Frito-Lay Investigations : 06/04/1996b: Memorandum: Telephone Interview

Memorandum

[REDACTED TEXT (b7D)]

[REDACTED TEXT (b7D)] does not have any hard evidence on paper but he believes that Frito Lay's presentations to retailers are designed to capture [REDACTED TEXT (b7D)] percent of the market. He says that [REDACTED TEXT (b7D)] is the biggest customer in the [REDACTED TEXT (b7D)] He heard that Frito Lay had offered [REDACTED TEXT (b7D)] in cash to get [REDACTED TEXT (b7D)] percent more shelf space in those stores. [REDACTED TEXT (b7D)] gave Frito [REDACTED TEXT (b7D)] percent more space, but nevertheless, it eliminated some competing companies, products in order to give Frito Lay that additional space.

[REDACTED TEXT (b7D)] refers to this as a perpetual monopolistic program that puts retailers in a prisoner's dilemma because of the large amounts of money that Frito is willing to pay to get the space. He illustrated his point by talking about [REDACTED TEXT (b7D)] where Frito Lay's share of the shelf space jumped from [REDACTED TEXT (b7D)] percent to [REDACTED TEXT (b7D)] percent. He said Frito was able to accomplish this by locking competitors out of the secondary display space in the store. He said that Frito has so many display sites that when the numbers come in on the annual sales volume, Frito Lay is always the highest and yet Frito Lay insists upon attributing those numbers all to the in-line shelf sales, not to display space. As a result, the low volume sellers get pushed out of the shelf space because they have no volume relative to Frito's.

According to [REDACTED TEXT (b7D)] Frito Lay's pricing is higher than anybody elses except where there is no competition, for example corn products. When Eagle came in with its corn products, Frito cut its prices. He said that prices are still low despite Eagle's demise, but he said that he has heard that corn product's prices are going to go up. When [REDACTED TEXT (b7D)] was in [REDACTED TEXT (b7D)] Frito Lay put in-place a program that was designed to get [REDACTED TEXT (b7D)] off the shelf. He was not able to elaborate on this but we might want to ask [REDACTED TEXT (b7D)]

He says that Nabisco is pulling out of the pretzel market and made an announcement to that effect last week.

[REDACTED TEXT (b7D)] says that [REDACTED TEXT (b7D)] percent of the chip aisle in [REDACTED TEXT (b7D)] is Frito's and [REDACTED TEXT (b7D)] percent of the chip aisle [REDACTED TEXT (b7D)] is Frito's. According to [REDACTED TEXT (b7D)] if it were not for [REDACTED TEXT (b7D)] and [REDACTED TEXT (b7D)] Frito Lay would have 100 percent. [REDACTED TEXT (b7D)]

[REDACTED TEXT (b7D)] referred to the same issue of recording sales volume based on shelf and display space that [REDACTED TEXT (b7D)] had complained of. [REDACTED TEXT (b7D)] said that in the past, [REDACTED TEXT (b7D)] percent of sales would come from the shelf or gondola, and [REDACTED TEXT (b7D)] percent would come from display space. Today, he says that [REDACTED TEXT (b7D)] percent is coming from the display space and [REDACTED TEXT (b7D)] percent is coming from the in-line shelf or gondola.

So/So # 11474size>