Frito Lays Case Analysis

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In the mid-eighties Frito-Lay’s Dips had become a highly profitable product line with sales of $30 million in 1981, growing to $87 million in 1985. In late 1986, Marketing Director Ben Ball, and Product Manager Ann Mirabito had completed the planning review for the Frito-Lay line of dips. A major issue at the planning meeting was where, and how, to further develop Frito-Lay’s Dips. Two divergent viewpoints developed; that the dip line should be more aggressively promoted in its market segment, and that Frito-Lay should actively pursue the “vegetable dip” category. The company had recently introduced a shelf-stable, sour cream-based French onion dip, the first cream-based dip for Frio-Lay, and some executives felt the dip could provide a bridge to the vegetable dip category. The Frito-Lay executives had yet to decide which direction to emphasize in 1987. Expense budgets would need special consideration, and more aggressive marketing would require higher marketing investment or at least a relocation of funds. Another consideration was to preserve the gross margin and profit contribution of dips. Case Problem:

Within a span of two years, 1984 and 1985, competition has increased in the dip market. New products have been introduced and firms are spending more in advertising these products. There are large, well-financed firms that have started to aggressively pursue this market. Major Issue:

Which geographic market should Frito-Lay expand into first? With its largest and main market becoming saturated, namely the United States market, it is time to search for new markets abroad. The company should be trying to capitalize from economies of scale and develop a global brand image to compete with local competitors. Case Issues/Application of Theory:

Dips have become increasingly popular in recent years due to their convenience and “grazing” trends in the United States. The dip category in general is substantially fragmented and essentially difficult to...
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