Marketing
13 February
Frito-Lay turned name brand chips into essentials
The PepsiCo business wasn't seeing trade-down to private label in 2022.
Photo by Giorgio Trovato on Unsplash
×
The Current, delivered daily.
Ecommerce news, right to your inbox.
Sign up for our email newsletter.
Subscribe.sticky-cta-wrapper {
width: 100%;
position: fixed;
bottom: 0;
left: 0;
background-color: var(--black);
}
Subscribe to The Current newsletter
Throughout 2022, a common narrative emerged that consumers were opting for private label products over name brands as they sought to save money amid 40-year-high inflation.
While grocers from Walmart to Kroger reported a general shift toward their store brands throughout the year, the trend was not uniform across all CPGs.
In particular, some of the country’s most popular chips brands proved resilient in their ability to keep consumers reaching for more.
PepsiCo said its Frito-Lay business, which includes Doritos, Cheetos and Lay’s, delivered double-digit growth of 18% year-over-year in the fourth quarter of 2022, and 17% for the year. It also gained share in key categories during the year.
“The business continues to benefit from strong category trends as consumers navigate towards popular, trusted brands that offer value, convenience, and variety,” top executives wrote in prepared remarks ahead of the company’s most recent earnings call.
Even as inflation rose, there were signs throughout the year that consumers were opting for Frito Lay products as they sought savings. Frito Lay’s multipack became a poster child of the consumer desire to stock up on essentials when it became one of the top selling items during July’s Prime Day, per data from Numerator.
Frito Lay’s prime positioning wasn’t accidental. PepsiCo CEO Ramon Laguarta called the snack business the “jewel” of the company.
“We've put a lot of investments in the last couple of years and [Frito-Lay] continues to respond every year better to those investments,” Laguarta said, adding that the company invested in upping marketing spend, product innovation and clearing infrastructure bottlenecks.
The result is a business with 11% operating profit growth in 2023, which Laguarta called historically high.
“We feel like Frito had just an outstanding year,” said CFO Hugh Johnston. “We'd love to have a couple more like this one.”
What’s the lesson?
Make your brand essential. Frito-Lay sells chips and snacks, but the company’s growth indicates that consumers see it further up the pyramid. They're the types of brand that people seek out as a treat as they seek to feel better, similar to beauty products. This is a result not just of innovation, but brand recognition that has turned products into categories. When people see Doritos, they don’t think they’re buying cheesy tortilla chips. They simply think they are buying Doritos, and that makes them a staple. Instead of looking for other brands that are cheaper, people sought savings by stocking up on Prime Day.
There’s opportunity in a downturn. PepsiCo recognized that Frito-Lay had a big opportunity, and invested. It’s a time when many companies are pulling back due to the collision of inflation and a consumer downshift. But the parts of a business that are working can benefit from a boost, no matter what’s happening in the economy.
Subscribe to The Current Newsletter
SubscribeTrending in Marketing
Retail Media
7h
Kroger grows in-store retail media with smart screens at 500 stores
The grocer is expanding a partnership with Cooler Screens.
(Photo courtesy of Cooler Screens)
You may have heard of offsite retail media. How about offline?
Retail media holds out the opportunity that brands and marketplaces can reach customers with advertising, anywhere that there’s a screen. Through a new partnership, that capability is extending to the store.
Kroger is set to add smart screens to 500 stores, bringing retail media activations to aisles and checkout lines.
It’s the result of an expanded partnership with Cooler Screens, a company that developed software and enabling hardware to provide advertising and analytics on in-store screens. The company started by developing screens for the cooler doors of frozen food sections, but has since expanded to other areas of the store, like endcaps, banner aisles or existing screens.
Kroger and Cooler Screens piloted the technology for three years, and set out to determine whether they could improve customer experiences through interactive media and digital merchandising. The companies now have conviction that the content available on screens can enable consumers to make “better-informed decisions based on their own preferences, diets, health needs, budgets and lifestyles,” according to an announcement detailing the activation.
In turn, providing in-store retail media allows brands to reach consumers while they are shopping at a brick-and-mortar location. It extends the digital ad opportunities available via ecommerce to a new channel. Unlike a traditional static display ad, digitally-powered retail media is measurable, and Cooler Screens said it offers tools that help brands provide contextually relevant promotions and product information, as well as analytics on performance.
Kroger has made retail media a central part of its digital strategy. The grocer provides advertising through the Kroger Precision Marketing arm, and customer insights through its 84.51° data science team. Executives have talked about how retail media is helping the company unlock new, high-margin business lines, and see the growth of available data as a key driver of the company’s proposed merger with Albertsons.
“We’re excited about this continued collaboration as it extends our vision for the future of retail media, offering brands another powerful marketing lever inside the store,” said Cara Pratt, senior vice president at Kroger Precision Marketing, in a statement. “Cooler Screens shares and further enables this vision by bringing the best of digital experiences directly into our retail stores while integrating with our 84.51° data science platform to create an engaging and valuable experience for our customers, associates, and brands.”
Cooler Screens said it reaches more than 90 million viewers monthly in stores. Along with Kroger, customers include Walgreens and Giant Eagle’s GetGo convenience stores.
While retail media is primarily a means of advertising on ecommerce marketplaces today, the expanded appearance of advertising on in-store screens underscores how the first-party data that powers it can be foundational for a growing range of channels.
Keep reading...Show less
Loading...
Subscribe to The Current Newsletter
SubscribeLatest from Marketing
Apr 03, 2023
.sticky-cta-wrapper {
width: 100%;
position: fixed;
bottom: 0;
left: 0;
background-color: var(--black);
}
Subscribe to The Current newsletter