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Frito Lay Case Study

1025 words - 5 pages

Frito-Lay Dips Case Study

1. In the mid-1980’s the overall dip market in the United States was doing well, but showed signs of slowing down. The data indicates that dips were very popular, in part because there were new varieties introduced to the market. Dips became somewhat of a fad and consumers bought what was popular. Also at this same time is when vegetable dip started to become popular. Consumers were starting to become more aware of their health and were making conscious decisions to purchase and consume more healthy alternatives and companies strategically marketed to the change in demand.
2. The different ways that supermarket dip market could be segmented are as ...view middle of the document...

5. Profit Contribution Percentage:
$6,572,000/$4,728,510 = 1.39%
$99,000,000/1.39 = $71,223,021
6. The pros of Frito-Lay focusing their attention on the “chip dip” segment are:
* Already has a foothold in the market.
* Data suggests major opportunity to build penetration through more aggressive advertising.
* Data suggests that there is an opportunity for sales increase through frequency-building promotions.
* Focus needs to be placed in the chip dip market due to competitive activity (Kraft and other companies were competing for Frito-Lay’s customers).
* Historically Frito-Lay did not aggressively promote chip dip. Comparatively speaking, if the company were to spend at the same ratio of its competitors it could see a dramatic rise in sales.
* The potential is there to spin off other products from their sour cream-based dip.
The cons of Frito-Lay focusing their attention on the “chip dip” segment are:
* Due to competitive activity in the market, Frito-Lay could only hope to hold its position in the chip dip category.
* The increase in sales was due to the introduction of a new product (the cheese dip) and there isn’t enough data to forecast if sales will remain constant or decline. Also, Frito-Lay isn’t sure how the new product will affect its other chip dips and if it will complement or cannibalize.
* The new sour cream dip is a different style of dip and could possibly be marketed to another segment (as a vegetable dip and not a chip dip). Focusing solely on the chip dip segment could mean losing out in another market.
7. The pros of focusing attention on the “veggie dip” segment are:
* Data suggests that no major competitors had a strong competitive position in the market and there was plenty of opportunity available for growth.
* Data indicated that sour cream based dip was more popular than cheese dip for vegetable dipping.
* Nutritional value and salt content was becoming more and more a concern of consumers.
* Frito-Lay already had a sour...

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