Summary

1. Introduction2. History3. Industry Analysis4. Pestle Analysis5. Mission6. Challenges7. SWOT8. KFS9. Kellogg’s International10.Competitive Strategies11.Product Life Cycle12.Conclusion

INTRODUCTION

The society lifestyle has evolved with time. The traditional UK breakfast consisting of beacon and eggs

has slowly been replaced by a less time consuming meal. Alongside a growing issue for health. There was created the healthy rapid breakfast cereal as a

response the market demand. While the breakfast meal change, it has socially become more

than just breakfast.

It is nowadays a all day meal or snack. Cereals are often consumed after school at 3-4pm. The market needed cereal bar as a quick on-the-go meal (i.e. workers in the office at 10am)

ABOUT THE COMPANY

Kellogg Company headquarters

Type Public (NYSE: K)Industry Food processingFounded 1906Founder(s) Will Keith Kellogg

Headquarters Battle Creek, Michigan, U.S.

Key people

James Jenness (Chairman)David Mackay (President, CEO)John Bryant (COO)

Products

CerealsCookiesCrackersToaster pastriesCereal BarsFruit-flavored SnacksFrozen WafflesVeggie Foods

Revenue US$ 12.6 billion (2009)Operating income US$ 2.0 billion (2009)Net income US$ 1.2 billion (2009)Total assets US$ 11.20 billion (2009)Total equity US$ 2.27 billion (2009)

Employees approximately 31,000 (2009)

HISTORYFebruary 19th 1906 - John Harvey Kellogg and Will Keith Kellogg also known as W.K Kellogg founded the Battle Creek Toasted Corn Flake Company in Battle Creek, Michigan. 1914 – The production of the Kellogg’s Corn Flakes expanded world wide. 1922 – The Battle Creek Toasted Corn Flake Company changed there name to The Kellogg Company. 1938 – The company continued to expand and build plants in England and Australia.1951 – W.K. Kellogg died. The Kellogg Company continued to expand and build plants in Latin America and Asia. 1964 – Kellogg’s Pop Tarts are introduced.1976 – Acquisition of Mrs. Smith’s Pie Company1999 – Acquisition of Worthington Foods.2000 – Acquisition of Kashi 2001 – Kellogg acquires Keebler, its largest acquisition. 2006 – With almost 11 Billion, Kellogg’s is the world’s leading producer of cereal and other convenience foods.

Mission

Key factors for success (KFS) Critical factors for success (CFS)

Health

Versatility

Convenience

Brand Awareness

Something for everyone

Innovation

Low barriers to entry

Value for money

Quality

Location

Availability

Marketing

Research & development/Innovation

Affordable

PESTLE

Political – The government has the food acts and there is also ACFM (Members of the Association of Cereal Food Manufacturers) which deal specifically on cereal issuesEconomic – The success is due to high usage but still threaten by the traditional breakfast. There are still opportunities to grow.Socio-cultural – Initial target was school student but grew the to whole family members. The eating habit has evolved.Technological Factors – The major player are seeking to diversify more and the production process is highly computerised.International – The majors are on every market in every countries.Legal - EU legislation regarding health, ingredients, labeling and storage. This legislation includes the Food Labeling Regulations and there is ACFM also and CEEREAL.Environment – The players are proactive in CSR and do sponsor a lot of event relating to diet.

ANSOFF MATRIX

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 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 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

Key Factor for Success(KFS)

Kellogg’s International

Product Life Cycle

Product Life Cycle

The Introduction Stage:

Market Size and Growth is small Research & development costs have been incurred in

getting product to the stage High Marketing costs Hardly to make good profits during this stage Products are carefully monitored to ensure the growth

Product Life Cycle

Growth:

Identified by rapid growth in sales and profits Huge market share Less costly for business to expand their market Enjoying the overall growth

Product Life Cycle

Maturity:

Competition of market share exist The most profits made during this stage in the whole

entire market An organization is recommended in order to get a bigger

market share

E.g : Kellogg’s expenditure research and development to

product modification and improvement

Product Life Cycle

Declined:

Market is declining Decreasing the amount of profits Market share is divided between competitors End the product if it is not profitable

Brand Names

Kellogg’s Keebler Nutri-grain Pop-Tarts Eggo Cheez-It Special K

Rice Krispies Morningstar Farms Kashi Murray Austin Famous Amos

Product Lines

Cereal Crackers Cookies

Snacks Frozen Foods Water

Economics

Consumer Segment Products are manufactured in 17

countries and are marketed in more than 180 countries.

Top Revenue Regions (Dollars are in Millions):

North America $6,807.8 67% Europe $2,013.6 20% Latin America $822.2 8% Asia Pacific $533.6 5% Total $10,177.2 100%

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.

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 Mills, and Philip Morris--responsible for 70% of kid’s foods in 2001.

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

Competitive Force AnalysisPower 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.

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

Kellogg’s Distribution Channels

Kellogg’s

Retailer

Kellogg’s

Wholesaler

Retailers

Kellogg’s

Computer system

Kroger, Target, distrib. centers

Distrib. In stores

Suppliers Bargaining Power

LowNo commodity control (Wheat)

Government regulationPower over processed foodFarmers negotiate prices

Buyers Bargaining PowerHigh

Grocery StoresHistorically lowPrivate label optionsCodependent buyer relationship

Pricing Power

The cost index and the gross margin are closely correlatedCost Price

Insulated industryStrength with purchasing power

Summary of Porter’s 5 Forces

Supplier Power: MediumBuyer Power: HighSubstitutes: HighBarriers to Entry: Medium-HighDegree of Rivalry: Very High

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

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

FINANCIAL ANALYSISCLICK HERE

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