Frito-Lay Marketing Plan - Marketing Essay Example

Frito-Lay Marketing Plan

1 - Frito-Lay Marketing Plan introduction.0    Executive Summary

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The main purpose of this marketing plan is to familiarize and define its industry, competition and its market viability.  It is believed that through this, different tactics and strategies can be employed to increase the sales goals of the company in  a given location.

Frito-Lay is one of the leading manufacturers of the different snack products.  In fact, they are considered as the largest company that sells these types of food products in the market of the United States.  It has under its wing more than “fifteen $100 million brands of products which include: LAY’S®, FRITOS®, RUFFLES® DORITOS®, CHEE.TOS®, BAKEN-ETS®, FUNYUNS®, TOSTITOS®, SUNCHIPS®, MUNCHIES®, BAKED LAY’S®, WOW!®, OBERTO®, ROLD GOLD®, GRANDMA’S® Cookies and Quaker Chewy Bars®, Quakes® and Fruit & Oatmeal Bars®.” (Frito Lay History, 2007)

Marketing plays a pivotal role in the continuing domination of the company among the different snack foods available in the market.  Frito-Lay needs to maintain its different promotional strategies which includes local and international advertising in the different media forms which includes television, print outs, radio and billboards.  Likewise, through this plan loyalty on the brands of the company among the costumers needs to be strengthened.  This can be achieved through product innovation based on the needs of the market.  This of course spells costumer satisfaction.

The company boasts a “health and wellness” program through is carefully  developed products.  It is able to answer to the different health concerns of the buying public. The company is committed on providing snacks which are great tasting and have different nutritional content.  It makes use only of the best ingredients in the market.  For its chips products, it makes use of  a patented Frito lay potatoes.  The manufacture of its ingredients are carefully monitored and managed by the company to ensure the highest standard of harvest.

Frito-Lay also had initiated the research on the different cooking oils available in the market.  It was able to use polyunsaturated oils instead of the conventional cooking oils to ensure the reduction of the fat content in its products.  By the year 2003, it had successfully converted to the use of non-hydrogenated oils.  This means the complete elimination of trans fats in the chips.  Research shows that an increase in the polyunsaturated fatty acids in the different food snacks helps in the reduction of coronary heart disease.  Other variations in the ingredients produced different products that try to answer as many health concerns of the publics. These are listed in the company website (2007), the products include:

Ingredient variation and some examples
Seasoned products made without Porcine enzymes

BAKED! CHEETOS® Crunchy Cheese Flavored SnacksDORITOS® Salsa Verde Flavored Tortilla Chips
FLAT EARTH® Apple Cinnamon Grove Baked Fruit Crisps
Products Not containing Gluten

DORITOS® Wild White Nacho Flavored Tortilla Chips FUNYUNS® Onion Flavored Rings
LAY’S® Cheddar & Sour Cream Artificially Flavored Potato Chips
FRITO LAY® Cashews
Products not containing Gluten and Casein

BAKED! LAY’S® Original Potato Crisps
BAKED! RUFFLES® Original Potato Crisps
BAKED! TOSTITOS® Scoops! Tortilla Chips
BAKEN-ETS® Fried Pork Skins
BAKEN-ETS® Hot ‘N Spicy Flavored Pork Skins
Products containing 7.5 grams or less fat

CHESTER’S® Butter Flavored Puffcorn Snacks
CRACKER JACK® Original Caramel Coated Popcorn & Peanuts
DORITOS® Salsa Verde Flavored Tortilla Chips
DORITOS® Toasted Corn Tortilla Chips
Products containing 140 mg or less sodium

CRACKER JACK® Original Caramel Coated Popcorn
DORITOS® Toasted Corn Tortilla Chips
FLAT EARTH® Apple Cinnamon Grove Baked Fruit
FLAT EARTH® Peach Mango Paradise Baked Fruit
FLAT EARTH® Wild Berry Patch Flavored Baked Fruit
FRITO-LAY® Honey Roasted Cashews
Baked vs. fried

CHEETOS® Crunchy Cheese Flavored Snacks
CHEETOS® FLAMIN’ HOT® Cheese Flavored Snacks
DORITOS® Light Tortilla Chips (all varieties)
DORITOS® Tortilla Chips (all varieties)
MUNCHIES® Snack Mix (all varieties)
Products not containing additives

LAY’S® Natural Sea Salt Thick Cut Potato Chips
LAY’S® Wavy Original Potato Chips*
Maui Style Regular Potato Chips*
MISS VICKIE’S® Original Potato Chips*
NUT HARVEST® Natural Lightly Roasted Almonds
NUT HARVEST® Natural Nut & Fruit Mix
Products certified Kosher Additives-Triangle K

GRANDMA’S® brand Vanilla Mini Cookies
GRANDMA’S® brand Vanilla Sandwich Cremes
LAY’S® brand Dill Pickle Flavored Potato Chips
LAY’S® brand Salt & Pepper Flavored Potato Chips
LAY’S® brand Salt & Vinegar Flavored Potato Chips
Products Not Containing Lactose or Milk

GAMESA® Sabrosas Crackers
GAMESA® Saladitas Saltine Crackers
GAMESA® Strawberry Fruitbars Cookies
GRANDMA’S® Homestyle Oatmeal Raisin Big Cookies
GRANDMA’S® Homestyle Peanut Butter Big Cookies
Products Not Containing MSG

CHEETOS® Cheddar Cheese on Golden Toast Flavored Crackers
CHEETOS® Natural White Cheddar Puffs Cheese Flavored Snacks
CRACKER JACK® Original Caramel Coated Popcorn & Peanuts
DORITOS® Natural White Nacho Cheese Tortilla Chips
DORITOS® Toasted Corn Tortilla Chips
Products not containing Onion

LAY’S® Classic Potato Chips
LAY’S® Deli Style Original Potato Chips
LAY’S® Dill Pickle Flavored Potato Chips
LAY’S® Kettle Cooked Original Potato Chips
LAY’S® Kettle Cooked Reduced Fat Original Flavored Potato Chips
Products containing egg

BAKED! LAY’S® KC MASTERPIECE® BBQ Flavored Potato Crisps
GAMESA® Emperador Strawberry Crème Sandwich Cookies
GAMESA® Grageas Cookies with Sprinkles
GAMESA® Lonchera Assorted Cookies
GAMESA® Marias Cookies
Products that may contain peanuts or tree nuts

CRACKER JACK® (all varieties)

FRITO-LAY® Nuts (all varieties)

FRITO-LAY® Trail Mix (all varieties)

GAMESA® Cookies & Crackers (all varieties)

GRANDMA’S® Cookies (all varieties)
Products containing soy

FRITOS® SCOOPS!® Corn Chips
LAY’S® Classic Potato Chips
LAY’S® Deli Style Original Potato Chips
LAY’S® Dill Pickle Flavored Potato Chips
LAY’S® Hot’n Spicy Barbecue Flavored Potato Chips
Target Market includes:

Students of all ages

Office workers in the different professional and business centers

Patrons of hospitals, movie houses, malls, parks, football games etc.

2.0    Situation analysis

Frito lay from its formal establishment in 1961 had worked its way from the southeast region to the national and international distribution of its goods.  Early on, during this time, it had acquired 46 manufacturing plants nationwide.  Likewise, the company has put up over 150 distribution centers across the country.  Its stocks rose gradually and made it to the New York Stock exchange.  In 1965, a new merger was formed this time with Pepsi Cola Company.

The snack industry is very competitive as more and more local brands flood the market.  Each offers a new variety of snacks.  The potato and corn chips throughout the years have been modified and repackaged to make it more marketable.  Frito-Lay remains to manage its competition by innovating its products, making it more appealing to the general public.

The increasing growth of the flavors and varieties of the Frito-Lay company is a good sign of the continuing efforts of the company to be on top of its game.

The general characteristic of the market is given by the following:

·      Served customers groups – the customers that the organization should market are according to the age group.  Clients between the age of four to ten years will demand a sweeter potato chip than those in the eighteen to twenty five age category.  Older clients prefer those that are healthy and less fat and cholesterol content.

·      Served customer functions – the market trend reveals that the new potato chip marketed should hold a vast array of flavors in order to complement the product variety demanded.

·      Technologies utilized – intense research and development should be applied in order to enhance the product features to be healthier and nutrient as the customer is demanding.  The company should therefore devote the necessary finance for such activities

2.1    Market Summary

The continuing popularity of the snack foods among the different age groups have

made this industry highly competitive.  With the long time experience of the company in dealing with changes in the market and answering costumer satisfaction, Frito-Lay had always enjoyed the top position in the market.

The target market of Frito-Lay have been steady and relatively growing in its pace.  The loyal costumers continue to patronize the different food products including those that have been recently released in the market.  In addition, the increasing conscious efforts by the company to produce products that serve as healthy options and have high nutritional content gives rise to the increasing market growth.

 

Target Market Growth:

The students’ preference for the Frito-Lay products increase at nearly 3%

Office workers especially those in business centers and professional buildings grows at 4%.

Patrons of hospitals, movie houses, malls, parks, football games etc. steadily rises at 6%

Others include seniors and teens.

 

2.1.1        Market Demographics

The costumers of Frito-Lay can generally be divided into two.  The first are those who throughout the years are loyal consumers of the products.  They continue to support the brand because of the quality that it had provided is consistent.  They welcome different varieties of the products that they are accustomed to.

The second are those who are conscious of their health.  Healthy innovations in the product have been part of the criteria in the development of the product.  As such, the wellness of the consumers are also highly considered thus helping in increasing the market of the products of Frito-Lay.

Costumer satisfaction has always been the mission of the company from its humble beginnings when the two companies are independent form each other and located on the different sides of the country.  Ensuring the quality of the products has been the primary reason why its market is continuously growing

 

Market Analysis

2002
2003
2004
2005
2006

Potential Customers
Growth

CAGR
Office Workers
4%
10,000
10,400
10,816
11,249
11,699
4.00%
Students
3%
20,000
20,600
21,218
21,855
22,511
3.00%
Patrons
6%
3,000
3,180
3,371
3,573
3,787
6.00%
Total
3.59%
33,000
34,180
35,405
36,677
37,997
3.59%
2.1.2  Market Needs

Different crucial factors such as being comfort foors and historical data guarantees that the demand for the product of the company will be steady over the years.

The increasing demand for healthy foods has triggered the food economy to be based on the wellness of every individual.  There is potential in the new varieties introduced by Frito-lay as they address the different nutritional needs of the public.  In addition, it had offered its consumers  a rather tasty products without the guilt of interfering with one’s diet.  Thus, establishing itself as a company which provides healthy options to its patrons gives them the advantage of higher market share.

2.1.3  Market Trends

A preoccupying trend that is constantly portraying its effect in the salty snack industry is the health issue of potato chips.  A research conducted in 1993 revealed that tight regulations are being imposed by the Government with respect to nutrition listing and labeling (Reference for business).  This was the result of the enactment of the Nutrition and Labeling and Education Act in 1990.  Such act for instance demands detail nutrition listing such as saturated fat per serving, daily reference values to aid comparison of dietary factors and more (Purdue University).

 

In addition, clients are also requesting more nutrient potato chips in view of the increasing health concerns.  The drastic pressure put by nutrition professionals on the gastrointestinal hazards of potato chips and other related health issues is incepting a trend of nutritional food shifting from low fat products.  Indeed at this stage it is important to highlight the rapid fall that the Wow fat-free potato chips manufactured by Frito-Lay Company had in 1999 even though they had lower cholesterol and fattening features.

The last but not least characteristic of the salty snack market is the necessitating flavor variety in the potato chips product.  The late 80s and 90s have underlined the fact that clients demand vast product variety and choice in the flavors offered.  In fact, the adoption of barbeque and sour cream and onion potato chips products aided in sustaining and developing the firm’s market share.

The total market share that management intends to achieve over the product life cycle is shown below.

CYCLE
YEARS
MARKET SHARE
Introductory stage
1
6%
Growth stage
2
12%

3
25%
Maturity
4
46%

5
54%

6-9
49%
Decline
10
35%
During the decline cycle, new and improved potato chips will be developed and be launched to restart the cycle.  This new innovations will be based on the market trend that is dictated during the decline stage.

 

Market Forecast:

 

As the increasing health consciousness among the buying public, the products of Frito lay is forecasted to increase the market share among the office workers.  Aside from having the buying power, they are continually looking for alternatives to satisfy their nourishment needs in a fast paced environment.  In addition, these groups of individuals are also more conscious on the benefits that they will be getting from the product that they consume.  They are predicted to establish loyalty in the product as long as all their needs are met.

 

 

2.2    SWOT Analysis

In this section, the strengths, weaknesses, opportunities and threats of the organization will be outlined in line with the external and internal environment that it will operate in.

Frito-Lay as an established company have a lot of strengths that had helped in its ability to maintain its position as the leading manufacturer and distributor of  snack foods in the United States.

2.2.1 Strengths

The main strengths that the company presently possesses are the following:

·      The product that will be launched in the market has better attributes than competing products by being a healthier good leading to a temporary competitive advantage.  This will help the organization to generate revenue and sustain and build up its reputation.

·      The company already holds a vast number of agreements with well established retailers.  This thus enables the corporation to quickly distribute and introduce effectively the product in the market. Likewise, the diversity of retailers offers the advantage of understanding further the needs and wants of the different costumers regardless of the difference in demographics.

·      Top management is fully aware of the need that a constant customer orientation approach is necessary for the survival of the organization.  Their pressure on employees to focus on clients will thus help the firm to be more competitive and responsive to threats from the external environment.

·      Its mission of maintaining sustainable growth within the company and its external environment.

2.2.2  Weaknesses

The most fundamental weakness that the enterprise will have is the health pressure exerted in the external environment.  Even though it is a healthier product when compared with competiting ones, the good still contains salts, sugar and other hazardous elements.  For instance, recent university studies highlighted the fact that low fat products like the one marketed increase the risk of cancer and hearth disease (Reference for business).  Such adverse influence will negatively affect the market reach of the product.

2.2. 3 Opportunities

The key opportunity that the organization faces is that in the future it can continuously sustain its market share internationally.  Exporting in foreign countries can help the firm increase its worldwide market share of potato chips and enhance its reputation globally.  A common saying used in business management which should be followed is that we have to “think local but act global”.  This means that we have to consider each countries client’s needs and wants in isolation but we have to market our product internationally.  The firm is already marketing products internationally, a careful research on the other possibilities in terms of introducing new varieties that are more appealing to the local market that it choose and price concerns.

 

2.2.4 Threats

 

Being a highly dynamic and challenging market, there are a number of threats that may emerge in the salty snack market.  The most significant ones are explained below:

·      In this industry the price difference between different competing  firms is getting smaller all the time even though the market is increasing.  Intense competition is directing towards closer product substitutes.  This therefore enhances the need for tremendous cost efficiency and cost control to enable competitive prices.  Improved product quality and brand image are also very important because they are becoming the only distinguishing feature from competitors products.

·      In the salty snack industry competitors can in the short term imitate our products.  There is also the risk that they can issue better products in terms of health and/or taste.  This therefore stems out the need of continuous research and development in new products.  It is a vital mistake if management relies on one product and avoids researching for improved products of better attributes.

 

2.3  Competition

The product upon which this marketing plan is based will face direct competition from competitors providing similar products, like General Mills Incorporation, Kellogg Company, Procter & Gamble, UTZ Quality Foods Incorporation and Kraft Foods Incorporation.  It is true that at the introductory stage the product will possess better features that will attract clients, but competitors will shortly manufacture similar or more health friendly products to compete.  They will not only compete on price and product quality, but also on distribution mediums.

 

Karfts foods has for its brand Nabisco was able to claim the second place in 2002 with a retail sales of $29.7 B.

Companies such as Anheuser-Busch, Keebler and Broden sought to fight the snack industry giant but lead to its exit from the salty snack industry.  This is attributed to the costly advertising war that they had engaged with Frito-Lay.

Pringles was then introduced by Proctor and Gamble.  Its has been growing in sales at roughly 20% per year.

Frito-Lay Company is presently one of the market leaders in the salty snack market.  It holds over 67% of the market’s sales.  However, the firm commenced facing tough competition from UTZ Quality Foods Incorporation on the grounds of distribution mediums.  The utilization of the internet to inform clients and market the products sold has boosted UTZ Quality Foods Incorporation in this market.  Management of Frito-Lay Company should keep abreast this competitive tool when the marketing strategy and action programmes are prepared in this marketing plan below.

 

3.0    Marketing Strategy

With the current standing of Frito lay in the market, maintaining this standing is as difficult as getting in that position.  It has at the moment , four main strategies.

The first strategy focuses on attracting new costumers.  This is done by providing proper education on the health benefits that one can achieve from the use of these products.  It would in turn lead to the increase of loyal patrons of the products.

The second strategy focuses on maximizing the use of different methods such as the internet in the education and trade of the different products.

The third strategy is geared on the convenience felt by the consumers in acquiring these products.  It will be made available in as many locations as possible.

Last but not the least, since the globalization of the product is already at hand, product development needs to cater as many diverse cultures present.

3.1    Mission

Frito-Lay provides its consumers the opportunity to enjoy tasty products at a

reasonable price while taking into account the consumer’s diet and nutritional needs.

The marketing strategy of Frito-Lay would be built on this mission.  From the

product development, pricing structure and its availability must be in accordance to the mission of the company.  The company caters to office workers, traveling business people, patrons of different establishments, and seniors.  The  marketing efforts are focused on preserving this market.

3.2  Marketing Objectives

Frito-Lay’s marketing objectives in its current operation include:

Total sales growth of at least 40% annually.

Provide diversity on existing products that would answer difference in nutritional needs and cultural preference.

Generate loyalty among customers through different educational campaigns.

Making its products more accessible and at a reasonable price.

Making Frito-Lay a household name not only in the United States but in different parts of the world as well.

 

 

3.3   Financial Objectives

The main goal of this plan is to be able to enlist different marketing strategies and programs that would help in maintaining the status of  the company as a leader in the snack food industry.  The vision include sales of roughly $30B having for at least an annual increase of 20%.

 

3.4  Target Marketing

The main target of the marketing plan are the professionals and the youth known as “Generation X”.

The primary target includes:

Students

The large student population in both the high school and college level is one of the primary target of the company.  They are seeking a convenient way of nourishing themselves that is within the allowances that is given to them.  They are looking for great tasting snacks that can help them get through the day.

Business People

The business companies are increasing especially due to the many opportunities that the different industries provide.  They are housed in high rise buildings in the metropolis.

Patrons of Establishments

With the proliferation of establishments that invites costumers to hang out like the internet café, the availability of snack foods by Frito-Lay provide a variety on the kind of products served.

Seniors

As people get older, they are now more conscious on the nutritional value of the food they consume.  Having the proper education would increase the marketability of the Frito-Lay products among the seniors.

3.5  Distribution

The main distribution networks available that will be adopted consist of direct channels as follows:

 

·      Hypermarkets, supermarkets and mass merchandisers are key retailers for the distribution of the product to the client.  Since the company is already well established, the present retailers used by the firm should be adopted.

·      A group of specialized salesmen whose responsibility is to negotiate agreements with new retailers willing to sell the aforementioned product.  This distribution medium can also apply to other products marketed by the organization.

3.6  Promotional Objectives

We have to comprehensively promote the product’s brand image and promote its benefits and value to maintain and build up a good brand.  Advertising and promotion techniques should also be adopt to reach the expected level of sales and create product awareness in the market.

3.7  Research and Development Aims

Brand strategy based on the premise to meet customers expectations and demands are very important in the Frito-Lay company.  The company employs the following strategy as given by the table:
Existing products
New products
Existing

Markets
Market

Penetration
Product

Development
New

Markets
Market Development
Diversification
The new product considered in this marketing plan, named Sklips potato chips will first be categorized under product development.  Under this strategy management will try to market the good in existing markets to regular clients.  Being a new product, a low price will be charged at first in order to quickly penetrate the market

Eventually to portray leadership in innovation, a product development strategy will be adopted for new products launched into the market with better features derived from research and development.

Presently market development in international markets and diversification strategies has been continually being developed.  These will be considered subsequently when this product reaches maturity in the local United States marketplace.

3.8   Promotion

Frito-Lay will spend more than half a million dollars in promotion in building up

new brands as well as customer base which are loyal to the products.  Marketing efforts will be focused on the different markets including the utilization of the Internet.  It would roughly increase by 10% per year to be at par with the increased sales revenue.  Marketing budget will be approximately equal to 20% of sale.

Different Marketing Efforts are:

Internet

TV advertisements

Newspaper

Billboards

Frito Lay Events

4.0    Financials, Budget, and Forecasts

4.1    Break Even Analysis

Break-even Analysis

Break-even Analysis

Monthly Units Break-even
$298,600
Monthly Revenue Break-even
$1,000,200

Assumptions:

Average Per-Unit Revenue
$33,500
Average Per-Unit Variable Cost
$840
Estimated Monthly Fixed Cost
$750,000
4.2    Sales Forecast

Sales Forecast

2002
2003
2004
2005
2006
Unit Sales

Reduced fat and fat free food products
162300
178530
196390
216020
237630
Specialty snacks
91290
100420
110470
121510
133660
Extruded snacks
121730
133900
147290
162020
178220
Potato chips
602550
662800
729080
801990
882190
Tortilla and Corn chips
547770
602550
662800
729080
801990

Total Unit Sales
15256400
16782000
18460200
20306200
22336800

Unit Prices
2002
2003
2004
2005
2006
Reduced fat and fat free food products
$1.00
$1.00
$1.00
$1.00
$1.00
Specialty snacks
$2.00
$2.00
$2.00
$2.00
$2.00
Extruded snacks
$10.00
$10.00
$10.00
$10.00
$10.00
Potato chips
$2.50
$2.50
$2.50
$2.50
$2.50
Tortilla and Corn chips
$1.25
$1.25
$1.25
$1.25
$1.25

Sales

Reduced fat and fat free food products
$162,300
$178,530
$1,963,900
$21,60200
$2,376,300
Specialty snacks
$182,590
$200,850
$2,209,300
$24,30300
$2,673,300
Extruded snacks
$1,217,260
$1,338,990
$14,728,900
$162,01800
$17,821,900
Potato chips
$1,506,360
$1,657,000
$18,227,000
$200,49700
$22,054,700
Tortilla and Corn chips
$6,847,100
$753,180
$8,285,000
$91,13500
$10,024,800

Total Sales
$37,532,300
$41,285,500
$45,414,100
$49,955,500
$54,951,000

Direct Unit Costs
2002
2003
2004
2005
2006
Reduced fat and fat free food products
$0.50
$0.50
$0.50
$0.50
$0.50
Specialty snacks
$2.50
$2.50
$2.50
$2.50
$2.50
Extruded snacks
$0.63
$0.63
$0.63
$0.63
$0.63
Potato chips
$0.31
$0.31
$0.31
$0.31
$0.31
Tortilla and Corn chips
$0.00
$0.00
$0.00
$0.00
$0.00
Other
$0.00
$0.25
$0.25
$0.25
$0.25

Direct Cost of Sales

Reduced fat and fat free food products
$8,11500
$8,92700
$9,81900
$10,80100
$11,88100
Specialty snacks
$22,82400
$25,10600
$27,61700
$30,37800
$33,41600
Extruded snacks
$7,66900
$8,43600
$9,27900
$10,20700
$11,22800
Potato chips
$18,67900
$20,54700
$22,60100
$24,86200
$27,34800
Tortilla and Corn chips
$22,82400
$25,10600
$27,61700
$30,37800
$33,41600
Reduced fat and fat free food products
$7,66900
$8,43600
$9,27900
$10,20700
$11,22800
Subtotal Direct Cost of Sales
$57,28600
$63,01500
$69,31700
$76,24800
$83,87300
4.3 Expense Forecast

The formulation of an aggressive marketing plan entails a large budget.  It will cover 20% of the sales revenue.  It is predicted that there will be an increase on the  budget by approximately 20%.

Explanation of Major Marketing Expenses:

TV advertisements . An approximate $230,000 is to be allotted in the TV advertisements.  TV spots allow reach a large audience share and eventually  effectively target the market.

Print Materials. Print materials always require a significant budget. They include: flyers, , novelties for customers, coupons, literature distributed internally and anything else we can squeeze into this budget.

Newspapers. An important part of our marketing efforts. Newspapers ads will give us a vehicle for consistently getting our message/brand in front of a large number of potential customers. We believe this vehicle will get our message to seniors, which make up a large portion of our target market. In addition, the business section will provide us with a means for communicating with our business customers.

Internet. These are an inexpensive way to secure a large number of daily impressions.

Frito-Lay Events… This will include local radio and TV events where radio and TV stations broadcast from the JavaNet site offering freebies to first-time customers for stopping by. JavaNet will also run educational programs and community events throughout the year.

Billboards.  This would constantly remind the possible consumers of the products of Frito Lay

Marketing Expense Budget

2002
2003
2004
2005
2006
TV advertisments
$2,300,000
$2,530,000
$2,783,000
$3,061,300
$3,367,400
Print Materials
$675,000
$742,500
$816,800
$898,400
$988,300
Newspaper. Frito-lay events, internet
$330,000
$363,000
$399,300
$439,200
$483,200

————
————
————
————
————
Total Sales and Marketing Expenses
$3,305,000
$3,635,500
$3,999,100
$4,399,000
$4,838,900
Percent of Sales
8.81%
8.81%
8.81%
8.81%
8.81%

4.4 Contribution Margin

The Contribution Margin chart and table presents a strong outlook for Frito Lay’s Operations Ja

Sales increase an average of 10% per month in the first year.
Contribution margin runs at roughly 50%.
The marketing budget is consistently based on 20% of total revenue.
A strong focus on local TV and radio is apparent in the expense breakdown.
The marketing budget is spread evenly throughout the year.

Contribution Margin Monthly

Contribution Margin

2002
2003
2004
2005
2006
Sales
$37,532,300
$41,285,500
$45,414,100
$49,955,500
$54,951,000
Direct Cost of Sales
$5,728,600
$6,301,500
$6,931,700
$7,624,800
$8,387,300
Other Variable Costs of Sales
$300,000
$300,000
$300,000
$300,000
$300,000

————
————
————
————
————
Total Cost of Sales
$60,28600
$66,01500
$72,31700
$7,924,800
$8,687,300

Gross Margin
$315,03600
$346,84000
$381,82400
$42,030,600
$46,263,700
Gross Margin %
83.94%
84.01%
84.08%
84.14%
84.19%

Marketing Expense Budget
2002
2003
2004
2005
2006
TV Advertisements
$2,300,000
$2,530,000
$2,783,000
$3,061,300
$3,367,400
Print Materials
$675,000
$742,500
$816,800
$898,400
$988,300
Other
$330,000
$363,000
$399,300
$439,200
$483,200

————
————
————
————
————
Total Sales and Marketing Expenses
$3,305,000
$3,635,500
$3,999,100
$4,399,000
$4,838,900
Percent of Sales
8.81%
8.81%
8.81%
8.81%
8.81%

Contribution Margin
$28,198,600
$31,048,500
$34,183,300
$37,631,700
$41,424,900
Contribution Margin / Sales
75.13%
75.20%
75.27%
75.33%
75.39%
 

5.0 Controls

There are also some obstacles and challenges that needs to be faced. Some of these are

The creation of a unique, innovative, upscale varieties that will differentiate Frito-Lay from other local products.

The establishment of  Frito-Lay as healthy options food products.

The creation of a market that would make the product readily available to as many costumers as possible..

 

 

 

 

 

 

References:

Explanation of the Three Dimensional Business Definition model of Derek F. Abell (on line).

Web Site:  Available from: http://www.12manage.com/methods_abell_three_dimensional_business_definition.html. Retrieved  27 July  2007

“Financial Review” PepsiCo.  March 2003

Fritolay.com.Company Information (on line). Web Site: http://www.fritolay.com/fl/flstore/cgi-

bin/comp_info.htm Retrieved 30 July 2007.

Kotler P.; Armstrong G.; Saunders J.; Wong V. (1999).  Principles of Marketing.  Second

Edition.  Essex:  Prentice Hall Europe

“Lay’s Potato Chip, the World’s Favorite Snack Food, Goes Gourmet!”PR Newswire, 12 April

2001

 

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