(Solution) Frito Company was founded in 1932 in San Antonio, Texas, - #80015
CASE: 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. According to data released by Information Resources, Frito-Lay brands account for more than 60% of the share of the snack chip market.
Despite its overall popularity, Frito-Lay faces a general lack of appeal in the Hispanic market, which is a growing segment of the U.S. population. In an effort to better penetrate that market, Frito-Lay hired various market researchers to determine why Hispanics do not purchase their products as often as company officials had hoped and what could be done about the problem.
Driving giant RVs through Hispanic neighborhoods and targeting Hispanic women (who tend to buy most of the groceries for their families), the researchers tested various brands and discovered several things. Hispanics thought Frito-Lay products were too bland, not spicy enough. Hispanics also were relatively unaware of Frito-Lay advertising. In addition, they tended to purchase snacks in small bags rather than in large family-style bags and at small local grocery stores rather than at large super-markets.
After the "road test," 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 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 home, the logo increased product familiarity. As a result of this research, Frito-Lay launched its first Hispanic products in San Antonio in 1997. Since that time, the Doritos brand improved 32% in Hispanic areas and Doritos Salsa Verde sales have grown to represent 15% of all Frito-Lay later expanded its line of products into other : the United States with large Hispanic populations.
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, the following:
The statistical mean can be used to measure various aspects of the Hispanic culture and the Hispanic market, including size of purchase, frequency of pur¬chase, age of consumer, size of store, and so on. Use techniques presented in this chapter to analyze each of the following and discuss how the results might affect marketing decisions.
a.
What is the average age of a purchaser of Doritos Salsa Verde? Suppose initial tests indicate that the mean age is 31. Is this figure really correct? To test whether it is, a researcher randomly contacts 24 purchasers of Doritos Salsa Verde with results shown in the following Excel output. Discuss the output in terms of a hypothesis test to determine whether the mean age is actually 31. Let alpha = .01. Assume that ages of purchasers are normally distributed in the population.
b. What is the average expenditure of a Hispanic customer on chips per year? Suppose it is hypothesized that the figure is $45 per year. A researcher who knows the Hispanic market believes that this figure is too high and wants to prove her case. She randomly selects 18 Hispanics, has them keep a log of grocery purchases for one year, and obtains the following figures. Analyze the data using techniques from this chapter and an alpha of .05. Assume that expenditures per customer are normally distributed in the population.
$55 37 59 57 27 28
16 46 34 62 9 34
4 25 38 58 3 50
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