Frito-Lay, Inc.

Sun Chips Multigrain

Snacks
Ryan Brogan, John Campanioni,
Patrick Hildebrandt, Tracy Lai,
Ashlea Morrell, and Kate
Piskorowski

Snack Chip Category

$37 billion in snack food retail sales- 5%

increase from 1989
Snack chip retail sales of $9.8 billion (26.7% of
snack food sales)-also 5% increase
Growth in snack chip category comes from
increased per capita consumption
In 1990 consumption was 14 pounds per person
Three types of competitors

National brand firms

Regional brand firms
Private Brands

Snack Chip Category

Highly competitive on price

Chip manufacturers rely on technology
to react quickly to competitors new
product introductions
Rely on media advertising, consumer
promotions, and trade allowances
New product failure rate is high
Most products are new flavors for
already existing chips

Frito-Lay, Inc

Division of PepsiCo, Inc

National brand firm manufacturer and marketer of
snack chips
Well-known brands- Lays, Ruffles, Fritos, Chee-tos,
Rold Gold,
13% of US snack food sales
Leading manufacturer of snack chips-half of retail
sales
U.S. sales of $3.5 billion in 1990
8 of the chips are among the top ten best-selling
chips
Every step in process-agriculture to stacking
shelves

Risks and Challenges of

Marketing Sun Chips

Requires a new manufacturing

process and introduces a new chip
category-huge capital investment
Requires a huge marketing
investment-new brand name
Sun Chips name had a negative
past

Past Problems

In 1970s introduced Prontos- failure with low

sales and manufacturing problems
Unfocused copy, confusing name , and too small
of target market
Frito-Lay has to enter the market at the right time
and before the competition
When is the right time? Efforts to develop another
multigrain product didnt occur until late 1980s.
Need committed and focused advertising, a
catchy and clear name, and a broader target
market

Assumptions

The test market is reflective of the

entire population
The cannibalization rate for the
test market will be used for the
national market

Pretest Results

Healthier product
Prior to use not an everyday snack
After trying product, everyday snack
Positive attitudes and perceptions of
brand name
Pretest indicates first-year sales of
$113 million
Focus on natural and wild onion flavors

Statement of Problem

To continue with the test market of

Sun Chips or to introduce it nationally
Manufacturing/marketing costs
Manufacturing difficulties-still a new
manufacturing process
What new additions will be added to
the product line. I.E. flavor extension,
15 oz. Package size

Brand Comparison
Nationally

OGradys had achieved 100 million in first

year sales
Sun chips sales for 10 months is
$82,096,000 and after a year about
$98,516,000 sales.
It is comparable to the bench mark of
OGradys Chips.
Since we are creating a new segment of
the market we would want to be the first
to enter it to capture customers early.

Test Results
For The Test Market
Quantitative analysis

Possible Alternatives

Continue the test market with 15ounce package

Continue the test market with a
flavor extension
Introduce product nationally with
same strategy as test market

Brand Extension National

Comparison

Flavor extension achieved

$110,328,000 in sales and achieved
a gross profit after cannibalization of
aprox $14,144,000
15 oz Package achieved
$101,469,000 in sales and achieved
a gross profit after cannibalization of
aprox $13,075,000

Test Results
Test Results for the Other
product extensions
Quantitative analysis

Recommendation

Because of the $98,516,000 in first year sales

it is a good idea to launch the Natural and
French Onion Combination.
Initial analysis of the flavor extension states
that we may have sales of $110,328,044 by
launching the product nationally.
Therefore we feel that it would be best to test
market the mild cheddar extension since it
may prove to be lucrative.