Frito-Lay changes the channels

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You won't find frito-lay on the Super Bowl this year.

Instead, the mass marketer of everyman brands is trading in its signature slot on the big game for a more targeted tie-in with the Susan G. Komen breast-cancer foundation. The shift comes as the $10 billion PepsiCo unit builds up its better-for-you offerings and shifts spending to more cost-efficient grassroots means to reach the elusive premium set.

New Chairman-CEO Irene Rosenfeld is bent on stealing even more than the roughly 65% share Frito now controls of salty snacks, a goal that will require more than just the continued mass marketing of its biggest brands-it will also require more attention to products like its multigrain SunChips.

Micro-marketer

"Frito-Lay is becoming a much more efficient micro-marketer," said Gary Stibel, founder and CEO of the New England Consulting Group. "Rather than spending mass dollars on a mass audience, they are segmenting the market far better," he said. Although he said the company's estimated $150 million media budget overall is increasing, which will result in an uptick in TV spending, overall the company is putting less emphasis on broadcast TV and more on targeted vehicles such as sponsorships and the Internet.

Frito's tie to 110 local "Race for the Cure" events as a presenting sponsor of Komen's Volunteers Recognition Program will initially be pegged to SunChips. That brand will be supported this year with traditional media after a long hiatus as Frito looks to build it into a new proprietary healthful-snacking platform. Down the road, though, the cause could be a place to tout any number of products, from a whole-grain Tostitos, expected to launch this year, to the all-natural snacks Frito recently picked up with the acquisition of upscale upstart Stacy's Pita Chip Co.

While corporately PepsiCo has pledged to devote as much as half of its marketing to its better-for-you products designated with its Smart Spot logo, so far Frito's media outlays on those brands has been paltry. Although Lay's Light (formerly Wow!) received $15.2 million, Baked Lay's received only $1.3 million and Baked Doritos and SunChips nothing in the first nine months of 2005, according to TNS Media Intelligence, compared to $24 million for Lay's Classic, $17 million for Lay's Stax and $18 million for Doritos (see chart, above).

But while spending on more-healthful brands is expected to rise, one executive close to Frito suggested that investments will be higher in cable and especially magazines, where people turn for information on health news and where health messages can be imparted more easily. In-store efforts will also play a larger role.

Even for its biggest brands, Frito is looking to appeal to more premium consumers willing to pay higher prices with a new sub-brand dubbed Sensations. Frito will introduce Lay's Sensations kettle-cooked potato chips in February featuring premium flavors such as four-cheese gourmet and lime and black pepper at $2.49 for 6 ounces (vs. $2.99 for 12 ounces of regular Lay's). In March it will launch Tostitos Sensations in exotic varieties such as roasted garlic and herb. With luxe packaging featuring photography of fresh ingredients and outdoor-dining scenes filled with wine, Frito is clearly hoping to capture sales that otherwise might go to smaller gourmet brands.

Although ad plans are under wraps, in the U.K., where PepsiCo has launched Sensations under its Walker's brand, ads have played to the gap between the line's more mass ownership and its "posh" aspirations by featuring Spice Girls' Posh Spice, Victoria Beckham.

Discovery

Its acquisition of Stacy's Pita Chips, the homespun marketer of Stacy's Pita Chips and Stacy's Soy Crisps that built a $60 million business on a shoestring, is also part of its effort to cater to consumers who eschew mass brands, as is a test in Arizona grocery stores of a premium Canadian potato-chip brand, Miss Vickie's. Frito acquired that brand in 1993 and has built it into a mainstay at U.S. sandwich shops such as Quizno's and Subway.

One executive close to Frito said that these truly niche brands will remain largely unadvertised, sold on the basis of being products that people can "discover" at the shelf and enjoy but that don't require a lot of marketing push. And that, Mr. Stibel suggests, is their beauty. With no marketing support, the margins for Frito's growing stable of smaller brands are "incredibly high," he said.

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