The primary reason for the Borden Foods to divert itself from snacks is to emphasis its efforts and resources in the growth of their whole-wheat meal segments. Because of this valuation they had and a growth plan they had they decided to announce sale of Cracker Jack in 1997. The management team of Broaden also recognized that with the increase in competition they have not been able to successfully grow the sales figure in past five years. Also because the Cracker Jack brand has various packaging options and has been maintaining a huge product line of 32 Stock-Keeping Units (SKUs). However, currently Broaden production facility had only 32 percent of space allocated to Cracker Jack Products and has been operating at 32% of its full capacity. Cracker Jack Management believed that the broadened distribution was the most important element of their new strategy. They believed that Broaden sales force and broker/distributor network currently in use should be replaced by a direct-store-delivery sales force. It was believed that a DSD sales force would provide product placement in the grocery DSD snack aisles, which is the highest velocity snack aisles in supermarkets. However, a DSD sales force is more resource intensive than Borden’s present sales and distribution network. Borden Foods management was neither prepared to make the investment required nor equipped to handle a DSD sales force for Cracker Jack given the resource demands of other business opportunities. Problem identification and root cause
Frito-Lay is the market leader in the salty snack food production having something different in their products will get a competitive advantage. Cracker Jack as a brand has a 97% awareness with people from the ages of 15 to 60 and a 95% awareness amongst the caramel popcorn users. This was a very well known brand even with a very few advertisements. There are other several reasons which is explained below why Frito-Lay decided to acquire the Cracker Jack. Frito-Lay sales and distribution team were starting to do the research as soon as the Cracker Jack acquisition opportunity became public. It was a great opportunity to fit in Cracker Jack in the existing Frito-Lay sales and distribution infrastructure. The Cracker Jack name registers virtually universal awareness and Cracker Jack has respectable brand equity due largely to its heritage and generally favorable image foundation. It is a recognized brand with a positive reputation that has lost its momentum in recent years but still has that chance of growing to the peaks.
According to the results of Simulated Test Market , almost 50% of the consumers are not buying this product because of no advertisements, non-availability in the area and product quality or value. Here is the best opportunity to improve and re gain that 50 % market share by winning over these customers. This might be one of the major reasons why Frito-Lay decided to acquire the Cracker Jack. Additionally the new division of the sweet snacks can create opportunities for the Frito-Lay by using appropriate existing distribution networks and marketing channels for the new add on product. Addition of Cracker Jack is one of the example of marketing enhancement which will create the additional retail selling points, giving Frito-Lay distribution opportunity in both salty and confectionery.
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.
Stimulated test market
Sales through different channels like small and large scale business. Weakness
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 the Frito-Lay to decrease to remain competitive
Lack of adaptability
Internal Developmental costs
High price than other.
Evaluation of Alternative
Cracker Jacks sales will represent a tiny part of the Frito-Lay’s business currently, however the chances are high to get the numbers high from this division if proper decisions are made. Frito-Lay is the leader in the US market concerning market share and sales volume. So they can use their advertising and marketing experience to uplift CJ. CJ should be marketed as a stackable treat which is healthy as of natural ingredients like popcorn. Marketing researchers should focus on the small children as the target market as well. By launching the different sizes and convenient packages to the customers so that they can grab it and go rather than having a box. The CJ should be made available to as many stores as possible by utilizing the same direct store delivery channels. A careful analysis has to be done to change any features like gifts in each bag and the flavor of the CJ, because that is the major point of CJ and most of the customers are attracted because of that particular features. Recommendation
In my opinion the Borden Foods will sell the company for above 30 million dollars based on the assets it has and the goodwill for the year ending 1996. However the Frito-Lay should only pay around 25 million dollars for acquisitions of the company. Because of the Cracker Jack current market shares and the popularity there is much more work needed to be done so that the product can gain the similar amount of sales figures as other general Frito-Lay products does. Also the price of the product has to be lowered to remain competitive which is another factor for Frito-Lay.