September 21, 2006
Changing Perceptions of Frito-Lay Products Biggest
Strategic Opportunity, Says Rader
By Sandie Taylor
Ever heard that a serving of Cheerios contains more sodium than a serving of
Lay’s potato chips? Frito-Lay’s marketing department hopes that you have. In
fact, the company is on a mission to show the public that tasty foods aren’t
always as bad for you as you might think.
“There are perceptions of what’s healthy for us, and then there are facts,” said
David Rader, executive vice president and chief financial officer of
Frito-Lay. He
spoke at the McCombs MBA Executive Speaker Series September 20. “Sometimes they
are very different.”
 David Rader, executive vice president and chief financial officer of Frito-Lay spoke to students September 20 at the McCombs MBA Executive Speaker Series. |
For many years, Frito-Lay’s customers thought of its products as
junk food. But, according to Rader, that view wasn’t completely
accurate.
Today, with health concerns becoming a growing priority for many
consumers, evolving demographics and a changing retail
environment, Frito-Lay realizes the time has come to address its
reputation as a junk food leader and challenge the conventional
wisdom.
“We’ve got a perception problem that we’ve got to change,” he
explained. “We want our customers to know that they can feel
good about eating Frito-Lay snacks.”
Redesign and Repackage
Despite its portfolio of powerful and established brands—the
company owns 12 brands worth more than $100 million, including
Tostitos, Doritos and Cheetos—Frito-Lay is continuing to improve
existing products and test healthier options in the marketplace.
In 2002, it was the first snack maker to eliminate all trans
fats from its entire chip line. In 2003, it launched an organic
line. And this year, Frito-Lay is changing the original Lay’s
potato chip; it will now be made with heart-healthy sunflower
oil.
According to Rader, each year this new product will eliminate 60
million pounds of saturated fat from the American diet.
Chips containing sunflower oil have seen great success in Canada
and other regions in the United States where the product has
already been rolled out. Frito-Lay’s next step is educating
consumers about the new and improved product.
To achieve this goal, the new Lay’s packaging will show
sunflowers bursting off the bag to convey the healthier image.
The company will also launch a strong advertising and public
relations campaign to educate consumers about the chips, and
bring science-based health information to the consumers about
the differences between good fats and bad fats.
“This generation may be the first one not to live longer than
their parents’ generation,” he said. “Frito-Lay wants to play a
part in stopping this from happening.”
In the future, Rader said Frito-Lay would like all of its
products to contain five or fewer ingredients. Frito Lay also is
beginning to establish Sun Chips as its number one healthy
product brand with a new marketing campaign educating consumers
about the chip’s whole grain and wheat ingredients.
“We think we are poised to deliver what our consumers want,” he
said.
In with the New
Frito-Lay, which is the largest North American brand owned by
PepsiCo, generates 38 percent of its parent company’s profits.
Sixty percent of the company’s marketing efforts go to
developing new products and 40 percent go toward existing
brands.
The company is working on unveiling fruit and vegetable chips in
the fall.
While new product development and recreations aren’t cheap or
easy—for instance, it cost the company $57 million to take trans
fats out of its chips and five years to create the Tostitos
scoop chip—Rader said taking risks is essential.
“We make big bets all the time,” Rader said. “We’ve taken a lot
of write-offs, but you have to do it.”
Before developing new products, Rader said the company is
careful to distinguish between fads that will go away or trends
that will continue. “When people started talking about low-carb
foods, we decided it was fad,” he recalled. “We’re glad we
didn’t choose to pursue that.”
The new emphasis on health and wellness in American culture,
however, is something Frito-Lay believes is a trend here to stay.
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