Frito Lays Dips Strategic Marketing

Background

In 1985 dip popularity had rose in the past years as a result of the convenience of use, multiple users, and popular trends in the United States. Dips are typically used as an appetizer, snack, or accompaniment to a meal.

Dips can be served along with chips, crackers, or raw vegetables. The market for dips is highly fragmented and difficult to measure, although 80% of dip sales are accounted for by supermarkets. Industry estimates state that total dip retail dollar sales volume through supermarkets was $620 million in 1985. Two-thirds of this dollar volume was captured by prepared dips; the other one third was accounted for by dip mixes for at home preparation. The major competitors in this segment were Kraft, Borden, a large number of regional dairies, and numerous store brands.

Exhibit 1 on page 119 shows a breakdown of the $620 million sales of dips in supermarkets by product type. Prepared Dips accounts for $420 million of supermarket dip sales while Dip Bases only account for $2oo million of the market. Under the Prepared Dips category there is the Shelf-Stable Dips ($185 million) and Refrigerated Dips ($185 million). Frito-Lay accounts for $135million of the Shelf Stable Dip category and competes directly with all others in that category which amount to a total of $50 million.

During a planning meeting at Frito-Lay Inc., a division of PepsiCo Inc. the issue was raised about where and how Frito Lay’s Dips could be developed further. One of the two viewpoints expressed was that the dip line should be more aggressively promoted in its present market segment that had been broadly defined as the “chip dip” category. The other view point was that Frito-Lay should also actively pursue the “vegetable dip” category. This new dip was the first sour-cream based dip introduced by Frito Lay. Many people thought that this dip could provide a bridge into the vegetable dip category.

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