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 StrategiesProduct 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.

Cereal Industry Volume Salesfor Presweet Cereal

Volume Sales (As of 2/01)

16.7

11.7

7.4

4.8

4.5 1.4Kellogg USA

GM & Ralston

Post & Nabisco

Quaker

Store Brands

Malt O Meal Co

In million

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.

Market Analysis(continued)

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 AnalysisIntensity of Rivals

Four Large companies are dominant in the market

Oligopoly

Competition is very intense

Inflated prices

Growth Rate has remained Constant

Competitive Force AnalysisThreat 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

High

Low

PR

ICE

/QU

AL

ITY

/IM

AG

E

PRODUCT LINE/MANUFACTURING MIX

Strategic Group Map of Competitors in the Presweeter Cereal Industry

Brand Cereals

Kellogg GeneralMills

General Food

Quaker Oats

Private Label

Bagged Value-Priced

Cereal

Cap’n Crunch

Snack Bars

Rice Cakes

Oatmeal Cereal Bars

Fruit Cereal Bars

Cap’n Crunch

Quaker Oats

General Foods

Honey Nut Shredded

Cranberry Almond Crunch

Honey Nut Cheerios

Private Label

Cocoa Krispies

KELLOGG

General Mills

Lucky Charm

Cheerios

Honey Nut Cheerios

Other Cereals

Competitive Force AnalysisHigh 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 AnalysisHigh 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

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.

Competitive Force AnalysisPower of Supplier

Customer Analysis

Cocoa KrispiesBuying 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 AnalysisWho 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)

16.3

29.4

22.3

10.3

8.8

8.2

25-34

35-44

45-54

55-64

65-74

75+

Ag

e G

rou

ps

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 KrispiesPromotion

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 TargetCocoa Pebbles(General Mills)Cocoa Puffs(Post)

$0.25/ounce$0.28/ounce

$0.25/ounce$0.27/ounce

$0.15/ounce$0.21/ounce

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

Major players:– Kroger– Farmer Jack– Target

Minor players:– Convenience stores– Gas stations

Retail/Distribution: Grocery stores are responsible for the overwhelming 99%--of cereal sales

Kellogg’s Distribution Channels

Kellogg’s

Retailer

Kellogg’s

Wholesaler

Retailers

Kellogg’s

Computer system

Kroger, Target, distrib. centers

Distrib. In stores

Introduction Growth Maturity Decline

Dol

lars

Time

Cocoa Krispies:

PRODUCT LIFE CYCLE

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 Cereals1. Frosted Flakes

2. Cheerios

3. Frosted Mini-Wheat

4. 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

Nutrition

Taste

Special K

Cheerios

Cocoa Krisp

Raisin Bran

Corn Flakes

Fruit Loops

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. 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 - www.Kellogg's.com http://faculty.sba.udayton.edu.schenk.kellcase.htm

The End