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

3. 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

4. Kellogg’s Marketing Strategy and Marketing Plans

5. Organizational Strategies n Leadership in product innovation n Strengthening the company’s seven largest cereal markets n Accelerating the growth of convenience foods business n Developing a more focused organization n Continuing to reduce costs

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

7. 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

8. Kellogg’s SWOT Analysis

9. Strengths n Control 42% of global market share for Pre- sweeter cereal, which is more than triple the market share of any of their competitors. n They have the strongest brand recognition and advertising recollection of all the cereal manufacturers

10. Weaknesses n Have not aggressively developed many new cereal lines in the past four years. n Slow erosion of their U.S. market share in the past few years, n Follower in Pricing Strategy

11. Opportunities n International expansion is the biggest area for growth for Kellogg’s. n Kellogg can continue to slowly diversify, while still remaining in their core business area, which will increase their profitability. n If they can develop a better pricing strategy and guarantee lower prices, they can reduce costs while increasing their market share.

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

13. Market Analysis

14. Market Analysis n Market size: sales of nearly $9.7 billion in the Ready-To-Eat Market in 2001 n Product segments: the best-selling kids’ cereal brands--GM Lucky Charms, GM Count Chocula, Post Marshmallow Alphabits, Q Marshmallow Safari, Rice Krispy. n 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 n 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.

15. Cereal Industry Volume Sales for Presweet Cereal

16. n Marketing/promotion: Seven breakfast cereal marketers allocated almost $775 million to purchases of space and time mass media in 2001. n Industry structure: Three food giants--Kellogg, General Mills, and Philip Morris--responsible for 70% of kid’s foods in 2001. Market Analysis (continued)

17. Major Trends in Cereal Industry n New products are dominated by line extension and product promotion n Increasing popularity of private labeled cereals due to high cost of branded products n Higher demand for health food markets & products n Health claims is becoming more prevalent; Kellogg’s - American Heart Association

18. Competitive Analysis

19. 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

20. 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

21. High Low PRICE/QUALITY/IMAGE PRODUCT LINE/MANUFACTURING MIX Strategic Group Map of Competitors in the Presweeter Cereal Industry Brand Cereals Kellogg General Mills General Food Quaker Oats Private Label

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

23. 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

24. 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

25. n Supplier does not have much power because of private labels. n Similar products have allowed buyers to acquire products from private labels at a Cheaper Price. n Now industry is very Sensitive to the buyer. Competitive Force Analysis Power of Supplier

26. Customer Analysis

27. Cocoa Krispies Buying Criteria n Key equity drivers: chocolate taste, Coco the monkey, snap, crackle and pop n Package: fun, colorful, capture children’s attention n Product: very sweet, colorful and contain nutritious elements

28. Kellogg’s Customer Analysis Who Are the Buyers? n Parents, Older Adults How Often Do They Purchase? n Kids cereal are purchased roughly 18 times a year n 10th fastest-moving product in the supermarket Where Do they Want to Buy? n Grocery Stores responsible for 99% of cereal sales Who Are the Influencers? n Kids Who consumes the goods? n Kids under 18 Who are Kellogg’s Target Market? n Kids 8-11 years old

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

30. Cocoa Krispies Objective n Strengthen kid consumer base n Secure Kellogg “cocoa” bit subsegment volume share with competitive focus on GM’s Cocoa Puffs and Post’s Cocoa Pebbles n Create a product that enhances the “ultimate multi- sensory food experience” by adding additional attributes that satisfy expended consumer needs n Attract different target groups

31. COCOA Krispies Promotion n Spent roughly $15 million for ad campaign: TV, print n Adds include Coco the Monkey n Advertiser: Kellogg Agency (Leo Burnet) n Quantity and price discounts n Packaging: fun, colorful, capture children attention

32. Cereal Pricing for Retail Stores

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

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

35. IntroductionGrowth Maturity Decline Dollars Time Cocoa Krispies: PRODUCT LIFE CYCLE

36. Critique of the Plan n Have we heard of it? Promotional issues n Can we get it? Distribution n Can we afford it? Pricing n Are we buying it? Target market record n Is it legitimate? Corporate responsibilities

37. Promotional Issues n Mass Advertising TV, Cocoa the Monkey, and Snap, Crackle and Pop. n Direct Promotions Coupons n Trade Promotions In-store displays, Samples n Personal Selling Key-account reps, Area reps, Merchandisers

38. Distribution n Penetration - Chain stores, Independent wholesalers n Sales Channel - Brand equity helps n Logistics - Finished goods warehouse / rail / truck / centers or independent warehouses n Relationships - Conflict or harmony?

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

40. Corporate Responsibilities n Legal Issues - Safety, Information, Choice n Environmental - Earth Spirit Award Issues n Civic Responsibilities - Ad content standards - Ad content standards - Stakeholder orientation - Stakeholder orientation - Public program support - Public program support n Ethical Issues - Nutritional education - More than required - More than required

41. America’s 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

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

43. Sorry Coco

44. The boys are back in town!

45. Sources n Kellogg - Mike Culverson / Customer Service n Farmer Jack’s - Ron Van Este / Cereal buyer n Media Week - May‘98 / ‘Something New Under My Nose” n Business Week - Wednesday, May 29, 2002 “Kellogg Co.” n WWW.industryweek.com - “Food Industry Focus” n Field Visits - Kroger, Farmer Jack’s, Target, Rite-Aid. n Florida Sun Sentinel - Feb. 7, 1998 / Robin Fields / “Get That One Mommy” n The NPD Group - March, 2001/ “The Twelfth Annual Report on Eating Patterns in America” n Kellogg - www.Kellogg's.com n http://faculty.sba.udayton.edu.schenk.kellcase.htm

46. The End