Frito Lay

A detailed Summary of Frito Lay

Frito-Lay, Inc.'s biggest problem, as stated in the text, is how to further develop their dip line as to increase the company's sales and profits.

To analyze the environment, I chose the following internal and external factors that I believe play an essential role:

Internal Factors External Factors

Sales effort Customer preference

The income statement that was shown on page 112 in the case shows that although Frito Lay's Mexican Dip has lower net sales, its overall profit contribution is higher in comparison to its Cheese Dip. In addition, dollar sales of Mexican Dips have gradually increased from 1981 to 1986 whereas Cheese Dip sale decreased from 1984 to 1985 and stayed constant the following year. This decline, according Product Manager, Ann Mirabito, was caused by three factors: 1) novelty of shelf-stable cheese dips passed; 2) increased competitive activity; 3) discontinuance of Enchilada Bean Dip.

Frito-Lay's distribution system covers the entire country and is organized into four geographical zones. Each zone has distribution centers that are responsible for carrying inventory

Industry research indicates that dip sales are increasing by 10 percent per year, but the growth itself is due to price changes. No real growth is evident. Almost all growth between 1984 and 1985 was from cheese-based dips, which captured market share from other dip flavors.

Choosing to remain in the chip dip market would be the easier of the two to choose. They have already developed an understanding for the industry as well as the technological "know-how" of survival within it. Their current distribution system is working toward their benefit in addition to having an already known product and loyal customers. However, competition is increasing by the year, which would require constant product development in order to stay afloat. As stated earlier, there is no real growth in their current industry and they risk the chance of incurring significant losses by staying where they are.

More aggressive marketing, however, would require higher marketing investment or at least a reallocation of funds, while simultaneously preserving gross margin and profits. Unfortunately, the odds of increasing the advertising and merchandising budgets beyond their current $4.73 million mark, are very slim.

Pursuing an entirely new market seems like a large and costly risk; I would recommend this alternative for Frito-Lay, Inc. Companies who do not take risks are left behind and eventually phased

Some common words found in the essay are:
Dip Frito-Lay's, IV Choosing, Campbell Soup, Inc Companies, Frito-Lay Inc's, Ann Mirabito, Cheese Dip, Campbell's Lipton, Location Shelf, Mexican Dip, vegetable dip, distribution system, dip market, cheese-based dips, 1984 1985, competitive activity, vegetable dips, increased competitive activity, market share, cheese dip, cheese dips,

Approximate Word count = 943
Approximate Pages = 4 (250 words per page double spaced)

Category: Miscellaneous

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Frito Lay

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