Frito

Frito-Lays Dips

Atrium Echo

1. How would you characterize the dip category in general? Discuss both qualitative and quantitative aspects of this market.

Dip has become increasingly popular in recent years due to its convenience and "grazing" trends in the United States. The dip category in general is substantially fragmented and hard to measure, but 80% of dip sales are made through supermarkets, estimating $620 million in 1985. Out of this dollar volume, two-thirds was accounted for by prepared dips and the rest for home-made dips. Approximately 45% of prepared dips were "shelf-stable," meaning that refrigeration wasn't required. Frito-Lay's was the major competitor in the shelf-stable dips. The other 55% of prepared dips required refrigeration. According to industry research, there has been a 10% growth rate in the dip market but this growth is mainly due to inflation.

Since sour cream-based dips are the most popular flavor, it accounts for about 50% of total dip sales. The second most popular is the cheese-based dips making up about 25% of total dip sales. Bean and picante dips make up 10% of total dip sales and cream cheese-based dips make up the remaining 15%. While 67% of total dips sales are correlated to salty snack usage, about 33% are associated with vegetable usage. There has been growth in cheese-based chips due to the recent popularity of Mexican food. Even though the dip market is large, 20% of all dip volume consumed by households is home-made and 35% of refrigerated salad dressing volume serves as a substitute for dips. Refrigerated salad dressings sales have been growing at 18% every year since 1978.

Within a span of two years, 1984 and 1985, competition has increased in the dip market. New products have been introduced and firms are spending more in advertising these products. There are large, well-financed firms that have started to aggressively pursue this market.

SWOT Analysis

Internal Factors Strengths Weaknesses

Offerings Offers a wide range of products in the dip category. Introduction of cheese based dips boosted sales. French onion flavor viewed as an ideal accent for the company's potato chips. Only introduced one sour cream dip. Has not yet been marketed as a vegetable dip. Have yet to penetrate all areas in the dip market. Limited selection of dip flavors.

Marketing Nationally recognized leader in salty snack foods. Uses a variety of techniques which include product sampling, couponing, and television and radio advertising. The products are placed strategically in the stores, near the salty snacks. Frito Lay has not promoted as aggressively as its competitors. Their advertising/sales ratio is 2.7% as compared to the typical ratio of 10%.

Distribution