Analysis of Brand Expansion Strategy for Pace®| Option 1: Pace® Tortilla chip Pros: * The risk is lower than creating a new brand Since Pace® already enjoyed a good reputation and big market share, and salsa sauce lovers are probably also tortilla chip consumers, a new tortilla chip with the brand name Pace® on it could be eye-catching on the shelves. The chips markets are highly competitive, so adapting Pace® brand name would guarantee a better chance of surviving. * The cost is lower than creating a new brand
Branding Pace® Tortilla chip can be more effective and cost efficient than creating a totally new brand. Lowering the cost is important since it would be extremely difficult for Pace® to gain enough profitability battling with Tostito® and other good-famed snack products without taking advantage of its Pace® brand name. * Helps revitalize the brand and create emotional bond Salsa sauce is a low-involvement product which is bought frequently and with a minimum of thought and effort.
Introducing Pace® Tortilla chip can help revitalize the brand and attract new consumers, especially those young generations. When they build certain emotional bonds with Pace®,they will probably buy Pace® salsa for their family when they grow older. * Win back some market share taken by Tostito® Salsa sauce and Tortilla chips are companion products which means the sale of one product may lead to that of the other. So introducing Tortilla chips can help win back some salsa market share taken by Tostito®’s salsa products. Cons: * Diminish identification with any one category
Since Pace® has always been very single-minded in maintaining its high-quality salsa brand image, introducing Pace® Tortilla chip may make the brand category line boarder, but may also lead to the a weaker brand image and confuse consumers what Pace® is about. Customers may no longer consider Pace® as the best salsa. Instead, Pace® may represent tortilla chips in some people’s minds. * Hurt parent brand image Facing extremely tough competition from all those famous snack and chip products that have been around for so many years, the chance of success for Pace® Tortilla chip is not that satisfactory for investors.
Although we believe that the new product will appeal to certain segments, but it is still at high risk of damaging the parent brand even if it survived but did not perform well in the market. Option 2:South of the border ® Tortilla chips Pros: * Do not hurt parent brand In customers’ minds, Pace® represents salsa. Introduce the tortilla chips branded by ‘South of the border ®’ will not dilute this brand meaning and “damage” the parent brand than using Pace® on the new product. If ‘South of the border’ did a terrible job in the market, it will not hurt the parent brand too much. * More options in the future
If this brand succeeds, Pace® can handle it more flexibly. In the future, Pace® could keep South of the border ® and build on volumes as a cash cow; Or increase its line extension just like what other chips brand did; Or sell it to other companies. Pace® can adopt different strategies according to its own need and the parent company Campbell®’s overall strategic needs. * Keep the independence of sub brand/endorse brand Using a new brand to introduce tortilla chips can keep the brand independent from parent brand. When consumers think of Pace®, the first impression is salsa sauce.
Using the same brand for tortilla chips will not easy to highlight the features of tortilla chips. That’s why almost every major snack producers introduce different brand name on different categories. This strategy allows a brand build its own brand characteristics which is a vital thing in the long run. Cons: * The risk is too high This market has developed for a long time. There are many strong competitors such as Tostito®, Lays®. They did well in line extension and brand establishment. The shelves are full of competitive products with different flavors and sizes.
There are many obstacles for Pace® to enter this market so the risk of entry with a new brand can be very dissatisfactory. * High marketing support expenditures Creating a new brand can be extremely costly itself. What makes it worse is the low efficient of marketing expenditures. When introducing a new product with a new brand, it will cost a lot more to reach the same level of awareness than a well-known brand. * Can encounter retailer resistance New brand has to convince retailers believe this product can not only live long but also brings profit.
There thousands brand to be chose into the market but the shelf space is limited. It is very common that retailers can say no to an immature brand. Option3: Focus on salsa category Pros: * More funds available Category extension and creating new brand can be highly risky and costly. Only focusing on existing product lines can further gain competitive advantages for Pace® to gain more market share, improve brand value, and generate more cash. * More line extensions Since salsa sauce becomes increasingly popular in the U. S. Pace® can introduce more products within salsa categories to attract literally every segment, building a stronger brand name, just like what Pringles® do when they introduced more flavors. * Enhance Pace® brand name Salsa can be considered as commodity or low-involvement product. It means that a strong brand name with better emotional function is vital in this category. Pace® can focus on branding its brand name and make it the first name that come to people’s minds when they think about salsa sauce, just like the brand name Heinz® come up when most people think about ketchup.
Cons: * Confined profits Since the demand and consumption of salsa sauce is limited and Pace® already captured large enough market share, it’s harder to gain more profits in a cost-efficient way, which means the ROI rate could keep decreasing if they stay in one category. * Too risky focusing on one category “Putting all eggs in one basket” is the most vital risk in adapting this option. This category has certain lifecycle and no one can accurately predict what will happen in the future.
People’s choices of sauce can be affected by so many factors such as health-concern, new recipes, recent trends and technology innovation. People keep buying from Pace® are just probably waiting for a new product or entirely new category to switch to, just like they switched from ketchup to other sauces certain years ago. So Pace® would probably not feel safe if they solely have products within salsa category. Conclusion and Recommendation The three options each have its own advantages and disadvantages. But after weighing the pros and cons, option 1, introducing Pace® Tortilla chip, is our choice.
Step 1: Rule out option 3: We first ruled out option 3 which suggests remain focused on building volume within the salsa category. This option seems to be the most safe and conservative choice but are actually not acceptable mainly for two reasons. * Too risky to only focus on salsa market First, the market is changing too fast for us to stand still and put all eggs on one basket. The ideal way for Pace® is to gain more profits when the salsa market still performs well and also have other product line to hedge the risk and support the company’s well-being when the salsa market goes down. No response to competitor’s move means more market share loss Second, if Pace® do not respond to competitors’ moves, they will keep eating away market share belongs to Pace® salsa sauce. For instance, consumers of Tostito® tortilla chip will find it natural to also consume salsa from Tostito®. Since the two products are companion to each other, the sales of one product will stimulate the other. If Pace® does not step into the tortilla chips market now, it will be too late when they lose more salsa consumers to Tostito®’ salsa. Step 2: Option 1 is better than option2:
These two options have something in common such as the investments required for new products, revitalizing the Pace® brand. But option 1 is preferred for the following reasons. * The risk of option 1 is lower than option 2 Using a well-known brand is safer than using an unknown brand. Consumers can recognize this new product faster and according to the past usage experience they are more likely to try the brand they trust. Retailers are willing to leave the limited shelf space to stronger brands which offer more profits. * The cost of option 1 is lower than option 2
Creating a new brand can be way more expensive and the promotion efficiency is also lower than using an existing brand. Pace® can not afford to battle Tostito® in such a cost-inefficient way since we are now under attacks from so many strong competitors from varied categories. Step 3: Summary To sum up, option 1 offers a good opportunity to battle Tostito® Tortilla Chip with a relatively low cost while helps maintain Pace® ’s salsa category perform well. We strongly recommend this option as the guideline of Pace®’s future brand expansion strategy.