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Case Analysis Frito-Lay, Inc. - Frito-Lay Company has a limited number of resources to expend and is deciding to introduce a multi-grain chip in the salty snacks category named SunChips. This final decision will be made after testing the product

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Introduction

Case Analysis - Frito-Lay, Inc. - SunChips Written By: Table of Contents Problem Statement 2 External Analysis 2 Market Analysis 2 Customer Analysis 3 Market Tests 3 Competitor analysis 4 Environmental Analysis 5 Internal Analysis 5 Performance Analysis 5 Determinants of Strategic Options 7 Alternative Analysis 7 Alternative 1 7 Alternative 2 8 Alternative 3 8 Alternative 4 8 Recommendation 9 Appendix 1 10 Appendix 2 11 Appendix 3 12 Problem Statement Frito-Lay Company has a limited number of resources to expend and is deciding to introduce a multi-grain chip in the salty snacks category named SunChips. This final decision will be made after testing the product with various forms of research including concept testing, premarket testing, and test markets. After using these tests, it needs to be decided whether the new product will reach sales projection benchmarks give the marketing used to develop the product. External Analysis Market Analysis With nearly 90 million snack chip households nationally, there is a large market up for grabs. This industry is in a state of maturity but is constantly forced to introduce new brands in the market place. More than 650 products are introduced every year by national and regional competitors and less than 1% of new products generate $25 million in first year sales, which is the target to cover implementation costs. The snack industry has been instilled in America since its inception but with new developments with sociocultural environment changes, the market is forced to adapt. ...read more.

Middle

A 52 week test marketing of Sun Chips predicted a predicted a revenue of $97.12 million in first year sales. This results in a profit of $13.43 million after factoring in $22 million in marketing expense and $11.33 million of cannibalization from other products. A full scale national launch of Sun Chips would require a capital expenditure of $20 million. Consumers perceive Sun Chips as a healthier product compared to regular snack chips. Also, contrary to initial research, consumers who tried Sun Chips believed it to be an "everyday snack." The name Sun Chip gave consumers the idea that the chip was wholesome, great tasting, light and distinctive, and fun. Compared to one ounce of Doritos, one ounce of Sun Chips have 10 less calories, 2 grams less fat, and 50 milligrams less sodium. This data is consistent with customers' expectations of a healthier snack option compared to alternatives. Sun Chips are made with quality ingredients including whole wheat, golden corn, and other natural grains. The primary target market for Sun Chips is adults between the ages of 18 and 34. Studies showed that consumers in this age group were looking for a healthier snack option to the standard potato chip. Sun Chips were branded as "the great tasting snack chip for people who care about what they eat." The advertising campaign would convey the message that Sun Chips are wholesome, fun, and simple. ...read more.

Conclusion

pounds (millions) revenue (millions) Gross Margin (millions) Gross Margin w/ Cannibalization Trial 117.94 7.37 19.90 9.58 7.26 First Repeat 129.17 8.07 21.80 10.50 7.95 Depth of Repeat 374.59 23.41 63.21 30.44 23.06 Total 621.70 38.86 104.91 50.51 38.27 Cannibalization $2.91 Alternative 2 ounces (millions) pounds (millions) revenue (millions) Gross Margin (millions) Gross Margin w/ Cannibalization Trial 107.46 6.72 18.13 8.73 6.62 First Repeat 97.51 6.09 16.45 7.92 6.00 Depth of Repeat 282.78 17.67 47.72 22.98 17.41 Total 487.75 30.48 82.31 39.63 30.03 Cannibalization $2.29 Margin - Marketing $8.03 Alternative 3 ounces (millions) pounds (millions) revenue (millions) Gross Margin (millions) Gross Margin w/ Cannibalization Trial 107.46 6.72 18.13 8.73 6.62 First Repeat 99.38 6.21 16.77 8.07 6.12 Depth of Repeat 288.21 18.01 48.64 23.42 17.74 Total 495.06 30.94 83.54 40.22 30.48 Cannibalization $2.32 Margin - Marketing $8.48 Alternative 4 ounces (millions) pounds (millions) revenue (millions) Gross Margin (millions) Gross Margin w/ Cannibalization Trial 107.46 6.72 18.13 8.73 6.62 First Repeat 97.51 6.09 16.45 7.92 6.00 Depth of Repeat 316.90 19.81 53.48 25.75 19.51 Total 521.87 32.62 88.07 42.40 32.13 Cannibalization $2.45 Margin - Marketing $10.13 Original ounces (millions) pounds (millions) revenue (millions) Gross Margin (millions) Gross Margin w/ Cannibalization Trial 115.51 7.22 19.49 9.38 7.11 First Repeat 117.95 7.37 19.90 9.58 7.26 Depth of Repeat 342.05 21.38 57.72 27.79 21.06 Total 575.51 35.97 97.12 46.76 35.43 Cannibalization $2.70 Margin - Marketing $13.43 ?? ?? ?? ?? SunChips 2012 2 | Page ...read more.

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