The Greatest Snacking Empire in the World
McCombs MBAs At Frito-Lay
By Erica Grieder

An individual Frito—a diminutive, gently curved strip of corn, its body flecked with black—is quite unassuming. A single Lay’s potato chip, golden, light, and crispy, makes no more of an impression. Just by looking, you would never guess that these modest chips are the foundations of one of the greatest snacking empires the world has ever known.

Yet over the past 70 years, The Frito-Lay Company has grown from a duo of cottage industries into the largest division of the behemoth PepsiCo, Inc. The Frito-Lay oeuvre encompasses dozens of brands, from chips and cookies to nuts and meat snacks. Four of these—Lay’s, Doritos, Tostitos, and Cheetos—are billion-dollar brands. Frito-Lay North America boasts annual revenue of roughly $10 billion and annual profits of over $2 billion, and commands sixty percent of the salty-snack market in the United States. To accomplish this, Frito-Lay uses five billion pounds of potatoes and one billion pounds of corn each year.

Such numbers would catch anyone’s eye, but they might be of special interest to McCombs alumni, as the school has strong ties to the Texas-based company. Around twenty percent of the members of the marketing team at Frito-Lay North America’s headquarters in Plano hold McCombs MBAs, and the school’s alumni are heavily represented in the finance department as well.

In recent years, the flow of McCombs alumni to Frito-Lay has accelerated, and the company is now among the top ten recruiters of McCombs MBAs. “In the last five years or so, we’ve really started to get a sense of a McCombs community,” says Brian Graham, a senior product manager, who has been at Frito-Lay since earning his MBA in 1998. “It’s a real testament to the program and to the people we’ve hired.”

One reason for the relationship between Frito-Lay and McCombs is simple geography—being a Texas company, Frito-Lay has better luck attracting and retaining Texas alumni than MBAs from other parts of the country. Other foundations of the relationship between McCombs alumni and the Frito-Lay Company include an understanding of each other’s need to grow and a shared commitment to teamwork. Successful marriages have been built on as much.

The McCombs MBA alumni on Frito Lay’s marketing team enjoy a solid network. This supportive environment may facilitate their ability to respond quickly to change, which is crucial to marketers, who build careers on their ability to keep pace with consumer concerns—or one step ahead. “You have to try to figure out what people want before they even know they want it,” says Graham.

Indeed, Frito-Lay has anticipated several major consumer trends well before the rest of the salty-snack industry. In the 1990s, for example, consumer concern about nutrition led Frito-Lay to develop low-fat Baked! Lay’s and Baked! Tostitos. In September 2003, the company announced that it was removing all trans fats, which have been implicated in many cases of high cholesterol and heart disease, from all of their products.

This spring, to meet the different needs of consumers, Frito-Lay will unveil a new line of low-carb chips. “It’s basically an extra process step,” explains Chris Hall, a 1990 alumnus and vice-president of brand innovation finance and profit performance. “When you take out carbs you have to replace them with something, so we replace them with soy and fiber. They’re higher in protein than our existing base product, much lower in carbs, and the same in fat content.”

And if we needed any more confirmation that Frito-Lay execs have their finger firmly on the pulse of consumers, it’s worth noting that Natural Lay’s recently appeared on The O.C. with Tate Donovan, and Tostitos have guest-starred alongside Paris Hilton on The Simple Life.

In order to figure out what consumers want, says Carol Goglia, MBA 01, associate manager of innovation, “We watch and ask.” Frito-Lay observes customer snacking behavior by tracking scanned sales and fielding ethnographic studies, and asks consumers what they want through segmentation studies and focus groups. “We probe to see if we can meet any under-met or unmet needs they have. Then we develop products to fit their desires,” Goglia says.

Having led the successful launch of Twisted Cheetos, Goglia has made good use of these tools of the trade. And in a pinch, she could turn to an in-house focus group, since most Frito-Lay employees are self-confessed snack aficionados.

Regan Ebert, MBA 92, vice president of potato chips.

Recently, market research led Regan Ebert, MBA 92, to revamp Lay’s so they are crispier than ever. Ebert, the vice-president of potato chips, was honored this February with the Trailblazer Award during the Women in Business Leadership Conference at McCombs. However, the most exciting moment of her year might have come a few weeks earlier, at the 38th annual Super Bowl. Her first ever Super Bowl ad, touting the new, crispier product, placed 5th in the USA Today Super Bowl Ad Meter. “For a marketer, that’s obviously really exciting!” she says.

Tony Rogers, BBA 90, MBA 97 and director of marketing for Tostitos, Fritos and dips, takes the Tostitos message nationwide with the Tostitos Fiesta Bowl, which he has been working on for the past four years. He eagerly looks forward to the year when UT will be able to take part in the festivities, but in the meantime, the project underscores one of his job’s advantages: “It’s just more fun to work on Tostitos than it is, say, widgets.”

Of course, brilliant marketing ploys can only take you so far. For any consumer goods company, the ability to get projects from the board room to the rec

room is crucial. And it is here that Frito-Lay enjoys its biggest competitive advantage: with 15,000 trucks, the largest fleet of direct-store delivery trucks in the U.S., their direct-store-delivery system is unparalleled. Frito-Lay’s trucks reach more than two million retail customers each week, from the big-box stores like Wal-Mart to the most out-of-the-way mom and pop operation.

“There are roughly 25,000 supermarkets, mass merch, and club outlets in the United States,” says Hall. “We can get to them within a week when we’re introducing a product. And then you have what we call “up and down the street”—7-Elevens and gas stations—there are over 200,000 of those—that we can get to within two weeks. We have a vending and a food service division, so we can get into every vending machine—I don’t even want to tell you how many there are of those. We can get to so many points of distribution much faster than anybody else.”

The extent to which the direct-store-delivery system is integrated with the marketing and finance functions of the company underscores a key element of Frito-Lay’s corporate culture: teamwork. “Our culture is very influenced by our route drivers and colleagues on the manufacturing side,” says Goglia. “All functions in the company work together to get the snacks from simple ideas to actual products on the store shelves.”

Omnipresent availability of Frito-Lay products is crucial to the company’s success. After all, the genesis of the company lies in an impulse buy. In 1932, a struggling ice cream salesman named Elmer Doolin stopped for lunch at a roadside café in San Antonio. While he was waiting for his five-cent sandwich to be prepared, he succumbed to his desire for a nickel bag of corn chips. He was so impressed by the product that he bought the recipe, nineteen retail accounts, and an old potato ricer and formed The Frito Company.

Doolin paid $100 for the recipe and the rights to the corn chips. Since then, of course, the value of the company has appreciated considerably.

Tony Rogers, BBA 90, MBA 97, director of marketing for Tostitos, Fritos and dips.

According to Rogers, the sheer size of the company is one of the features that attracts so many McCombs graduates to Frito-Lay. “They’re attracted to the fact that we think big,” he says. “When you come here, you work on four, five, six, seven hundred million dollar brands, whereas if you went to some other companies you might have to take a zero off of that.”

Still, there is room to grow. “Here in the United States, we have a 60 percent-plus share of the salty-snack market. Some markets are even higher than that. Here in Texas, for example, it’s closer to 75 percent,” says Hall. “But that’s just salty snacks. If you look at the things we call “macro-snacks”—cookies, crackers, gum, candy, mints, ice cream—in the broadest definition of macro-snacks, we’re only about a 16 percent share. Which is why we still believe we have so much growth potential.”

To achieve this potential, Frito-Lay is looking to increasingly diversify its portfolio through the inclusion of more sweet products and wholesome products. Last year’s acquisition of The Quaker Oats Company was a big step in that direction.

But Frito-Lay, according to these McCombs MBAs, is not just concerned with its own growth. The company also places a high premium on the personal growth and initiative of its employees. “I’ve had experience with process-oriented companies and found, at least for me, that they can be a little bit stifling, creativity-wise—they always have a model and a process or procedure for doing everything,” says Graham. “For me, it’s refreshing to have the scope within my job and the capability to craft a work plan that fits the problem or project at hand.”

The ability of The Frito-Lay Company to prioritize personal creative development, while maintaining a corporate culture that prizes teamwork and consensus-building must be attractive to McCombs alumni, who are often cited as an example of how a competitive spirit is not mutually exclusive with an ability to work well with others. “I think the people we get at Texas really do like our culture and environment,” concludes Hall. “That’s why it’s been such a good match.”