Frito Lays Inc.

Case Study 2 (Frito-Lay Inc)

Frito-Lay Inc is a division of PepsiCo, Inc. which manufactures markets and sells a variety of corn chips, potato chips and other snack foods. The company's current form is the result of a merger (1965) of Frito-Lay, Inc. and the Pepsi-Cola Company, which resulted in the formation of PepsiCo Inc. Frito-Lay is one of the leader companies in the manufacture and marketing of salty snack foods in the global market. Today the company owns over 34 brands such as Lay's, Doritos, Cheetos, Frito Lay Dips, etc... in snack food market. As a convenient foods business unit of PepsiCo, Frito Lay's net sales in 2010 approached $12 billion. In this case study we are going to analyze Frito Lay's approaches in the dip business.

First of all we should look at the dip business development in the United States between 1980 and 1985 in order to understand the market's situation. As we know dips are a complementary product which they are served along with chips, crackers or raw vegetables. The market for dips is highly fragmented and difficult to measure. More than %80 percent of all dips are counted for supermarkets with a total dip retail dollar sales volume of $620 million in 1985. In addition, the dip category became more popular in late 1983 and early 1984. An explanation of this increase is growing popularity of Mexican food such as nachos which is kind of Mexican style dips. Even though market for dips is large, it is estimated that about 20% of all dip volume consumed by households in the U.S is homemade. Also many consumers use refrigerated salad for dips, especially for vegetables.

Frito Lay introduced its first dip product in the 1950s. When dip popularity increased, they decided to extend dip product line in 1983. However they didn't create new brands for these dips. They did try to market these new dips under Frito Lay's brand name instead of having new brand. I think they did right choice terms of market's condition in that time because all these dips were displayed in the salty snack section which is where Frito Lay's major products are usually displayed. Thus they were able to avoid additional cost of marketing new brand. However they produced so many different kinds of dips between 1983 and 1986. There were advantages and disadvantages of aggressively extending dip product line. As an advantage I think Frito Lay Inc produced these so many dips in order to gain market share against competitors. It was so important for Frito Lays in order to increase its sales and revenue in the growing business filed. Another good thing was that some of these dips became successful and received good sales numbers. But on the other hand some of them couldn't receive sufficient interest from costumers. In that time in this market major competitors were Kraft, Borden, regional dairies and