Kellogg's Cornflakes: Consumer Perceptions

Presented By: Ekta Bawa Naina Deo Rupshika Borah Md. Faiz Ahmed Subhodeep Ray Chaudhury

History of Kelloggs in INDIA

In September 1994, US-based cereal manufacturer, Kellogg's entered India with investment of US$ 6.9 billion in its Indian Subsidiary.

September,1994,Kelloggs initial offerings in India included cornflakes, wheat flakes and Basmati rice flakes. Set up its 30th manufacturing facility in India with a total investment of $30million.

Failure of Kelloggs in the INDIAN market Failed Launch In April 1995, KELLOGS received unsettling reports of gradual drops in sales from its distributors 25% decline in countrywide sales. KELLOGS product failed in Indian market even after: Offering good quality products, supported by technical, managerial & financial resources High profile launch backed by hectic media activity

Failure of Kelloggs in the INDIAN market

Despite offering good quality products and being supported by the

technical, managerial and financial resources of its parent, Kellogg's products failed in the Indian market. Kellogg's knew it will be difficult to get Indian customers to accept its products hence it relied heavily on the quality of its crispy flakes. Indians liked to boil their milk and consume it warm or lukewarm, they also like to add sugar to their milk. The rice and wheat versions did not do well because sugar could not easily dissolve in cold milk which made it not sweet enough for the Indians. Some consumers called the rice flakes, rice corn flakes.

Reasons for Failure

Positioning

positioned it as health product

Over confidence and ignorance of cultural aspects

Non understanding of Indian consumer behavior and habits Banked heavily on crispy flakes Premium Pricing policy

Main Reasons for Failure

Analysts believe that the major reason for Kelloggs failure in the Indian

market was the fact that the taste of its products did not suit Indian breakfast habits. The second mistake it made in the Indian market was its positioning front. Its advertisements and promotions focused initially on the health aspects of the product which was a fundamental departure from the successful fun and taste positioning adopted in the United States. In the U.S, Kellogg's offered toys and other branded merchandise for children and had a Kelloggs fan club. At an average cost of Rs 80 per 500gm,Kellogg products were clearly priced way above the product of its main competitor, Mohun Cornflakes only for Rs33. Another small time brand, Champion was selling at prices almost half that of Kellogg's. This gave Kellogg a premium image and unattainable for the average Indian consumer.

Main Reasons for Failure

In most third world countries pricing is believed to play a dominant role in

the demand for any product but Kellogg did not share this position and this affected the demand for its products. Due to the premium pricing problem faced by Kellogg's, it tried a dollar to a rupee pricing for its products, still it could not attract the mass consumer. Even those consumers at the higher end of the market failed to perceive any extra benefits in Kelloggs products.

A Business Today report said that like other Multinational Companies, Kellogg had fallen into a price trap by assuming that there was substantial latent niche market in India for premium products.
In order to maintain quality Kellogg's focused on Premium and middle-level retail stores. This decision made it difficult for the larger population to get its products.

Correcting its mistakes

In order to forge ahead, Kellogg decided to launch two of

its highly successful brands-Chocos(September,1996) and Frosties (April,1997) in India. These brands were very successful and sales picked up significantly. Brands were even consumed as snacks and led to the launch of Chocos Breakfast Cereal Biscuits. The success of Chocos and Frosties led to the total indianisation of the Companys flavours in future which resulted in the launch of Mazza series in August,1998 in three local flavors Mango Elaichi,Coconut Kesar and Rose after one year extensive research to study consumer patterns in India.

Correcting its mistakes

Kellogg's was able to reduce prices by reducing its cost of production. For

example Mazza was not positioned in the premium segment. The glossy cardboard packaging was replaced by poaches which helped in reducing the price. Furthermore, Kellogg's saw advertising as a vital tool in promoting its brand .This made it attempt to indianise its campaign instead of simply copying its international promotions. The rooster that was associated with the Kellogg brand worldwide was missing from its advertisements in India. One of the adverts depicted a cross section of individuals from a yoga instructor to a kathakali dancer attributing their morning energy and fitness to Kellogg. Kellogg saw distribution as an important area to look into to improve its market penetration.In1995,Kellogg had 30000 outlets which was increased to 40000 outlets by 1998.

Importance of Demand Forecasting

Planning and Scheduling production.

Budgeting of cost and sales revenue Controlling Inventories. Making policies for long term investments. Helps in achieving targets of the firm. Lessons from Kelloggs
It was just clumsy cultural homework. It

was important for them to study cultural behavior of Indians.

Do not underestimate local competitors. Multinational corporations 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.

Importance of Demand Forecasting

Lessons from Kelloggs cont 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. Globalization may be an increasing trend, but regional identities, customs and tastes are as distinct as ever. When Kelloggs first launched Corn Flakes in India it was essentially launching a Western product attempting to appeal to Indian tastes.
Dont try and make consumers strangers to their culture. You can

alienate one a bit from their culture, but you cannot make them a stranger to their own 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.