Frito Lay Case Study

Frito-Lay Dips Case Study

1. In the mid-1980’s the overall dip market in the United States was doing well, but showed signs of slowing down. The data indicates that dips were very popular, in part because there were new varieties introduced to the market. Dips became somewhat of a fad and consumers bought what was popular. Also at this same time is when vegetable dip started to become popular. Consumers were starting to become more aware of their health and were making conscious decisions to purchase and consume more healthy alternatives and companies strategically marketed to the change in demand.

2. The different ways that supermarket dip market could be segmented are as follows:

Prepared Dips Dip Bases

-Refrigerated Dips -Dry Soup Mixes

-Sour Cream-Based -Dry Dip Mixes

-Cheese-Based -Sour Cream

-Shelf-Stable Dips -Cream Cheese

-Frito-Lay

-All Others

3. Frito-Lay Market Share for shelf stable dips: $135,000,000/$185,000,000 = 72%

Frito-Lay has a great competitive position in the supermarket shelf-stable dip segment. They account for well over the majority of sales.

4. Frito-Lay dips are profitable. The company would not still remain in the business for this long if the product was not generating a positive contribution. Also, not only are dips profitable for Frito-Lay but they act as a complimentary item to their other product brands (potato chips, corn chips, tortilla chips, etc.) and add to the overall value of the company (i.e. the “halo effect”). Per the 1985 income statement, the most profitable product line is the Mexican dip at $5,192. While the cheese dip outsold the Mexican dip, due in large part to it being a new product line, the marketing expenses took away from the overall profit of this product line. Since the 1986 forecast shows sales to remain higher for the cheese dip it could mean this product would take over as the most profitable dip for Frito-Lay.

5. Profit Contribution...