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

Kelloggs Marketing Strategy and

Marketing Plans

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

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

Kelloggs 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 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.

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.

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 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.

Cereal Industry Volume Sales for Presweet Cereal

Volume Sales
4.5 1.4 4.8 16.7
(As of 2/01)

7.4 11.7
In million

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 kids 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; Kelloggs 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 (1990s started a price war between rivals)

Made the buyer more powerful

Strategic Group Map

of Competitors in the Presweeter Cereal Industry
High

Kellogg
General Food

General Mills Quaker Oats

Low

Private Label
Brand Cereals

PRODUCT LINE/MANUFACTURING MIX

Private Label
Quaker Oats General Foods General Mills
Capn Crunch

KELLOGG
Honey Nut Cheerios Lucky Charm
Cocoa Krispies Other Cereals Cheerios

Honey Nut Cheerios

Honey Nut Shredded

Capn Crunch Snack Bars

Bagged ValuePriced Cereal

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 childrens attention Product: very sweet, colorful and contain nutritious elements

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

Percent of Total Annual Spending on Presweeter Cereal

(by Age Group)

75+ 65-74
Age Groups

8.2 8.8 10.3 22.3 29.4 16.3

Percentage

55-64 45-54 35-44 25-34

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 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 (Kelloggs) $0.22/ounce $0.23/ounce $0.17/ounce

Private Labels

$0.23/ounce $0.13/ounce

n/a

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

Kelloggs

Major players:
Kroger Farmer Jack Target

Minor players:
Convenience stores Gas stations

Distribution Channels
Kelloggs Kelloggs Kelloggs

Kelloggs

Computer system
Wholesaler Kroger, Target, distrib. centers Retailer Retailers Distrib. In stores

Cocoa Krispies:
PRODUCT LIFE CYCLE

Introduction

Growth

Maturity

Decline

Time

Critique of the Plan

Have we heard of it?

Can we get it? Can we afford it?

Promotional issues
Distribution Pricing

Are we buying it?

Is it legitimate?

Target market record

Corporate responsibilities

Promotional Issues

Mass Advertising Direct Promotions

Trade Promotions Personal Selling

TV, Cocoa the Monkey, and Snap, Crackle and Pop.

Coupons In-store displays, Samples Key-account reps, Area reps, Merchandisers

Distribution

Penetration Sales Channel Logistics

Chain stores, Independent wholesalers Brand equity helps Finished goods warehouse / rail / truck / centers or independent warehouses Conflict or harmony?

Relationships -

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

Americas 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 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

The End