Sun Chips

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Frito-Lay, Inc.

Sun ChipsTM Multigrain Snacks



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NUS Gusinass School

In mid-1990, Dr. Dwight R. Riskey, Vice President of Marketing Research and New Business at Fritu-Lay,Inc., assembled the product management team responsible for Sun Chipsm Multigrain Snacks. The purpose of the all-day meeting was to prepare a presentation to senior Frito-Lay executives on future action pertaining to the brand. Sun Chipsm Multigrain Snacks is a crispy textured snack chip consisting of a special blend of whole wheat, corn, rice, and oat flours with a lightly salty multigrain 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 choles terol-free. According to a Frito-Lay executive,it is "a thoughtful,upscale classy chip." The product had been in test market for 10 months in the Minneapolis-St. Paul, Minnesota, metropolitan area. Even though it appeared consumer response was extremely favorable, Riskey and his associates knew their presentation to senior FritoLay executives would have to be persuasive. In addition to presenting a thorough assessment of test-market data, Riskey added: We will have to do heavyduty selling [to top executives] because Sun Cbipsm Multigrain Snacks required a new manufacturing process, carried a new brand name, and pioneered a new snack chip category.There is a huge capital investment and a huge marketing investment that could be £inancially justified only with a product that could be sustainable for an extended time period.

Frito-Lay, Inc. is a division of PepsiCo, Inc., a New York-based diversified consumer goods and services f m . Other PepsiCo, Inc. divisions include 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.

Company Background
Frito-Lay, Inc. is a worldwide leader in the manufacturing and marketing of snack chips. Well-known brands include Lay'sB brand and RufflesB brand potato chips, ~ritos@ brand corn chips, ~oritos@' h d , ~ o s t i t o s @ ' brand, and santitasB brand tortilla chips, ~hee.tos@' brand cheese-flavored snacks, and Rold Gold@ brand pretzels.

The cooperation of FriteLay,Inc. in the preparation of this case is gratefully acknowledged.This case was prepared by Professor Roger A. Kerin, of the Edwin L. Cox School of Business, Southern Methodist University,and Kenneth R. Lukaska, Product Manager, Frito-Lay,h c . , as a basis for class discussion and is not designed to illustrate effective or ineffective handling of an administrative situation. Certain company information is disguised and not useful for research purposes. Copyright O 1995 by RogerA. Kerin. No part of this case may be reproduced without written permission of the copyright holder.




Frito-.Lay, Inc.: Major Brands

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$638 Million

Source: 1990 PepsiCo, Inc., annual report.

The company's major brands are shown in Exhibit 1 along with estimated worldwide retail sales. Other well-known Frito-Lay products include ~ a k e n - ~ tbrand fried pork s@ skins, ~ u n c h o s @ brand potato crisps, and ~unyuns@ brand onion-flavored snacks. In addition, the company markets a line of dips, nuts, peanut butter crackers, processed beef sticks, smartfood@ brand ready-toeat popcorn, and randm ma's@ brand cookies. Frito-Lay,Inc. accounts for 13 percent of sales in the United States snack-food industry, which includes candy, cookies, crackers,nuts, snack chips, and assorted other items. The company is the leading manufacturer of snack chips in the United States, capturing nearly one-half of the retail sales in this category. Eight of...
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