Kelloggs Marketing Strategy and Marketing Plans

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Like Coco the monkey we sing the praises of the
chocolatey cereal

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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

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Kelloggs Marketing StrategyandMarketing Plans
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Organizational Strategies

• Leadership in product innovation
• Strengthening the companys seven largest cereal
  markets
• Accelerating the growth of convenience foods
  business
• Developing a more focused organization
• Continuing to reduce costs

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Global Strategy

• Management continues global strategy
• Offers brand-differentiated pricing
• Invests in new product research
• Brand-building marketing activities
• Cost structure reduction

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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

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Kelloggs SWOT Analysis
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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

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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

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Opportunities

• International expansion is the biggest area for
  growth for Kelloggs.
• 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.

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Threats

• General Mills, Post, and Quaker Oats are using
  price competition and product proliferation to
  erode Kelloggs share of the market.
• Discount imitation cereals brands have been
  successful in reducing premium brands in the more
  commodity like cereals.

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Market Analysis
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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 kidsmarket 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 kids food market was driven, to the
  largest extent, by gains in cereals.

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Cereal Industry Volume Sales for Presweet Cereal
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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 kids foods in 2001.

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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
  Kelloggs - American Heart Association

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Competitive Analysis
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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

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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 (1990s started a price war
  between rivals)
• Made the buyer more powerful

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Strategic Group Map of Competitors in the
Presweeter Cereal Industry
High
Kellogg
General Mills
General Food
Quaker Oats
PRICE/QUALITY/IMAGE
Private Label
Low
Brand Cereals
PRODUCT LINE/MANUFACTURING MIX
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Private Label
Quaker Oats
General Foods
General Mills
Capn Crunch Snack Bars
Capn Crunch
KELLOGG
Honey Nut Shredded
Honey Nut Cheerios
Lucky Charm
Cocoa Krispies
Honey Nut Cheerios
Other Cereals
Bagged Value-Priced Cereal
Cheerios
Fruit Cereal Bars
Cranberry Almond Crunch
Rice Cakes
Oatmeal Cereal Bars
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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

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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

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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.

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Customer Analysis
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Cocoa KrispiesBuying Criteria

• Key equity drivers chocolate taste, Coco the
  monkey, snap, crackle and pop
• Package fun, colorful, capture childrens
  attention
• Product very sweet, colorful and contain
  nutritious elements

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Kelloggs 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 Kelloggs Target Market?
• Kids 8-11 years old

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Percent of Total Annual Spending on Presweeter
Cereal(by Age Group)
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Cocoa Krispies Objective

• Strengthen kid consumer base
• Secure Kellogg cocoa bit subsegment volume
  share with competitive focus on GMs Cocoa Puffs
  and Posts 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

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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

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Cereal Pricing for Retail Stores
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Kelloggs 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

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Kelloggs Distribution Channels
Kelloggs
Kelloggs
Kelloggs
Computer system
Wholesaler
Kroger, Target, distrib. centers
Retailer
Retailers
Distrib. In stores
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Cocoa Krispies PRODUCT LIFE CYCLE
Dollars
Introduction
Growth
Maturity
Decline
Time
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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

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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

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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?

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The Target

• Fastest Growing Foods in the American Diet
• Carbonated Soft drinks
• Pre-Sweet Cereal
• Bagels
• Toaster Pastries
• Pizza

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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

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Americas Top 10 R-T-E Cereals

• 1. 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

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Positioning Map
Taste
Cocoa Krisp
Cheerios
Fruit Loops
Raisin Bran
Corn Flakes
Nutrition
Special K
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Sorry Coco
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The boys are back in town!

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Sources

• Kellogg - Mike Culverson / Customer Service
• Farmer Jacks - Ron Van Este / Cereal buyer
• Media Week - May98 / Something New Under My
  Nose
• Business Week - Wednesday, May 29, 2002 Kellogg
  Co.
• WWW.industryweek.com - Food Industry Focus
• Field Visits - Kroger, Farmer Jacks, 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
  

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The End