Frito Lay

Expanded Executive Summary

Frito-Lay Dips

Frito-Lay Inc. has to choose between positioning the dip line in segment “chip dip” or in segment “vegetable dip”, and it is about the planning meeting was where and how Frito-Lay’s Dips could be developed further. Frito-Lay executives had yet to decide how much emphasis to place on each category in 1987. Furthermore, expense budgets would need special consideration. More aggressive marketing would require higher marketing investment or at least a reallocation of funds, while at the same time to gross margin and profit contribution of dips would have to be preserved.

If we choose the segment Chip Dip, in one view we can capitalize on its foothold in the chip dip market and attempt to expand the market and build market share. But there are several arguments of this view. First research indicated that only 20 percent of chips were currently eaten with dips; only 45 percent of all U.S. households used dips in 1985, whereas 97 percent used salty snakes. Second, research indicated in 1985 the average number of times shelf-stable dips were purchased by households was four and the purchase frequency of all Frito-Lay’s Dips was 3.6 times per year. Third, the chip dip market competitive was increased. Fourth, the historically Frito-Lay had not promoted dips aggressively. Fifth, Frito-Lay could spin off other products from its sour cream-based dip. Other executives argued that the opportunity in the chip dip category was less promising. First, the competitive activity was not improving its position in the chip dip category. Second, Frito-Lay’s recent sales growth in dips was due to new products, and it was not clear that further product line extensions could produce continued growth. Third, the new sour cream dip represented a break with Mexican-style dips and cheese dips and was probably more suitable for vegetable dipping.

In vegetable dip opportunity, executives who voiced concern about focusing on the chip dip category also raised several points in favor of the vegetable dip opportunity. First, they noted that 33 percent of dip sales were linked to vegetables. Second, research indicated that sour cream-based