Sun Chips-Multigrain The problem definition: a presentation on the future action of the brand related to test market of 10 months. Frito-Lay, Inc. is a division of PepsiCo Inc. it is a worldwide leader in snack ships with different brands and products. •Competition The snack chip category is highly competitive and the new-product failure rates high. Very few new products can generate more than $25 million in first-year sales. It leads to the competitive pricing problem and the importance of using other tools to stimulate the sales. Manufacturing Since Sun Chips® is a multigrain product, large-scale manufacturing requires different process and technology; in other words, a new investment in new production line is necessary. Creating brand awareness As we know, this category is highly competitive, in order to expand the market, the brand awareness is a key issue. As long as the product is launched, more money should be spent on advertising to increase the brand awareness. Product cannibalization The research in the test-market shows a 30% cannibalization rate of Sun Chips®. And one-third of the cannibalized volume are from Doritos® brand tortilla chips, which is also a product from Frito-Lay. Timing and competitive reaction The competitors were monitoring Frito-Lay’s test market; they might launch the same product and upstage Choose a right name The failed multigrain product called Prontos®, which is hard for people to link to the healthy, nutritious snacks. However, Sun Chips has a very positive image and this name is the result from the brand name testing. A broader target market Prontos® was first introduced in 1974, when the wholesome snacks market was not yet fully formed. But later this concept was perceived as a “healthier product”, the market was mature. Manufacturing technology available The other reason led to the failure of Prontos® is the difficulties of manufacturing. But now this is no longer an obstacle for Sun Chips multigrain snacks. Strong selling potential. A prediction of first-year sales volume of $133 million was given from the research. •$22 million of A&M would be a proper amount. In order to achieve the $100 million first-year sales goal, Frito-lay has to adapt the larger amount of advertising and merchandising expenditure. Natural and French onion Vs. Natural and Cheddar Frito-Lay was going to combine two different flavours together. From the results,(a) Natural and French onion combination produced the lowest cannibalization, and (b) it had a better selling potential, the sales volume was supposed to grow by 58%. (c) In the other hand, the combination of Natural and Cheddar were better accepted according to the first-year trial rate and first-year repeat rate. • Trial and Repeat Rate The first-year trial and repeat rate from the simulated testmarket was 25%and 57%, however, the trial and repeat rate of the first month reached almost20% and 42%. These data showed that the market accepted the product very well, and the Sun Chips® was ready to be launched nationally. •Depth of repeat rate The depth of repeat rate of Sun Chips® was 2.9 times, however the recently most successful O’Grady’s® depth of repeat rate was only 1.9 times. •Product Cannibalization The cannibalization rate of Sun Chips® was only 30%, which was much lower than the forecast in the premarketing test, 42%. That cannibalism rate was common, and the gross margin of Sun Chips® was higher than that for Frito-Lay’s other snacks. Frito-Lay can afford that cannibalization and Sun Chips® was a profitable product. Most of the strategies applied in the test market would still be used in the national launch, some of adjustments would be considered: •A&M Strategy In order to reach the goal of high brand awareness, Frito-Lay should consider invest more money on marketing and advertising. A budget of $30 million would be a proper amount. •Product Strategy At the beginning of the introduction, the Sun Chips® will provide customer with two flavours (Natural & French onion), in three sizes (2 ¼, 7, 11 ounce). A new flavour of mild cheddar and a larger size of 15 ounce are under consideration. However the decisions would be made according to the performance of the initial flavours and packages, more marketing research would be required.