Frito-Lay Investigations : 06/18/1996b: Memorandum: Telephone Interview

Memorandum

On June 17th, I received a telephone call from [REDACTED TEXT (b7D)] He called because he wanted to report an incident that he felt was out of the ordinary in terms of the kind of business tactics that he has seen over his years in the snack food business.

He said that in a [REDACTED TEXT (b7D)] Frito-Lay had bought [REDACTED TEXT (b7D)] and other competitors, off the shelf. [REDACTED TEXT (b7D)] had been letting the Eagle product sell down in this grocery store chain and was taking up that space with [REDACTED TEXT (b7D)] What he told us was that Frito had basically bought the Eagle space and therefore he could no longer take up the space with [REDACTED TEXT (b7D)]

The name of the grocery store chain is [REDACTED TEXT (b7D)] When I asked him if he thought the store would change its mind [REDACTED TEXT (b7D)] suggesting that perhaps the arrangement [REDACTED TEXT (b7D)] at which point Frito-Lay then began to spend significant amounts of money to build its own share. Indeed, according to [REDACTED TEXT (b7D)] spent more dollars than what he was selling of the Eagle product.

We talked a little bit about other grocery chains in his part of [REDACTED TEXT (b7D)] He said that he is not in [REDACTED TEXT (b7D)] because they will not let him in. He is not sure why this is true and he continues to try. In addition, there is a [REDACTED TEXT (b7D)] has made it clear to him that [REDACTED TEXT (b7D)] needs a strong number two to push number one. He means by that that Frito is number one and in order to get the kinds of promotions and other deals that Frito offers, there has to be a strong number two pushing at number one. [REDACTED TEXT (b7D)] believe that once the competition is gone, Frito raises the prices. Indeed, [REDACTED TEXT (b7D)] cited to pricing in [REDACTED TEXT (b5), (b7D)]

I asked [REDACTED TEXT (b7D)] if he had any sense of Frito's pricing and whether it was going below cost. He said that Frito always has something on deal. Apparently, the current practice is Doritos and Ruffles being sold at two for three dollars which, as far as he's concerned, means that Frito is selling them as buy one, get one free. He does not think that Frito is going below cost, but he does think that they are very close to the margin.

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