Frito-Lay’s Dips

Frito-Lay’s Dips

History of Company

Frito-Lay is a division of PepsiCo Inc. This company sells various kinds of corn chips. This headquarter is located in Plano, Texas. Charles Elmer Doolin purchased a corn chips recipe and established a new corn chip business, the Frito Company in 1932. Their first public offering is in 1954 and their merger and acquisition is in 1965. In 1985, the sales are $87 million, compared with $30 million in 1981. This growing derives from the product line of dips which is made by Ben Ball, Ann Mirabito.

Problem

 Targeting issue

The company’s target is consumer market. They need to know customer’s behavior and trend. However, there is perspective problem which is the novelty of product for customers. For example, one of their products, shelf-stable cheese dips’ novelty had passed. As a new strategy of the countermeasure, the company introduces new products such as a shelf-stable, sour cream-based French onion dip.

 Positioning issue

The managers try to sell sour cream-based French onion dip in vegetable category because dips can be used along with chips, crackers, or raw vegetables. Needless to say, there are refrigerated salad dressings as substitute of dips in vegetable category. Managers need to consider other kinds of product’s competition. When the dips entries in vegetable category, SWOT analysis would be needed.

 Marketing mix issue

Marketing mix can be divided by four categories of definition which is Product (product variety, line), Price, Promotion, Place (distribution). I would like to mainly take about Promotion and distribution parts. As this company’s distribution strategy, they use a “front-door store delivery system” in which one person performs the sales and delivery function. This technic is suitable for non-chain outlets. However, chain-store doesn’t accept it. Chain-store required that manager come here to see situation of store because Chain-store would buy Frito-Lays products for all their outlets in the chain and they want to directly receive approvals of the merchandising plans from manager. In addition, on the point of view of researcher, the new product, sour cream-based French onion dip should be handled by their produce warehouse. This meant that the front door store delivery system would not be suitable for their method. However, they don’t have experience and unfamiliar with merchandising (Promotion) practices in the produce section in warehouse.

 

Brand equity and value

              Frito-Lay’s products are basically belonging in salty snacks section. However, in case of the cheese dips, it would be different response from the customers because the company mainly used to sell salty chips such as tortilla chip. It means the company would sell cheese dips with their bland name which was created by their salty snack business. Customers always pays price premium for the brand because they already have sense of security from purchasing experience. However, if the different kinds of new products such as cheese dips are sold in different kind of brand category such as salty snack, this changing method would affect their original products. It cannot be sold easily without considering various factors which are related each other. Actually, there is risk.

Financial/Marketing relevant data

              Their high revenue would be derived from competitive activity. Since their former product, Enchilada Bean Dip had done with producing, their customer flows to other company’s dip. However, thanks to an effort of advertising of new product, their revenue didn’t decrease. In addition, the dips market would get synergy effect.

                   

Their income statement can be shown as Total Dip = Gross margin ($41,022) - Total marketing expense ($25,481) - General and administrative overhead ($6,572) = Profit contribution ($8,969).

Recommendation and Opinion

              SWOT analysis would be most efficient method so I would like to introduce it.

              Frito-Lay Inc. SWOT analysis 

Strength

·         Novelty of new product (cheese)

·         Costless approach to non-chain store

·         Adequate budget for advertisement

Weakness

·         No experience of distributing from warehouse

·         No experience of entering in vegetable category

Opportunity

·         Enter in vegetable category

·         Synergy effect by competitive activity

·         Strong market potentials

Threat

·         Degrading brand image by new product.

·         Substitution of dips, refrigerated salad dressings

 

Reference

·         Free SWOT analysis

http://www.businessballs.com/swotanalysisfreetemplate.htm