Frito-Lay stays course faced with possible stronger rival

PepsiCo.'s (PEP) Frito-Lay business is staying the course in the wake of Diamond Foods Inc.'s (DMND) pending acquisition of the Pringles, which is poised to present more formibable competition in the snack aisle.

Procter &Gamble Co. (PG) last week announced that it was selling Pringles, the world's largest potato crisp brand, for $1.5 billion to Diamond Foods, a smaller snack player that plans to devote more resources to selling Pringles than the global consumer giant P&G did.

The deal, expected to close by the end of 2011, catapults Diamond to the second-largest snack company globally with more than $3.2 billion in global retail sales, Diamond said last week, citing Euromonitor data. That's still a fraction of PepsiCo's $27.7 billion global snack business, but some analysts say that Diamond will provide a stronger challenge to Frito-Lay.

Frito-Lay's Chief Marketing Officer Ann Mukherjee on Monday said that the maker of Lays, Tostitos and Doritos has an opportunity to gain share by continuing its push toward converting half its snack portfolio to all-natural products while Diamond focuses on digesting its latest acquisition.

"Diamond has a lot going on right now. It will not take away from what we are doing,"Mukherjee said. "Our opportunity is just to make sure we keep our eye on the ball."