The global snack food market is the target and taking aim at this $17 billion prize is PepsiCo Foods International, which announced recently a series of marketing and operations moves designed to create one of the largest global food brands, reports The Wall Street Journal
The changes include everything from new packaging and ad campaigns for Lay’s potato chips to an overhaul in manufacturing techniques and higher quality standards for all the company’s products sold abroad. While snacks haven’t generated nearly the same excitement overseas as PepsiCo’s soft drinks or restaurants, the snack business brings in more than $9.25 billion in sales.
Unlike the soft-drink and restaurant business, PepsiCo has less competition in snacks overseas. But foreigners also don’t eat the amount of snacks as do consumers in the United States, where Americans eat more than 20 lbs. of salty snacks a year – eight times the world average. When overseas snackers do partake, they tend to choose more local fare, such as Asian “pellet” snacks, which are processed chunks of corn or wheat.
The key to the project’s success is the good old potato chip. Interviews with over 100,000 consumers in more than 30 countries last year revealed that potato chips were far and away the most popular snack, with a worldwide market of $4 billion.
To capitalize on the demand, PepsiCo is lashing together its dozens of company-owned brands of chips – now sold under different names – and marketing them abroad all under a more uniform Lay’s logo. The company plans to more than double ad spending to some $50 million to market the brand overseas.
It is also overhauling it’s manufacturing and distribution operations. Overseas growth has mainly come from buying it’s foreign competitors or entering into joint ventures, which has given PepsiCo Foods an entree into new markets but made product quality unpredictable. This has resulted in chips that were sometimes too thick or too thin or overcooked or, occasionally made with low-grade oil or damaged potatoes.
The company now insists on quality standards similar to those used by sister company Frito-Lay in the U.S. It has installed new equipment to handle potatoes more gently and trained staff to better monitor slicing and cooking. Having a unified brand also allows the company to buy raw materials in bulk which will cut costs more than $200 million a year when combined with other new efficiencies.