Frito-Lay plans to keep rolling out new products

September 05, 1995|By Dallas Morning News

DALLAS -- Halfway through another year of double-digit sales growth, Frito-Lay Inc. already is making plans for a slate of new snack products including the possibility of an entirely new brand line that it hopes will generate similar gains in 1996.

"Over half of our growth has come from new products," notes Steven Reinemund, chief executive officer of the Plano, Texas-based snack maker. "We wouldn't be getting double-digit growth if we were giving the consumer the same old stuff. If it gets tired, it doesn't sell."

That strategy of hot-wiring sales growth by barraging consumers with new products will certainly be in evidence in 1996. In an interview, Mr. Reinemund gave a glimpse of the company's new product plans for next year:

* A major line extension of the trademark Fritos brand is planned with the addition of Texas Grill, a strip-shaped corn chip that is less oily than standard Fritos and sports grill marks. Honey barbecue and fajita are the planned flavors.

* A brand new product line tentatively called 3-D's is being tested internally, and test marketing is tentatively set for 14 grocery stores in Eau Claire, Wis. The product, a hollow triangle of puffed corn or potato, is being tested in nacho cheese and ranch flavors.

* The hugely successful Rold Gold pretzel brand will get a line of flavored pretzels next year. Frito-Lay hopes the new flavors, which haven't been chosen yet, will continue the strong growth in Rold Gold sales, which jumped more than 70 percent last year.

Frito-Lay produces Rold Gold pretzels at its $55 million plant in Harford County, which it has earmarked for expansion.

* Baked Lay's, the low-fat version of the flagship potato chip brand, will be rolled out nationally early next year. The chips will be sold in regular and barbecue flavors.

"Frankly, we have more new products for next year than we have windows to put them in," Mr. Reinemund says, noting that Frito-Lay will spend $600 million on product development and rollouts this year.

Frito-Lay's 1994 performance is a tough act to follow. The company's sales topped $5 billion for the first time, jumping 14.8 percent over 1993. That was four times the growth rate for the entire $15 billion U.S. salty snack industry.

And Frito-Lay, with about half the market, continues to dominate the snack chip business. Its largest individual competitor, Anheuser-Busch's Eagle brand, commands only 6 percent or 7 percent of the market. Frito-Lay now accounts for about 18 percent of parent company PepsiCo Inc.'s total annual sales.

So far, products introduced this year such as Wavy Lay's and Taco Supreme Doritos have helped Frito-Lay maintain the pace. Through two quarters, its sales are up 12 percent, and operating profits are up 15 percent over the first half of last year.

"Frito-Lay's expertise in proprietary chip technology and lowering production costs, along with new brand extensions, are a very powerful combination for profitability," said Andrew Conway, an analyst at Salomon Brothers.

Competitors, meanwhile, aren't conceding the field to Frito-Lay. Anheuser-Busch installed a new president at the division in May.

Although far behind, Eagle has managed to pick up market share by taking business from regional snack companies.

Eagle has also been developing products, such as its spicy potato chips and Cheegles.

It also has revamped its product packaging and distribution.

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