Like Coco the monkey we sing the praises of
the chocolatey cereal
Kellogg Company Mission Statement
“Kellogg is a Global Company Committed
to Building Long-Term Growth In
Volume and Profit and to Enhancing its
Worldwide Leadership Position by
Providing Nutritious Food Products of
Superior Value”W. K. Kellogg
Kellogg’s Marketing Strategy
and
Marketing Plans
Organizational Strategies
Leadership in product innovation Strengthening the company’s seven largest cereal
markets Accelerating the growth of convenience foods
business Developing a more focused organization Continuing to reduce costs
Global Strategy Management continues global strategy Offers brand-differentiated pricing Invests in new product research Brand-building marketing activities Cost structure reduction
Product Market StrategiesProduct development– Constant innovation. Introduction of new product to present
customers.
Market development– Maintain global position
Diversification– Introduction of new products to fit new customers needs
Kellogg’s SWOT Analysis
Strengths Control 42% of global market share for Pre-sweeter
cereal, which is more than triple the market share of any of their competitors.
They have the strongest brand recognition and advertising recollection of all the cereal manufacturers
Weaknesses Have not aggressively developed many new
cereal lines in the past four years.
Slow erosion of their U.S. market share in the past few years,
Follower in Pricing Strategy
Opportunities International expansion is the biggest area for
growth for Kellogg’s.
Kellogg can continue to slowly diversify, while still remaining in their core business area, which will increase their profitability.
If they can develop a better pricing strategy and guarantee lower prices, they can reduce costs while increasing their market share.
Threats General Mills, Post, and Quaker Oats are
using price competition and product proliferation to erode Kellogg’s share of the market.
Discount imitation cereals brands have been successful in reducing premium brands in the more commodity like cereals.
Market Analysis
Market Analysis Market size: sales of nearly $9.7 billion in the Ready-To-Eat Market in
2001
Product segments: the best-selling kids’ cereal brands--GM Lucky Charms, GM Count Chocula, Post Marshmallow Alphabits, Q Marshmallow Safari, Rice Krispy.
Market share: competition is heating up in this market as flat sales and low-priced clones have eroded the market shares of Kellogg and General Mills
Market Forecasts: the kids’market has been growing at a rate of more than 15% a year, for the 5 to 7 years and shows no sign of slowing through the end of the decade. Growth in the overall kid’s food market was driven, to the largest extent, by gains in cereals.
Cereal Industry Volume Salesfor Presweet Cereal
Volume Sales (As of 2/01)
16.7
11.7
7.4
4.8
4.5 1.4Kellogg USA
GM & Ralston
Post & Nabisco
Quaker
Store Brands
Malt O Meal Co
In million
Marketing/promotion: Seven breakfast cereal marketers allocated almost $775 million to purchases of space and time mass media in 2001.
Industry structure: Three food giants--Kellogg, General Mills, and Philip Morris--responsible for 70% of kid’s foods in 2001.
Market Analysis(continued)
Major Trends in Cereal Industry New products are dominated by line extension and product
promotion
Increasing popularity of private labeled cereals due to high cost of branded products
Higher demand for health food markets & products
Health claims is becoming more prevalent; Kellogg’s - American Heart Association
Competitive Analysis
Competitive Force AnalysisIntensity of Rivals
Four Large companies are dominant in the market
Oligopoly
Competition is very intense
Inflated prices
Growth Rate has remained Constant
Competitive Force AnalysisThreat of a Substitution
Private Labels
Has made substitution very significant
Caused other 3 competitors to lower their prices
Low switching cost (1/3 of 1,000 shoppers switched to private label)
Price competition (1990’s started a price war between rivals)
Made the buyer more powerful
High
Low
PR
ICE
/QU
AL
ITY
/IM
AG
E
PRODUCT LINE/MANUFACTURING MIX
Strategic Group Map of Competitors in the Presweeter Cereal Industry
Brand Cereals
Kellogg GeneralMills
General Food
Quaker Oats
Private Label
Bagged Value-Priced
Cereal
Cap’n Crunch
Snack Bars
Rice Cakes
Oatmeal Cereal Bars
Fruit Cereal Bars
Cap’n Crunch
Quaker Oats
General Foods
Honey Nut Shredded
Cranberry Almond Crunch
Honey Nut Cheerios
Private Label
Cocoa Krispies
KELLOGG
General Mills
Lucky Charm
Cheerios
Honey Nut Cheerios
Other Cereals
Competitive Force AnalysisHigh Barriers to Entry
Main barriers to entry in the breakfast cereal market are four major cost factors.
Product development - easy for established manufacturers to duplicate products, new products take more money & time to develop
Distribution - high slotting & promotional fees, limited shelf space, need to create retail demand, all increase costs for manufacturers
Competitive Force AnalysisHigh Barriers to Entry
Marketing - need to compete against current brands that have been established through large advertising and promotional efforts (t.v., coupon)
High Capital costs - for different types of equipment and plants
Supplier does not have much power because of private labels.
Similar products have allowed buyers to acquire products from private labels at a Cheaper Price.
Now industry is very Sensitive to the buyer.
Competitive Force AnalysisPower of Supplier
Customer Analysis
Cocoa KrispiesBuying Criteria
Key equity drivers: chocolate taste, Coco the monkey, snap, crackle and pop
Package: fun, colorful, capture children’s attention
Product: very sweet, colorful and contain nutritious elements
Kellogg’s Customer AnalysisWho Are the Buyers? Parents, Older Adults
How Often Do They Purchase? Kids cereal are purchased roughly 18 times a year 10th fastest-moving product in the supermarket
Where Do they Want to Buy? Grocery Stores responsible for 99% of cereal sales
Who Are the Influencers? Kids
Who consumes the goods? Kids under 18
Who are Kellogg’s Target Market? Kids 8-11 years old
Percent of Total Annual Spending on Presweeter Cereal
(by Age Group)
16.3
29.4
22.3
10.3
8.8
8.2
25-34
35-44
45-54
55-64
65-74
75+
Ag
e G
rou
ps
Percentage
Cocoa Krispies Objective
Strengthen kid consumer base
Secure Kellogg “cocoa” bit subsegment volume share with competitive focus on GM’s Cocoa Puffs and Post’s Cocoa Pebbles
Create a product that enhances the “ultimate multi-sensory food experience” by adding additional attributes that satisfy expended consumer needs
Attract different target groups
COCOA KrispiesPromotion
Spent roughly $15 million for ad campaign: TV, print
Adds include Coco the Monkey
Advertiser: Kellogg Agency (Leo Burnet)
Quantity and price discounts
Packaging: fun, colorful, capture children attention
Cereal Pricing for Retail Stores
Farmer Jack Kroger TargetCocoa Pebbles(General Mills)Cocoa Puffs(Post)
$0.25/ounce$0.28/ounce
$0.25/ounce$0.27/ounce
$0.15/ounce$0.21/ounce
Cocoa Krispies(Kellogg’s) $0.22/ounce $0.23/ounce $0.17/ounce
Private Labels $0.23/ounce $0.13/ounce n/a
Kellogg’s Distribution Players
Major players:– Kroger– Farmer Jack– Target
Minor players:– Convenience stores– Gas stations
Retail/Distribution: Grocery stores are responsible for the overwhelming 99%--of cereal sales
Kellogg’s Distribution Channels
Kellogg’s
Retailer
Kellogg’s
Wholesaler
Retailers
Kellogg’s
Computer system
Kroger, Target, distrib. centers
Distrib. In stores
Introduction Growth Maturity Decline
Dol
lars
Time
Cocoa Krispies:
PRODUCT LIFE CYCLE
Critique of the Plan Have we heard of it? Promotional issues
Can we get it? Distribution
Can we afford it? Pricing
Are we buying it? Target market record
Is it legitimate? Corporate responsibilities
Promotional Issues Mass Advertising TV, Cocoa the Monkey,
and Snap, Crackle and Pop.
Direct Promotions Coupons
Trade Promotions In-store displays, Samples
Personal Selling Key-account reps, Area reps, Merchandisers
Distribution Penetration - Chain stores, Independent
wholesalers
Sales Channel - Brand equity helps
Logistics - Finished goods warehouse / rail / truck / centers or independent warehouses
Relationships - Conflict or harmony?
The Target
Fastest Growing Foods in the American Diet:
Carbonated Soft drinks
Pre-Sweet Cereal
Bagels
Toaster Pastries
Pizza
Corporate Responsibilities Legal Issues - Safety, Information, Choice
Environmental - Earth Spirit Award
Issues Civic Responsibilities
- Ad content standards
- Stakeholder orientation
- Public program support
Ethical Issues - Nutritional education
- More than required
America’s Top 10 R-T-E Cereals1. Frosted Flakes
2. Cheerios
3. Frosted Mini-Wheat
4. Corn Flakes
5. Rice Krispies/Cocoa Krispies
6. Honey Nut Cheerios
7. Raisin Bran
8. Fruit Loops
9. Special K
10. Corn Pops
Positioning Map
Nutrition
Taste
Special K
Cheerios
Cocoa Krisp
Raisin Bran
Corn Flakes
Fruit Loops
Sorry Coco
The boys are back in town!
Sources
Kellogg - Mike Culverson / Customer Service Farmer Jack’s - Ron Van Este / Cereal buyer Media Week - May‘98 / ‘Something New Under My Nose” Business Week - Wednesday, May 29, 2002 “Kellogg Co.” WWW.industryweek.com - “Food Industry Focus” Field Visits - Kroger, Farmer Jack’s, Target, Rite-Aid. Florida Sun Sentinel - Feb. 7, 1998 / Robin Fields / “Get That One Mommy” The NPD Group - March, 2001/ “The Twelfth Annual Report on Eating Patterns
in America” Kellogg - www.Kellogg's.com http://faculty.sba.udayton.edu.schenk.kellcase.htm
The End
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