Frito-Lay

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I. Factual Summary:
Frito-Lay, Inc. is a division of PepsiCo, Inc., a New York-based diversified consumer goods and services firm. PepsiCo, Inc. includes Pizza Hut, Inc., Taco Bell Corporation, Pepsi-Cola Company, Kentucky Fried Chicken, and PepsiCo foods international. PepsiCo, Inc. recorded net income of $ 1.077 billion on net sales of $ 17.8 billion in 1990.

Frito-Lay, Inc is a worldwide leader in the manufacturing and marketing of snack chips. In 1960, the Frito Company and the H.W. Lay Company merged to become Frito-Lay, Inc. The company is the leading manufacturer of snack chips in the United States, capturing about 50% of the retail sales in this category. During 1990, the company has 39 manufacturing plants, more than 1,600 distribution facilities, and a 10,000-person route-sales team that calls on more than 400,000 retail store customers in the United States. Today, Frito-Lay brands account for 59% of the U.S. snack chip industry.

Sun Chips Multigrain Snacks resulted from Frito-Lay’s ongoing marketing research and product development program. In the early 1970s, corporate marketing research indicated that consumers were looking for nutritious snacks. In the early 1980s, Frito-Lay marketing R&D instituted the “Harvest” project with the multigrain snack to appeal to consumers. The “Harvest” project also emphasizes on flavor line extension and low-fat versions. In the beginning, Frito-Lay faced some problems for increasing its sales volumes. Later, Frito-Lay uses different aspects strategies to solve these problems and accounts for high percent of sales in the U.S. snack food industry.

II. Case Problems or Opportunities:
Nowadays, the snack chip category is very competitive in the United States. There are three types of competitors, national brand firms, regional brand firms, and private brand firms to share the snack chip market. Sun Chip has new flavors for existing snack chips and the new product failure rate is high. Because customers...
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