Kellogg's goes snacking

Seema Sindhu / New Delhi Apr 12, 2010

The premium brand has gone to the bottom of the pyramid by launching corn flakes at a price point of just Rs 10. Its not only the mass brands that are adopting small-pack strategy to increase penetration; premium and niche brands like Kelloggs too are going the same way.

You can now buy Kelloggs Corn Flakes, the companys flagship brand, for just Rs 10. The company calls it Kpak format. It is the third brand to be added in the Kpak range (after Chocos and Honey Loops). The idea is to increase the penetration of the Kelloggss brands through affordability, as breakfast cereals are still a very small market in India. Anupam Dutta, Managing Director, Kelloggs India, says, Low price points help us reach the Tier II and III towns. We launched Chocos Kpak in Tamil Nadu first and then rolled it out nationally. The small pack for Kelloggss Corn Flakes was first test-marketed in Tamil Nadu, and going by the response, we decided to launch it nationally this year. A low fat option, Kelloggss Corn Flakes at Rs 10 has what the company calls Iron Shakti. The product positioning has been changed as well: From a breakfast cereal, it is now also a Shaam ka Nashta (evening snack). The new positioning will help promote out-ofhome consumption. While the small-pack strategy will help Kelloggs push sales in tier II and III towns, the company is not looking to hit rural markets yet as it feels there is still a lot of head-room in urban India, considering the low penetration. Kelloggs has a market share of more than 70 per cent value share in the ready-to-eat cereal category. But competition for Kelloggs is heating up. PepsiCo has increased its focus on Quaker and is also planning to bring more products from its global breakfast portfolio. Competition is also strong from the private labels of some retailers like the Future Group, which have made a huge success out of its Tasty Treat cornflakes. But Dutta is unfazed: More players will only help drive category growth, he says. Devendra Chawla, Head (private brands) of the Future Group, agrees: Theres no competition as the category is under-penetrated. More players will only help the category grow. For instance, before our launch of Tasty Treat cornflakes, only two out of 100 bills at our stores used to be of cornflakes. After our launch, it has become three on an average. While Tasty Treat cornflakes are priced the same as Kelloggs, none is available at the Rs 10 price point, which gives Kelloggs the first mover advantage. The size of the ready-to-eat breakfast cereal category is around Rs 350-400 crore and is growing at 30 per cent. There is immense potential for a category such as ours that remains untapped. And the active category growth is likely to benefit all players, adds Dutta.

Kelloggs plans to further expand its distribution network in line with its expansion plans and bring out new introductions. In India, Kellogs is present only in breakfast cereals. However, worldwide it has a wide portfolio of product categories like cookies, crackers, toaster pastries, , frozen waffles and veggie foods. But at the moment Kelloggs has no plans to diversify into other categories.

Kelloggs 10 Rs Kpack Strategy Analysis

General Information
Category: Ready-to-eat breakfast cereal Category Segment: Niche Segment Market Size: 350-400 Crore Market Share : 70 % Market growth : 30% Competitors: Pepsi cos Quaker & Future group Tasty treat Cornflakes Strategy: Bottom of the Pyramid

Why this Strategy? to increase penetration through affordability To convert non users into users Acc. To M.D. Low price points help us to reach Tier 2 and Tier 3 towns

Application of the Strategy First test- marketed in Tamil Nadu going by the response went nationally.

Change in product positioning Product positioning has been change. Now it is also Shaam ka Nashta New positioning help to promote out-of-home consumption.

Future Target Market Rural Market

S.W.O.T Analysis Strength Oldest player in the market Market share of 70% Only player in the 10 rs price point.

Weakness Price

Opportunities With 10 rs price point they can capture a market which their competiors cant i.e Tier 2 and Tier 3 Town

Threats New players are entering into market like Quaker and Tasty treat cornflakes