Yesterday P&G announced that it was selling the Pringles brand to Diamond Foods. This is a good move for P&G and Diamond. It is bad news for PepsiCo.
Pringles is a fascinating marketing story. Despite a very slow start, P&G supported Pringles for many years and eventually the brand caught on. P&G created great advertising and invested in innovation. According to The Wall Street Journal, Pringles had sales of about $1.2 billion in 2010.
For the past several years, however, it has been quite clear that P&G has no real interest in Pringles. The company is investing in areas such as health and beauty. P&G sold off other food and beverage brands including Crisco, Sunny Delight and Folgers.
Selling Pringles to Diamond makes perfect sense; Diamond has recently acquired snack brands including Pop Secret and Kettle Chips. Pringles will substantially strengthen the Diamond portfolio.
The sale is clearly bad news for PepsiCo, owner of Frito. In the Pepsi portfolio, Frito is one of the gems; Pepsi has long had a dominant position in the market, with no real competition. As a result, PepsiCo has been able to count on Frito very consistently delivering great results. Life is much easier when you don’t have any serious competition.
Diamond is now emerging as a viable competitor. With a portfolio of well-known brands, Diamond is in a position to put pressure on Frito.
This will be an interesting battle to watch. Frito might spring into action and blunt the Diamond advance. Indeed, Frito has a history of successfully defending its business. But if Frito is a bit complacent or distracted, Diamond could fundamentally change the competitive dynamics in the category.
The folks at Frito should be scrambling.