Frito-Lay goes on offensive for Lay's

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Lay's will be the focus of Frito-Lay's 2004 marketing efforts with significantly higher media spending, a product reformulation and new packaging as the snack giant redoubles its efforts to take on local competition in potato chips.

The PepsiCo unit is expected to use its annual Super Bowl ad buy to focus on Lay's, which has been reformulated to become "even crispier" and repackaged to reflect sharper, more vivid graphics of the classic potato chips. Beginning next month, Frito-Lay will begin running "much higher levels of advertising" for Lay's in a variety of markets including Minneapolis/St. Paul, to determine if bolstered media spending helps drive growth of the brand, according to an executive close to the company.

Some markets not included in what one retail executive referred to as the "national Lay's challenge program" have sought approval from Lay's VP-marketing Regan Ebert to get more grassroots marketing funds to compete against growing efforts from smaller players.

easy to copy

Potato chips, which according to Information Resources Inc., totaled nearly $3 billion in sales for the 52 weeks ended Nov. 30 in supermarkets, drug stores and mass merchandisers excluding Wal-Mart, is still the largest sub-category of salty snacks. It's also the easiest technology for private-label manufacturers to copy. Lay's sales grew 3.3% to $1.3 billion during the year ended Nov. 30, and aggressive support for the core Lay's umbrella brand is intended to continue that momentum and help drive share of the brand overall.

Media spending for Lay's in recent years has fallen below Frito-Lay's expenditures on other brands including Doritos, Tostitos and Ruffles. In 2002, Frito-Lay spent $10 million on Lay's, most of it to tout new Tastes of America varieties, vs. $27 million for Doritos and $20 million on Tostitos, according to TNS Media Intelligence/CMR. Lay's received only $6.5 million of Frito-Lay's overall $50 million spending in the January through September 2003 period.

According to Bryan Spillane, analyst with Banc of America Securities, which owns at least a 1% share of PepsiCo common stock, it makes sense to try to leverage the "under-appreciated" equity. He said "the introduction of Lay's Stax in August accounted for 30% to 40% of Frito-Lay's incremental growth in the third quarter," proving the power of the Lay's umbrella and prompting the company to turn up the dial on Lay's initiatives.

Frito-Lay is expected to maintain celebrity endorser Dana Carvey to tout the Lay's brand in some of this year's ads. Omnicom Group's BBDO Worldwide, New York, handles. This year's in-store "Power of One" promotion surrounding the Super Bowl touts a $10 mail-in rebate with the purchase of three bags of Lay's chips and three six-packs of Pepsi Cola. A Frito-Lay spokesman declined to comment on the new efforts.

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