The Frito-Lay Cracker Jack case

Category: Pepsico, Sales
Last Updated: 17 Aug 2022
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Table of contents

            This paper is being written to analyze the Frito-Lay Cracker Jack case.  This case is about the acquisition by the company Frito-Lay of Borden Food’s caramel popcorn brand Cracker Jack.  The case facts extensively details company information of Frito-Lay, Borden Foods and the brand Cracker Jack.  It also discusses efforts already undertaken by Frito-Lay in its bid to acquire the brand from Borden Foods.  There are already extensive discussions on these types of information.  The task at hand is meant to analyze the intended sale from a marketer’s point of view using the worksheet provided by Kerin and Peterson (2007) in their book on Strategic Marketing Problems.

In order to do an adequate case study analysis using the worksheet, we answer the specific topics with 5 questions in mind.  These are as follows:

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  1. Why is Borden selling Cracker Jack?
  2. Why is Frito-Lay considering purchasing Cracker Jack?
  3. What would a SWOT analysis of Cracker Jack look like from Frito Lay’s perspective?
  4. How will Frito-Lay likely market Cracker Jack?
  5. What is a fair market price for the sale?

The reasons why Borden and Frito-Lay are selling and buying the Cracker Jack brand would be discussed in our discussion on the Nature of the Industry and Market of which both companies belong.

The SWOT analysis of Cracker Jack from Frito-Lay’s perspective will be tackled successively in “The Organization”.  The SWOT analysis is simply an assessment of the strengths, weaknesses, opportunities and threats facing the Cracker Jack brand when it is acquired by Frito-Lay.  It would be a combination of the pertinent company and brand details of Frito-Lay, the acquiring company and Borden Foods, the selling company.

The question regarding Marketing strategies of Cracker Jack under Frito Lay and the suggested price for fair market value will be discussed under the headers “Plan of Action” and “Potential Outcomes”.  Buying the brand and properly marketing it is a distinct plan of action by Frito-Lay with distinct outcomes depending on the methods used.

Nature of the Industry, market and buyer behavior

In starting any case analysis discussion on industry, it is noteworthy and important to distinguish the particular industry where the company or companies involved are part of.  We would briefly state the profile of the companies and proceed onwards.

Frito-Lay is a division of Pepsi-Co. Inc. It is a highly profitable enterprise with an operating profit of $1.63 billion of net sales in 1996.  It is also an integral part of Pepsi-Co.  Frito-Lay contributes 31 percent of Pepsi Co’s net sales and 60 percent of its operating profit.

The company is also a growing company with an annual growth rate of 13 percent for the 5-year period from 1991-1996.  (Kerin, 1999, p. 237)

Borden Foods with its brand Cracker Jack is one of the two industry leader in the Ready to Eat caramel popcorn category.  It is owned by Kohlberg Kravis Roberts & Co which purchased the company for $1.9 billion dollars in 1994.  It was widely known for its dairy products before it divested from such an industry.  Today, prior to any acquisition, Borden Foods makes pasta, soup mixes, and bouillons, snack foods, consumer adhesives, and industrial adhesives, coatings and resins. It’s recorded net sales is $5.8 billion dollars. (Kerin, 1999, p. 241)

From the nature of these two companies, it is easy to recognize that they are involved in different industries.  Frito-Lay is a part of Pepsi-Co which is in turn also involved in the Beverage or Soft Drinks Industry.  Borden Foods on the other hand is involved in food and even in industrial supply industry.

In relation to our topic of acquisition efforts regarding Cracker Jack, both companies are involved in the Snack Food Industry.  More particularly the companies are or will be engaging in the Ready-to-eat (RTE) popcorn segment.

Frito-Lays is already a provider of “low-fat and no-fat” snacks.  These snacks include Baked Lay’s potato crisps, Baked Tostitos tortilla chips, and Rold Gold pretzels.  Frito-Lay’s US snack food business ps every aspect including food production and distribution.  This means they are involved not only in agricultural production but also stocking retailer shelves.  The company has extensive distribution capabilities.  (Kerin, 1999, p. 238)

Borden Foods as already mentioned is an industry leader in the RTE popcorn segment.  Its competitors in the RTE popcorn segment can be divided into national brand firms, seasonal/specialty firms, regional firms, and private label firms. Its main competitor is the national brand firm of International Home Foods, Inc.  Their leading RTE popcorn brand is named Crunch ‘n Munch. (Kerin, 1999, p. 240)

Borden is selling Cracker Jack because its focus and resources are no longer centered towards the snack industry.  The company wants to focus on its pasta business and expand into grain-meals that require a significant resource investment.  As a result of their company’s strategic assessment, Borden Foods announced in 1997 that they would divest from Cracker Jack, along with Borden Brands North America and Borden Brands International. (Kerin, 1999, p. 242)

Frito-Lay, on the other hand, is considering the purchase of Cracker Jack because it fits the company’s growth plan.  For growth, the company devised three criterions to qualify their choice.  They want to expand into new products.  They want to capitalize Frito-lay’s extensive distribution capabilities.  Last, they want to acquire “opportunistic acquisitions” made by divesting companies because of corporate restructuring. (Kerin, 1999, p. 239)

Acquisition of the Cracker Jack brand fits all three criterions.

Cracker Jack is a new product for Frito-Lay.  It will provide the company entry into the RTE caramel popcorn segment of the snack industry.  Cracker Jack’s future profitability is also entwined with better distribution efforts.  Borden Foods initially planned a direct-store-delivery method but opted not to push through because of steep resource requirements. (Kerin, 1999, p. 249)  Frito-Lay already has extensive distribution capabilities which would go well with this problem.  Lastly, Cracker Jack is a worthwhile brand with a deep heritage.  It is an “opportunistic acquisition” as Borden Foods is divesting itself for the purpose of focusing into different industries to which it is currently involved.

The Organization

The Organization to be described would be the Cracker Jack division if and when Frito Lay acquires it.  This organization would be in-charge of a well-known brand under a sizeable corporation which is part of Pepsi Co. Inc. The following paragraphs would describe the strength, weaknesses, opportunities and threats to this organization.

The key strength of this organization would be the Cracker Jack Brand.  The brand has a deep heritage with the American populace.  It is one of the most recognized consumer food brands in the country.  The brand name enjoys a 97 percent awareness among persons between the ages 15 and 60.  It also has a 95 percent brand name awareness among heavy users of caramel popcorn. (Kerin, 1999, p. 243)

The key weakness of this organization would be the birth pains in incorporating the Cracker Jack Brand with Frito-Lays.  The current Cracker Jack SKUs has 32 kinds.  This is large for Frito-Lay’s whose extensive distribution capabilities are used to handling lesser number of kinds.  This weakness would have to be addressed head on by the key management put in by Frito-Lays. (Kerin, 1999, p. 255)

The key opportunity of this organization would be taking advantage of the extensive distribution capabilities of Frito-Lays. The company employs 17,500 salespeople. It is the largest store-door-delivery sales force in the world.  They make 750,000 sales and delivery calls on approximately 350,000 retail store customers each week. (Kerin, 1999, p. 238) On the other hand, Borden Foods had trouble with the Cracker Jack Brand because of rising prices in distribution and trade and promotion expenses.  If Frito-Lays can efficiently use its distribution capabilities, it would significantly affect sales to increase.

The key threat of this organization would be its primary competitor International Home Foods Inc.  This competitor produces a highly profitable brand known as Crunch and Munch.  It has recorded net sales of $942 million in 1996.  It is a definitive market share leader in the RTE popcorn segment of the snack food industry. (Kerin, 1999, p. 241)

Plan of Action and Potential Outcomes

The recommended plan of action for Frito-Lays to take would be to acquire and market Cracker Jack as its own.  This is in light of the financial and logistical capabilities of Frito-Lays.  As has been earlier mentioned acquisition of Cracker Jack fits squarely with the growth avenues sought after by Frito-Lays.  It is a brand that will help the company venture into a new product category.  It is a fit into Frito-Lays extensive distribution capabilities.  Lastly, it is an “opportunistic acquisition” in light of Borden Foods company reorganization.

The immediate cost to Frito-Lay’s would be the financial burden of effecting such an acquisition.  The company is surely able to shoulder this.  However, this would still be a significant amount.  The benefit of this plan of action would be the acquisition of a significantly American Brand with a deep heritage and extensive brand awareness.

In order to market Cracker Jack properly, Frito-Lays would have to market it using the extensive distribution capabilities of their company.  This is the initial plan to be implemented during the first years of operation.  Brand and flavor extensions should be pursued in the second and third years of Cracker Jack as a Frito-Lay brand.

The proposed snack bar method of marketing is also recommended.  Kellog’s Rice Krispies has achieved much success using this type of marketing.  It has recorded more than $100 million in supermarket retail sales over the past years.  Quaker Oats has followed suit with the launch of its Fruit and Oatmeal Cereal Bars supported by $20 million of trade and promotional advertising budget. (Kerin, 1999, p. 255)

As to line of marketing, the traditional Cracker Jack taglines are recommended.  The brand already has significant brand awareness that it needs only to be sustained.   It should focus on the Cracker Jack positioning employed for over the past 30 years which centers on Cracker Jack as a traditional fun treat. (Kerin, 1999, p. 244)

As to a fair market price for the sale, it must be noted that the figures given by the case were disguised so it cannot be used for external research.  In order to determine the value of a business we need to determine its fair market value.  This is the value of the cash, cash equivalent, or price which an asset would be traded between a willing buyer and seller, with each in command of all information necessary to value the asset and neither under any pressure to trade.

The case study recommends the use of the Discounted Cash Flow (DCF) technique.  Using this technique, fair market value is calculated by the summation of the present value of projected cash flows for a determined period plus the present value of the residual and terminal value at the end of the projection period for a business.

Using the provided values, the owner’s investment would be $24.8 million.  This is derived from Cracker Jack’s current balance sheet with Assets of $34 million and Liabilities and equity of $9.2 million dollars.


  1. Kerin, Roger (1999). Case. Frito-Lay Company; Cracker Jack. In Strategic Marketing Problems: Cases and Comments. USA: Prentice Hall.

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The Frito-Lay Cracker Jack case. (2018, Jan 29). Retrieved from

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