In this report the objective is to evaluate the feasibility of Frito-Lay, Inc. launching a new product, Sun Chips™ Multigrain Snacks.
Dr. Dwight R. Riskey, Vice President of Marketing Research and New Business at Frito-Lay, Inc. had to decide and present, together with the product management, the future for Sun Chips™ Multigrain Snacks. The chip had been in test-market for 10 months in the Minneapolis-St. Paul, Minnesota, metropolitan area and appeared to be extremely favorable according to consumer response. The presentation to the Frito Lay, Inc. seniors had to be persuasive, and besides the thorough assessment of the test-market data, Riskey added: “Sun Chips™ Multigrain Snacks required a new manufacturing process, carried a new brand name, and pioneered a new snack category. There would be a huge capital investment and a huge marketing investment that could be financially justified only if it could be sustained for an extended time period”.
Should the Sun Chip Multigrain Snack be put on the national market or should it be tested further? What kind of product and promotion strategy should be suggested in order to reach the goal of an estimated first year sales volume of USD 100 Million and is at all profitable?
Introduction Frito Lay, Inc.
Frito-Lay, Inc. is a division of the world famous PepsiCo, Inc. PepsiCo, Inc. recorded a net income of $1.077 billion on net sales of $17.8 billion in 1990.
Frito-Lay, Inc. is known as a worldwide leader in the manufacturing and marketing of snack chips, with well-known brands such as Lay’s brand and Ruffles brand potato chips, Fritos brand corn chips, Doritos brand, Tostitos brand and Cheetos brand cheese-flavored snacks etc. Doritos brand tortilla chips and Ruffles brand potato chips have the distinction of being the only snack chips worth $1 billion in retail sales in the world.
Frito-Lay, Inc. accounts for 13 per cent of sales in the United States (U.S.) snack-food industry including candy, cookies, crackers, nuts, snack chips, and assorted other items, which is approximately worth 37 billion per annum. The company is the leading manufacturer of snack chips in the U.S. capturing almost 50% of the retail sales in this category, and it recorded U.S. sales of $3.5 billion in 1990.
The product Sun-Chips™ Multigrain snack
Sun-Chips™ Multigrain snack is a crispy, textured snack chip consisting of a specific blend of whole wheat, corn, rice and oat flours with a lightly salty multi-grain taste and a slightly sweet aftertaste. The product contains less sodium than most snack chips and is made with canola or sunflower oil. The chip is approximately 50 percent lower in saturated fats than chips made with other cooking oils and is cholesterol-free. According to a Frito-Lay, Inc. executive, it is a “thoughtful, upscale classy chip.”
The chip product has been on the market for a long time, but has until now managed to stay in a strong and constantly growing position, especially since the manufacturers introduce new offerings keeping their market share and image on a high level. The Product lifecycle (PLC) concept is often used to define the products or service life cycle, a managerial tool to find out where the in the market the product is according to opportunities and competitors. The PLC has four stages:
On the market, a product’s sales growth is typically low, and losses are incurred because of heavy development and promotional cost. Companies will be monitoring the speed of product adoption and, if this is disappointing, may terminate the product at this stage. The point is to build up a market position and product awareness.
In this stage, faster sales and profit growth. Sales growth is reached by rapid market acceptance and repeat purchasing. Profits may begin to decline towards the later stages of growth as competitors enter the market.
The market is now used to the product, and fewer...