Arun Verma- Lays Potato Chips

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'In revitalising the brand, the goal is not only to generate added sales levels but to have them based upon enhanced equity, a move which involves improved recognition, enhanced perceived quality, changed associations, an expanded customer base and increased loyalty.' David A. Aaker – Professor of Marketing Strategy at University of California at Berkeley.

This is a story of risk and reward. About having the guts to effectively withdraw the Hostess Brand from the market, even though it was Canada’s largest snack food trademark and the company's flagship brand – in favour of replacing it with an old, weak brand – and then making that old brand the national leader, in its first year. The salty snacks market is notorious for its myriad brands, line extensions, flavours, and snacking variants, each striving to hook consumers with something new. It is fiercely competitive, and in 1996 (the base year for this case) Hostess, the market leader, had just over a 10% share. How do you relaunch an old weak brand into this snacking frenzy, when it has no product news, and is merely a good, old-fashioned potato chip? This paper describes how. The Lay's relaunch exceeded all objectives, and catapulted the brand to market leader in only 12 weeks. The relaunch is so recognized by Frito–Lay that the same strategy and creative, adapted to local needs, is being used throughout Mexico and Latin America. The paper will demonstrate strategic evolution. After Year I, Lay's grew further in Year II – by finding a previously untapped distribution advantage and transforming it into a benefit via advertising and packaging. This not only grew the brand, but established it as the superior quality chip. Frito–Lay's distribution and merchandising strength was a factor in this success. But history has proven that this alone is not enough. We will prove via tracking that advertising was the key factor driving attitudinal shifts for Lay's. The measure of success is that Lay's has changed the category. By the last 6 months of 1998, Lay's had more than double the sales that Hostess had before the relaunch, and triple the national share of the nearest branded competitors. Furthermore, HFL had finally made headway in Western Canada – against the previously untouchable Old Dutch brand. Lay's more than lived up to David Aaker’s mandate. In the US, with the same product but different advertising, Lay's had been an icon for 20 years. In Canada, after only 18 months, Lay's had superior Brand Equity scores to the US brand – and the only difference was the advertising.

In 1996, Frito–Lay Worldwide decided to make Lay's a global brand. Hostess Frito–Lay Canada (HFL) faced a dilemma. Lay's was licensed to a competitor, had extremely low brand awareness, and an even weaker quality image. Even so, HFL reacquired Lay's with the mandate to relaunch it in 1997 as their flagship potato chip brand. This raised significant portfolio issues. HFL already had Hostess and Ruffles – #1 and #2 in the market – and a number of specialty brands. The challenge was further complicated by the proliferation of SKUs. Adding Lay's would put dramatic strain on distribution logistics. Realistically, was there room for a third major brand? The judgement was made. No.1 This led to the key strategic decision. Despite being the company’s biggest brand, Hostess would be essentially discontinued and replaced by Lay's. The risk was huge. Hostess accounted for 33% of the company's total branded sales – and once it was replaced there would be no going back. The next question was, 'How can we position Lay's as the quality/premium brand when its consumer perceptions, especially for quality, are so poor?' One thing was certain. There would be no time for a slow build. HFL’s direct–to–store delivery system meant that the changeover would happen almost instantaneously. Hostess loyalists would go to the shelf and find their favourite snack missing – an obvious...
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