Kellogg's Company Analysis

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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 ValueW. K. Kellogg

Kelloggs Marketing Strategy and Marketing Plans

Organizational Strategiess s

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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 StrategyManagement continues global strategy s Offers brand-differentiated pricing s Invests in new product research s Brand-building marketing activities s Cost structure reductions

Product Market StrategiesProduct 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

Strengthss

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

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Weaknessess

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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Opportunitiess

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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Threatss

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

Market Analysiss

Market size: sales of nearly $9.7 billion in the Ready-To-EatMarket in 2001

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Product segments: the best-selling kids cereal brands--GMLucky Charms, GM Count Chocula, Post Marshmallow Alphabits, Q Marshmallow Safari, Rice Krispy.

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Market share: competition is heating up in this market as flatsales and low-priced clones have eroded the market shares of Kellogg and General Mills

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Market Forecasts: the kidsmarket has been growing at arate 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 CerealVolume Sales4.5 1.4 4.8 7.4 11.7In million

(As of 2/01)

16.7

Kellogg USA GM & Ralston Post & Nabisco Quaker Store Brands Malt O Meal Co

Market Analysis(continued)s

Marketing/promotion: Seven breakfast cereal Industry structure:

marketers allocated almost $775 million to purchases of space and time mass media in 2001.

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Three food giants--Kellogg, General Mills, and Philip Morris--responsible for 70% of kids foods in 2001.

Major Trends in Cereal Industrys

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

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

Competitive Force AnalysisThreat of a SubstitutionPrivate 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 Mapof Competitors in the Presweeter Cereal IndustryHighPRICE/QUALITY/IMAGE

KelloggGeneral Food

General Mills Quaker Oats

Low

Private LabelBrand Cereals PRODUCT LINE/MANUFACTURING MIX

Private Label Quaker Oats General Foods General MillsCapn Crunch Lucky Charm

KELLOGGHoney Nut Cheerios 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 AnalysisHigh Barriers to EntryMain 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 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

Competitive Force AnalysisPower of Suppliers

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

Cocoa Krispies Buying Criterias

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

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

75+ 65-74Age Groups

8.2 8.8 10.3 22.3 29.4 16.3Percentage

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

Cocoa KrispiesObjectives

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 Krispies Promotions

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 Pricingfor Retail StoresFarmer 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

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Distribution PlayersRetail/Distribution: Grocery stores are responsible for the overwhelming 99%--of cereal saless

Kelloggs

Major players :Kroger Farmer Jack Target

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Minor players :Convenience stores Gas stations

Distribution ChannelsKelloggs Kelloggs Kelloggs

Kelloggs

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

Cocoa Krispies:PRODUCT LIFE CYCLE

DollarsIntroduction

Growth

Maturity

Decline

Time

Critique of the Plans s s s s

Have we heard of it? Can we get it? Can we afford it? Are we buying it? Is it legitimate?

Promotional issues Distribution Pricing Target market record Corporate responsibilities

Promotional Issuess

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

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Distributions

Penetration -

Chain stores, Independent wholesalers

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Sales Channel - Brand equity helps Logisticscenters or warehouses

- Finished goods warehouse /rail / truck / independent

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Relationships - Conflict or harmony?

The TargetFastest Growing Foods in the American Diet : Carbonated Soft drinks Pre-Sweet Cereal Bagels Toaster Pastries Pizza

Corporate ResponsibilitiesLegal Issues - Safety, Information, Choice s Environmental - Earth Spirit Award Issues s Civic Responsibilities - Ad content standardss

- Stakeholder orientation - Public program supports

Ethical Issues - Nutritional education- More than required

Americas Top 10 R-T-E Cereals1. 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

Positioning