A product that competes with the Maui Onion Style Chips is made by the Mondelez International conglomerate under the brand name of Nabisco is Cheese Nips. This corporation is headquartered in Illinois but had production in many countries all over the world. A 7 oz. box of Cheese Nips retails to the consumer at a price of $2.99. (Keyfood.com, 215) There is a distributor in the middle so assuming a 50% markup from the distributor then the price that distributor pays for the product would be $1.99 per 7 ounce box. (x1.5=$2.99). According to the financial statements of the Mondelez conglomerate, the gross margin was about 38%. (Mondelez, 2015) Thus, the price to manufacture the Cheese Nips can be derived by applying the gross margin to the selling price to get the price the product is manufactured which is $.76. (.38*$1.99=$0.76). .
It would seem that compared to Frito-Lay and the Maui Onion Style Chips Nabisco will have to sell much more product to make the same amount of return. However, by being able to manufacture and deliver it at such a cheaper price, this can translate into higher volume. The gross margin is about the industry standard, so they are doing pretty good. To be fair, though the Frito-Lay chips are a much more specialized taste which appeals to a much more limited market. The crunchy texture is one of the reasons it is my favorite snack and why I am willing to pay more for it. The Nabisco product, on the other hand is more standard in taste and cheaper and so appeals to a much wider market. The difference in cost is related to this more specialized taste and production of the Frito-Lay Chip. Plus, the manufacturing takes place in North America where costs can be higher than in Mexico and Central America where some of the Nabisco products are manufactured. Apply the concept of the value chain to this product. What types of costs would be relevant for each segment of the value chain for this product?.
