FRITO-LAY

TARGETS
THE
HISPANIC
MARKET
Frito Company was founded in 1932 in San Antonio, Texas, by Elmer
Doolin. H.W. Lay & Company was founded in Atlanta, Georgia, by
Herman W. Lay in 1938. In 1961, the two companies merged to form
Frito-Lay, Inc., with headquarters in Texas. Frito-Lay produced,
distributed, and marketed snack foods with particular emphasis on
various types of chips. In 1965, the company merged with Pepsi-Cola to
form PepsiCo, Inc. Three decades later, Pepsi-Cola combined its
domestic and international snack food operations into one business unit
called Frito-Lay Company. Today, Frito-Lay brands account for 59% of
the U.S. snack chip industry, and there are more than 45,000 Frito-Lay
employees in the United States and Canada. In the late 1990s, despite its
overall popularity, Frito-Lay faced a general lack of appeal to
Hispanics, a fast-growing U.S. market. In an effort to better penetrate
that market, Frito-Lay hired various

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market researchers to determine why Hispanics were not purchasing
their products as often as company officials had hoped and what could
be done about the problem. In the studies, market researchers
discovered that Hispanics thought Frito-Lay products were too bland,
Frito-Lay advertisements were not being widely viewed by Hispanics,
and Hispanics tended to purchase snacks in small bags at local grocery
stores rather than in the large family-style bags sold at large
supermarkets. Focus groups composed of male teens and male young
adults—a group that tends to consume a lot of chips—were formed. The
researchers determined that even though many of the teens spoke
English at school, they spoke Spanish at home with their family. From
this discovery, it was concluded that Spanish advertisements would be
needed to reach Hispanics. In addition, the use of Spanish rock music, a
growing movement in the

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Hispanic youth culture, could be effective in some ads. Researchers also
found that using a “Happy Face” logo, which is an icon of Frito-Lay’s
sister company in Mexico, was effective. Because it reminded the 63%
of all Hispanics in the United States who are Mexican American of
snack foods from home, the logo increased product familiarity. As a
result of this research, Frito-Lay launched its first Hispanic products in
San Antonio, in 1997. Within a few of years, sales of the Doritos brand
improved 32% in Hispanic areas. In May 2002, Frito-Lay teamed up
with its Mexican affiliate, Sabritas, to launch a new line of products to
further appeal to Hispanic customers. Included in these offerings are
Sabritas Adobadas tomato and chile potato chips, Sabritones
Churrumais fried corn strips with chile and lime seasonings, Crujitos
queso and chile flavor puffed corn twists, Fritos Sabrositas lime and
chile chips, El Isleno Plantains, and others.

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Discussion
Questions
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In the research process for Frito-Lay Company, many different numerical
questions were raised regarding Frito-Lay products, advertising
techniques, and purchase patterns among Hispanics. In each of these areas,
statistics—in particular, hypothesis testing—plays a central role. Using the
case information and the concepts of statistical hypothesis testing, discuss
the following:

1. Many proportions were generated in the focus groups and market

research that were conducted for this project, including the proportion of
the market that is Hispanic, the proportion of Hispanic grocery shoppers
that are women, the proportion of chip purchasers that are teens, and so
on. Use techniques presented in this chapter to analyze each of the
following and discuss how the results might affect marketing decision
makers regarding the Hispanic market.

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a. The case information stated that 63% of all U.S. Hispanics are Mexican
American. How might we test that figure? Suppose 850 U.S. Hispanics
are randomly selected using U.S. Census Bureau information. Suppose
575 state that they are Mexican Americans. Test the 63% percentage using
an alpha of .05.

Conclusion: Since the

observed z = 2.81 > z.025 =
1.96, the decision is to
reject the null hypothesis.
The proportion of
Hispanics that are Mexican
Americans is not .63. The
sample data indicate that
the proportion is higher.

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b. Suppose that in the past, 94% of all Hispanic grocer shoppers were
women. Perhaps due to changing cultural values, we believe that more
Hispanic men are now grocery shopping. We randomly sample 689
Hispanic grocery shoppers from around the United States and 606 are
women. Does this result provide enough evidence to conclude that a lower
proportion of Hispanic grocery shoppers now are women?

Conclusion: Since the

observed z = -6.69 <
z.05 = -1.645, the
decision is to reject the
null hypothesis. The
proportion of Hispanic
grocery shoppers that
are women is less
than .94.

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c. What proportion of Hispanics listen primarily to advertisements in Spanish?
Suppose one source says that in the past the proportion has been about .
83.We want to test to determine whether this figure is true. A random sample
of 438 Hispanics is selected, and the Minitab results of testing this
hypothesis are shown here. Discuss and explain this output and the
implications of this study using  = .05.

Conclusion: Since the p-value of .042 <  = .05, the decision is to

reject the null hypothesis. The proportion of Hispanics who listen to
advertisements in Spanish is not .83. The sample data indicate that the
proportion may now be less than .83.

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2. The statistical mean can be used to measure various aspects of the
Hispanic culture and the Hispanic market, including size of purchase,
frequency of purchase, age of consumer, size of store, and so on. Use
techniques presented in this chapter to analyze each of the following
and discuss how the results might affect marketing decisions.
a. What is the average age of a purchaser of Doritos Salsa Verde?
Suppose initial tests indicate that the mean age is 31. Is this figure really
correct? To test whether it is, a researcher randomly contacts 24
purchasers of Doritos Salsa Verde with results shown in the following
Excel output. Discuss the output in terms of a hypothesis test to
determine whether the mean age is actually 31. Let  be .01. Assume
that ages of purchasers are normally distributed in the population.

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> Since the observed t = -1.52 > t23,.005 = -2.07, the decision is to
fail to reject the null hypothesis. There is not enough
evidence to say that the average age is different from the
mean age of 31. Marketing decision makers must assume that
the average age has not changed.

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b. What is the average expenditure of a Hispanic customer on chips per
year? Suppose it is hypothesized that the figure is $45 per year. A
researcher who knows the Hispanic market believes that this figure is
too high and wants to prove her case. She randomly selects 18
Hispanics, has them keep a log of grocery purchases for one year, and
obtains the following figures. Analyze the data using techniques from
this chapter and an alpha of .05. Assume that expenditures per customer
are normally distributed in the population.

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Conclusion: Since the observed t = -2.06 < t.05, 17 = -1.740,
the decision is to reject the null hypothesis. We can conclude
that the average expenditure of Hispanic customers on chips
per year is less than $ 45.
Thank
You!
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