Sunchip Case Analysis
Memorandum
Date:
To:
From:
Subject: Recommendation: Frito-Lay Sun Chips
In conclusion of the ten month test market trial that Sun Chip conducted, there at several options are available to the Sun Chip project:
Continue in the current test market.
Expand to other regional markets.
Launch the product nationally.
Making adjustments to the marketing mix
Abandon the Sun Chip product altogether.
Frito-Lay has a benchmark of $100 million in first-year sales for new products. During the test market Sun Chips was able to receive 19.9% of the households in the Minnesota/St. Paul to try the product. Of that percentage, 41.8% had accounted for repeater purchases. Sun Chips was able to sell 535,833 pounds in the 10 month test market and received $1.4 million in revenues. At the end of ten month test market Sun Chips had reached a brand awareness level of 33%. Table 1 represents the Sun Chips brand awareness to O’Grady’s brand potato chips at the end of the test market. Sun Chips had also shown a comparative advantage over O’Grady’s in the depth of repeats, 2.9 to 1.9 respectively. O’Grady’s is Frito-Lays’ most recent introduced product reaching the $100 million benchmark.
Table . Brand Awareness
Continue in Current Test Market. To extend the test market would be necessary only if Sun Chips would be interest in a full year of actual sales data. The success that Sun Chips has had in the first 10 months in the test market seems sufficient to conclude the test market trial.
Expand to other Regional Markets. Sun Chips has two alternatives of expansion regionally. These alternatives come with capital costs so that the manufacturing process will be efficient. The alternatives are to expand 25% or 50% at a capital cost of $5 million and $10 million, respectively. Expanding regionally should not be a option because Sun Chips potentially could give away its first to market advantage by this conservative action.
Abandoning the Project. The benefits
Date:
To:
From:
Subject: Recommendation: Frito-Lay Sun Chips
In conclusion of the ten month test market trial that Sun Chip conducted, there at several options are available to the Sun Chip project:
Continue in the current test market.
Expand to other regional markets.
Launch the product nationally.
Making adjustments to the marketing mix
Abandon the Sun Chip product altogether.
Frito-Lay has a benchmark of $100 million in first-year sales for new products. During the test market Sun Chips was able to receive 19.9% of the households in the Minnesota/St. Paul to try the product. Of that percentage, 41.8% had accounted for repeater purchases. Sun Chips was able to sell 535,833 pounds in the 10 month test market and received $1.4 million in revenues. At the end of ten month test market Sun Chips had reached a brand awareness level of 33%. Table 1 represents the Sun Chips brand awareness to O’Grady’s brand potato chips at the end of the test market. Sun Chips had also shown a comparative advantage over O’Grady’s in the depth of repeats, 2.9 to 1.9 respectively. O’Grady’s is Frito-Lays’ most recent introduced product reaching the $100 million benchmark.
Table . Brand Awareness
Continue in Current Test Market. To extend the test market would be necessary only if Sun Chips would be interest in a full year of actual sales data. The success that Sun Chips has had in the first 10 months in the test market seems sufficient to conclude the test market trial.
Expand to other Regional Markets. Sun Chips has two alternatives of expansion regionally. These alternatives come with capital costs so that the manufacturing process will be efficient. The alternatives are to expand 25% or 50% at a capital cost of $5 million and $10 million, respectively. Expanding regionally should not be a option because Sun Chips potentially could give away its first to market advantage by this conservative action.
Abandoning the Project. The benefits