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Kellogg’s is, of course, a mighty brand. Its cereals have been consumed around
the globe more than any of its rivals. Sub-brands such as Corn Flakes, Frosties
and Rice Krispies are the breakfast favourites of millions.
In the late 1980s, the company had reached an all-time peak, commanding
a staggering 40 per cent of the US ready-to-eat market from its cereal
products alone. By that time, Kellogg’s had over 20 plants in 18 countries
world wide, with yearly sales reaching above US $6 billion.
However, in the 1990s Kellogg’s began to struggle. Competition was
getting tougher as its nearest rivals General Mills increased the pressure with
its Cheerios brand. Kellogg’s management team was accused of being
‘unimaginative’, and of ‘spoiling some of the world’s top brands’ in a 1997
article in Fortune magazine.
In core markets such as the United States and the UK, the cereal industry
has been stagnant for over a decade, as there has been little room for growth.
Therefore, from the beginning of the 1990s Kellogg’s looked beyond its
traditional markets in Europe and the United States in search of more cereal-
eating consumers. It didn’t take the company too long to decide that India
was a suitable target for Kellogg’s products. After all, here was a country with
over 950 million inhabitants, 250 million of whom were middle class, and
a completely untapped market potential.
In 1994, three years after the barriers to international trade had opened in
India, Kellogg’s decided to invest US $65 million into launching its number
one brand, Corn Flakes. The news was greeted optimistically by Indian
economic experts such as Bhagirat B Merchant, who in 1994 was the director
156 Brand failures
of the Bombay Stock Exchange. ‘Even if Kellogg’s has only a two percent
market share, at 18 million consumers they will have a larger market than in
the US itself,’ he said at the time.
However, the Indian sub-continent found the whole concept of eating
breakfast cereal a new one. Indeed, the most common way to start the day in
India was with a bowl of hot vegetables. While this meant that Kellogg’s had
few direct competitors it also meant that the company had to promote not
only its product, but also the very idea of eating breakfast cereal in the first
place.
The first sales figures were encouraging, and indicated that breakfast cereal
consumption was on the rise. However, it soon became apparent that many
people had bought Corn Flakes as a one-off, novelty purchase. Even if they
liked the taste, the product was too expensive. A 500-gram box of Corn
Flakes cost a third more than its nearest competitor. However, Kellogg’s
remained unwilling to bow to price pressure and decided to launch other
products in India, without doing any further research of the market. Over
the next few years Indian cereal buyers were introduced to Kellogg’s Wheat
Flakes, Frosties, Rice Flakes, Honey Crunch, All Bran, Special K and Chocos
Chocolate Puffs – none of which have managed to replicate the success they
have encountered in the West.
Furthermore, the company’s attempts to ‘Indianize’ its range have been
disastrous. Its Mazza-branded series of fusion cereals, with flavours such as
mango, coconut and rose, failed to make a lasting impression.
Acknowledging the relative failure of these brands in India, Kellogg’s has
come up with a new strategy to establish the company’s brand equity in the
market. If it can’t sell cereal, it’s going to try and sell biscuits. The news of
this brand extension was covered in depth in the Indian Express newspaper
in 2000:
and visible on the retail shelves with a wide range of products,’ explains
a company dealer in Mumbia.
As per the trade, Kellogg India has disclosed to the dealers its intention
of launching more than one new product onto the market every month
for the next six months.
One of the reasons why Kellogg’s and these other brands’ passage to India
was not smooth was because they had been blinded by figures. The Indian
population may be verging on 1 billion, but its middle class accounts for only
a quarter of that figure. However, a 1996 survey conducted by the Indian
National Council on Applied Economic Research in Delhi found that the
sub-continent’s ‘consumer class’ numbers are around 100 million people at
the most, and that buying habits and tastes vary greatly between the Indian
regions. After all, India has 17 official languages and six major religions
spread throughout 25 states.
As a result, only those companies which are in tune with India’s many
cultural complexities can stand a chance. One of the companies which has
managed to get it right is Unilever. However, the conglomerate has had a
head start on those Western companies which entered the market after 1991.
Indeed, Unilever’s soap and toothpaste products have been available in India
since 1887, when the sub-continent was still the crown jewel of the British
Empire. The secret to Unilever’s longevity in India is distribution. Hindustan
Lever Limited (Unilever’s Indian arm) has products available in a staggering
total of 10 million small shops throughout rural India.
As for Kellogg’s, it remains to be seen whether its move into other product
categories, such as snack food, will be able to help strengthen its brand. The
dilemma that it may face is that if it becomes associated with biscuits rather
than cereals, core products like Corn Flakes could become a marginal part
of the company’s brand identity in India.
‘Kellogg’s is caught in a bind,’ one Indian brand analyst remarked in India’s
Business Line newspaper. ‘It realises that cornflakes can make money only in
the long haul, so it needs a product which will give it some accelerated growth
and the tonnage it is desperately looking for. However, its area of strength
worldwide lies in breakfast cereal and not in the snack food category.’
However, other impartial Indian commentators are more optimistic about
Kellogg’s future prospects within the sub-continent. Among those who
believe Kellogg’s will eventually succeed is Jagdeep Kapoor, the managing
director of Indian marketing firm Samiska Marketing Consultants. ‘With
every product offering, Kellogg’s chances improve based on its learning in the
Indian market,’ he says.
Only time will tell.
160 Brand failures
l Do your homework. Why did Kellogg’s cereals have a tough ride in India?
‘It was just clumsy cultural homework,’ says Titoo Ahluwalia, chairman
of market research company ORG MARG in Bombay.
l Don’t underestimate local competitors. Although Indian brands were worried
they would struggle against a new wave of foreign competition following
the market opening of 1991, they were wrong. ‘Multinational corpora-
tions must not start with the assumption that India is a barren field,’ said
C K Prahalad, business professor at the University of Michigan, in a
Business Week article. ‘The trick is not to be too big.’
l Remember that square pegs don’t fit into round holes. When Kellogg’s first
launched Corn Flakes in India it was essentially launching a Western
product attempting to appeal to Indian tastes. Globalization may be an
increasing trend, but regional identities, customs and tastes are as distinct
as ever. It may be easy for brand managers of global brands to view the
world as homogenous, where consumer demands are all the same, but the
reality is rather different. ‘There is a bigger opportunity in localizing your
offerings and the smarter companies are realizing this,’ says Ramanujan
Sridhar, chief executive officer at Indian marketing and advertising
consultancy firm Brand Comm.
l Don’t try and make consumers strangers to their culture. ‘The rules are very
clear,’ says Wahid Berenjian, the managing director for US Pizza (which
has successfully launched a range of pizzas with Indian toppings) in an
article for the Hindu newspaper, Business Line. ‘You can alienate me a bit
from my culture, but you cannot make me a stranger to my culture. The
society is much stronger than any company or product.’ Brands who want
to succeed in India and other culturally distinct markets need to remember
this.