Frito-Lay Company

Frito-Lay Company

Week 3

Background

Frito-Lay currently is the market leader in salty snack food products. The existing product mixes are comprised of chips and salty snacks, but have only limited sweet flavored offerings. The Frito Lay Company is a leading manufacturer and distributor in snacks in America. They have 50 distribution centers in 26 states. They offer direct store delivery sales straight from the manufacturer instead of a warehouse.

Borden Foods has owned Cracker Jack (CJ), a well known trademark in the United States, since 1964. In 1997, Borden Foods has decided to exit the snack food product line in order to focus efforts and resources in growing their pasta and grain based meal segments. In 1996, Cracker Jack brand sits in the number two position in terms of Ready-To-Eat (RTE) caramel popcorn product category market share with approximately $192 million in retail sales.

Borden Foods has been unsuccessful in growing sales in the past five years. In addition Borden Foods has experienced negative product contributions over the past three years. The Cracker Jack brand offerings are comprised of various packaging options with 32 stock-keeping units (SKUs). Production facilities have only 32% of space allocated to Cracker Jack products and operate at just 33% of capacity.

Considerations

Acquire Cracker Jack from Borden Foods.

In 1996 the New Ventures Division of the Frito-Lay Company is considering the purchase of the Cracker Jack brand. This division has been directed to create opportunities and products where the Frito-Lay Co. strengths can be capitalized and deliver consumer food solutions with a high impact. They are leading in manufacturing and distribution. An evaluation into the background of why Cracker Jacks is not excelling with Borden’s Food to find out what the underlying problems if any are and whether or not they could be fixed an evaluation of