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KELLOGG’S

William Campbell

Amber Huggins

Jason Webb

Christine Werfelman

History

February 19th 1906 - John Harvey Kellogg and Will Keith Kellogg also known as W.K Kellogg founded the Battle Creek Toasted Corn Flake Company in Battle Creek, Michigan.

1914 – The production of the Kellogg’s Corn Flakes expanded world wide.

1922 – The Battle Creek Toasted Corn Flake Company changed there name to The Kellogg Company.

History Continued

1938 – The company continued to expand and build plants in England and Australia.

1951 – W.K. Kellogg died. The Kellogg Company continued to expand and build plants in Latin America and Asia.

1964 – Kellogg’s Pop Tarts are introduced. 1976 – Acquisition of Mrs. Smith’s Pie

Company.

History Continued

1999 – Acquisition of Worthington Foods. 2000 – Acquisition of Kashi 2001 – Kellogg acquires Keebler, its largest

acquisition. 2006 – With almost 11 Billion, Kellogg’s is

the world’s leading producer of cereal and other convenience foods.

Brand Names

Kellogg’s Keebler Nutri-grain Pop-Tarts Eggo Cheez-It Special K

Rice Krispies Morningstar Farms Kashi Murray Austin Famous Amos

Product Lines

Cereal Crackers Cookies

Snacks Frozen Foods Water

Environmental Assessment

Economics

Consumer Segment Products are manufactured in 17 countries and are

marketed in more than 180 countries. Top Revenue Regions (Dollars are in Millions):

North America $6,807.8 67%Europe $2,013.6 20%Latin America $822.2 8%Asia Pacific $533.6 5%Total $10,177.2 100%

Consumer Economic Indicators

Unemployment Rate Discretionary Spending Saving Rate Consumer Debt

– Installment – Revolving

Capabilities Analysis

Kellogg’s Financial Trends

Operating Margin Trend

0

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(as

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Kellogg's General Mills


ROE trend

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ROI trend

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Leverage Trends

020406080

100120

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Lev

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e R

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Kellogg’s Financial Goals

Projected Sales

02,000,0004,000,0006,000,0008,000,000

10,000,00012,000,00014,000,00016,000,000

Year

Pro

jecte

d S

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in b

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Projected Operating Margin

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Projected ROI

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Projected ROE

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100

1997

1998

1999

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2011

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d R

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Projected Leverage

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Critical Success Factors

Purchasing power Distribution Market Research:

– Demographic analysis– Consumer/ Multinational taste

Product Development:– Baking Innovators– Nutritionists

Critical Failure Factors

Strong Balance Sheet Media Competence

– Television / Radio broadcasts– Packaging

Foreign Markets Distribution

– Location

CSF: Report Card

Company Name

Market Research

Product Development

Strong Balance Sheet

Process Development

Advertising/Marketing Overall GPA

Kellogg's A A A A A A 4.0

General Mills A A A A A A 4.0

Ralcorp D C B A D C 2.2

Suppliers Bargaining Power

Low– No commodity control (Wheat)

Government regulation

– Power over processed food– Farmers negotiate prices

Buyers Bargaining Power

High– Grocery Stores– Historically low– Private label options– Codependent buyer relationship

Pricing Power

The cost index and the gross margin are closely correlated

Cost Price – Insulated industry– Strength with purchasing power

GDP Growth Rate 2007

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

Brazil

Canad

a

Mex

ico

Japa

nIn

dia USAUK

Countries

An

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Population 2006

0

200

400

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1,000

1,200

Countries

Po

pu

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Global Matrix Structure

N.A. Europe Latin A. Asia P.

RTE Cereal

Snack foods

Meat Alt.

Frozen foods

Porter’s 5 Forces Applied to Kellogg’s

Michael Porter’s theory of an industry being influenced by 5 forces, which include Supplier Power, Barriers to Entry, Buyer Power, Threat of Substitutes, and Degree of Rivalry. Let’s now take at the theory and how it applies to Kellogg’s.

Kellogg’s and Supplier Power

Kellogg’s posesses only medium power when buying from suppliers. Wheat for example will vary in price because of extensive forces and that cost will be passed onto customers of Kellogg’s.

Buyer Power and Kellogg’s

Buyer’s of Kellogg’s are mostly grocery stores and supermarkets. They hold the power because they set the price. They ultimately hold the power of the industry in its hands.

Substitutes and Kellogg’s

Kellogg’s is basically a breakfast company therefore anything that is popular to consume at breakfast time is a substitute to Kellogg’s. This includes fruit, bars, doughnuts, toast, etc. Private labeling brands pose a threat as well.

Barriers to Entry and Kellogg’s

The Barriers to Enter into the Breakfast Cereal is medium at the moment. While a startup company would find trouble getting in, there are two companies that at anytime could strike and take away a large amount of market share from both Kellogg’s and General Mills. PepsiCo and Kraft are also in the Cereal business and have the money to aggressively strike at anytime to wreck havoc on the breakfast cereal industry.

Degree of Rivalry and Kellogg’s

At the moment Kellogg’s is at a dead heat with rival General Mills. The companies are both in the mature stage as is most their products. Trying to find that smoking gun that will catch the market share has become a game of cat and mouse between the two entities.

Summary of Porter’s 5 Forces

Supplier Power: Medium

Buyer Power: High

Substitutes: High

Barriers to Entry: Medium-High

Degree of Rivalry: Very High

Kellogg’s Critical Success Factors

Critcal Success Factors (CSF) include things within a company that ensure that your company will succeed.

Kellogg’s CSF: Tradition

Kellogg’s has been in the business since 1906. That kind of tradition will buy some equity when it comes to selling a product.

Kellogg’s CSF: Innovation

Kellogg’s has developed many new products over the years trying to get hold of the majority of the market share in the industry.

Kellogg’s CSF: Baking

They have innovated many products but one thing has stayed the same in the 101 years of business. The core competence of Kellogg’s is baking.

Kellogg’s CSF: New Markets

Seeing that there are more people in the world that need ready-to-eat cereal and other baked goods Kellogg’s entered into foreign market’s, again, trying to get the majority of the market share in the industry. Latin America, Europe, and Asia Pacific are markets that Kellogg’s have entered into.

Kellogg’s CSF: Imagination

Over the years, Kellogg’s has introduced a wide range of characters that have served as mascots for their respected cereals. Tony the Tiger, Snap, Crackle, and Pop, Toucan Sam, Dig Em’, and Cornelius are the more popular characters in the mix.

Kellogg’s CSF: R&D Department

America went through a cultural change recently and shifted to wanting more healthy foods. The responsibility then was in the hands of the producers, like Kellogg’s. Making healthy foods meant R&D was needed and Kellogg’s answered with their line of foods for the health conscience.

Kellogg’s CSF: Shelf Placement

When stores put Kellogg’s products on the shelf the employees aren’t just throwing them in a vacant space. Kellogg’s placement on the shelf is methodical and strategic and comes at a price.

Kellogg’s Strengths

Baking: When it comes to skills this is one thing that Kellogg’s knows and does best.

Innovation: With the rivalry with GM at a stalemate Kellogg’s must be looking for new ways to get more share with any new product and also appease the public with healthy products.

Kellogg’s Strengths (Cont.)

Distribution: Kellogg’s currently has manufacturing plants in 17 different countries.

Brand: Kellogg’s is a very recognizable American product. Tony the Tiger, Dig’ Em, Snap, Crackle, and Pop are all embedded in pop culture.

Kellogg’s Strength’s (Cont.)

Social Responsibility: Kellogg’s welcomes social responsibility and notes the environment, advocating healthy lifestyles, and promoting diversity as it’s main responsibilities.

Kellogg’s Weaknesses

Maturity: Many products that Kellogg’s offer are in the mature stage and are at a peak when it comes to profitbility.

Broad Market: Kellogg’s has many demographically different customers which means many different focuses. This may cause a conflict when it comes to public opinion.

Kellogg’s Weaknesses

Debt: As of Dec. 30th, 2006 Kellogg’s had a debt of 5.04 billion dollars. In their Annual Report they admit that their high Leverage may put them in a competitive disadvantage.

Need For Gas: Other than trucks needing to deliver their product, many of the ovens that bake the cereal also run off gas.

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