cholesterol-free.

Analysis and Strategic Evaluation

Frito-Lay, Inc. accounts for 13 percent of sales in the United States snack-food industry, which includes candy, cookies, crackers, nuts, snack chips, and assorted other items. The company is the leading manufacture or snack chips in the United States, capturing nearly one-half of the retail sales in this category. Eight of Frito-Lay’s snack chips are among the top-10 best-selling snack chip in the U.S. supermarkets. Impressively, in 1990. The United States purchased 3.5 billion pounds of snack chips, which equated to 14 pounds per person. The snack chip segment, in 1990, brought in $9.8 billion in retail sales.

Of the snack food industry, snack chips are a highly competitive segment. Pricing is competitive and there is a heavy reliance on prices to attract consumers. According to the case, on average, about 650 snack chip products are introduced each year consisting mainly of new flavors for existing products. There are three types of competitors serve the snack chip category: (1) national brand firms, (2) regional brand firms, and (3) private brand firms.

Frito-Lay, Inc. has strategically positioned themselves within the snack food industry. They account for 13% of sales and are the leading manufacturer in the U.S.. Frito-Lay, Inc. operates based on four basic