FRITO-LAY ROLLING OUT CHIP CITY

JAMES TENSER

DALLAS -- Frito-Lay has begun rolling out and installing 2,000 freestanding snack merchandising fixtures in power alleys at supermarkets and mass merchants across the country.

The display units, dubbed Chip City, have successfully expanded total salty snack sales at test stores in 20 markets, said Tom Kuthy, director of new products for the company.

The four-sided Chip City units are designed to drive incremental impulse sales outside stores' main snack aisles, said Kuthy. They display one-ounce bags of Frito-Lay's most popular snack brands at a 25-cent price point. Consumers can make their own multi-packs by placing the individual items into a plastic bag from a roll mounted on the display unit.

A distinctive feature of the unit is a motion-activated voice unit which speaks to passing consumers in the voice of Chester Cheetah, a Frito-Lay animated spokes-character whose image decorates the display. In-store research at test locations proved that the voice has great attention-grabbing power, he said.

"This is by far the most elaborate

piece of equipment that Frito-Lay has ever concocted. Each of these cost about $2,000 to produce," said Kuthy.

What adds up to a $4 million investment is largely justified, he explained, because in test stores the units have generated a $300 to $500 per week increment in total salty snack sales. And they did so without cannibalizing sales from other Frito-Lay brands, he said.

The Chip City displays were designed to overcome the tendency by many shoppers to skip the salty snack aisle entirely in order to avoid temptation, said Kuthy. In market research commissioned by Frito-Lay, the company learned that 46% of all potential salty snack customers never even go down the aisle.

He added that the 25-cent price point was chosen because it represented meaningful value for the consumer and further encouraged impulse sales.

"Our mission was pretty simple. Develop a specially priced, attention grabbing display that is located on the perimeter and that is going to entice kids and adults to buy more salty snacks," he said.

Testing of the Chip City concept began two years ago in Dallas, where several Tom Thumb, Kroger, Brookshire and Wal-Mart stores were outfitted with the units. About one year later the test was expanded to 200 stores across country. "We sent out 10 units to each of our 20 sales divisions, which chose where to put them," he said.

Kuthy said Frito-Lay has continually monitored the display's effectiveness, using Information Resources' Behavior Scan to run a split panel test which compared 10 Chip City stores with another 10 stores.

"We were very concerned about cannibalization of our variety pack," he explained. "What ended up happening was that variety pack was down about 5%, but not like it fell off the map. This was essentially all incremental sales."

After two years of experience, the company is confident that it can tell a compelling story to retailers about the benefits of Chip City. "On the bottom line, Chip City has provided retailers and Frito-Lay with a tremendous boost in sales. Total salty snack category where we have put these units in can grow by up to 6%. That's total category, all sizes," Kuthy said.

He also cited a consumer poll in which 52% of shoppers said that they would prefer shopping in a store with Chip City.

"This was a little bit astounding and some folks are skeptical, but since it keeps kids entertained, the displays are a benefit for Mom."

Kuthy said the individual scanning for the 25-cent bags at the checkout has not proven to be an issue with retailers.

"We were worried about that, but if you think about the number of items in any given grocery cart, there are a lot of little items anyway -- baby food or others. So it hasn't been a problem from a productivity problem at the cash register."

Frito-Lay has not yet studied whether the sales of 25-cent bags have built any movement on larger bags. "Part of idea behind this was as a great place to put trial size," Kuthy explained.