Angustiado lay sunlight chips case study essay

1 ) How would you characterize the snack chip category and Frito-Lay’s competitive position from this category? The snack computer chip category is growing, mainly because from the increased every capita consumption, which rose from regarding 12 pounds in 1986 to nearly 16 pounds in 1990. The snack computer chip category involves three types of opponents: national, regional and private manufacturer firms. Industry is very competitive and difficult; as much as 650 new products are introduced every year, nevertheless less than 1% of them create more than $25 million in first-year revenue.

Frito-Lay is a national brand and a worldwide leader in the manufacturing and marketing of snack chips. Frito-Lay accounts for 13 percent of sales in the US snack food industry. Frito-Lay’s market share is 50% of the snack chips category, and and eight of its snack chips are among the top-10 best-selling chip items in US supermarkets. Furthermore, Doritos and Ruffles are the only snack chips with $1 billion in retail sales in the world.

2. What specific challenges and risks does Frito-Lay face in marketing SunChips and what are the implications of each? The following are many of the specific challenges and risks that Frito-Lay faces in marketing SunChips and the implications of each: * There are a relatively large number of rivals >a lot of competition.

* There is a large number of substitute brands/chips >a lot of competition. * Consumers are very price sensitive so brands are competing on price >detrimental. * There are a few barriers to entry, and existing entrants have better access to distribution channels than new ones.

* Tried healthy snacks and failed >high-risk strategy.

* New brand name is known as a departure by known identity.

2. Cannibalization is known as a concern.

* Salteado Lay strategy: differentiator, range extensions, new products to address demands.

3. What insights could be drawn from Frito-Lay’s prior experience of multigrain appetizers? As mentioned before, the snack food chip market is incredibly competitive. With up to 650 new releases entering the product every year and fewer than 1% reaching a sustainable sales tag of $25 million, it really is rare to discover a successful a single. Frito-Lay initially toyed with multigrain snack food chips in the early 1970s, when exploration indicated a purpose for a munch in this category. Prontos, released in 1974 and distributed pertaining to four years, weren’t incredibly well received. While an absence of success is usually attributed to a confusing identity, poor developing and too small a market, Dwight Riskey, VP of Marketing Study and Start up business, admits that he is “not sure there had been dramatic items wrong while using product style [¦]. It may have been invented and introduced just before its time. 

This sentiment was reflected in the Harvest Job in the early 1980s, once Frito-Lay developed several multigrain products to attempt and have a possible healthy replacement for saltier snack foods for the baby-boomer generation. Lackluster response caused the project to stall in to the mid 80s as focus was placed on developing fresh flavors and healthier alternatives in other brands. Development pertaining to the product at this point under the Sunshine Chips manufacturer picked up 23 years ago. Consumer assessment found a couple of variations of the Sun Processor chip that were identified by test out markets since both healthy and as “everyday snacks ” a factor essential to the long term achievement of the snack. Ultimately, they’d to wait until the right time to discharge the product. The marketplace was slowly and gradually gaining health consciousness while baby-boomers matured and desired healthier alternatives to their snack foods. Early attempts were just that: too early.

4. What a conclusion can be drawn from research on SunChips’ customer acceptance and sales potential prior to the Minneapolis-St. Paul check market? The results from the premarket test were not by any means what Frito-Lay’s executives got initially anticipated. Consumers favored the SunChip name, even though the most popular flavors had been Natural and French Onion. After the trial, Sunchips experienced the potential being an “everyday snack.  The results from the premarket test suggested that the Sunshine Chips Multigrain Snacks would sell an overall total sales volume of $113 mil during is actually first season on the market. Included in this sales amount is a $22 million marketing and merchandising expenditure. Therefore, $113 million far is greater than the $22.99 million revenue performance target for which Frito-Lay initially planned.

There is also significantly less potential for product cannibalism in 42%. The Minneapolis-St Paul, Minnesota city area was chosen since executives assumed it to become strong cultural and monetary representation with the US as a whole. Generally speaking, this place also symbolized a standard environment in which customer acceptance of products and competitive behavior equally could be assessed accurately. Finally, 2 . 2% of American homes that take in these types of chips reside through this metropolitan place. Thus, based on the research in SunChips’ buyer acceptance and sales potential prior to the evaluation market, it will be highly suggested for Frito-Lay to continue query with this device, and go to more advanced periods of merchandise testing.

five. What is your evaluation of the SunChips’ test industry results? Promotion/Advertising: As a result of the Premarket Test out, Frito-Lay can be allocating a $22 , 000, 000 advertising budget for Sun Poker chips. 70% of the budget”$15. 4 million”is to get used inside the first six months time of the test market. The advertising message will communicate subtle confident messages, which include wholesomeness, fun and simplicity. Television commercials emphasizing “smarter because they’re multigrain will be shown in order to charm to the health-oriented consumer part while depicting the product as unique.

In-store displays and free-standing inserts in magazines will support the marketing campaign, while coupon codes placed in magazine free-standing inserts will promote trial and repeat sales during the evaluation market Price and Sales: Forecasted annual sales in the snack food chip category amount to half of the market share or about $5 billion. Product sales are forecasted to develop at a 4-5% level annually as a result of an increase in every capita ingestion. Sun Chips carries a value to stores of $0. 385 intended for the 2. 25 ounce package deal, $1. 240 for the 7 ounces package, and $1. 732 for the 11 oz package. The weighted-average selling price amounts to $0. sixteen per oz sold, with 15% of purchases in the Test Marketplace going for the 2 . 25-ounce package, 47% to the 7-ounce package, and 38% towards the 11-ounce package. With this kind of average price-per-ounce of $0. 16, first-year sales on the national level as symbolized by the Test Market will certainly amount to $82, 866, 894 for Sunlight Chips. Decisions/Alternatives:

1 . Make a decision not to kick off Sun Potato chips

installment payments on your Continue to test the product and risk creating a competitor kick off a similar merchandise nationally or regionally three or more. Expand and launch a national advantages, requiring adequate manufacturing ability Strategies:

1 . Increase promoting and merchandising spending to either check further or perhaps launch nationally 2 . Introduce a larger bundle size several. Build the family unit repeat and depth of repeat business by bringing out a taste extension (mild cheddar)

six. Given the assessment in the test market results, what actions ought to Dwight Riskey recommend to Frito-Lay’s top executives? We believe that Riskey should implement the flavor extendable strategy whilst continuing to test the product for another 6 months. The extension would increase the “repeats per repeater for an average of three. 5 times each year instead of three times per year as a result of greater selection for consumers. This will enhance expected national sales via $82, 866, 894 to $90, 984, 446, or perhaps $8, 117, 552 nearer to the company’s $100 million aim.

The introduction of one more flavor could increase the cannibalization rate via 30% to 35%. This kind of, however , in fact amounts to 23% cannibalization because one-half of this cannibalized volume comes from Doritos which may have the same recommended retail cost as Sunlight Chips. Adding another flavour will also enhance brand recognition (33%) even more past the successful O’Grady’s manufacturer awareness of 28% before the merchandise can be released on a national scale. In taking more time to test the item and by adding another flavor, Frito-Lay can increase first-year sales because they build repeat business, as well as enhance brand awareness to assure that they reach their goal of $100 mil in first-year sales.

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