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 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
Kellogg’s SWOT Analysis
Strengths

Control 42% of global market share for Presweeter 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 Sales
for Presweet Cereal
Volume Sales
4.5 1.4
16.7
4.8
7.4
11.7
In million
(As of 2/01)
Kellogg USA
GM & Ralston
Post & Nabisco
Quaker
Store Brands
Malt O Meal Co
Market Analysis
(continued)

Marketing/promotion:

Industry structure:
Seven breakfast cereal
marketers allocated almost $775 million to purchases of space
and time mass media in 2001.
Three food giants--Kellogg, General
Mills, and Philip Morris--responsible for 70% of kid’s foods in
2001.
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 Analysis
Intensity of Rivals
Four Large companies are dominant in the market
Oligopoly
Competition is very intense
Inflated prices
Growth Rate has remained Constant
Competitive Force Analysis
Threat 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
Strategic Group Map
of Competitors in the Presweeter Cereal Industry
High
Kellogg
General
Mills
General
Food
Low
Quaker
Oats
Private
Label
Brand Cereals
PRODUCT LINE/MANUFACTURING MIX
Private Label
Quaker Oats
General Foods
General
Mills
Cap’n Crunch
KELLOGG
Honey Nut
Cheerios
Lucky
Charm
Cocoa Krispies
Honey Nut
Cheerios
Honey Nut
Shredded
Cap’n
Crunch
Snack Bars
Other
Cereals
Bagged ValuePriced Cereal
Cheerios
Fruit
Cereal Bars
Cranberry
Almond Crunch
Rice Cakes
Oatmeal
Cereal Bars
Competitive Force Analysis
High 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 Analysis
High 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 Analysis
Power 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.
Customer Analysis
Cocoa Krispies
Buying 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 Analysis
Who 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)
75+
Age Groups
65-74
55-64
8.2
8.8
10.3
45-54
22.3
35-44
25-34
29.4
16.3
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 multisensory food experience” by adding additional attributes
that satisfy expended consumer needs

Attract different target groups
COCOA Krispies
Promotion

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
Target
Cocoa Pebbles
(General Mills) $0.25/ounce $0.25/ounce $0.15/ounce
Cocoa Puffs
$0.28/ounce $0.27/ounce $0.21/ounce
(Post)
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
Retail/Distribution: Grocery stores are responsible for
the overwhelming 99%--of cereal sales

–
–
–
Major players:
Kroger
Farmer Jack
Target

–
–
Minor players:
Convenience stores
Gas stations
Kellogg’s
Distribution Channels
Kellogg’s
Kellogg’s
Kellogg’s
Computer system
Wholesaler
Kroger, Target, distrib. centers
Retailer
Retailers
Distrib. In stores
Cocoa Krispies:
PRODUCT LIFE CYCLE
Introduction
Growth
Maturity
Time
Decline
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 -

Sales Channel -
Brand equity helps

Logistics
Finished goods warehouse /
rail / truck / centers or
independent warehouses

Relationships -
Chain stores, Independent
wholesalers
-
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
Cereals
1.
2.
3.
4.
5.
Frosted Flakes
Cheerios
Frosted Mini-Wheat
Corn Flakes
Rice Krispies/Cocoa
Krispies
6. Honey Nut
Cheerios
7. Raisin Bran
8. Fruit Loops
9. Special K
10. Corn Pops
Positioning Map
Taste
Cocoa Krisp
Fruit Loops
Corn Flakes
Cheerios
Raisin
Bran
Nutrition
Special K
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

The NPD Group - March, 2001/ “The Twelfth Annual Report on Eating








Mommy”
Patterns in America”
Kellogg - www.Kellogg's.com
http://faculty.sba.udayton.edu.schenk.kellcase.htm
The End