You are on page 1of 12

CASE STRATEGIC MARKETING

FRITOLAYS DIPS
GROUP 2

Dips Sales in 1985 at Supermarket Industry research indicates that dollar sales growth by 10%. snack. 15% is cream cheese based.. cheese puffs. 1. or accompaniment to a meal. but this growth because of the price (inflation). Retail sales of refrigerated salad dressing have been growing 18% annually since 1978. 67% sales linked to salty usage that usually found at regular shelving and 33% linked to vegetables usage that shelved in produce area close to vegetable and salad dressing. Even though the market is large enough. The market dips highly fragmented. a division of PepsiCo. Inc. markets and sells a variety of salty snack foods. Inc. actually 20% of dips consumed by households and homemade by mixing the salad dressing that typically located in produce section (refrigerated). Picture 1.CHAPTER I BACKGROUND 1. peanut butter 2|Page .1 Situation Analysis Dips are typically used as an appetizer. 25% choose cheese based. tortilla chips. The usage of dips. corn chips. Consumer`s favorite flavor 50% is sour cream based. Products include potato chips. They also produce a line of nuts. Upward of 80 percent of dip sales are accounted for by supermarket. and pretzels. as well as dips to complement them. manufactures.2 Company Profile Of Frito Lays Frito-Lay’s. and the rest is (10%) is bean and picante based..

Frito . 3|Page .Lays use “front door distribution system” which one person performs sales and delivery function. In 1985 and 1986. Frito-Lay’s dips sales 48% by cheese dips. In 1986.000 supermarket. and reached net sales of $3 billion. and Grandma’s brand cookies and snack bars.000 non-chained outlets. and Sour Cream Dip. 44% by Mexican dips. 47. but nevertheless total dollar of sales decline in 1985 and going stagnate in 1986. The Dip popularity accelerated the dip product line by 1983 by introduces cheese dips. From 1981 to 1984 the sales increased.5 Dip Marketing In 1983.000 nonfood outlets. Frito Lays viewed as a nonpromoted profit producer which just do consumer promotion and trade promotion as its strategy. Frito -Lay’s primarily competes in the salty snack food segment of the snack food market. the sales task and account are more time consuming and complex. processed beef sticks. 1. and 20. and in 1985. 1. Furthermore.Lays start promote the products by consumer advertising and spend a lot of budget consumer promotion to do cross selling with the chips products. the company captured 33 percent of their segment sold in the United States.4 Dip Distribution and Sales Effort Frito-Lay distribute the products through 350.000 convenience store.3 Dip Business Frito Lays started dips business in 1950 by Jalapeno Dips and Enchilada Bean Dips. But in supermarket usually require participation by branch manager. 1. Frito. Cheese Dips. This sales system is suited to 270.000 outlets nationwide consist of 34. and the rest is small groceries.crackers. and 10% by sour cream dips. Frito Lays have 3 type of dips : Mexican Dips.

Promote the dip line more aggressively in the present “chip dip” market segment. 2. The company’s executives. product manager. Actively pursue the “vegetable dip” category. were faced with two alternatives concerning where and how Frito-Lay’s Dips could be further developed. while others felt an advertising campaign in the chip dip market would better suit the product. 1. and Ann Mirabito. Frito-Lay had introduced the first shelf-stable. sour cream-based French onion dip that was packaged in a metal can and required no refrigeration. Some executives thought the dip could be used to reach a new vegetable audience. marketing director. 4|Page .CHAPTER II KEY ISSUE Frito-Lay’s Dips had become a very profitable product line and obtained exceptional growth within the past five years after 1986. Ben Ball.

and total dips usage behavior. So. we have to define the market potential. Growth in Dips Market Vegetable dips market growth 18% annually since Percentage Of Growth Growth in Dips Market 20% 15% 10% 5% 0% Vegetable Dips Chip Dips 1978 which majority homemade product by mixing the salad dressing. even if the product exist is just a local brand. and competitive advantage of the two products (chip dips and vegetable dips). flavor popularity of dips consumer.CHAPTER III ANALYSIS In analyzing which opportunity that could be develop for Frito-Lays. Beside growth in chip dip just 10%. There is no special dip for vegetable. vegetable market is an opportunity market for company to extend the product line. Dips on Market and Flavor Popularity Type Of Dips Product in Market Type of Dips Flavour Popularity Of Dips Consumer 10% 38% 32% 15% 50% 25% 30% sour cream DIP BASES SHELF TABLE DIPS REFRIGERATED DIPS cream cheese based cheese based bean and picante 5|Page .1 Market Opportunity Market opportunity in Frito-Lay could be seen from growth of market. 3. market segmentation. the growth because of the dollar (inflation). type of products in market.

and market access. Both of segment needs are delicious. 3. usually eat salty snacks b. usually eat salad or refrigerated vegetables. Segment attractiveness In segmentation attractiveness there are three indicators can be used consist market demand.2 Market Segmentation In analyzing dips market segmentation there are seven steps that must be done. Frito lays launched the first sour cream shelf table dips. competitive intensity. Sour cream dips usually placed in refrigerator but in 1986. Some executive said that the sour cream dips sometimes used for vegetable. and the other experience during eat salty snacks and vegetables depend on its option. Here is the table that showed each indicator by comparing chip dip and vegetable dip: 6|Page . Chip dips : American People. Need based segmentation We analyze that need based from each option are same. 2. the sour cream (the most favorite flavor and the biggest market share) linked to the vegetable used and it’s an opportunity for the company. So.The biggest dips market share is refrigerated dips which majority is sour cream based. It is linked with the most favorite flavor in consumer. Those steps are : 1. healthy interest 3. Segment identification In segmentation identification there are different segment for those option: a. Vegetable dip : American people. tasty.

b. and this segment has a lot of major competitor. Segment strategy acid test Both segmentation use the story board 7.Segment Attractiveness Market Size Market Demand Growth Rate Chips Dips $ 415.4 M tend to growth ( dressing salad that ussualy to use as vegetables dips growth 18% annualy) Number Companies Competitive Ease of Entry Intensity Substitutes Costumer Familiarity Market Access Chanel Access Company Fit of so many big company and no major competitor there major competitor easy easy homemade dips homemade dips Frito Lays is Major costumer doesn’t know vegetable company in shelf dip dips yet easy (350. easy to use.000 outlets) easy (350. 5.4 M dips down 9% in 1985 Vegetable Dips $ 206.000 outlets) chips Dips are fit with the unfit with the core company bussines company core bussines 4. Vegetable dip No major competitor in vegetable dip indicate we don’t need a lot of marketing expen se as big as chip dip. Marketing mix strategy Both segmentation use 4P marketing mix strategy 7|Page . Chip dip Chip dip segment has a stagnant phase during in 1985. 6. If Frito Lays chose this segmentation it will take very high marketing expense to get a market share and it means we do face to face fight with many major competitor. Segment positioning Both segmentation wants communicate that their product are delicious. but we still have a big expense to educate the market because vegetable dip segment is a sleeping market. easy to eat. Segment Profitability a. easy to find.

Comparing the competitive advantage between chip dips and vegetable dips can used based on cost advantage.Many big competitors play on this market .3.Libby Dip Mixes and Bennett Toping Dip. but just sold in local areas Frito-Lay as a company has an extensive competitor knowledge but average customer knowledge. and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset higher prices. MARKET SHARE NUMBER OF COMPETITORS CHIP DIP $ 416 million (67% of total dips) . The value itself is what buyers are willing to pay. and marketing advantage. so Frito-Lay`s position is competitor reactive strategy which means overreaction to competitor moves due to limited customer knowledge. A chip dip has a lot of competitors and strong financial support so the promotion and marketing stronger than Frito-Lay did. differentiation advantage. Competitor review for dips category is different between chip dip and vegetable dips.Kraft. Borden .Well financed company starts playing on this market (Campbell Soup and Lipton) VEGETABLE DIP $ 205 million (33% of total dips) . Lack of customer knowledge in Frito Lays result sales decrease in company`s profit such:    Time when company delete one of Mexican dips (enchilada bean dips). the customer not prefer the other flavor of Frito-Lay dips but directly switch the brand. 8|Page .3 Competitive Advantage Competitive advantage grows fundamentally from the value a firm is able to create. Late responds to realize the most favorite flavors Lack knowledge that their sour cream dips product used as vegetable dips too.Not too many competitors .

sour cream based suitable for COST vegetable ADVANTAGE . So Frito-Lay could be leader not only on chips but also in dips category. ADVANTAGE ADVANTAGE concern or support to be more healthy.VD wouldn't give cannibal effects DIFFERENTIATION PRODUCT new flavor More advantage : flavors/taste. Loyal consumer of chip dip will and will give cannibalism buy both effect 2. So it will be better to launch the vegetable dips.VEGETABLE DIP (VD) COST VARIABLE No variable cost advantage ADVANTAGE COST variable cost will high and need ADVANTAGE an investment to produce VD MARKETING . New consumer who likes vegetable dips 3. But better the product of vegetable dips using other brand name CHIP DIP variable cost will be lower since the chip dip market is high . leader on the dips market REPUTATION Reputation advantage just Vegetable dips with catch up: ADVANTAGE maintain the loyal customer 1.Growth of product (Mexican & cheese dips) tendency stagnant .Creating in chip dip marketing didn’t give cost advantage 9|Page . New consumer from another brand MARKETING MARKET Market share will be Vegetable dips will be make FritoADVANTAGE SHARE stagnate Lay’s market share on dips will be higher FORMULATION Since a lot of competitors in a chips dip market and the market on shelf table dips are going to stagnate. company innovation.Frito-Lay’s market share in shelf table dips is 73% .VD will give more choices to customer .Launch vegetable dips as a line extension could reduce the marketing cost .

Example : “ banded strategy : buy 1 chip dips get 1 vegetable dips”  Promotion ADEX priority : consumer promotion. D segment C2 segment C1 segment C segment B2 segment B1 segment B segment A2 segment A1 segment A segment all segment 10 | P a g e . This strategy doesn’t means the chip dips category left behind but also focus in increase market share as second priority. This category is new in the market. Product  Vegetable Dips – shelf table dips category  New identity . Price Place Promotion From those analyses. we categories the market segmentation strategies to adjacent segmented that shown at the picture below. and trade promotion  Ads strategy: join with chip dips to make the integrated dips promotion. and competitive advantage is company better to – enter the vegetable dip category – since the attractiveness is compromising. advertising promotion.FRITO GREEN DIPS  Flavor innovation – benchmark to salad dressing flavor  Medium price ( equal to shelf table dips price – that higher than refrigerated dips)  Price benchmarking – salad dressing  Distributed in supermarket  Product shelving in 2 place both in regular shelving and refrigerated shelving (closed to vegetables)  Consumer Promotion – give a consumer promotion to encourage customer to try the vegetable product. market segmentation.CHAPTER IV SOLUTION The solution for Frito-Lay to develop market from the opportunity analysis. The strategy for vegetable dips describe in table below. so company has to consider the good strategy to educate the customer about the product and the budget strategy.

set the advertising. The marketing tim include to educate the market (healty life style). Make a clear border between frito lays and frito deep to avoid cannibalization form their product 11 | P a g e . Develop the marketing team to maximize the frito green.CHAPTER VI RECOMMENDATION 1. The new brand used in order to avoid the ambiguous effect between dip for chip and dip for vegetable. 2. These line product goals is to help increasing frito green sales 4. and canvassing to the supermarket and explore the distribution channel. Develop research to find line product for frito green. Entered the vegetable dip using a new brand called frito green. the place of frito green in supermarkets. 3.

Customer. delicious. easy to eat using story board using mix 4p 12 | P a g e .usually snack less attractive need verry high marketing cost to get a market share from saturated market delicious easy to find. in america. interest in health. usually eat salad or refrigerated vegetable. tasty. more attractive need high marketing cost to educate the market delicious. easy to eat using story board using mix 4p vegetables Dip other experience during eat vegetables. tasty customer in america. easy to use. easy to use.APPENDIX Appendix 1. delicious. easy to find. Needs Process Need Based Segmentation Process Need Based Segmentation Segment Identification Segment Attractiveness Segment Profitability Segment Positioning Segment Strategy Acid Test Marketing Mix Strategy Chips Dip other experience during eat snacks.