Frito-Lay Company

Introduction

In 1932, Elmer Doolin started doing business in a small San Antonio cafe and purchased a bag of corn chips to eat with his sandwich. Mr. Doolin set his new business venture in his mother's kitchen. Because there was no money for hiring employees, his family helped him. In 1933, the fritos production was increased by designing a "hammer" pres and the company continued to expand.

In 1945, as American returned to peace-time, the country exposed a huge demand, booming population.In order to meet it, The Frito Sales Company was established, which separated sales from production activities Expansion by the Frito National Company continued with the issue of six franchises in 1945. The first of the FRITOS® franchises was offered to The H.W. Lay Company of Atlanta, GA., and would be the start of a partnership that would change consumption patterns of American people. Its first public stock was issued in 1954, with sales that year reaching $21 million. (www.researchandmarkets.com)

“Mr. Doolin changed a small, kitchen-operated business into a multi-million dollar company. At the time of his death in 1959, The Frito Company produced over forty products, had plants in eighteen cities, employed over 3,000 people, and had sales in 1958 in excess of $50 million. Today, FRITOS® Corn Chips rank among the top 10 salty snacks in the United States.”

Problem Statement

Frito-Lay has very good arguments for both opportunities in the marketplace.

SWOT Analysis

Strengths

Frito-Lays were a highly profitable product line and had show phenomenal sales growth in the past five years. 'Shelf-stable' dips can be displayed virtually anywhere in a supermarket. § Frito-Lay is a nationally recognized leader in the manufacture and marketing of salty snack foods. In 1985, Frito-lay captured about 33 percent of the salty snack food tonnage sold in the United States. For Frito-Lay's cheese dips, Frito-Lay chose to stay with the Frito-Lays name to trade off the company's equity in salty snacks and capitalize on the company's strengths in marketing and distribution. The phenomenal success of Frito-Lays Dips was due to two factors: cheese dips were novel and Frito-Lays flavors were innovative, and they had the right merchandising location next to salty snacks. Consumer household penetration increased from 12 percent in 1983 to 20 percent in 1984, (Choo & Chen 21)driven largely by placing cheese dips near salty snacks. The association between chips and dips was conveyed in promotions and in shelf placement. Providing their consumers with easy-to-use, convenient and innovative containers are one of their top priorities. Package introductions they have made over the years include metal cans and required no refrigeration. The vegetable dip may be packaged in an air-tight recyclable plastic jar which can be readily prepared and opened on the spot. With metal cans, the dips must be transferred to another container because the metal cans cannot be sealed again. Air-tight jar is very practical for the whole family (consumers).

For Frito-Lay cheese dips, Frito-Lay chose to stay with the Frito-Lays name to trade off the company's equity in salty snacks and capitalize on ...