Frito-Lay Sun Chips-Multigrain Sun Chips The problem definition: a presentation on the future action of the brand related to test market of 10 months.
Frito-Lay, Inc. is a division of PepsiCo Inc. it is a worldwide leader in snack ships with different brands and products. The challenges and risks Frito-Lay faces in marketing Sun Chips are: Competition The snack chip category is highly competitive and the new-product failure rates high. Very few new products can generate more than $25 million in firstyear sales. It leads to the competitive pricing problem
and the importance of using other tools to stimulate the sales. The challenges and risks Frito-Lay faces in marketing Sun Chips are: Manufacturing Since Sun Chips is a multigrain product, large-scale manufacturing requires different process and technology; in other words, a new
investment in new production line is necessary. The challenges and risks Frito-Lay faces in marketing Sun Chips are: Creating brand awareness As we know, this category is highly competitive, in order to expand the market, the brand awareness is a key issue. As long as the product is launched, more money should be spent
on advertising to increase the brand awareness. The challenges and risks Frito-Lay faces in marketing Sun Chips are: Product cannibalization The research in the test-market shows a 30% cannibalization rate of Sun Chips. And one-third of the cannibalized volume are from Doritos brand tortilla chips, which is also a product
from Frito-Lay. The challenges and risks Frito-Lay faces in marketing Sun Chips are: Timing and competitive reaction The competitors were monitoring Frito-Lays test market; they might launch the same product and upstage 2-Frito-Lays last multigrain snacks program failed, the insights can be
drawn from that experience are: Choose a right name The failed multigrain product called Prontos, which is hard for people to link to the healthy, nutritious snacks. However, Sun Chips has a very positive image and this name is the result from the brand name testing. 2-Frito-Lays last multigrain snacks program failed, the insights can be
drawn from that experience are: A broader target market Prontos was first introduced in 1974, when the wholesome snacks market was not yet fully formed. But later this concept was perceived as a healthier product, the market was mature. 2-Frito-Lays last multigrain snacks program failed, the insights can be drawn from that experience are:
Manufacturing technology available The other reason led to the failure of Prontos is the difficulties of manufacturing. But now this is no longer an obstacle for Sun Chips multigrain snacks. 3.The conclusions we can get from the Premarket Test are: Strong selling potential.
A prediction of first-year sales volume of $133 million was given from the research. 3.The conclusions we can get from the Premarket Test are: $22 million of A&M would be a proper amount. In order to achieve the $100 million first-year sales goal, Frito-lay has to adapt the larger amount of advertising
and merchandising expenditure. 3.The conclusions we can get from the Premarket Test are: Natural and French onion Vs. Natural and Cheddar Frito-Lay was going to combine two different flavours together. From the results,(a) Natural and French onion combination produced the lowest cannibalization, and (b) it had a better selling potential, the sales volume was supposed to grow by 58%. (c) In the other
hand, the combination of Natural and Cheddar were better accepted according to the firstyear trial rate and first-year repeat rate. 4.The results from the in-market testing conducted in the Minneapolis-St. Paul showed some differences from those of the premarket test. Trial and Repeat Rate The first-year trial and repeat rate from the simulated testmarket was 25%and 57%, however, the trial and repeat rate of the first month reached
almost20% and 42%. These data showed that the market accepted the product very well, and the Sun Chips was ready to be launched nationally. 4.The results from the in-market testing Depth of repeat rate The depth of repeat rate of Sun Chips was 2.9 times, however the recently most successful OGradys
depth of repeat rate was only 1.9 times. 4.The results from the in-market testing Product Cannibalization The cannibalization rate of Sun Chips was only 30%, which was much lower than the forecast in the pre-marketing test, 42%.
That cannibalism rate was common, and the gross margin of Sun Chips was higher than that for Frito-Lays other snacks. FritoLay can afford that cannibalization and Sun Chips was a profitable product. 5.Frito-Lay should launch the Sun Chips nationally using the strategies adapted in the test market to ensure its first-to-market position in the new snack chips category .
Most of the strategies applied in the test market would still be used in the national launch, some of adjustments would be considered: A&M Strategy In order to reach the goal of high brand awareness, Frito-Lay should consider invest more money on marketing and advertising. A budget of $30 million would be a proper amount.
One More Strategy like Product Strategy At the beginning of the introduction, the Sun Chips will provide customer with two flavours (Natural & French onion), in three sizes (2 , 7, 11 ounce). A new flavour of mild cheddar and a larger size of 15 ounce are
under consideration. However the decisions would be made according to the performance of the initial flavours and packages, more marketing research would be required.
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