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Problem Statement

Sun Chips Case. Problem Statement.

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Problem Statement

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  1. Sun Chips Case Problem Statement • Frito Lay has had Sun Chips in a 10 month long test market in Minneapolis St. Paul. The product appears to be successful. The national company must now decide what product launching path it will take or decide to extend their test market another six months.

  2. Market Analysis • Frito-Lay, Inc. • A leading snack manufacturer • Recorded U.S. sales of $3.5 billion in 1990 • Total US Snack Industry recorded $37 billion in 1990. • There are 650 new products introduced per year in the snack industry • PMT was setup to take place in Minneapolis-St. Paul. • Minneapolis-St. Paul Test Market contains: • 1.98 million households that were identified as users of snack chips • 2.2% of the 90 million snack chip user households in the US

  3. Porter’s Five Forces Model • Barriers to Entry: • Established distribution network • Retail outlet agreements and an established sales force. • Potential Entrants: • 650 new snack products launched yearly • Private brands block sales on a local level • Threats of Substitutes: • Readily available substitutes. • Technology is flexible • Bargaining Power of Suppliers: • Purchased 1.6 billion lbs of potatoes from multiple farmers • 600 million lbs of corn from multiple farmers. • Bargaining Power of Customers: • Customers hold a lot of power due to price pressure.

  4. Customer Analysis • Primary audience 18-34 years of age • Secondary audience expanded to 49 yrs • Age range 34-49 more receptive of a healthier snack. • Baby boomers target market? • Americans like to snack

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