Honors Program at the University of Rhode Island
Senior Honors Project
Year 2007
Business Proposal: Kellogg’s Inc
Product: Cholesterol Lowering Snack bar
University of Rhode Island
Nicole St. Jean
Business Proposal: Kellogg’s Co.
Product: Cholesterol Lowering Snack bar
Nicole St. Jean
University of Rhode Island
Candidate for:
B.A. in Biological Science
B.S. in Business Administration: Marketing
Faculty Sponsor: Dr. Edward Mazze, Business Administration Professor
May 2008
2
Table of Contents
Page
I. Executive Summary………………………………………….……………….…4-6
A. Description of Product/Technology…………………………………………..6-8
i. Technical Information………………………………………………….8-10
B. Intellectual Property…………………………………………………………10-13
II. Industry Description………………………………………………………………14
A. Size and scope of industry…………………………………………………..... 14-15
B. Future direction of industry …………………………………………………....15-16
C. Life-Cycle of the Industry………………………………………………………16-17
III. Industry Competitiveness………………………………………………………..18
A. Major Industry Leaders ……………………………………………………..…18-19
B. Direct and Indirect Competition……………………………………………..…19-21
C. Barriers/Obstacles to Market Entry……...……………………………………..21-22
IV. Market Potential (US and Global) ……...……………………………………..22-25
A. Target Market ……...…………………………………………………………… 25
B. Customers' Needs and Price Expectations………..……...……………………… 26
C. How Customers Benefit from Product(s) ……...………………………………26-27
V. Costs
A. Costs of manufacturing the product……...…………………………………….. 28
VI. Conclusion
A. Recommendations……...……………………………………………………… 29
VII. Works Cited……...…………………………………………………………… 29-32
3
I. Executive Summary
This report encompasses a business proposal that I have designed for Kellogg’s Co, an
international cereal and convenience food company founded in 1906, headquartered in
Battle Creek, Michigan. This proposal outlines the innovative technology of adding plant
sterols and stanols (phytosterols) to foods and beverages to develop cholesterol lowering
products. Kellogg’s Co. specializes in producing cereals and convenience food products,
manufactured in 17 different countries and marketed to 180 countries worldwide.1
Kellogg’s maintains a diverse product line including: cereals, portable snacks, cookies,
crackers, natural, organic and frozen brands, as well as some specialty channels.
Kellogg’s is the world’s leading producer of cereal and convenience foods and has a
strong commitment to health, nutrition and quality. Kellogg’s Co. had sales last year of
$12 billion, and plans to remain consistent with its core business strategy that it has
maintained over the past 6 years, to grow its cereal business, expand its snack business,
and pursue selected growth opportunities.2
Kellogg’s Co. Website. 2008. 20 March 2008. http://www2.kelloggs.com/General.aspx?ID=466.
Kellogg’s Annual Report. 2008. 20 March 2008.
http://www.shareholder.com/visitors/dynamicdoc/document.cfm?CompanyID=K&DocumentID=2112&PI
N=&Page=7&Zoom=1x
1
2
4
My decision to focus on expanding Kellogg’s product line stems from its very well
recognized and credible company name and its large customer base. Since, one of
Kellogg’s main focus is on snacks products, it would be a great opportunity to increase
one of its product lines to cater to the growing consumer demands of on-the-go and
healthy snack products. In a recent study conducted by the International Food
information council in 2007, it was discovered that 70% of consumers are making
changes to improve the healthiness of their diets. Also, 36% of American consumers (up
from 23% in 2006) said they are increasing their consumption of specific foods and
beverages to maintain a better diet. Studies done by the International Food Information
Council also indicate that 80% of consumers believe in benefits offered by foods and
beverages to improve heart health. This study also examined the top health concerns of
consumers; findings indicated that 53% of consumers indicated that Heart/Circulatory
Health issues were their top health concern in 2006. When making purchasing decisions,
65% of consumers indicated that the healthfulness of the product was significantly
important, 88% said taste, 72% price, and 55% said convenience.3
Kellogg’s is a company, who consistently strives to provide consumers with nutritionally
beneficial and convenient products for their increasingly “on-the-go” lifestyles. Kellogg’s
company’s website states:
3
2007 Consumer Attitudes toward Functional Foods. October 2007. 22 March 2008.
http://www.ific.org/research/upload/IFICExecSumSINGLE_vF2.pdf
5
“Our founder, W.K. Kellogg, had a strong commitment to nutrition, health and quality.
His vision continues to drive improvement in our products and processes, with the goal of
providing great-tasting, nutritious products that meet the most rigorous quality
standards.”4
Combining Kellogg’s efforts in continuing to manufacture nutritionally novel products to
satisfy the changing and growing demands of customers, are inventors of food
technologies. The technology of adding plant sterols and stanols (also known as
phytosterols) to specified food products, as a natural means of lowering cholesterol
would be a great opportunity for Kellogg’s to pursue. Kellogg’s currently has a brand of
heart smart cereal products, “smart start”, which was created to promote healthy hearts.
The brand “smart start” has four different types of cereal including: Toasted Oat,
Antioxidant, Maple Brown Sugar, and Cinnamon Swirl. My proposal would be for
Kellogg’s to create a new line of products for the Smart Start brand to incorporate a
product line of Smart Start snack bars with phytosterols added to the snack bars. These
bars would be consistent with Kellogg’s brand user image of heart healthy and would
also help to lower individual’s cholesterol.
A. Description of Product/Technology
4
Kellogg’s Our Company. 2008. 22 March 2008. http://www.kelloggcompany.com/company.aspx?id=32
6
Plant sterols are found naturally in many fruits, vegetables, nuts, seeds, legumes,
vegetable oils and other plant sources. Plant stanols are found in the same sources, just in
smaller amounts. Sterols and stanols are important elements of plant cell membranes and
resemble cholesterol in a structural form.5 A term that can be used to include both plant
sterols and stanols is phytosterols. More than 200 sterols and stanols have been found in
plants with beta sistosterol, stigmasterol, and campesterol most abundant in sterols and
sistostanol and campestanol most abundant in stanols. Approximately 50% of dietary
cholesterol is absorbed from the intestinal tract, where phytosterols such as:
campesterols/stanols are absorbed at 10-15%, 4-7% for sisterol and less than 1% for
sitostanols. A typical diet in western populations provides about 150-400 mg/day of
phytosterols and phytostanols from the ingestion of vegetable oils, cereals, vegetables,
and fruits. The majority of this intake is considered to be plant sterols, accounting for
about 150-350 mg/day, where plant stanols only account for about 15-50 mg/day.6
Plant sterols were first noticed for their cholesterol lowering effects in the 1950’s, when
they were taken from vegetable fats/oils and pine trees and analyzed for their
effectiveness. Plant sterol and stanols work to lower cholesterol by slowing its intestinal
absorption. As mentioned above, sterol and stanols structurally resemble cholesterol,
thus they interfere with cholesterol loading into the mixed micelles (submicroscopic
aggregation of molecules), thus less cholesterol is absorbed by the body.7
“Functional Foods Fact Sheet: Plant Stanols and Sterols.” April 2003. 21 October 2007.
http://www.ific.org/publications/factsheets/sterolfs.cfm.
6
Stipanuk, Martha H. Biochemical Physiological and Molecular Aspects of Human Nutrition. Saunders
Publisher. 2nd Edition. Pp.24-25. 2006.
7
Stipanuk. Pp. 24-25. 2006.
5
7
In multiple studies performed, reviewing 41 trials and in another study, 50 trials, it was
concluded by both studies that on average, intake of 1.5-2.0 g/day of stanol and sterols
decreased LDL (bad cholesterol) by 10%. Both studies similarly concluded that ingesting
more than 2 grams of plant sterols and stanols a day did not add any greater benefits of
lowering a greater percentage of cholesterol. 8
Another study was conducted involving the effectiveness of plant sterols and stanols
added to individuals diets, which were either already on a heart-healthy diet or on a
cholesterol lowering medication. Patients in this study following the National Cholesterol
Education Program (NCEP) diet alone were given 2.3 g/day of stanols to their diets.
These patients were shown to have decreased levels of total cholesterol by 8-11% and a
4-14% decrease in LDL cholesterol levels.9
*No unfavorable side effects were encountered with the ingestion of plant stanol or
sterols in these studies.
i.
Technical Information
The technology of adding phytosterols in food and beverage products was discovered in
1986, when 1.5 g/d sitostanol was noted to lower total human cholesterol.10 The
discovery of sitostanol being effective at 1.5 g/d led to the development of fat-soluble
Katan MB et al. “Efficacy and safety of plant stanols and sterols in the management of blood cholesterol
levels.” August 2003. 1 Nov 2007.
9
Stipanuk. p 25. 2006.
10
Heinemann, T., Leiss, O. and von Bergmann, K. Effect of low-dose sitostanol on serum cholesterol in
patients with hypercholesterima. 1986.
8
8
phytostanol esters, and later to the creation of the first phytostanol-enriched food product
by Benecol. 11
The technology of phytosterol-enriched foods is described by the World Intellectual
Property Organization as:
“A food in which a plant sterol and/or plant stanol whose dissolution in water is difficult
is stably dispersed homogeneously while suppressing any deposition or coagulation (ring
formation) thereof; and a process for producing the same. An emulsifier of 6 to 16 HLB
and a plant sterol are added to a food raw material in a weight ratio of 3:8 to 10:1 and
heated at 110˚ to 200˚C, thereby obtaining an intended food.”12
This technology has been proven effective, in its implementation in the product line of
General Mill’s Nature Valley snack bars, “Healthy Heart”. These snack bars come in two
different flavors of Honey nut and Oatmeal Raisin, containing the ingredients: Rolled
Oats, High Maltose Corn Syrup, barley Flakes, Raisins, Crisp Rice Flour, Sugar, malt
extract, salt, mixed Tocopherols (preservative), honey, fructose, sugar, plant sterols,
canola oil, maltodextrin soy lecithin, salt, natural flavor, cinnamon, baking soda,
sunflower meal, almond flour, peanut flour, mixed tocopherols added to retain
freshness.13 An individual snack bar contains .4 g of plant sterols.
11
Vanhanen, H.T., Kajander, J. Lehtovirta, H. And Miettinen, T.A. Serum levels absorption efficiency,
faucal elimination and synthesis of cholesterol during increasing doses off dietary sitostanol esters in
hypercholesterolemia subjects. 1994. Clin Sci 87. Pp. 61-67.
12
Process for Producing Food Containing Plant Sterol. 5 April 2006. 25 March 2008.
http://www.wipo.int/pctdb/en/wo.jsp?wo=2006046686&IA=WO2006046686&DISPLAY=STATUS.
13
Nutrition Facts. 2005. 3 April 2008. http://www.naturevalley.com/
9
“Studies have shown that 0.8 grams – the amount found in two Nature Valley® Healthy Heart Granola
Bars -- consumed over a period of as little as four weeks can reduce LDL or ‘bad’ cholesterol by about 6
percent..14
This study proves that consuming a designated amount of snack bars with plant sterols
can lower cholesterol in as little as four weeks. Since, Kellogg’s Co. has the know-how to
produce snack bars (Special K snack bars) it will have the capability and knowledge to
produce an additional line of snack bar products aimed at lowering cholesterol. The
reason I suggest to diversify the “Smart Start” product line, is because that brand name is
focused on heart healthy product, which is consistent with the plant sterol-enriched snack
bar image to be displayed.
B. Intellectual Property:
A very important question Kellogg’s Co. will be faced with when figuring out how to
incorporate this cholesterol lowering snack bar into its product line is how? How will
Kellogg’s Co. obtain the technology to create this phytosterol-enriched snack bar?
Kellogg could produce its new line of cholesterol lowering snack bar by participating in
an agreement with a plant sterol manufacturing company.
General Mills Launches Nature Valley® Healthy Heart Granola Bars with Plant Sterols. 24 March 2008.
24 March 2008.
www.generalmills.com/corporate/media_center/news_release_detail.aspx?catID=20369&itemID=10208
14
10
Since the plant sterol producing company has the patent for plant sterol ingredient,
creating an agreement with that company would be the first step in the process of creating
the new “Smart Start” snack bar line, to lower cholesterol.
Another alternative for producing products with plant sterols, is to obtain a license from
the company that is producing the ingredients. Licensing is a legal term that describes the
process of using another’s form of intellectual property, while avoiding litigation. A
License would essentially be an agreement permitting Kellogg the use of patent (in this
case the use of the plant sterol ingredient) in order to create its new product line of
cholesterol lowering products.15
There are currently several companies on the market that occupy a patent for plant
sterols, including, but not limited to: Cargill, Forbes MediTech, Arboris, Cognis, Kraft
Inc. and Coca Cola. These companies occupy patents to add plant sterols into foods
and/or beverages.16 After analyzing these companies, I came to the conclusion that
Kellogg’s should partner with Cargill, “an international provider of food, agricultural
and risk management products and services.”17
Cargill, as mentioned above is an international company headquartered out of
Minneapolis, Minnesota and has 158,000 employees in 66 countries. This company
Clarkson, Kenneth W. West’s Buisness Law Text and Cases. Tenth Edition. 2006. Pp.161-162.
Competition Proliferates. 2001. 5 March 2008. www.new-nutrition.com/newspagre/plantsterols/htm.
17
Cargill Website.2008.3 April 2008. http://www.cargill.com/
15
16
11
focuses on helping other companies succeed by utilizing its knowledge and expertise to
work together with its customers. Cargill’s vision, as displayed on its website:
“Accelerate health innovation in foods by focusing on health conditions that are
important to our customers and consumers.”
And its mission statement states:
“To be a global leader in offering ingredients that offer functional and/or health benefits.
We create value with our partners by developing innovative solutions. Through our
business practices, we enhance the success of our customers, satisfy our stakeholders,
provide opportunity for our employees and act as responsible citizens in our
communities.”18
This aligns with Kellogg’s mission:
“To drive sustainable growth through the power of our people and brands by better
serving the needs of our consumers, customers and communities.”
Kellogg’s Co. also mentioned in its 2007 Annual Report:
“We continually launch product innovations to meet consumers' health needs, such as
digestive health, heart health and shape management. We have also reduced or removed
Tran’s fatty acids from almost all of our products. We believe that educating consumers
18
Cargill Website. 2008. 3 April 2008. http://www.cargill.com/
12
empowers them to make good nutritional choices. We provide comprehensive nutrition
information, nutrition education and healthy-lifestyle messages on millions of packages
as well as online.”19
The commonality of goals and visions of these two companies (Cargill and Kellogg’s Co)
is the reason I decided to propose the business plan with regards to these two companies.
In a phone interview, with Cargill employee Colleen Ness on April 3rd, 2008, she notes:
“Cargill has the Corowise brand of plant sterols, we make agreements with companies
consistent with our company image. We decide which companies to make agreements
with, depending on the beneficial relationship of the agreement. We sell our plant sterol
ingredient to many suppliers and make different agreements with those companies based
on a number of different factors. Our ingredient ranges from powdered form to oil-based,
and what we sell to companies really depends on the specific product and company we
are working with.” 20
One of Cargill’s customers is General Mill’s Nature Valley: “Heart Healthy” snack bars,
which contains the ingredient Corowise ® plant sterols to create its cholesterol lowering
snack bars. Kellogg’s and Cargill would be able to create an agreement of terms
encompassing: costs, royalties, usage, exclusive and non-exclusive rights.
Kellogg’s 2007 Annual report: Our Nutrition Heritage. 2007. 3 April 2008.
http://annualreport2007.kelloggcompany.com/15.aspx
20
Interview with Cargill Employee. Colleen Ness. 3 April 2008.
19
13
II.
Industry Description
A. Size of industry
The market for plant sterols is estimated to be growing, but slowly. In a recent article
published by Function Ingredients, it is noted that AC Nielson conducted a study of
the total market for plant sterols to be $66 million in 2004 and $93 million for August
2005. Also, General Mills, producer of Nature Valley’s “Healthy Heart” snack bars
had a 21% increase in sales growth in its granola bars over the past two years.21
CEO of Cognis, Dr. Antonio Trius comments in a press release in November of 2007,
"We are very proud to say that during the last few years around 35 million euros
have been invested in the functional foods business in Illertissen. Natural foods that
come with additional health benefits are at the heart of Cognis' corporate strategy.
These markets are central to our future, and we will continue to invest in state-of-theart facilities to maintain our leading position."22
Cognis is an international Nutrition & Health company based in Illertissen, Germany.
This company specializes in nutritional ingredients, specifically focusing on wellness
21
General Mills 2007 Annual Report. 3 April 2008. http://media.corporateir.net/media_files/irol/74/74271/GIS_AR07.pdf
22
Enhancing service and quality: Cognis expands sterol ester plant in Illertissen, Germany 14 November
2007. 3 April 2008.
http://www.cognis.com/company/Press+and+Media/Press+Releases/2007/Press+Room_Company+Novem
ber+14_2007+(en).htm
14
and sustainability. Cognis currently employees 7,700 and operates in 30 countries.23
Cognis is one of the many companies producing and marketing its plant sterol
ingredients to companies for the production of plant sterol-enriched products.
B. Future direction of industry & Potential Risks
There is a positive outlook for the industry of plant sterol-enriched food products
because heart disease is affecting half of the US population, attributing high blood
cholesterol as a major risk factor of this disease.24
The potential risks associated with plant sterol-enriched products are the issue of
statin or prescription drugs, which are currently effective in lowering cholesterol and
widely used. Patients are able to control their cholesterol levels by taking statins
without needing to make dietary changes. However, Steve Snyder, Vice President of
Sales and Marketing at Cargill says,
“Of course, statins are a very potent and effective means to treat high or very high
cholesterol, but most consumer work we have done says that consumers would prefer
not to have medicine or pills as a solution to high cholesterol.”25
23
Enhancing service and quality: Cognis expands sterol ester plant in Illertissen, Germany 14 November
2007. 3 April 2008.
http://www.cognis.com/company/Press+and+Media/Press+Releases/2007/Press+Room_Company+Novem
ber+14_2007+(en).htm
24
“National Institute of Health.” June 2005. 3 April 2008.
www.nhlbi.nih.gov/health/public/chol/wyntk.htm.
25
US sterol foods market growing – but slowly. September 2006. 3 April 2008.
http://www.functionalingredientsmag.com/fimag/articleDisplay.asp?strArticleId=1089&strSite=FFNSite
15
Also, statin drugs are expensive and have the negative drawback of potential side effects,
where plant sterol-enriched products are not priced much higher than traditional food
products and do not have any proven adverse side effects. Stains have also been proven to
most effective in improving intrinsic high cholesterol synthesis, where plant sterols are
proven to be most effective in the absorption from the gastrointestinal tract in individuals
with high intrinsic cholesterol. 26
Another risk factor to consider for a plant sterol-enriched product could be over
saturation of the market. Since, there are several health & science companies developing
ingredients for plant sterols, many companies could see this opportunity to create a plant
sterol-enriched product and Kellogg’s Co could potentially loose customers due to
substitute products being available.
C. Life-Cycle of the Industry
The industry for plant sterol products is in the emerging industries. Consumer awareness
has not yet reached its peak. There is a proven market for the effectiveness of plant
sterols, with the FDA labeling health claims on products proven to lower cholesterol,
only if containing at least 1.7 g plant stanol esters and 0.65 g plant sterol esters. However,
there is still a large market of consumers who are unaware of what plant sterols actually
26
Thomsen AB, Hansen HB, Christiansen C, et al. Effect of free plant sterols in low-fat milk on serum lipid
profile in hypercholesterolemia subjects. Eur J Clin Nutr. 2004;58:860–70.
16
are, how they are proven to lower cholesterol and how plant-sterol enriched products can
actually help them to lower cholesterol. 27
Plant sterol-enriched products have been on the market shortly after the FDA approved
these products in 2000, but have experience very slow growth. Entry barriers, for this
industry, are low-medium due to the fact that the companies producing the ingredient
must have the know how and capabilities to invent the plant sterol ingredient. Also,
several companies have already been issued patents for the invention of the plant sterol
ingredient. Technological uncertainty still might be lingering around companies and or
consumers, which could also support the fact that the product lies in the emerging
industry. In this stage of the industry, companies aim to merge or acquire other firms,
pool resource strengths, gain added expertise, pursue new customer groups, and enter
new geographic areas (foreign markets). Although, the market for plant sterol-enriched
products has a positive outlook, the industry would still be considered emerging because
of the slow growth and lack of awareness it has created among consumers.28
27
FDA Authorizes New Coronary Heart Disease Health Claim for Plant Sterol and Plant Stanol Esters. 5
September 2000. 2 March 2008. http://www.fda.gov/bbs/topics/answers/ans01033.html
28
Crafting and Executing Strategy: Concepts and Cases, 16 th Edition. C 2008.
17
III.
Industry Competitiveness
A. Major Industry Leaders
The major industry leaders for producing plant sterols are29:

Arboris LLC

Cognis

Forbes MediTech

Archer Daniels Midland (ADM)

Teriaka

Cargill

Novartis Consumer Health

McNeil Consumer Health
These companies are in the business of producing plant sterols and are expanding into
the business of using plant sterols in food. These companies all large companies,
dedicated to research and are all competing in the global marketplace, producing
plant sterols and providing ingredients to other companies. These large scientific
based companies are competing in Research and development methods in designing
and implementing its plant sterol patent.
“Plant Sterols-all hyped up and nowhere to go?” 5 March 2008. 20 March 2008. http://www.newnutrition.com/newspage/Plantsterols.htm
29
18
There are several companies that are now producing plant-sterol enriched products,
including:

General Mills

Kraft

Mars

Benecol

Unilever
B. Direct and Indirect Competition
Kellogg’s is a global company- leading the breakfast cereal industry, also having
many other products in the snack food industry. This report focuses on implementing a
snack bar product line with added plant sterols in order to reduce cholesterol.
Kellogg’s main competitors would be those companies producing cholesterol lowering
or heart healthy snack products. General Mills has already developed a product line, of
“Healthy Heart” granola bars with CoroWise plant sterols, proven to lower cholesterol.
Direct Competitors are businesses that sell similar products in the same marketKellogg’s direct competitors are listed below.30
30
Corowise: Naturally Sourced Cholesterol Reducer. 10 April 2008.
http://corowise.com/products.html#oroweat
19

Coca-Cola Company- Minute Maid Orange Juice

Unilever- Promise active SuperShots

Unilever-Promise Margarine Spread

OroWheat- Whole grain & Oat Bread

Vitatops-Muffin Tops

Rice Dream- Rice Dream Heart Wise

Lifetime- Low fat cheese

Giant Eagle- Fat Free Milk

Kroger- Active Lifestyle Milk

GNC- Heart Advance dietary supplement

Centrum Cardio- Two Centrum Cardio® a Day

Mars- Coco Via Circulation
Indirect competitors are businesses that sell products that fill the same need as your
business. Kellogg’s indirect competitors would therefore be companies that are
offering products for a healthy heart, but not necessarily aimed at lowering cholesterol.

Power Bar- Harvest Whole Grain Snack Bars

Kashi- Heart to Heart Product line of Hot & Cold Cereals, waffles

General Mills- Cheerios

V8- Vegetable Juice
20
These products offer heart healthy benefits but do not contain plant phytosterols and
are do not label health claims to lowering cholesterol and risk of CVD. The reason
these companies are still competing with Kellogg’s heart healthy snack bars is due to
consumers in this category. Consumers that are purchasing heart healthy items could
also most likely benefit from plant-sterol enriched products and be keen on purchasing
plant-sterol enriched products. Indirectly, companies with heart healthy products are
stealing market share away from companies that offer a cholesterol-lowering product
line.
C. Barriers & Obstacles to Market Entry
Factors to consider with barriers to growth in the plant sterol industry are the mass
amount of companies such as: Arboris (US), striving to have the largest capacity for
producing plant sterols in Georgia, and Forbes MediTech growing larger and now
entering the European market.
The market is expanding annually at15%, and companies such as Forchem are
counting on organic growth of the market, instead of stealing market share from its
competitors. 31
Obstacles to market entry include the process of obtaining a patent to produce plant
sterols, the high licensing and agreement fees, and consumer awareness about the new
food technology. In a recent study conducted by the International Food Information
Council, it was found that people surveyed has typically lower levels of awareness of
31
New Capacity for Plant sterols at Finnish Plant. 21 March 2005. 10 April 2008.
http://www.nutraingredients.com/news/news-ng.asp?n=58862-new-capacity-for
21
plant sterols, probiotics, soy protein, etc. Opportunities for Kellogg’s would be to
heavily invest in marketing and promotion for their new product line and launch
efforts to educate consumers on the benefits of their plant sterol-enriched snack bars.
IV. Market Potential (US & Global)
Recent consumer trends have pointed out that a growing number of consumers are
purchasing healthy snack items, as this has becoming the number one choice to satisfy
hunger between meals. Consumer Research recognizes that 36% of American and
Europeans overall consume healthy snacks one or more times per day.32
A study conducted by the International Food Information Council, also discovered that
53% of Americans rate heart disease as their top health concern, and 13% of Americans
are concerned with cholesterol levels. 85% of consumers indicated that functional foods,
providing health benefits beyond the basic nutrition to reduce the risk of disease or other
health concerns. Also, 70% of consumers surveyed indicated that they have a great
amount of control over their health, compared to 44% who believed they had moderate
control, and 36% who believed they had no or limited control over their health. This
study also indicated that 83% of American are interested in learning more on functional
32
Healthy Snacking: Future Trends & New Insights. August 2007. 23 March 2008.
http://www.reportbuyer.com/food_drink/snacks/healthy_snacking_future_trends_new_insights.html
22
foods, and are interested in consuming a variety of foods for health benefits.33 Clearly,
there is a market for the functional food product to lower cholesterol. Kellogg’s has a
great opportunity to diversify its product line with plant sterol-enriched snack bars.
Consumers are more conscious of health concerns and taking more actions to improve
their health through purchasing functional food items such as cholesterol lowering
products.
This current food technology is something that many companies have already started to
pursue. Companies such as Unilever have created cholesterol lowering Promise Spread
and Activ Super shots. Other companies such as Mars Inc are manufacturing products
such as Cocoa Via, a heart healthy snack line, which is proven to lower cholesterol and
provide healthy circulation. 34
The technology of manufacturing foods with plant sterols has proven to be very safe and
the FDA has permitted companies to label claims on approved products to advertise their
cholesterol lowering effect.
“The IFR authorizes the use of a health claim relating plant sterol/stanol esters and
reduced risk of CHD on labeling of (1) spreads and dressings for salad containing at
least 0.65 g plant sterol esters per serving, and of (2) spreads, dressings for salad, snack
33
2007 Consumer Attitudes towards Functional Foods/Foods for Health October 2007. 3 March 2008.
http://ific.org/research/funcfoodsres07.cfm
34
Cocoa Via. 2008. 10 April 2008. http://www.cocoavia.com/
23
bars, and dietary supplements in soft gel form containing at least 1.7 g plant stanol esters
per serving.”35
The European phytosterol market is currently worth $75 million dollars and is forecasted
to grow by 15% annually, in a study done by Frost and Sullivan. This growth, they
indicate will be attributed to the new plant sterol enriched product launches. Also, a study
by Reuters predicts cholesterol-lowering products the most profitable innovation for food
producers within the next five years.36
David Henstrom, overseer of operations at Cargill Health & food Technologies,
indicates:
"Cargill's proprietary marketing research indicates that the majority of consumers in
selected European markets think seriously about their health and the nutritional value of
what they eat. Good-tasting, efficacious functional foods are experiencing a greater
acceptance by mainstream consumers than ever before. We're committed to promoting
heart health by bringing easy-to-formulate forms of CoroWise plant sterols to a broader
audience."
David also commented on the good market growth of the functional food industry with
respect to products enriched with plant sterols.
35
Stanols/Sterols and Risk of Coronary Heart Disease. 14 February 2003. 2 April 2008.
http://www.cfsan.fda.gov/~dms/lab-ssa.html
36
Multibene to enter US Food Market. 28 October 2004. 10 April 2008.
http://www.nutraingredients.com/news/news-ng.asp?n=58862-new-capacity-for
24
“This has continued to grow at more than 10%. The market for cholesterol lowering
foods also continues to experience great growth and will continue to substantially
outpace that of traditional food."37
The market for plant sterol-enriched food is growing as more and more people are
becoming aware of how important it is to take action in supporting a healthy lifestyle.
Companies are providing more functional foods that are healthy, convenient and taste
good as a result.
A. Target Market
The Target Market for cholesterol lowering food products is intended for those who want
or need to lower their cholesterol. Patients on a cholesterol lowering medicine can also
consume plant sterol products, but should consult their health care provider first. It is not
suggested that plant-sterol enriched foods are appropriate for children, pregnant and
breast-feeding women.38
Cognis, currently the global leader in producer of plant sterols, claims that the target
market for sterol-enriched products are likely to be oil based and low-fat products.
Products that are oil based, such as salad dressing, margarines and butter spreads, and a
37
A healthier World. 31 January 2007. 4 March 2008. http://www.foodchain-magazine.com/articlepage.php?contentid=422&issueid=18
38
Do We Need to Be Buying Plant Sterols? Food Magazine 67. Oct/ Dec 2004. p. 16.
25
variety of low fat products: yogurt, milk, bread would be a good match to add plant
sterols into that product.
B. Customers' Needs and Price Expectations
Consumers are in need of convenient, functional food products that are proven to lower
cholesterol. Products enriched with plant sterols are priced higher than similar products
that do not contain plant sterols, but are for a reason. In manufacturing plant sterol
products, 2500 parts of raw materials are needed to remove one part of a sterol. Cargill’s
CoroWise plant sterols are added to food and beverages without increasing the calories,
or affecting flavor or texture, which makes it easier for consumers to ass plant sterols into
their daily lives and help them lower cholesterol at the same time.39 Also, compared to
drug treatment, the spreads and food products containing plant sterols are a more costeffective way to lower blood cholesterol concentration. A strict diet and consuming plant
sterol enriched products may allow individuals to lower cholesterol levels to target levels,
if they have moderately high cholesterol. In people with extremely high cholesterol
levels, the LDL cholesterol lowering power of the statin drug proves to be greater;
however the combination of the statin drug and the plant sterol enriched food could
provide a greater benefit.40
C. Benefits to consumers
39
A healthier World. 31 January 2007. 4 March 2008. http://www.foodchain-magazine.com/articlepage.php?contentid=422&issueid=18
40
Phytosterols—a new dietary aid for the treatment of hypercholesterolemia. August 2003. Vol 93.8.
http://search.sabinet.co.za/images/ejour/m_samj/m_samj_v93_n8_a7.pdf
26
Consumer studies have pointed out what is most important when choosing which snack
food they buy. Taste is by far the most important factor in governing snack choice for
consumers. Brand was least important thereby suggesting that big name manufacturers
and retailers cannot rely on brand strength alone to generate healthy snack sales.30
In a consumer survey taken by the US Food and Drug Administration in November of
2005, 93% of consumers agreed that by eating a healthy diet, it would greatly reduce the
chances of getting heart disease (72% strongly agreed to this statement).41
The trend of healthy items are shaping many company’s new product developments and
marketing. Data monitor surveyed European and Americans to find that health concerns
are increasing and income is no longer a direct indicator of consumption behavior. For
example, 28% of US consumers traded up to higher priced items at the grocery store in
categories they enjoy of find important. Also, stresses, work life and time constraints
have had a large impact on the ways in which consumers obtain and consumer meals. The
need for convenient health is gaining momentum: nearly 6 in 10 (59%) of European and
US consumers overall sought more convenient and healthy food and drinks in 2006
compared to the 12 months previously. In the past, it was difficult to consume healthy
convenient foods because they were often not available, however now that consumers
have convenient and healthy products at their disposal, they are taking advantage of this
development.42
30
41
FDA Health and Diet Survey-2004 Supplement. http://www.cfsan.fda.gov/~comm/crnutri3.html#fat
November 2005. 10 April 2007.
42
Food & Drink Weekly. 6 August 2007. 10 April 2008.
27
IV.
Costs
A. Costs of manufacturing the product
Costs associated with manufacturing a product containing plant sterols would include:
research and development, production, (plant and equipment), labor, materials,
marketing and promotion, legal processing costs, and purchasing the plant sterols. Most
of this information is confidential, and private to the individual company. However, I
did obtain information regarding the costs of the plant sterol ingredient from the
supplier (Cargill). Cargill prices its plant sterol ingredients at $20-40 a kg. In order for
the food product to be labeled with health claims to lower cholesterol (FDA), the
individual product must contain at least 0.65 g of plant sterols. Therefore, 1000g
(1kg)/0.65g= 1538.46 bars could be manufactured by purchasing a 1 kg (1,000g) of
plant sterols for $20-40 a kg. Since, Kellogg’s will most likely package these bars
together, purchasing $20-40 of plant sterols would allow Kellogg’s to make roughly
308 boxes of plant sterol-enriched snack bars, assuming 5 bars came in one package.43
Due to the lack of available information, no other costs could be calculated.
43
Interview with Cargill Employee. Colleen Ness. 3 April 2008.
28
VI. Conclusion
A. Recommendations
Kellogg’s would greatly benefit from adding a product line of plant-sterol enriched snack
bars. Kellogg’s is a company with a great reputation, contingent on evolving its products
with the changing demands of consumers. After researching the food technology of plant
sterol-enriched products and the large number of Americans who have high cholesterol
and are at risk for heart disease, it is extremely important for companies to produce
products for these individuals. Since the technology has been proven effective, and the
FDA supports labeling health claims about the effectiveness of plant sterols lowering
cholesterol, companies are able to promote its products in this light. It is not only a great
opportunity for companies to increase profits and strengthen their bottom line of
promoting healthier products, but it is also a way for companies to let consumers know
they care about the health of consumers, disease prevention and healthy lifestyles.
Incorporating a line of snack bars to lower cholesterol and improve heart health would be
a great opportunity for Kellogg’s.
29
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32