U.S. Department
of Justice
Frito-Lay Investigations : 05/23/1996a: Memorandum: Telephone Interview
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On May 22, 1996, I interviewed by telephone [REDACTED TEXT (b7D)]
Page(s) 2 [REDACTED TEXT (b7D)] He said that [REDACTED TEXT (b7D)] had done some research and had come up with the conclusion that Frito-Lay has a 17 percent cost advantage over its competitors because of its size. In the snack business, this is critical because generally there is not enough margin to survive. According to [REDACTED TEXT (b7D)] five percent net profit is excellent. I asked [REDACTED TEXT (b7D)] what he knew about Frito's efforts to get an exclusive supply relationship with convenience stores. He said he was well aware of this strategy and [REDACTED TEXT (b7D)] In [REDACTED TEXT (b7D)] view, the reason that the regional snack food manufacturers have been going out of business is that they have cut their margins to survive the battle and in order to cover the costs of surviving the battle, they have been dipping into equity. He does not see that as a fruitful strategy. [REDACTED TEXT (b7D)] said that things are changing in the business and that people are not willing to pay the money for shelf space any more which may mean that life will return to normal. He also said that he will be sending the documents that he put together for the [REDACTED TEXT (b7D)] scenario where the Frito shelf captain prepared a schematic that pushed him off the shelf. And, he also said that if he had any other documentary evidence that he would send it to us.
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