Smaller bags play big role in Lay's plans

by Jeff Gelski
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Frito-Lay North America is having success with a new, smaller 8-oz bag of Lay’s.

BOSTON — A marketing message once bet consumers they could not eat just one Lay’s potato chip. It turns out they will buy more than one sized bag, too. Frito-Lay North America is having success with a new, smaller 8-oz bag of Lay’s, said Tom Greco, chief executive officer of Frito-Lay North America, in a Sept. 9 presentation  at the Barclays Global Consumer Staples Conference in Boston.

Frito-Lay North America, a business of Purchase, N.Y.-based PepsiCo, Inc., in 2013 examined how marketplace dynamics were affecting its potato chip business, he said.

Tom Greco, c.e.o. of Frito-Lay North America

“First, on the consumer side, households were getting smaller,” Mr. Greco said. “By the end of 2014, over 60% of U.S. households had two people or less, making a strong case for a smaller bag of take-home Lay’s.

“Meanwhile, our customers were facing huge margin pressures. In 2014, grocery margins had dipped over 40 basis points in just one year. And, finally, we knew that over 90% of Lay’s take-home business was in just one size. In fact, we had 14 s.k.u.s (stock-keeping units) of 10-oz Lay’s, and the majority of the transactions on this size were buy-one-get-one-free.”

Frito-Lay North America tested a new price-sized architecture for Lay’s for one year and focused on four objectives: driving household penetration, accelerating market share, improving customer margins and enabling pricing runway.

“As a result, we recently introduced a smaller 8-oz bag of Lay’s with full variety,” Mr. Greco said. “We then reduced the lineup on our 10-oz bag and branded this ‘Family Size.’ Finally, we added weight to our largest size and branded this ‘Party Size.’

“During the second and third quarter of this year, we executed this massive change across all channels on Lay’s. We’ve now completed over 25,000 section resets, and, in many cases, our customers rewarded us with incremental shelf space to go after the sales, margin and profit opportunity.”

He said F.L.N.A. has shifted its promotion emphasis from 14 s.k.u.s at buy-one-get-one- free on key holidays to 4 to 5 s.k.u.s. Customer margins are up, and unit share and growth is accelerating, he said.

Lay’s has fared well in international markets as well, particularly Russia, said Ramon Laguarta, c.e.o. of Europe and Sub-Saharan Africa for PepsiCo. Lay’s is now the No. 1 snack in Eastern Europe. PepsiCo, which has a 61% market share in potato chips in Russia, featured a “Summer Tastes Better with Lay’s” promotional concept in that country this summer.

PepsiCo leverages Russia as a gateway to the C.I.S. (Commonwealth of Independent States), Mr. Laguarta said.

“For example, if you look at our share of market performance in the C.I.S. markets in savory over the last five years, we’re now leaders everywhere, leveraging our factories in Russia, leveraging the brand activities in Russia, leveraging the talent in Russia,” he said. “This is countries like Kazakhstan, Belarus, Georgia, Armenia, Uzbekistan, Tajikistan.

“Clearly there are short-term challenges in the Russia business, and you’ve seen it, probably, in most of the (Barclays) presentations. There is nothing new. This country has been through crisis in the last 10 years. We have very strong and very experienced local management in each one of the markets, in Ukraine, in Russia, the C.I.S. markets, that have been through (this) turbulence, and we’re managing the business to stay competitive, to make sure that our brands remain relevant with our consumers, that we continue to provide value to the consumers.”
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READER COMMENTS (5)

By Phil 2/6/2018 10:07:12 PM
What a joke! 15oz = "party size"??! What party? Party of 1 or 2? Same big plastic bag going to the landfill now comes with even less product than it ever has before. Absolutely infuriating! So sick and tired of all the food companies pulling this, thinking we consumers are too stupid to notice. If you're that greedy for profit, just raise the price, but QUIT MESSING WITH THE QUANTITY! If I want a little bag, I'll buy one, but if I need a larger quantity, I expect to be able to get it without having to fill a dumpster with plastic bags that were 1/4 full at best. Anyone remember when the Old Dutch "Big Triple" box used to contain 3 16oz bags? Its wasn't even that many years ago. Now it scarcely contains 15oz for the entire package, but exactly the same mass load to trash headed to the landfill...

By Matthew O Ferrell 2/6/2018 4:20:02 PM
I say bravo. The product is delicious and most people do not mind paying for products they enjoy. I say more power to Frito-Lay. Hooray for capitalism.

By Gary hren 1/26/2018 11:44:02 AM
YOU ARE A BUNCH OF CROOKS CHEATING AMERICANS OUT OF A SIMPLE PLEASURE.HOW MANY POTATOES GO INTO A 8OZ BAG...ANSWER..NOT EVEN ONE, CMON YOUR PRICE IS NOT GOING DOWN BUT YOU FAT CATS ARE RAKING IN HUGE PROFITS FOR YOURSELF.I HARDLY BUY CHIPS ANYMORE FROM YOU.I DON'T NEED THEM THAT BAD, THEY'RE UNHEALTHY ANYWAY..TOO BAD... PEOPLE HAVE LESS CHILDREN BECAUSE THEY CAN'T AFFORD THEM OR YOUR CHIPS.

By Rebecca Zukosky 11/7/2017 12:54:07 PM
This is nothing but downsizing. You can blame it on market research, or whatever, it's nothing but downsizing. I've been in sales and marketing for over 30 years, I know how the game is played. An 8oz bag costs as much as the 10oz, the 10oz bag as much as the 15oz, and the Party Size, or 15oz is absolutely ridiculous in cost. Other companies downsize and charge the same amount for the smaller sizes as their larger predecessors. They call it marketing, I call it theft.

By Koko grayson 2/21/2017 8:38:00 AM
I quickly noticed the change in bag size when I purchased Doritos today. My 10oz bag was not what I expected. I was feeling cheated.