Frito Lay Sun Chips Case Study

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1. How would you characterize the snack chip category and Frito-Lay’s competitive position in this category? The snack chip category is growing, mainly because of the increased per capita consumption, which rose from about 12 pounds in 1986 to nearly 14 pounds in 1990. The snack chip category consists of three types of competitors: national, regional and private brand firms. The market is very competitive and difficult; as many as 650 new products are introduced every year, but less than 1% of them generate more than $25 million in first-year sales. Frito-Lay is a national brand and a worldwide leader in the manufacturing and marketing of snack chips. Frito-Lay accounts for 13 percent of sales in the US snack food industry. Frito-Lay’s market share is 50% of the snack chips category, and and eight of its snack chips are among the top-10 best-selling chip items in US supermarkets. Furthermore, Doritos and Ruffles are the only snack chips with $1 billion in retail sales in the world.

2. What specific challenges and risks does Frito-Lay face in marketing SunChips and what are the implications of each? The following are many of the specific challenges and risks that Frito-Lay faces in marketing SunChips and the implications of each: * There are a relatively large number of rivals > a lot of competition. * There is a large number of substitute brands/chips > a lot of competition. * Consumers are very price sensitive so brands are competing on price > detrimental. * There are a few barriers to entry, and existing entrants have better access to distribution channels than new ones. * Tried healthy snacks and failed > risky strategy.

* New brand name is a departure from known name.
* Cannibalization is a concern.
* Frito Lay strategy: differentiator, line extensions, new products to address needs.

3. What insights can be drawn from Frito-Lay’s prior experience with multigrain snacks? As mentioned before, the snack chip market...
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