Frito Lay Case Study free essay sample

Frito-Lay, Inc has been developing multigrain chips since the early 1970s. It is a worldwide leader in the manufacturing and marketing of snack chips. It is capturing nearly one-half of the retail sales in the United States snack chips market. Frito-Lay knew that a healthier option was appealing to consumers and that this healthier option had proper time to be introduced, but the market was not ready for it yet. Product research and development is carried out in 1980s and it was found that consumers are expecting multi grain rectangular chips with ridges. So, sun chip is introduced in late 1990. It is a crispy textured snack chips with a mixture of wheat, corn, rice and oat flours. (Sun chips. n. d. ). Frito lay has invested a huge capital in sun chip products and so they did pre market test before introducing the product into market. This test has shown positive result as more consumers got attracted. (Frito lay corporation. n. d. ). Case problem: Sun chips had been in test market for 10 months in the Minneapolis-St. Paul, Minnesota, and metropolitan area. The senior Frito-Lay executives need to decide it they would launch this new product to market officially after the test period. The snack chip category is highly competitive and the new-product failure rate is high. This is the main cause of the problem. Very few new products can generate more than $25 million in first-year sales. In order to expand the market, the brand awareness is a key issue. So, the budget of advertising and merchandising will increase. The new product will cannibalize volume from its previous products. Alternative solutions: Give up the new product: Giving up the new product is a safe strategy. Frito-Lay, Inc. is the leader manufacturing in the snack chips market. Its products have held large market share. Even if it gives up the new product, its still the leader. But if it gives up the new product, the spending in the premarket test becomes meaningless. The market test result appeared consumer response was favorable which means it likely gain profit from the new brand. Its quit just leaves the opportunity to its competitors. Putting the new product on the market following the same strategies of premarket test: This solution gives the company a simple way when it expands its product sales from a single area to nationwide. In the premarket test, its pricing strategy, advertising and merchandising strategy, distribution and sales strategy were all determined. When Frito-Lay, Inc. puts the new product on the national market, the things they need to do is raising the advertising and distribution expending and adding more production line to meet the higher quantities requirement. But applying the experience that comes from a single area into whole national market is very dangerous. Peoples eating habit and lifestyle is different in various states that determine their demand of snack chips will be different. Simply coping with the strategies from the test may lead to a terrible result. Putting the new product on the market after strategies adjustment: This solution is adjusted from the former solution. This alternative will increase its operation cost, but it will bring a better result. The reason why Minnesota metropolitan area was chosen as the test site is because Frito-Lay executive were confident it had a social and economic profile representative of the United States. It is more convinced that these strategies can achieve success in other metropolitan areas. How about non- metro areas? So Frito-Lay, Inc. needs to use adjust its market strategies when it comes to different places. Continuing the test: This is not a good solution. This new product had been tested for 10 months, if Frito-Lay, Inc. still continued testing the product; its competitors might have enough time to launch their own products. Frito-Lay, Inc. would lose the best time to enter the new market. Selected Solution Putting the new product on the market after strategies adjustment: Its premarket test was made in a metropolitan area and got a satisfied result. Its manufacturing capacity was limited which means the product quantities were hard to meet the requirement of nationwide market in a short time. Base on these two factors, Frito-Lay, Inc. had better focus its market promotion on the metropolitan areas at first. In this period, the market test information is more useful because the marketplaces are similar. After its new production line completed, it can gradually expand its market to other areas. In this period, it had better to hire research firm to get the consumers response. Based on these responses, Frito-Lay, Inc. an make a better adjustment when launching Sun Chips on non-metro areas. For instance, because population distribution is different from metropolitan areas, Frito-Lay, Inc. needs to find another efficient and economical advertising scheme to achieve its marketing purpose. Conclusion: Frito-Lay, Inc. is a cautious company. It would do a premarket test before it wants to launch a new product. The results of the test inf luence company executives’ decision about the new product. It was estimated that the sun chip would gain $100 million dollar if it is launched nation wise. It is a success indicator for the sun chips. Although the test result is very exact and detailed, it can only reflect one-sided market situation because the market test is taken in only one area. To make a business plan for national market, it still does more effort. In this process, maximum using the test information is important and meaningful.