Frito-Lay
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Table of Contents
Purpose and Overview
Analysis of Our Past and Current Situations
External Opportunities We Could Exploit
External Threats That May Impeded Success
Internal Strengths on Which to Capitalize
Internal Weaknesses to Overcome
Assumptions on Which the Strategies are Based
Marketing Strategies That Emerge from the SWOT
Summary and Request for Action
References
Case Analysis of Frito-Lay Company
Purpose and Overview
Frito-Lays net sales of over 8 billion dollars in 1985 amounted to a 190% increase in sales growth from 1981 (Kerin, Peterson, pg.131). This success leads the company to a major issue of how the company can be further developed. The companys options lead to two different viewpoints. The first is the chip dip category or secondly, the newer vegetable dip category.
Analysis of Our Past and Current Situations
Frito-Lay is a nationally recognized leader in the marketing and manufacturing of salty snack foods. The company began introducing dips in the 1950s as a complement to the chip market. Frito-Lay has introduced many other cheese type dips to add to their product line due to the increase popularity of Mexican food. In 1986, its first sour cream-based, shelf-stable dip was introduced as an accent to the companys potato chips (Kerin, Peterson, pg. 134).
Currently, 33% of dip sales are linked to vegetables. Only one fourth of the dollar volume is associated with vegetable dipping with relatively no major competitors in this market area (Kerin, Peterson, pg. 141). Furthermore, research has indicated that sour cream-based dips are the most popular dip type (Kerin, Peterson, pg. 132). With an increased trend moving to healthier eating options, an increased preference for vegetable dipping would exist. Promoting this market area would strengthen an already strong market growth of 18% in this segment (Kerin, Peterson, pg. 132).
Following are the internal and external factors affecting the market opportunities for Frito-Lay. Strengths, weaknesses, opportunities, and threats (SWOT) serve as the basis for identifying appropriate marketing strategies for Frito-Lay.
External Opportunities That Could Be Exploited
There are several external marketing opportunities within the food dip industry. First, increased grazing trends in the United States have caused popularity in the dip market (Kerin, Peterson, pg. 131). Refrigerated salad dressing market is growing at a compounded annual rate of 18% because of the use with vegetables. Also, Mexican food popularity has caused growth in cheese based dips (Kerin, Peterson, pg. 132).
Next, 33% of dip sales are linked to vegetable usage. However, only two main brand names are located in the produce section. In additional, the brand names are sold on a regional basis (Kerin, Peterson, pg. 132).
The dip industry is a highly marketable segment. A survey shows than 90% of Americans dip with their chips with sour cream based dips being the favorite (Business New Publishing Company, 2001). The main market segments in the industry include 80% in prepared dips and 20% dip bases (Kerin, Peterson, pg. 132).
Next, there are several competitors in the dip industry. A major competitor in this field is Campbell Soup, which introduced a nacho soup/dip and a line of vegetable dip mixes in 1985. Lipton also expanded its line of vegetable dip mixes and upgraded its packaging in 1985. In addition, Bordon, Kraft, Velveeta, regional dairies, and numerous store brands offer increased competition in the chip dip lines (Kerin, Peterson, pg. 134).
External Threats That May Impede Success
There are several external marketing threats that should be considered within the food dip industry. First, many brand name companies are expanding their product line while other well financed companies are entering the dip market and expanding. Numerous brands are located in store section. The intensity of competition has accelerated 25% from 1984 – 1985 (Kerin, Peterson, pg. 134). Industry research indicates that dip sales are growing at 10 percent per year, but the increase is from inflationary increases. This means that no real growth was evident (Kerin, Peterson, pg. 132).
Next, current grazing trend may change as United States culture may adopt healthier eating habits. This may lead to new products that can be easily introduced and duplicated by competitors.
Internal Strengths on Which to Capitalize
There are several internal strengths that should be reviewed within the food dip industry. First, the company introduced its first dip in 1978 to complement a newly introduced tortilla chip. Two additional dips were introduced and were the only dips sold until 1983. The increased popularity of Mexican food resulted in an additional product line of shelf stable cheese-based dips (Kerin, Peterson, pg. 134). Sales in 1981 were $87 million and increased 190% with sales reaching $30 million in 1985 (Kerin, Peterson, pg. 131).
Frito-Lays distribution system is organized around four geographical zones that distribute its products through 350,000 outlets nationwide. The sales force is composed of 10,000 individuals that make 400,000 sales and delivery calls each day. Frito-Lay uses a “front-door store” delivery system that suits the 270,000 non-chain outlets (Kerin, Peterson, pg. 135).
Increased household penetration increased 8% from 1983 to 1984 from shelf placement with salty snacks (Kerin, Peterson, pg. 137). This corresponds to a survey prepared for the Association for Dressings & Sauces which states that 90% of Americans use dips