The main reason Borden Foods decided to stop focusing on snacks and instead prioritize their whole-wheat meal segments was because they wanted to concentrate their efforts and resources on the growth of these segments. As part of this plan, they announced the sale of Cracker Jack in 1997. The management team at Borden also realized that they had been unable to successfully increase sales in the past five years due to heightened competition. Additionally, the Cracker Jack brand offered a variety of packaging options and had a large product line of 32 Stock-Keeping Units (SKUs). However, the production facility at Borden currently only allocated 32 percent of its space to Cracker Jack Products and operated at 32% of its full capacity. The management at Cracker Jack believed that expanding distribution was the most crucial aspect of their new strategy. They felt that the current sales force and broker/distributor network used by Borden should be replaced with a direct-store-delivery sales force. This was because placing the product in the grocery DSD snack aisles, which are the most popular snack aisles in supermarkets, would lead to greater sales. However, implementing a DSD sales force requires more resources than Borden’s current sales and distribution network. Borden Foods management was not prepared or equipped to invest in a DSD sales force for Cracker Jack due to the resource demands of other business opportunities.Identification and determination of the root cause of a problem.
Frito-Lay, the leader in salty snack food production, sought a competitive advantage by offering something distinct in their products. The Cracker Jack brand boasts a remarkable 97% awareness among individuals aged 15 to 60 and 95% awareness among caramel popcorn consumers. Despite minimal advertising efforts, Cracker Jack remained widely recognized. Frito-Lay recognized several reasons for acquiring Cracker Jack. Upon the announcement of the acquisition opportunity, Frito-Lay’s sales and distribution team immediately began conducting research. Integrating Cracker Jack into Frito-Lay’s existing sales and distribution infrastructure presented a significant opportunity. The Cracker Jack name enjoys near-ubiquitous recognition and holds considerable brand equity, primarily attributed to its rich heritage and generally favorable image. Although it has experienced a decline in recent years, Cracker Jack remains a respected brand with a positive reputation and the potential for future growth.
According to the results of the Simulated Test Market, nearly half of consumers are not purchasing this product due to a lack of advertisements, unavailability in their area, and concerns about product quality or value. This presents a great opportunity to improve and regain that 50% market share by winning over these customers. It is likely that this is one of the main reasons why Frito-Lay decided to acquire Crackerjack. Additionally, the addition of a new sweet snacks division can create opportunities for Frito-Lay by utilizing existing distribution networks and marketing channels for the new product. The inclusion of Crackerjack is an example of marketing enhancement that will generate additional retail selling points and provide Frito-Lay with distribution opportunities in both salty and confectionery markets.
SWOT Analysis
Strengths
– Strong and Reputed Brand Name
– More Numbers of likes compared to dislikes of the products
– Brand awareness of 97% amongst the 15-60 years old
– A 100 years history of existence
– Huge room for expansion or addition of new products as has 50 manufacturing and processing plants
– Have tools and infrastructure to work closely with 480,000 retail trade locations weekly.
Opportunities
– Stimulated test market
– Brand Extension
– Flavor extension
– Sales through different channels like small and large scale business.
Weaknesses
– CJ has too many products SKU numbers
– The weak financial position of Cracker Jack which incurred losses in 1995 and 1996
– CJ increased the price of the product to maintain their net income resulting in Frito-Lay decreasing to remain competitive.
Threats
Competition
Lack of adaptability
Internal Developmental costs
High price than other.
The evaluation of alternative options for increasing sales of Cracker Jacks reveals that although currently representing a small portion of Frito-Lay’s business, there is potential for significant growth in this division. Frito-Lay, the leader in the US market in terms of market share and sales volume, can leverage their advertising and marketing expertise to enhance the success of Cracker Jacks. To attract customers, Cracker Jacks should be positioned as a healthy snack option made with natural ingredients like popcorn. Targeting small children as the primary market is recommended. Offering various sizes and convenient packaging options will enable customers to easily grab and go without the need for a box. Furthermore, maximizing the availability of Cracker Jacks in as many stores as possible can be achieved by utilizing the existing direct store delivery channels. However, careful consideration should be given to any potential changes to the key features of Cracker Jacks, such as the inclusion of gifts in each bag and the flavor. These features are integral to the appeal of Cracker Jacks and draw in many customers.
In my opinion, Borden Foods will sell the company for over 30 million dollars, considering its assets and goodwill for the year ending in 1996. Nonetheless, Frito-Lay should only pay approximately 25 million dollars for acquiring the company. This is due to the current market shares and popularity of Cracker Jack, which require more effort to achieve sales figures comparable to other Frito-Lay products. Additionally, lowering the product’s price is necessary to maintain competitiveness, which is another factor for Frito-Lay.
