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
Strategies
Product 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.
Market Analysis
(continued)
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.
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
Analysis
Intensity of Rivals
Four Large companies are dominant in the market
Oligopoly
Competition is very intense
Inflated prices
Growth Rate has remained Constant
Competitive Force Analysis
Threat 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
Strategic Group Map
of Competitors in the Presweeter Cereal Industry
High
Kellogg General
Mills
PRICE/QUALITY/
General
IMAGE
Quaker
Food
Oats
Private
Low Label
Brand Cereals
PRODUCT LINE/MANUFACTURING MIX
Private Label
Quaker Oats
General Foods
General
Mills
Cap’n Crunch Cap’n
KELLOGG Honey Nut
Crunch
Snack Bars
Honey Nut
Lucky Shredded
Cocoa Krispies Cheerios
Honey Nut Charm
Cheerios
Other
Cereals
Bagged
Cheerios Value-Priced
Cereal
Fruit
Cereal Bars
Cranberry
Almond Crunch
Rice Cakes
Oatmeal
Cereal Bars
Competitive Force
Analysis
High 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
Analysis
High 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
Competitive Force
Analysis
Power of Supplier
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.
Customer Analysis
Cocoa Krispies
Buying 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
Analysis
Who 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)
75+ 8.2
65-74 8.8
Age Groups
55-64 10.3
45-54 22.3
35-44 29.4
25-34 16.3
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 Krispies
Promotion
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 Target
Cocoa Pebbles
(General Mills) $0.25/ounce $0.25/ounce $0.15/ounce
Cocoa Puffs $0.28/ounce $0.27/ounce $0.21/ounce
(Post)
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
Retail/Distribution: Grocery stores are responsible for
the overwhelming 99%--of cereal sales
Major players: Minor players:
– Kroger Convenience stores
– Farmer Jack Gas stations
– Target
Kellogg’s
Distribution Channels
Kellogg’s Kellogg’s Kellogg’s
Computer system
Wholesaler
Kroger, Target, distrib. centers
Retailer Retailers
Distrib. In stores
Cocoa Krispies:
PRODUCT LIFE CYCLE
Dollars
Introduction Growth Maturity Decline
Time
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
Cereals
1. Frosted Flakes 6. Honey Nut
2. Cheerios Cheerios
3. Frosted Mini- 7. Raisin Bran
Wheat 8. Fruit Loops
4. Corn Flakes 9. Special K
5. Rice 10. Corn Pops
Krispies/Cocoa
Krispies
Positioning Map
Taste
Cocoa Krisp
Fruit Loops Cheerios
Corn Flakes Raisin Nutrition
Bran
Special K
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.”
[Link] - “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 - [Link]'[Link]
[Link]
The End
