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 LongGrowth 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 brand Invests in new product research  Brand-building marketing activities Brand 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 PrePresweeter 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, 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 Ready-ToMarket in 2001 

Product segments: the best-selling kids cereal brands--GM bestbrands--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 lowKellogg 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 Sales for Presweet Cereal
Volume Sales
4.5 1.4 4.8 16.7
(As of 2/01)

7.4 11.7
In million

Kellogg USA GM & Ralston Post & Nabisco Quaker Store Brands Malt O Meal Co

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 giants--Kellogg, Mills, and Philip Morris--responsible for 70% of kid s foods in Morris--responsible 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 Food

General Mills Quaker Oats

Low

Private Label
Brand Cereals PRODUCT LINE/MANUFACTURING MIX

Private Label Quaker Oats General Foods General Mills
Cap¶n Crunch

KELLOGG
Honey Nut Cheerios Lucky Charm Cocoa Krispies Other Cereals Cheerios Honey Nut Cheerios

Honey Nut Shredded

Cap¶n Crunch Snack Bars

Bagged ValuePriced 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 fastestWhere 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 8-

Percent of Total Annual Spending on Presweeter Cereal
(by Age Group)

75+ 65-74
Age Groups

8.2 8.8 10.3 22.3 29.4 16.3
Percentage

55-64 45-54 35-44 25-34

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 multimultisensory 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:
Kroger Farmer Jack Target 

Minor players: players:
Convenience stores Gas stations

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

Introduction

Growth

Maturity

Decline

Time

Critique of the Plan 
   

Have we heard of it? Can we get it? Can we afford it? Are we buying it? Is it legitimate?

Promotional issues Distribution Pricing Target market record Corporate responsibilities

Promotional Issues 

Mass Advertising Direct Promotions Trade Promotions Personal Selling

TV, Cocoa the Monkey, and Snap, Crackle and Pop. Coupons  

In-store displays, Samples In- 

KeyKey-account reps, Area reps, Merchandisers

Distribution 

Penetration Sales Channel Logistics

Chain stores, Independent wholesalers Brand equity helps Finished goods warehouse / rail / truck / centers or independent warehouses Conflict or harmony? 



- 

Relationships -

The Target
Fastest Growing Foods in the American Diet: Diet: Carbonated Soft drinks PrePre-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 RCereals
1. Frosted Flakes 2. Cheerios 3. Frosted Mini-Wheat Mini4. 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
Taste Cocoa Krisp Fruit Loops Corn Flakes Cheerios Raisin Bran Nutrition

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. WWW.industryweek.com - Food Industry Focus Field Visits - Kroger, Farmer Jack s, Target, Rite-Aid. RiteFlorida 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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