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

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

2. 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

3. Kellogg’s Marketing StrategyandMarketing Plans

4. 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

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

6. 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

7. Kellogg’s SWOT Analysis

8. 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

9. Weaknesses • Have not aggressively developed many newcereal lines in the past four years. • Slow erosion of their U.S. market share in the past few years, • Follower in Pricing Strategy

10. 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.

11. Threats • General Mills, Post, and Quaker Oats are using price competition and productproliferation 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.

12. Market Analysis

13. 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 beengrowingat 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.

14. Cereal Industry Volume Sales for Presweet Cereal

15. 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.

16. 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

17. Competitive Analysis

18. 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

19. 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 (1990’s started a price war between rivals) • Made the buyer more powerful

20. 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

21. Private Label Quaker Oats General Foods General Mills Cap’n Crunch Snack Bars Cap’n Crunch KELLOGG Honey Nut Shredded Honey Nut Cheerios Lucky Charm CocoaKrispies Honey Nut Cheerios Other Cereals Bagged Value-Priced Cereal Cheerios Fruit Cereal Bars Cranberry Almond Crunch Rice Cakes Oatmeal Cereal Bars

22. 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

23. 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

24. 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.

25. Customer Analysis

26. Cocoa KrispiesBuying 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

27. 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

28. Percent of Total Annual Spending on Presweeter Cereal(by Age Group)

29. Cocoa KrispiesObjective • 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 multi-sensory food experience” by adding additional attributes that satisfy expended consumer needs • Attract different target groups

30. 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

31. CerealPricing for Retail Stores

32. Major players: Kroger Farmer Jack Target Minor players: Convenience stores Gas stations Kellogg’sDistribution Players Retail/Distribution: Grocery stores are responsible for the overwhelming 99%--of cereal sales

33. Kellogg’sDistribution Channels Kellogg’s Kellogg’s Kellogg’s Computer system Wholesaler Kroger, Target, distrib. centers Retailer Retailers Distrib. In stores

34. Cocoa Krispies: PRODUCT LIFE CYCLE Dollars Introduction Growth Maturity Decline Time

35. 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 marketrecord • Is it legitimate? Corporate responsibilities

36. Promotional Issues • Mass AdvertisingTV, Cocoa the Monkey, and Snap, Crackle and Pop. • Direct PromotionsCoupons • Trade Promotions In-store displays,Samples • Personal SellingKey-account reps, Area reps, Merchandisers

37. 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?

38. The Target Fastest Growing Foods in the American Diet: Carbonated Soft drinks Pre-Sweet Cereal Bagels Toaster Pastries Pizza

39. 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

40. 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 America’s Top 10 R-T-E Cereals

41. Positioning Map Taste Cocoa Krisp Fruit Loops Cheerios Raisin Bran Corn Flakes Nutrition Special K

42. Sorry Coco

43. The boys are back in town!

44. 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

45. The End