Date: January (June) 23, 1987 (2000)

To: William Korn, President and CEO

From: 

Subject: Information Technology at Frito-Lay

As you recently outlined, Frito-Lay’s goal is to sustain real sales growth of 6% and double-digit profit growth in the years to come. You have also outlined 4 key strategies to accomplish this goal. One of the keys to accomplishing these strategies and meeting our goal is the successful implementation of the Hand Held Computer (HHC) Project. With our virtual saturation of the salty snack market, now more than ever our sales growth is dependent on the introduction of new products and out executing our competitors. Effective micro-marketing will be key to our success. The HHC will enable us, and our customers, be more successful.

The HHC has been successfully tested in 2 markets. The benefits of its use were immediate and dramatic. Salesmen reported savings of at least ½ hour per day in efficiency gains. Sales management is committed to using this time saved to create the additional $20 million in sales to cover the HHC’s annual operating costs. The HHC was also effective in reducing the sales force "over/short" problem. In fact, the HHCs were so well received by our sales people that they were afraid to report any problems with them for fear that it might be taken away. A key benefit of the HHC is that it allows our sales people to do what they do best, and that is sell.

As you have mentioned, one of Frito-Lay’s keys to success in the future is the successful introduction of new products. With our more than 100 products today expected to grow to 400 by 1990, the HHC will play 2 very important roles in this expansion. First, the shear volume of paperwork involved with our current product line is very burdensome. It would become much worse with 400 products. Also, the data obtained by the HHCs will give us much better and more rapid marketing data on our new products. This would allow us to more quickly address marketing issues for these new products thus enhancing their likelihood of success.

Micro-marketing is a very important concept being pursued that will require the HHC to be successful. Micro-marketing would allow each store to be treated separately and have a customized product line, promotional and pricing strategy. It is believed that this concept can increase sales by 10-15% without any new outlets. With micro-marketing, we believe we can build our relationships with our customers and make more money for them and Frito-Lay. The HHC will also allow us to capture detailed sales data for our cash paying customers for the first time. These customers who account for about 25% of our sales and 80% of our accounts cannot be ignored if we are to meet our sales and profitability goals.

There are 3 issues that must be completely addressed in order to minimize the risk in implementing the HHC. One key to successfully implementing the HHC is ensuring that the IT infrastructure is ready in every way to support it. If this system can’t support the HHC and the system crashes during the introduction, it could be disastrous. The second is training. We must fully train all personnel on the HHC and its peripheries to make it work. The last, and perhaps most important aspect in successfully implementing the HHC is the full support of all levels of the company. All levels of management must fully support its use and reinforce it at every opportunity. After all, the value of the information is an unknown, but it is believed to be great. We must make this work!