Frito-Lay Inc. Case Recap
Frito-Lay Inc. Case Recap
Frito-Lay Inc. leads the world in manufacturing and marketing of snacks. More than eight different kinds of Frito-lay snacks chips brands are found among the top 10 best-selling snacks in the U.S Supermarkets. Frito-lay’s well-known brands are: lay’s Doritos, Tostitos, Ruffles potato chips, Fritos corn chips, Santitas tortilla chips, Sun chips Multigrain snacks and Cheetos cheese-flavored snacks among others. Frito-Lay operates as an independent division of the PepsiCo Inc. Its operations had been very successful and are evident in the 1996 net sales reports. For example, the company recorded “operating profit of 1.63 billion on net sales of 9.68 billion; which represented 31 percent of PepsiCo’s net sales and 60 percent of PepsiCo’s operating profit” (Kerin and Peterson, 2013).
Moreover, Frito-lay’s five years period, from 1991 to 1996 sales and operating profit combine were 13 percent. The company has two fronts, the Americas and international. The Americas front consists of Canada and the United States; these two fronts had revealed significant growth in sales and operating profit compare to the international front. Yet, the overall Frito-lay’s business growth has been phenomenal. Frito-lay’s product developing strategies had been its premier source of volume growth. In the 1990s, the company found a new way for developing the chips. These chips were baked Lay’s potato crispy, Rold Gold pretzels, and baked Tostitos tortilla. The introduction of these low fat and no fat snacks increases sales and profit. Problem Identification
In 1996, Frito-Lay created a division called New Ventures Division, with a mission: “To drive significant Frito-Lay growth by seeking and creating new business platforms and products which combine the best of Frito-Lay advantages with high-impact consumer food solutions” (Kerin and Peterson, 2013). Right after its interception, the department executive heard of Borden Foods Corporation selling Cracker Jack brands and related assets. Frito-Lay’s new division Vice President Lynne quickly put together a studying team to study a possible acquisition for Cracker Jack brand and related assets. The purchase of Cracker Jack’s brands while losing value and declining in sales and profit growth is a problem that can be identify in Frito-Lay’s marketing strategy. The introduction of Cracker Jack’s brands and related assets to snack foods markets that are overpopulated and more competitive would be a daunting task for the Frito-Lay’s marketing management team. Identifying Root Problem Components
The lack of keen observations, misinterpretations, and miscalculated perceptions of possible growth are the root components of the problem. New Ventures Division team convinced PepsiCo Inc. senior executives to purchase Cracker Jack’s brand of caramel popcorn and related assets. The purchase of Cracker Jack’s brands was a great mistake because the brand was losing recognition among its competitors. It sales and profit growth decline from 8 percent to 6.68 percent in 1996 while still a part of Borden Foods Corporation. Also the consumer research reveals that caramel popcorn snacks are consume in a little quantity during afternoon and evening hours as treat or reward. In addition to that, only 12 and below percent of the U.S households are consuming Ready –To-Eat caramel popcorn. Nevertheless, Cracker Jack’s brands and related assets had a long tradition in the American history. Its long tradition can be revived through Strength, Weakness, Opportunity and threats analysis. After the analysis, Frito-Lay’s marketing team can used different avenues or alternatives to revitalized Cracker Jack’s brands in the snack foods markets (Kerin and Peterson, 2013).
Possible higher price demand than the already existing brands Greater chances to re-attract consumers
Cracker Jack brand heritage
Frito-Lay introduce Cracker Jack sweet brand across a variety distribution venues.
healthy ingredients in Cracker Jack brand, compared to other sweet brand and snacks
Great brand difference because of free-prize inside the box
Expand snack brands and sweet popcorn business
Increase brand’s business potential through variety of distribution and promotional channels
A chance to differentiate Cracker Jack brand with other brands because of it rich heritage
Potential for bringing new product to the market with several seasonal offerings
Natural with rich ingredient but low prices among other products
Poor replacement ; close to salty snack foods
Frito-Lay may discount Cracker Jack brand more to compare to its competitors
Decline in sales and profit growth
Increase in snacks markets and high prices may reduce the profit margin in growth Global push to healthy choice in what to eat may discourage public from sweet and sugary traditional snack food brands
Increasing and overpopulated sweet snack business
Evaluation of Alternatives
Frito-Lay’s senior manager will capitalize on Cracker Jack’s brands mix and create marketing strategies that would promote it sales and operating profit within 6 month of acquisition. Strategy #1“New Corporate Culture” this strategy will focus on Cracker Jack’s brands product and brands Promotion. Frito-Lay marketing manager will revitalize Cracker Jack brand through New Corporate Culture. The manager will focus attention on family culture and recognizes the strength of Cracker Jack brand’s past as American traditional product. Offerings employees’ picnics once a year, Day care discounts from company partners and educating employees on importance of the product are great ways to show the importance of this strategy.
Strategy #2 Bridge the Cracker Jack brands generation gap. This strategy will focus on Product prices and product locations or places. Frito-Lay’s manager will target retailer stores and convenience stores. And at the same time, target current consumers and customers who are from families with children and adult between the ages of 25 to 45. Cracker Jack has heritage and brand awareness that is very high. So focusing on both old and new generations will increase customers’ volume and growth volume.
Product, Price, Promotion and Place
Product, Cracker Jack’s product brands are: Butter Toffee Flavored Popcorn and Original Caramel Coated Popcorn & Peanuts just to mention few. Cracker Jack brands are popular in the snack foods markets. Revitalizing the brands will result in higher growth. Prices, Frito-Lay will reposition shelves and increases the brands prices to generate the operating profit. The change of location and shelving format within the retailer stores, and convenience stores will be a great strategy .Because Cracker Jack brands will increase prices for only few cents (25) perhaps and it will not be notice, because the brands is not competing with others Frito-Lay brands.
Promotion, an aggressive advertising that reveals product brands will be done to attract customers from competitors. Advertising TV ads that talks about the prizes and the slogan of how great the product is, will be establish, on a fairly low budget. Places, Cracker Jack brands are found in the retailer stores, convenience stores and supermarkets. Brands will be place on shelves far from others Frito-Lay brands to minimize price confusion. Doing so will promote the chances of increase in Cracker Jack brands prices and better organization.
The marketing team should emphasis on a new corporate culture, New Cracker Jack Agenda, and sound communication message aiming on four marketing mixes i.e. Product, Price, Promotion, and place. The implementation for each of these marketing mixes would be a great way forward to the Cracker Jack brand’s success. Also an Aggressive Ads campaigns would promote and enhance the position of the brands and the overall growth in the Frito-Lay company.
Kerin, R. A., Peterson, R. A. (2013). Strategic Marketing Problem Cases and Comments (13Th ed.) New Jersey: Pearson Prentice Hall