1. Analysis on Product Development
in the Food and Beverage Industry and Frito Lay
for Directed Study
with Chip Besio
Analysis written by
Dustin Fontenot

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Introduction and Overview
As a soon to be graduate of the SMU Cox School of Business with a BBA in Marketing, I
found it beneficial to conduct an independent study on a company that I would one day like to
work for: Frito Lay. The area of Marketing that I am pursuing is Product Development. I am
familiar with Frito Lay through a case study I worked on for a Product and Brand Management
course at Cox in the spring of 2012 with Chip Besio with whom I am conducting this current
study. Since then I have been interested in the methods Frito Lay uses to seek out new
opportunities for its current products as well as potential opportunities for new products. For this
study I have provided an analysis on product development in the food and beverage industry as a
whole with some examples provided, followed by an analysis of product development at Frito
Lay and I conclude with examples of some of their newest creations including: the Doritos Taco.
New Product Development in the
Food/Beverage Industry
Consumer tastes and preferences are always changing and as a result companies have to
constantly update or change their products to suit them. In the food and beverage industry this is
no exception. When trying to decide what direction to take with an existing product or whether
pursuing an idea for a new product is worth it, companies in the food and beverage industry use
innovative tools to help them make these decisions. In the past, companies in this industry have
made use of meetings, retreats and trusted vendors when it came to formulating new ideas for
products (Food Processing). However, in recent years they are bringing in “outsiders” to provide
them with ideas of their own and collaborating with them to bring these ideas to life. Included
among these “outsiders” is the consumer. Companies not just in the food industry, but in all

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industries are becoming wiser about listening to what their customers are saying and applying
what they hear when developing new products or changing existing ones. This is a process
known as crowdsourcing.
Crowdsourcing is defined as a process involving the outsourcing of tasks to a distributed
group of people (Food Processing). This means that the tasks involved in product development
are divided up into smaller tasks and completed by an on-demand workforce. Coming up with
new ideas for an existing product, let alone a new product in general, is not an easy process for
any industry. Crowdsourcing not only makes this process easier, but it also allows the company
to hear and follow-through on customer suggestions, which is the key to gaining market share,
brand equity and brand loyalty with consumers. One of the methods used in crowdsourcing is
“Sentiment Analysis,” which involves gaining an insight into a customer’s attitudes towards a
company’s brand by analyzing the variables of context, tone and emotion expressed through
social media such as Twitter and Facebook (Food Processing). Since its inception, social media
has become both a blessing and a curse for companies. Customers often express opinions on their
experiences with a particular product or service and social media has become the common
ground for it. This makes it the best source for WOM (Word-of-Mouth) marketing, and
depending on whether or not the customers are satisfied when they comment can either be
beneficial or detrimental to the company’s image. Therefore, companies need to pay close
attention to what their customers are saying.
An example of crowdsourcing is the website created by Lego called the Cuusoo
crowdsourcing platform beta-version, (www.legocuusoo.com). After spending three years
prototyping, testing and refining the concept in Japan, Lego launched the platform globally in
2008 with the objective of increasing the number of product ideas while also improving their

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customer engagement (Digital Spark Marketing). The business model for Lego’s crowdsourcing
platform is both simple and straightforward. A product design can be submitted by any user and
voted on by other users. Once that design receives up to 10,000 votes, it gets a formal state-gate
review and then moves on to production—provided that no legal issues or showstoppers occur.
Upon the product’s completion, the creator will receive a 1% loyalty fee on the net revenue
generated from the product (Digital Spark Marketing). It is not clear how many submissions fail
before reaching the production stage, but if proper feedback is provided to those who submitted
the ideas, it is possible they will continue to submit other ideas in the future.
Since the platform’s launch, Lego has enjoyed benefits not usually found in the product
development process of crowdsourcing, they include (Digital Spark Marketing):
1) A wider community which can produce more ideas than their creative design team alone.
2) A highly cost-efficient development phase: projects that fail don’t cost Lego any money
and projects that succeed only cost them a very small 1% royalty fee paid to the creator.
3) A virtually free pre-launch campaign platform that creates buzz among Lego fan bases
through its voting phase and also provides a clear picture on what those fans bases want.
As mentioned earlier, companies need to keep up with the changing tastes and
preferences of consumers. However, new product development is not easy and it is also very
risky—especially if a company is trying to enter a market that it is not already in and/or lacks the
experience needed to produce the product(s) for that market. And even if a company does have
past experiences in a new market, if those experiences were negative then the process will be
even more difficult and risky. To make sure the process is done both carefully and correctly,
companies sometimes turn to a service company called MachinePoint Food Technologies.

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MachinePoint Food Technologies helps companies come up with new and creative
product ideas as well as new recipes or other ideas for existing products by working side-by-side
with them from start to finish. This close working relationship is highly beneficial to the client as
it gives them an advantage in terms of adding value to their new creations as well as getting a
head start on the uses of new and more efficient technologies and processes (MachinePoint Food
Technologies). If companies want to get ahead and/or stay ahead of the competition they need to
implement the newest and latest technology, and the most efficient production processes.
MachinePoint Food Technologies can help.
MachinePoint also emphasizes the need of collaboration of the following areas listed
below when it comes to developing new products (MachinePoint Food Technologies):
 Food Technologists: these people need to have keen knowledge of food in
general, the ingredients used, different types of cuisines, as well as knowledge of
food science and a good sense of imagination.
 Technical Managers: to oversee the development of newer technologies for the
client to make the production process more efficient and give them an advantage
over the competition.
 Nutritional Experts: to give sound advice on food choices when creating new
products.
 Food Microbiologists: to analyze the new food product(s) for bacteria or other
microorganisms that could make the food unsafe to consume.
 Lawyers: to make sure the new product complies with FDA regulations.

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 Marketing, Packaging and Commercial Managers: usually from the client’s side,
to assemble the final product and create the marketing/advertising campaign to
sell it.
MachinePoint Food Technologies covers a wide range of areas in all industries in the
food and beverage market. They also cover all of the supply chain requirements: product recipe
development, process and technologies definition and plant and equipment manufacturing,
assembling and commissioning (MachinePoint Food Technologies). In the end, it depends on
who the client is and what they want. The results will vary from client to client, but the decision
will be worth it.
New Product Development at Frito Lay
In a meeting with Caitlin Horan, Marketing Analyst of SunChips at Frito Lay, I was
provided with some details on how Frito Lay’s process works when it comes to new product
development. There are three areas of innovation at Frito Lay: 1) Flavor Development, 2)
“Outside Aisle” and 3) New Uses for Current Brands.
Frito Lay is always trying to keep up with the current trends of its customers. In Flavor
Development, Frito Lay creates new flavors to add to its ever-expanding snack food product line.
To expand off the Crowdsourcing example presented in the previous section, this past year the
company launched its “Lay’s Do Us a Flavor” campaign. In a manner similar to Lego’s virtual
platform, Frito Lay asked all of its consumers across America to assist them in creating its next
chip flavor in celebration of its 75th anniversary (‘Do Us a Flavor’). Frito Lay made use of the
power of social media by teaming up with Facebook and created a page where consumers and
fans could go to submit their ideas for new flavors and vote on other people’s submissions. In

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addition, Facebook changed its “Like” button on the page to “I’d Eat That” to encourage friend
interactions as well “flavor showdowns” among contestants (‘Do Us a Flavor’). The contest, a
first in the United States, was already a major hit across the globe in over 14 countries which
resulted in some really unusual and wacky ideas for new chip flavors. Among them were: Chili
& Chocolate, Caesar Salad, Late Night Kebob and even Cajun Squirrel (‘Do Us a Flavor’).
To generate even more excitement for the contest in the U.S., Lay’s hired actress and
restaurateur Eva Longoria and Iron Chef Michael Symon (‘Do Us a Flavor’). They will assist in
judging the flavor submissions and narrowing them down to three finalists from which the
winning flavor will be deemed the new Lay’s chip flavor. After the contest concluded on
October 6, 2012 the final three flavors were chosen to compete for the crown, they are: 1)
Cheesy Garlic Bread, 2) Chicken & Waffles, and 3) Sriracha (a Thai hot sauce). Again, Frito Lay
is asking its fans to vote on Facebook for the flavor they like the most. The contest ends on May
5 of this year. Once voting concludes, the winning flavor will be announced.
Outside Aisle is Frito Lay’s second area of innovation. Caitlin says that this is all about
creating new beachheads—meaning anything outside of the salty snack/chip aisle. For example,
if Frito Lay wants to expand a product into a store’s Deli section or its cracker aisle, then the
Outside Aisle is where they develop new and unique products to help them achieve that goal or
even discover inventive ways to view and place existing products in a new light outside of their
current aisle placement. This area is critical to Frito Lay’s past, current and future success in the
market. If Frito Lay wants to continue growing its market share and its incrementality—
increasing its marketing to attract more consumers--then it needs to innovate new products
outside of the salty snack aisle.

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The third and final area of new product development is New Uses for Current Brands.
This is where Frito Lay tries to go beyond the basic chip. One example is the Top n’ Go. The
Top n’ Go consists of an ordinary bag of chips tipped on its side. This allows the user the “top
off” the chips with any of their preferred topping(s) such as a meat, salad, chili or any other
desired food. Currently, this product is still in development.
The Doritos Taco
To expand on Frito Lay’s third area of innovation, New Uses for Current Brands, I will
now talk about their most recent creation: the Doritos Taco. This product, which was three years
in the making, was created out of a co-branding partnership between Frito Lay and Taco Bell.
Taco Bell was looking for ways to “highlight the better Bell” meaning they wanted to make the
taco shell better and at the same time do something really innovative to celebrate their 50th
anniversary (McCombs Today). The idea for the Doritos Taco originated when Greg Creed, Taco
Bell Corp.’s President and CEO called on his research team to create the “[fast-food] industry’s
next big thing.” After trying the prototype he knew the company had created something special.
In a quote to Restaurant magazine, Creed called the idea “simple” and “brilliant…a flavor
pairing just waiting to happen (TIME).”
As luck would have it, Frito Lay was also looking for new ways to improve its brand.
After considering which brand of chips would work best as a taco shell, it was decided that
Doritos would be the chip of choice. The reason Doritos was chosen was because the brand was
targeted at millennial males between the ages of eighteen and twenty-four. This group was
labeled “the risk takers,” those who want to live life to the extreme, take chances and try
something new and unusual. In addition, Doritos is Frito Lay’s most successful brand of chips

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and the one most advertised. The Doritos Taco would be very similar to the ordinary crunchy
taco and have the same choice of toppings: ground beef with shredded cheese, sour cream,
tomatoes, lettuce, and choice of hot sauce: mild, hot or fire. The only difference would be the
Doritos Taco would have an orange-colored shell made from the same formula as the Doritos
Nacho Cheese chip. In addition, to add appeal to the product Frito Lay had the Doritos brand
name imprinted on a taco holder and used the Doritos bag in its advertisements (see the images
below).
i ii
At midnight on March 8th 2012, Taco Bell officially launched the new Doritos Locos
Taco. From the very beginning it was clear that both companies had struck gold. Taco Bell sold
200,000 Doritos Locos Tacos on the first day! Since its launch, the Doritos Taco has become a
major success for both Frito Lay and Taco Bell. In its first ten weeks on the market Taco Bell
sold more than 100 million, setting a new record and making the Doritos Locos Taco the most
popular new product it has ever released. Taco Bell spokesman Rob Poetsch stated that the
Doritos Locos Taco had officially dethroned the company’s previous big hit: the Crunch Wrap
Supreme released back in 2005 (TIME). To put perspective on just how impressive this sales
record is, Taco Bell pointed out that McDonald’s sold its first 100 million burgers back in

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1958—18 years after McDonald’s opened its first burger stand and three years after Ray Kroc
started the first McDonald’s franchise (TIME).
When Taco Bell first launched the Doritos Taco, it had planned to only serve it through
the spring months of 2012. However, when it quickly became a multi-billion dollar success just
days following its release, they quickly reconsidered pulling the product. Instead, they turned
their focus on creating another Doritos Taco—the Cool Ranch Taco.
Since the first Doritos Taco was extremely successful upon its release it made perfect
sense that Taco Bell would attempt to continue their newfound success by turning Frito Lay’s
other Doritos brand: Cool Ranch, into a taco. In addition, many of its consumers were eagerly
hoping they would follow the original with a Cool Ranch version. Finally, Taco Bell answered
those hopes on March 7th of this year when they officially launched the Cool Ranch Doritos
Taco. Like the original Doritos Taco, the Cool Ranch Taco has the same choice of toppings and
has the Cool Ranch chip flavored shell (see images below).
iii iv
While the Cool Ranch taco has proven to be another success for Taco Bell and for Frito
Lay, it may not enjoy the same success that the original Doritos Taco did. Some reasons for why

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this may be the case are: 1) despite it tasting just like the Cool Ranch Doritos chip, the Cool
Ranch Taco looks too similar to Taco Bell’s original Crunchy Taco. 2) Food bloggers have
commented that the Cool Ranch flavor is too light compared to rest of the taco and is barely
noticeable. In addition, they mention that the seasoned beef in the taco drowns out any Cool
Ranch flavor that existed in the taco shell (Man Reviews Food).
Despite the Cool Ranch Taco not getting quite the same hype as the original Doritos
Taco, Frito Lay and Taco Bell show no signs of slowing down with the success they have
enjoyed since the release of both products. The two companies have continued building on their
success with the release of Doritos Locos Tacos Flavored Chips on April 8th of this year. These
chips come in the same flavors as the original Doritos: Nacho Cheese and Cool Ranch, but with
one major difference—they taste like the Doritos Taco. PepsiCo, Frito Lay’s parent company,
decided to release the chips for a limited-edition line to ride the wave from the success
accumulated from the Doritos Taco (International Business Times).
In closing, Frito Lay and Taco Bell are now entering the second year of their partnership.
Currently they are developing more new and exciting products including another Doritos Taco.
There is no word yet on what the next Doritos chip to be made into a taco shell will be, but with
the success that both companies have experienced so far there is undoubtedly another great
product combination on the horizon.

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References
Curtin, Stacy. "‘Do Us a Flavor’: Lay’s Launches $1 Million Chip Flavor Contest." Yahoo! Inc..
Yahoo Finance, 20 July 2012. Web. 27 Apr. 2013.
<http://finance.yahoo.com/blogs/daily-ticker/us-flavor-lay-launches-1-million-chip-
flavor->.
DeNinno, Nadine. "Doritos Locos Tacos Flavored Chips To Hit Grocery Stores April 8, Plus A
Contest To Win The Taco Bell Chip Spawn Before Release." International Business Times. IBT
Media Inc., 27 Mar. 2013. Web. 5 May 2013.
<doritos-locos-tacos-flavored-chips-hit-grocery-stores-april-8-plus-contest-win-taco-bell-
chip-spawn>.
"Innovative Tools Help Food and Beverage Processors with Product Development Ideation."
Food Processing. Ed. Dave Fusaro. Putman Media, 15 Feb. 2013. Web. 21 Apr. 2013.
<http://www.foodprocessing.com/articles/2013/product-development-ideation>.
"New Food and Beverage Product development." MachinePoint Food Technologies. Machine
Point,2013.Web.22Apr.2013.
<http://www.machinepoint.com/foodtechnologies/machinery.nsf/beverage_technology/ne
w_food_and_beverage_product_development>
Reding, Shawna. "The Strategy Behind America's New Favorite Taco." McCombs Today.
University of Texas at Austin, 14 Aug. 2012. Web. 5 May 2013.
<http://www.today.mccombs.utexas.edu/2012/08/the-strategy-behind-americas-new-
favorite-taco>.
"Review: Taco Bell Cool Ranch Doritos Locos Taco." Man Reviews Food. Wordpress, 8 Mar.
2013. Web. 5 May 2013.
<http://www.manreviewsfood.com/foodreviews/review-taco-bell-cool-ranch-doritos-
locos-taco/>.

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Rosenfeld, Everett. "Taco Bell's Doritos Locos Tacos Are an Insanely Huge Hit." TIME News
Feed. TIME, 5 June 2012. Web. 5 May 2013.
<http://newsfeed.time.com/2012/06/05/taco-bells-doritos-locos-tacos-are-an-insanely-
huge-hit/>.
Schoultz, Mike. "Lego Innovation: An Example of Crowdsourcing Design." Digital Spark
Marketing. Digital Spark Marketing, n.d. Web. 27 Apr. 2013.
<http://www.digitalsparkmarketing.com/innovation/crowdsourcing-design/>.
i
Image from sogoodblog.com
ii Image from articles.latimes.com
iii
Image from yelp.com
iv
Image from abcnews.go.com