Strategic Marketing Management Chips

Presented to:
Mr. Mobin-ul-Haq

Presented by:
Waqas Ashraf 094532061 Noman khawaja 094532-0 Omer 094532-0 Adil Raza 094532-006

Date:
25/01/2010

University Of Management & Technology

History

Lay's is the brand name for a number of potato chip varieties as well as the name of the company that founded the chip brand in 1938. Lay's chips are marketed as a division of Frito-Lay, a company owned by PepsiCo Inc. since 1965. Other brands in the Frito-Lay group include Fritos, Doritos, Ruffles, Cheetos and Rold Gold pretzels. In 1932 salesman Herman W. Lay opened a snack food operation in Nashville, Tennessee and, in 1938, he purchased the Atlanta, Georgia potato chip manufacturer "Barrett Food Company," renaming it "H.W. Lay & Company." Lay criss-crossed the Southern United States selling the product from the trunk of his car. In 1942, Lay introduced the first continuous potato processor, resulting in the first large-scale production of the product. The business shortened its name to "the Lay's Company" in 1944 and became the first Snack food manufacturer to purchase television commercials, with Bert Lahr as a celebrity spokesman. His signature line, "so crisp you can hear the freshness," became the chips' first slogan along with "de-Lay-sious!" As the popular commercials aired during the 1950s, Lay's went national in its marketing and was soon supplying product throughout the United States. In 1961, the Frito Company founded by Elmer Doolin and Lay's merged to form FritoLay Inc., a snack food giant with combined sales of over $127 million annually, the largest of any manufacturer. Shortly thereafter, Lays introduced its best-known slogan "betcha you can't eat just one." Sales of the chips became international, with marketing assisted by a number of celebrity endorsers. In 1965, Frito-Lay merged with the Pepsi Cola Company to form PepsiCo, Inc. and a barbecue version of the chips appeared on grocery shelves. A new formulation of chip was introduced in 1991 that was crisper and kept fresher longer. Shortly thereafter, the company introduced the "Wavy Lays" products to grocer shelves. In the mid to late 1990s, Lay's modified its barbecue chips formula and rebranded it as "K.C. Masterpiece," named after a popular sauce, and introduced a lower calorie baked version and a variety that was completely fat-free (Lay's WOW chips containing the fat substitute olestra). In the 2000s, kettle cooked brands appeared as did a processed version called Lay's Stax that was intended to compete with Pringles, and the company began introducing a variety of additional flavor variations. Frito-Lay products presently control 55% of the United States salty foods marketplace

Flavors
Except for barbecue-flavor potato chips, which were introduced no later than 1958, up until the last 20 years, the only flavor of potato chips had been the conventional one. Despite an explosion of new flavors, the unadorned original is still the selection of 81% of consumers. In the United States, Lay's offers a number of flavor combinations, in addition to the classic chips. Flavored products in the traditional fried varieties include sour cream & Onion, Barbecue, cheddar & sour cream, Hidden Valley Ranch, salt & vinegar, salt & pepper, Flamin' Hot, dill pickle, Limon (Lime) and a thicker "Deli style" chip. Canadian sellers have a number of varied flavors, with curry, ketchup, poutine, pizza, Fire’s Gravy, roast chicken, Smokey bacon, salsa, wasabi, spicy Indian masala and sea salt and pepper brands available. The marketing success of these flavors in Canada sometimes leads to a limited time offering of a flavor to the south, with the dill pickle recently appearing in the United States after a successful run. Interestingly the name 'sour cream' has got Lay's into a lot of confusion in some countries. In India for instance the name was changed to American style cream and onion after consumers reported their discomfort with the idea of 'sour' cream In the baked products, there are classic, barbecue and sour cream & onion varieties. The kettle cooked version includes original, sea salt & vinegar, mesquite barbecue and jalapeño brands. Wavy Lay's have original, hickory barbecue, ranch and Au Gratin flavors while Lay's Stax offers original, sour cream & onion, cheddar, barbecue, ranch, pizza and salt & vinegar. The newest variety, Lay's Natural has thick cut barbecue and sea salt brands. The WOW! Brand was rebranded in 2004 as Lay's light after the olestra formula was altered and the U.S. Food and Drug Administration allowed removal of warnings about various health consequences of the fat substitute.

Outside North America, Lay's in Greece and Cyprus are made and packed by Tasty Foods and Carina Snacks LTD, with Mediterranean flavors which include Feta cheese flavor, Tzatziki flavor, Olive and Tomato, Oregano, Sea Salt & Black Pepper and various more. There are hundreds of sub-variations of the Mediterranean line and the company performs. Constant experimentations to create new flavors and adjust them to each country's liking. In some countries such as Argentina variations of the Mediterranean tastes exist include Olive Oil and Parmesan Cheese, Olive Oil and Tomato, Olive Oil and Basil, Greek Tzatziki Cheese with onions, Lasagna, Beef Capriccio with Parmeggiano and Smoked Manchego Cheese. In Belgium there is a version of Cucumber and Goats Cheese. Finally

in Chile there is a version of Lemon and Cilantro (Coriander) and Sour Cream and Onions. In Australia, a cilantro version exists while a hot & sweet chili, sweet corn and cotija cheese brand can be found in South America. Another flavor sold primarily in southern Asia is called "Magic Masala." This flavor is very popular in India, Pakistan, and Bangladesh. Flavors featured in Thailand include Nori Seaweed, Basil, Squid, Spicy Chili Squid, Seafood and Mayonnaise, and Spicy Seafood. There are a number of unique products in the United Kingdom sold under the Walkers label, including prawn cocktail, beef & onion, Greek kebab and Marmite yeast extract. Under the Smith's label in Australia, unique flavors include Greek Feta & Herb and Italian Tomato & Basil. Russia has "Lay's MAX" chips (Chicken, Sour cream & Onion, Sour cream & Cheese, and Ham & cheese flavors) and some international "Lay's" flavors plus Russian "Lay's" flavor - Mushrooms & Sour cream, Crab and Red caviar. In Poland the chips flavors are: Green Onion, Mushrooms & Sour Cream, Chicken, Original, Paprika, Hot pepper, Original, Ketchup, Forage, new potatoes with basil. Also there is Lays Appetite which is also part of lays and has the following flavors Kebab, Pepper and Cheese, Onion and Cheese. In parts of South America (notably Argentina and Uruguay), Lay's flavored products are sold with the "Lay's Mediterranean" label, and include such flavors as ham, tomato and basil, tomato Parmesan, and oregano. Peru has "Lay's Sabores Peruanos" (Lay's Peruvian Flavors), with flavors like queso andino (Andean cheese); also recently was released Lay's Dips, that includes a "Peruvian Criollo Chili" sauce sachet. In Ukraine there is crab, bacon, cheddar, and sour cream and green onion In Thailand there is Classic, Sour Cream & Onion, Cheese & Onion, Mexican Bar-B-Q, and And Japanese Nori Seaweed. Flavors also come and go usually with an international theme, for example: French Mayonnaise, Balsamic Vinegar and Salt (England), Garlic Soft Shelled Crab (Hong Kong), Soy Sauce, Salmon Teriyaki (Japan), Lobster, Bacon & Cheese (America). Also traditional "Thai" flavors include Tom Yum, Thai Chili Paste, Thai Seafood Dip, Chili and Lime. Popular flavors are often kept in circulation longer. There are currently 12 regular Lay's flavors in Canada, though there are more, available only in certain parts of the country. The flavors available nationwide are the following: Classic (yellow), BarBQ (black), Salt & Vinegar (teal), Ketchup (dark red), Wavy Original (red), Dill Pickle (bright green), Smokey Bacon (brown), Sea Salt & Pepper

(silver), Sour Cream & Onion (green), Roast Chicken (light brown) and finally Lightly Salted (bright blue). Also, in select Canadian markets (Toronto & Vancouver) Lay's has introduced international flavors such as "Spicy Curry" and "Spicy Indian Masala" to appeal to a wider consumer group. Lays have entered the German market with some success in the last couple years. All 3 key Lay's brands are distributed with 2 flavors for each brand. The following flavors are marketed in Germany.

Frito-Lay and Pepsi Join
In February 1965, the Board of Directors for Frito-lay, Inc. and Pepsi-Cola announced a plan for the merger of the two companies. On June 8, 1965, the merger of Frito-Lay and Pepsi-Cola Company was approved by shareholders of both companies, and a new company called PepsiCo, Inc. was formed. At the time of the merger, Frito-Lay owned 46 manufacturing plants nationwide, had more than 150 distribution centers across the United States, and was listed on the New York Stock Exchange.

Frito-Lay Today
Today, Frito-Lay has more than fifteen $100 million brands: • • • • • • • • • • • • • • • • LAY'S FRITOS CHEE.TOS BAKEN-ETS RUFFLES DORITOS FUNYUNS TOSTITOS BAKED LAY'S SUNCHIPS MUNCHIES OBERTO ROLD GOLD GRANDMA'S Cookies and Quaker Chewy Bars Quakes

Lays Flavors in Pakistan
• • • • Plain Salted French Cheese Tomato Tango Masala

Lays brand IN Pakistan: 1. 2. 3. Kurkre Lays Cheetos

Pest Analysis

Political:
Political effects Pakistan telecommunication industry is one of the major source of revenues for the government of Pakistan. The annual contribution by the industry in the form of taxes is approx Rs. 65 billion (in USD $812 million). The industry also contributed Rs. 120 billion (in USD $1.5 billion) in the form of Foreign Direct Investment (FDI) in the last calendar year. Not only this, the industry directly and indirectly employs around 2.5 lakh people. It is such industries, which are the considered very important by the governments and the governments protect them all around the globe. Alas things are not same in Pakistan where such fast growing industries are highly taxed to milk them to the maximum and bring them to a stand still just like majority of the other industries of Pakistan. The budgeted presented by the government of Pakistan for 2009-10 is not very encouraging for the telecommunication sector. The government introduced some good measures like the reduction of GST from 21% to 19%, the reduction of Rs. 250 in the import of mobile handsets as well as the reduction of activation tax by Rs. 250. These are good measures but we should keep it in mind that that the GST for the whole country stands at 16% while it is only the telecommunication sector which is facing the discriminatory taxation in the form of GST. Generally, industries providing basic services to the people are taxed lower then the the general public but things are totally opposite in Pakistan. The reduction in activation tax will not benefit the industry since the industry has already reached its maturity and hence the addition of new subscribers has greatly reduced. It is evident from the subscribers addition numbers shown on the website of Pakistan Telecommunication Authority (PTA). The total subscriber stands at 92 million i.e around approx 60% penetration ratio. It is not expected to go much higher then this and hence the reduction in activation tax will not be a major benefit to the industry. The reduction in taxes on the import of handsets will also not make any big difference since 90% of the cell phones are imported in the country through illegal channels. The illegal import witnessed a major increase last year when the government introduced a straight tax of Rs. 750 on all the handsets imported in the country. Therefore, the reduction in the handset tax will only result in decreasing the illegal import of handsets and will not contribute much to the exchequer. Now lets move to the new taxes imposed on cellular industry in the Budget of Pakistan 2009-2010. The government introduced a very innovative tax of Rs. 0.2 per sms. Generally 40 billion sms are sent in Pakistan every year by the subscriber of cellular phones. With a tax of Rs 0.2 per sms, the government expects to earn Rs 8 billion per annum (in USD $100 million). The imposition of this new tax will discourage the users from using such an important mode of communication. Since bulk sms deals will become very difficult to operate, the telecom industry is expected to curtail them from the current levels. This will further result in decrease in the sms usage and hence reduce the revenue generation for the government. Imposition of a further turnover tax of 0.5% is another move beyond the understanding of common sense.

The increase in fuel prices will also be a major source of concern for all the cellular companies who rely on diesel powered generators to run their cellular towers since electricity is a rare commodity in Pakistan. If that was not enough, even a new tax has been imposed on the advertising sector which will pass it on to the customers. Since telecom industry is one major customer of all big advertising companies of Pakistan, it will also have a serious negative impact on the advertisement spend of the cellular industry.

Environmental: Social: Technological:

Porter

COMPETITOR ANALYSIS
Competitor analysis is an assessment of the strengths and weaknesses of current and potential competitors. This analysis provides both an offensive and defensive strategic context through which to identify opportunities and threats. There are various local snack making companies like Gourmet Chips, Shezan Chips etc that are our indirect compititors.The few competitors that we have targeted as major players includes in snacks industry are Super Crisp, Kolson chips, Pringles.

Kolson
Business Profile: Ever Since its inception in 1942, as on today, Kolson enjoys the distinction of being one of the Pioneer food manufacturing and processing industries in Pakistan. The name of Kolson is synonymous with dynamic and innovative food products. The Philosophy of the company is based on self-commitments to offer consumers greater choice of exclusive quality products. In doing so, the company has, in true sense, evolved its own marketing style to establish a more effective relationship with consumers. Being a food manufacturing company we understand our responsibility to provide consumer high quality products and selection of best ingredients that add to the nutritional value of our products. The whole range of Kolson products is made by using latest German, Dutch, Swiss and Italian etc latest technology and process to back prime raw materials. The raw materials are procured from the leading available sources in Germany, Denmark, Belgium and Nederland etc. The high quality Pakistani wheat products, procured from select bunch of millers, are pivotal in determining the final outcome of high quality products. Products: Kolson is proud to be the pioneer in Pasta production in Pakistan. More than 50 years back nobody could think of Pasta as forming a food habit being an absolutely new food concept for populace of Pakistan. At present company is market leader in Pasta products such as Spaghetti, Macaroni, Lasagne, Noodles and Vermicelli. Kolson also has a leading edge in manufacturing breakfast cereals that are innovative and extremely popular among the consumers of all ages. As company hierarchy enters to the third generation, it befittingly coincides with yet another stunning product, an innovative range of high-class Biscuits. Jam Hearts, Cream Hearts, Katch and Bravo, being sandwich, crackers and traditional bakery biscuits respectively which are already fetching consumers’ recognition & appreciation because of its unique and smacking flavor and texture.

Chips and Snacks Products

Some of the company snacks and chips are not available in the market as crinkle, twinkle and snackers.

Strategies
As the global economy is taking a different turn in its outlook and demand, Pakistan cannot afford to lag. Kolson is prepared to accept the challenge to be always one step ahead of changes in offing. This is our simple promise to our die-hard and prospective consumers in Pakistan and abroad. Distribution strategy: The company has the intensive distribution strategy for its products. Normally their products specially chips and snacks can easily available in the market every where including all kind of general grocery stores to big retail stores even in small roadside shops. Target Market: Kolson brands appeal to an extraordinarily diverse array of consumers. Our consumer segment starts from as young as one year old who starts developing a taste for snacks and goes all the way up to older age people who consume pasta and breakfast cereals as part of their healthy diet. In consumer promotions, designed to enhance the Kolson image, we therefore, try to satisfy the growing needs of all our target segments. Pricing strategy: As the company is providing its chips and snacks in all sizes and has intensive distribution strategies therefore the prices are low and competing with their competitors on low cost leadership fundament so that every one can buy it easily. Promotional strategy: The company is aggressive in its promotional strategy as they came up with heavy advertisement campaigns and with the noticeable placement in stores and shops. http://www.kolson.biz/aboutus.html http://www.kolson.biz/products.html

Super Crisp
Company profile: Back in 1982 a business firm was created with the vision to cater to the culinary requirements of the taste buds of the Pakistani nation and at the same time to uphold the qualifications, preconditions and specifications set internationally by the ISO 9001. We commenced with the crunchy product of potato chips of high quality under the brand name of “Super Crisp”. No doubt the name itself is self-explanatory. Super business profile: The company commands the world’s most advanced and sophisticated processing unit, custom built for Tripple Em by the leading American manufacturer of fully automatic and computerized snack food plants. The packing system has been provided by a leading Japanese manufacturer renowned for its extremely modern & accurate computerized weighing and packing machines. The entire processing machinery is housed in a precision-built, centrally air conditioned premises to meet highest hygienic standards. Highly qualified & experienced food technologists are employed to run the plant. The company maintains a most modern research and test laboratory to ensure the highest international standards in quality of the products. Quality of raw materials, efforts and efficiency at Tipple Em enables us to provide the best of tastiest snack food items to you. The company offers a range of snack food items to include Potato Chips, Nimko Mix, Peanuts, corn and potato based extruded products. Nation wide availability of the products is made possible by a vast and effective distribution network. Products Products that are indirectly in competition with Lays Smart chips

Potato Chips

Natural Potato Chips Plain Salted

(15gm Rs 10/-) (25 gm Rs 20/-)

Mr Crips Salty

(18gm Rs 20)

Mr Crips Spicy

(18gm Rs 20)

Natural Potato Chips Chilli

(15 gm Rs 10/-) (25 gm Rs 20/-)

Chips Salt & Vinegar

(40 gm Rs 20/-)

Chips Fiery Hot

(40 gm Rs 20/-)

Cars

(40 gm Rs 20/-)

Frenchfries

(40 gm Rs 20/-)

Extrusion Product

Catty Chins (12gm Rs 10/-) (25gm Rs 20/-) Rings

Rings

(15gm Rs 10/-)

Wheelo Pop

(15gm Rs 10/-)

Dino

(20gm Rs 20/-)

Strategies Distribution strategy: Super crisp is using intensive distribution strategy for its chips. They are available from small roadside shops to all grocery and big retail stores. Its has various flavors in the market which covers all type of taste and it has a strong distribution channel. Pricing Strategy: Super Crisp had places its prices similar to the other competitors with different size of packing. Super Crisp has targeting all age groups with 15gm of 10 rupees and varies to 40 grams with rupees 20. Promotion Strategy: Super Crisp had aggressively when it was launched. They used television commercials as well as billboards for a long period of time. But now the promotion is limited.

S.W.O.T ANALYSIS

Strength The strength of this product will be; 1. First of all the fact that this is a new product which is not available in Pakistan so we will have first mover advantage, i.e. we won’t be facing any direct competition. 2. The product is creating a niche and has a separate segment. 3. Usually health conscious people do not like fried snacks, so this product being a baked product, might get the attention of diet conscious people. 4. Strength of our product is that it has a strong parent company which is Pepsi Co. already having a strong brand Lays. 5. This product will be available both in snack bag and tin pack.

Weakness Although there is hardly any weakness of our product, but few are mentioned below; 1. The probable weakness of our product might be the adaptability issue of the Pakistani customers for the new product, as they like deep fried chips, so introducing a baked product might be a problem. 2. We might not be able to give more tastes of our product due to the production process involved in making. 3. Less exposure of the new product to the Pakistani customers.

Opportunities 1. Once we have successfully launched our product, we will look for new taste development like introducing spicy, salted, curry and cheese tastes. 2. Our big opportunity will be introducing the product to body builders and the trainers as they like low fat, high protean products which we are providing. 3. Increase in the demand of our product (Fit Chips). 4. This is a growing industry.

Threats 1. The biggest threat will be facing is the fact that, in this industry, there are very low entry barriers. So, threat of new competitors will always be there. 2. Our big funds will be wasted on fulfilling gas and electricity deficiency.

Porter Generic Forces

Poter Generic forces
Cost Leadership Differentiation Niche  Focus

Opportunity Matrix

1

2

High Low

3

4

S.T.P

Segmentation
Target Segment Our target segment are all the people of Lahore, who are food lovers, which includes upper, middle and lower middle class. Along with this “FitChip” has segmented its target segment into the following category: Geographical Segmentation “FitChip” is a start up product; therefore it has geographically segmented its target market. This geographical region is LAHORE, KARACHI & ISLAMABAD. Psychological Segmentation Psychologically targeting, “FitChip” is concentrating its focus on Elite class (health conscious class), Middle Class and Lower Middle class. This product of ours is not good for the high cholesterol people as it is highly protein that is protein is not good for the people because they could get heart attack.

Market Segmentation

Women

House

Hold

Teenager s

Kids

Famil y

Men

Target market:
Our target market volume is almost every food lover but still we have estimated a number of 405405 people living in different localities of Lahore, who have potential to visit. Beside in Karachi the target market potential seeker are more than 30% then in Lahore as according to the data. In Islamabad we could see a good and equally attractive market but due to low population the turnover there would be equally low.

Population of Lahore Below Poverty line (40%) Male population (45%) Under 20yrs of age (40%) No. of Housewives Lower Middle class/ Lower class (55%) Not interested (35%) Potential customers

7,000,000 2,800,000 1,890,000 2,310,000 924,000 1386,000 762,300 623,700 218,295 405,405

Positioning
Where our product does stands according to the market. Direct competitor: As this product is not in the market, it is just a new launch so we could find none direct competitors. It is a pure monopolized item in the market which is not before launched or existing. So we have no threat of direct competitors but we have threat of new entrants. Indirect competitor: Our product has 2 types of indirect competitors.

1. Competitors With Same Product Line
These are those competitors who have same chips line with them but they are in the fried chips. So they are sought of our competitors.

2. Competitors With Different Product Line These include all other competitors with biscuits and other junk eatable foods may b sometime nimkos and other, in short all people with snacks. Branding Strategy “FitChip” will be promoting as an entirely different and new brand in the market with its unique and distinctive attributes. It is a brand of different shades (attributes) for different demand clusters present in the market. Especially those people who are junk food lovers but want to remain fit. Product Category

“FitChip” can be categorized as a new brand with different food category among the food lovers in the Lahore, fitness lover in Karachi, Fashion in lovers of Islamabad, which needs intensified marketing efforts. Brand Positioning “FitChip” will position its brand among customers on the basis of the following: Desirable Benefits “PepsiCo.” is introducing a product line that is the part of culture from many years and we people, our ancestors were like to eat these products. But now they have become unhygienic to our health and very unhealthy as we are not in the habit of working out as our ancestors use to, but “FitChip” is promoting them for the first time by adding benefits like product differentiation, quality and so on. Beliefs and Value As “Lays” is REVIVING THE TRADITION, by providing a food line that have a strong cultural acceptance but are dying out because of poor precautions people took in their manufacturing. In short “Lays” is promoting the beliefs and values of culture. Brand Development Strategy In brand development strategy “PepsiCo” will be focusing on promoting healthy products in the food category. Thus for brand development strategy “Lays” will be focusing on Line Extension. Usability Testing We clearly know that the food industry is a growing industry and people are fond of eating carry food. Now what the barrier was that the food was unhealthy and was not so preferable to eat but when we talk about this food everyone was once thinking to use it as a good product.

PRICING STRATEGIES
“FitChip” is a new desirable segment, so we would be offering at high prices for this product. Pricing Objectives “FitChip” wants to have high growth rate hence we have to set that price for our product which gives us maximum possible profits in the initial stage of our organization. But the most desirable move we want to make is to made awareness initially. In pricing, “FitChip” is focusing in the following strategies: Market Skimming Strategy “FitChip” will be using market skimming strategy in which “Lays” is offering high quality products on the economical prices, in order to capture high market share, but niche segment could not be used penetrated but skimmed price. Cost Based Strategy For the pricing of products for cost base strategy let me tell you that the baking process of chips is far cheap then the frying Prices of “FitChip” with grams will be: GRAMS 12 30 170 PRICE 20 50 130

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