Firto Lay

Frito Lay SWOT

STRENGTHS

1. High Brand Equity (Frito Lay is worldwide leader in the manufacturing and marketing of snacks. Frito lay is the leading manufacturer of snack chips in USA with retail market share 54% in 1996).

2. Large Distribution network/broad distribution coverage (Frito lay has 45 manufacturing plants in 26 states and operates 1800 warehouses )

WEAKNESS

1. Less Diversified - highly concentrated in Salty snack segment and North America (Frito lay North America accounted for 68% of sales and 79% of ops profit in 1996.)

2. Narrow product line (for example 'better for you' snacks including baked lay's potato crisps tortilla chips and Gold pretzels accounted for 47% of volume growth in 1995 and 1996 and 40% in 1994, close to 50% of volume growth driven by single product line)

OPPORTUNITY

1. Opportunity to enter the sweet snack segment using strong Cracker Jack brand equity.

2. Under Marketed RTE category (the category is viewed by category analysts as an under marketed category).

THREAT

1. Average RTE caramel popcorn consumption frequency is low relative to other snack categories at less than 2 purchases per year.

2. Acquisition of Cracker Jack could cannibalize Frito lay's salty snack chips category.

Leverage.

Given Frito Lay's broad distribution network, it can exploit the opportunity of acquiring Cracker Jack (currently facing distribution challenges) and venture into the sweet snack market.

Vulnerability

Although the broad distribution network would help it acquire Cracker Jack, Frito Lay may cannibalize its salty snack category sales.

------- Cracker Jack's strategy of fat free line extension generally was a bad move for the following reasons:

1. Over 30 years, the Cracker Jack brand positioning focused on its brand heritage as a traditional fun treat and for 100 years, the Cracker Jack product line consisted only of Caramel-coated popcorn and peanuts using the original recipe. As such consumers identified Cracker Jack with this original concept. The repositioned brand somewhat confused consumers whether to look at Crack Jack in the manner they have always known the brand or to call it something else. Overall, it did not meet what customers expected out of the brand.

2. Findings by about why buyers did not purchase Cracker Jack indicate that of those who did not purchase the brand, only 6% considered unhealthy and among those who actually bought the brand only 9% thought it was unhealthy. Further the industry fat free did not command such a premium brand as that charged by Frito lay. Introducing a brand offering the same attributes as what other industry plays are offering but relatively cheap and marketing it as a premium brand because of the brand equity of existing brand is a bad idea.

3. The promotion message "Cracker Jack, the sweet and crunch fun snack you remember, has surprisingly less fat than you thought", clearly illustrates the overall branding challenges of the fat free idea. The uniqueness of the original recipe for which Cracker Jack was known for and the new benefits the brand offered while somewhat different (level of fat vs. fat free) could not be easily distinguished.

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Of the three components of brand equity, brand integrity presents the most significant immediate barrier to building the Cracker