Frito-Lay Targets the Hispanic Market

Frito Company was founded in 1932 in San Antonio, Texas, by Elmer Doolin. H. W. Lay & Company was founded in Atlanta, Georgia, by Herman W. Lay in 1938. In 1961, the two companies merged to form Frito-Lay, Inc., with headquarters in Texas. Frito-Lay produced, distributed, and marketed snack foods with particular emphasis on various types of chips. In 1965, the company merged with Pepsi-Cola to form PepsiCo, Inc. Three decades later, Pepsi-Cola combined its domestic and international snack food operations into one business unit called Frito-Lay Company. Today, Frito-Lay brands account for 59% of the U.S. snack chip industry, and there are more than 45,000 Frito-Lay employees in the United States and Canada.

In the late 1990s, despite its overall popularity, Frito-Lay faced a general lack of appeal to Hispanics, a fast-growing U.S. market. In an effort to better penetrate that market, Frito-Lay hired various market researchers to determine why Hispanics were not purchasing their products as often as company officials had hoped and what could be done about the problem. In the studies, market researchers discovered that Hispanics thought Frito-Lay products were too bland, Frito-Lay advertisements were not being widely viewed by Hispanics, and Hispanics tended to purchase snacks in small bags at local grocery stores rather than in the large family-style bags sold at large supermarkets.

Focus groups composed of male teens and male young adults' a group that tends to consume a lot of chips' were formed. The researchers determined that even though many of the teens spoke English at school, they spoke Spanish at home with their family. From this discovery, it was concluded that Spanish advertisements would be needed to reach Hispanics. In addition, the use of Spanish rock music, a growing movement in the Hispanic youth culture, could be effective in some ads.

Researchers also found that using a 'Happy Face' logo, which is an icon of Frito-Lay's sister company in Mexico, was effective. Because it reminded the 63% of all Hispanics in the United States who are Mexican American of snack foods from home, the logo increased product familiarity.

As a result of this research, Frito-Lay launched its first Hispanic products in San Antonio, in 1997. Within a few of years, sales of the Doritos brand improved 32% in Hispanic areas. In May 2002, Frito-Lay teamed up with its Mexican affiliate, Sabritas, to launch a new line of products to further appeal to Hispanic customers. Included in these offerings are Sabritas Adobadas tomato and chile potato chips, Sabritones Churrumais fried corn strips with chile and lime seasonings, Crujitos queso and chile flavor puffed corn twists, Fritos Sabrositas lime and chile chips, El Isleno Plantains, and others.

More recently, Frito-Lay has been relying on input and guidance from the Adelante employee network, which is a multicultural Latina/Hispanic professional organization associated with PepsiCo. At Frito-Lay, the organization's mission is to help develop a diverse, inclusive culture accelerating growth opportunities for associates while providing a competitive advantage in an increasingly diverse marketplace. As part of this effort, Adelante has been used to help develop new flavors and advertising programs for Hispanics. Based on information gleaned from Adelante members, new Frito-Lay snack products are being test marketed in several states, and guacamole-flavored Doritos became one of the most successful new-product launches in the company's history.

Discussion

In the research process for Frito-Lay Company, many different numerical questions were raised regarding Frito-Lay products, advertising techniques, and purchase patterns among Hispanics. In each of these areas, statistics' in particular, hypothesis testing' plays a central role. Using the case information and the concepts of statistical hypothesis testing, discuss the following:

1. Many proportions were generated in the focus groups and market research that were conducted for this project, including the proportion of the market that is Hispanic, the proportion of Hispanic grocery shoppers that are women, the proportion of chip purchasers that are teens, and so on. Use techniques presented in this chapter to analyze each of the following and discuss how the results might affect marketing decision makers regarding the Hispanic market.

a. Suppose that in the past, 94% of all Hispanic grocery shoppers were women. Perhaps due to changing cultural values, we believe that more Hispanic men are now grocery shopping. We randomly sample 689 Hispanic grocery shoppers from around the United States and 606 are women. Does this result provide enough evidence to conclude that a lower proportion of Hispanic grocery shoppers now are women?

b. What proportion of Hispanics listen primarily to advertisements in Spanish? Suppose one source says that in the past the proportion has been about .83. We want to test to determine whether this figure is true. A random sample of 438 Hispanics is selected, and the Minitab results of testing this hypothesis are shown here. Discuss and explain this output and the implications of this study using.