The company has chosen the ready-to-eat caramel popcorn as the best fit as it was neutral with almost both the elements of flavors. The marketing mix can be the perfect method that can help boost the sales of the newly acquired brand if implemented by Frito-Lay. The company reviewed its sales and acquisition history to determine the brand’s fair market value. The acquisition history of the competitive manufacturer, which included a 1.2 billion sale of 80 percent of the then the market leader, was some of the reviewed data. From the sales, acquisition, and marketing review, it was evident that Borden Food overpriced its brand.
Problem Statement and Analysis of Alternatives
Competition is one of the factors in the business environment; in an attempt to increase sales in the past five years by introducing a new offering, Borden faced stiff competition in the market. Due to the stiff competition, Borden Foods decided to sell the Cracker Jack because the company wanted to focus and put a lot of effort into building the segment, dealing with the grain meals and pasta, which the consumers largely needed as an alternative course of action. The brand maintained a huge product line with about 32 percent stock-keeping units (SKUs). The company production facility at the time had a capacity of 32 percent, allocated to the Cracker Jack brand line, which was 1 percent lower than the brand capacity.
The company sales and distribution were also under analysis by management, who realized that the trade and distribution methods involve a lot of money. At the same time, after the huge spending, the products were unavailable at the locations where the company wanted the products to be, for instance, in the warehouse and the grocery stores, thus limiting access to the consumers. Reduced funding for advertisement and promotional activities are some of the challenges which led to the weakness of the ready-to-eat caramel popcorn. They considered using the brand equity for the Cracker Jack name to drive sales while at the same time maintaining the premium pricing strategy, this negatively impacted brand awareness, and also, the premium pricing strategy reduced the purchasing ability of consumers, thus, buying the alternative products.
Frito-Lay showed interest in purchasing the Cracker Jack brand as a direct result of the new segment within the company’s new ventures. The new division at the Frito-Lay company was tasked with spotting or creating opportunities where the company’s strength can be fully utilized to help deliver consumer food solutions with greater impact. Frito-Lay’s performance in the market has been exceptional, with it being the leader in salty snack food products, with this brand holding position in the top ten best performers.
Cracker Jack SWOT Analysis
The strength of the sweet-flavored product caramel popcorn to Frito-Lay is that it had a limited sweet-flavored product with most of its products mixed comprised of chips and salty snacks. Therefore, the ready-to-eat caramel popcorn was the best fit for the company as it was neutral with almost both the elements of flavors. The cracker Jacks’s strength in the market included its longevity; thus, it helped market the company. Apart from the flavors and longevity, the Cracker Jack brand also had a long untapped packaging offer to Frito-Lay. The brand’s weakness was observed in the failed attempts by the Cracker Jack owners to use a volume-based pricing strategy which disrupted the brand sales margin and led to the cannibalization of the small boxes. Consumer trend sales for the ready-to-eat-caramel packaging mix stood at 75 percent family boxes and 25 percent single-serving boxes.
The opportunity offered by the ready-to-eat caramel popcorn to Frito-Lay is that the company will reduce the rate of the stock-keeping units as their research indicated that the Cracker Jack products could be consumed in an extended period and with other products. The popcorn products were traditionally consumed only during the evening hours and not throughout the day. The weakness of the ready-to-eat caramel popcorn was that it had a low purchase rate which was less than two times a year, with a potentially small market for the snacks, with only about 12 percent of the customers choosing it over other available alternatives.
If Frito-Lay continued with the bid to purchase the Cracker Jack brand, the company could rely on the following marketing activities to market the products. The marketing mix can be the perfect method that can help boost the sales of the newly acquired brand. Product, the company can reduce the number of SKUs by 50 percent to 16 percent through standardization of the packaging sizes. This step is very important to the company as it will allow the introduction of new flavors without the cannibalization of the existing brands. It will also be beneficial as it will improve marketing efficiency. For the price, it is recommended that for the first year, the company should retain the price of the products, and the focus should be shifted to reducing the cost and cost reduction can be achieved by the company through capitalization on the extensive distribution and sales network at the company and reduction of the promotional expenses. The additional revenue which will be generated from the increased sales will help in assisting in maintaining the sales margin and profitability.
On the other hand, promotion should focus on creating awareness of the newly developed brand in the first year, which was lacking exposure, according to the preliminary report by Frito-Lay. The place is also an important component of the marketing mix strategy (Elliott et al.). The company is recommended to continue with its distribution channel mix, with most of the company products being stored in the warehouse.
The company reviewed its sales and acquisition history to determine the brand’s fair market value. The acquisition history of the competitive manufacturer, which included a 1.2 billion sale of 80 percent of the then the market leader American Home Products, was reviewed. Borden, the parent company which manufactures the brand, was acquired at the cost of 1.9 billion, while its dairy business was divested in 1997. According to the Frito-Lay finance team, the sale projections at Borden were inflated, and after evaluation, it was revised and the forecast was reduced to 10 percent. This alters the identification of the brand’s fair value. Frito-Lay’s capital investment, as anticipated by the managers at Borden, is also pointless to the level anticipated as the company has the existing packaging resources. Another variable that the company used to overestimate the cost of the brand was promotion and advertisement. All this contributed to the lower valuation and cash flow; therefore, the acquiring company can offer a purchase price to the tune of 75 million dollars.
Elliott, Charlene, Emily Truman, and Sylvia Aponte-Hao. “Food marketing to teenagers: An exploratory study examining the ‘Power’and platforms of food and beverage marketing in Canada.” Appetite (2022): 105999.