Frito-Lay Company Case

Case Recap

Frito-Lay Company is a division of PepsiCo, Inc. It is a well-known company that sells brands such as: Lay’s, Ruffles, Doritos, Tostitos, Cheetos, and Frito’s Corn Chips. The company also has a market line of dips, salsas, nuts, peanut butter and cheese-filled sandwich crackers, processed beef sticks, Smartfood brand ready-to-eat popcorn, and Grandma’s brand cookies. Frito-Lay is the leading manufacturer of snack chips in the United States, with 54% of the retail sales in this category in 1996. It also has 45 manufacturing plants in 26 states, including the world’s largest snack food plant in Frankfort, Indiana (Kerin and Peterson, 2013). In 1996, the New Ventures Division originated, with a mission to manifest itself as a deliberate approach for identifying and developing sales and profit growth opportunities for Frito-Lay. One growth avenue that the New Ventures Division came up with was labeled “opportunistic acquisitions”, which would be made possible by related food companies offering products or entire businesses for sale. When Borden announced that they wanted to sell their Cracker Jack brand, Frito-Lay jumped on the opportunity and purchased it (Kerin and Peterson, 2013). Borden Food’s Cracker Jack is one of the leading brands in Ready-to-Eat caramel popcorn. They decided to sell Cracker Jack because they want to focus on their pasta business and grain meals (Kerin and Peterson, 2013).

Problem Identification

One main problem that Frito-Lay’s will face now that they purchased Cracker Jack is the competition concerning Ready to eat popcorn companies. There are four main types of competitors in the Ready to eat (RTE) caramel popcorn category, including: national brand firms, seasonal/specialty firms, regional firms, and private label firms. Its main competitor is Crunch ‘n Munch which is a national brand firm. International Home Foods, Inc. (Crunch ‘n Munch) and Borden Foods (Cracker Jack) are the RTE caramel popcorn category dollar and volume market share leaders in the United States (Kerin and Peterson, 2013). Crunch ‘n Munch leads in dollar sales market share and pound volume market share over Cracker Jack, for example: the 1996 dollar sales market share of Cracker Jack was at 26%, where Crunch ‘n Munch was at 32% in market share.

A second problem that it faces is the fact that consumers feel that Cracker Jack has lost its momentum. Even though Cracker Jack is a well-recognized and respected brand, it is in the past and has not used the opportunities needed to catch consumers’ eyes.

Root Problem Components

There are many reasons that Cracker Jack is behind Crunch ‘n Munch on sales. One reason is that only 7.1 percent of U.S. households consume it. These households consume less than one pound of Cracker Jack annually (Kerin and Peterson, 2013). Another