Frito-Lay launches 2 new snacks

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Frito-Lay will flex its muscle as snack leader next year, taking on Procter & Gamble Co.'s Pringles with the national launch in March of canister-packaged Lay's Stax. It will also tackle the encroachment of Nabisco and Keebler into the impulse-snack arena with the launch of sweets under the Quaker Quick Bites banner.

The PepsiCo unit's competitive onslaught is in large part a reaction to the expansion of rivals into the impulse areas Frito-Lay has virtually owned at retail. According to an executive close to the company, retailers are being wooed by upfront slotting fees paid by marketers, including P&G, that ship to retail warehouses. The company aims to convince them that longer-term profit margins are higher for Frito-Lay snacks merchandised by its 18,000-truck delivery team. P&G did not comment by press time.

Sales for Pringles in food, drug and mass outlets (excluding Wal-Mart Stores) were flat at $318 million for the 52 weeks ended Oct. 6, according to Information Resources, Inc. But Frito-Lay believes it can grow that category through the name-brand recognition of its Lay's franchise and the attention of its direct-store delivery system.

Frito-Lay holds a 59.6% share of the potato chip category, with sales for its various brands up 0.8% to $1.6 billion for the 52 weeks ended Oct. 6.

Meanwhile, P&G is gearing up for combat. In the Lay's Stax test market in Iowa, P&G countered taste tests of Stax with free giveaways of Pringles. In many markets, Pringles are routinely sold at the discounted price of 99 cents vs. the expected retail price of Stax, roughly $1.29.

According to a Midwest retail executive, "pricing plays a big part when products are merchandised in the same area." In fact, he said, the pricing discrepancy has already hurt Frito-Lay's Go Snacks, portable canisters of its various salty snacks, also sold at $1.29.

Despite the retailer's skepticism, however, a Frito-Lay insider said Go Snacks, which has received a significant portion of its marketing budget this year, "have been very successful for us."

So successful, in fact, that the company will use similar contour on-the-go packaging for a new line of sweet snacks under the Quaker name.

Marketing plans could not be learned at press time for the new products. Quaker referred calls to Frito-Lay, which declined to comment. Omnicom Group's Element 79, Chicago, is the Quaker unit's agency of record and will most likely handle Quick Bites. Omnicom sibling BBDO Worldwide, New York, Frito-Lay's agency of record, is likely to handle Stax.

Quaker Quick Bites will initially feature bite-sized oatmeal raisin and chocolate-chip cookies as well as honey graham crackers. Although Frito-Lay plays in the cookie category in vending and convenience channels with its Grandma's cookie brand, the Quaker banner conveys a more wholesome snack, something that consumers are increasingly demanding.

slew of products

Quick Bites will join a slew of Quaker product introductions next year, including Toastables toaster pastries and Corn Rings (AA, Oct. 7). The new entries clearly indicate PepsiCo's focus on innovation to build upon its newly aquired equity.

Kraft Foods earlier this year launched its own Nabisco Go-Paks with bite-sized versions of its cookies and crackers, among them Oreo and Mini Ritz. Keebler, too, has launched mini versions of its products, including Chips Deluxe and Golden Vanilla Wafers.

Both efforts are attempts to grow sales in non-supermarket channels such as convenience stores, mom-and-pop stores and vending machines where Frito-Lay has prevailed.

Also in a nod to the growing good-for-you trend, Frito-Lay will roll national next year its line of natural and organic chips and salsas, among them Tostitos Organic, Lay's Natural and Sun Chips Organic, which it has been testing on the East Coast and in Des Moines, Iowa.

In response to the growing demographic shift, 2003 will also see a big ethnic marketing push for Frito-Lay, with an expansion of the company's partnership with Pepsi-owned Mexican snacks marketer Sabritas to offer a wide variety of popular Hispanic flavors and marketing initiatives to those audiences.

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