How profitable is cereals business

MKT 408
Phase 3

Prepared by:

Tables of Contents
Ⅰ. Executive Summary………………………………………………………………...……3
Ⅱ. Objective…………………………………………………………………………….…....4
Ⅲ. Background………………………………………………………………………………4
Situation Analysis…………………………………………………………………

Current Marketing Strategy………………………………………………………..

Marketing Challenges/Issues ……………………………………………………..

Current Positioning………………………………………………………………….

Ⅳ. Market Analysis……………………………………………………………………….XX
Demographics ……………………………………………………………………..

Psychographics…………………………………………………………………….

Motivations………………………………………………………………………….

Personal, Social, and Cultural……………………………………………………... Influences…………………………………………………………………………..

Situational Influence……………………………………………………………….

Purchase Process…………………………………………………………………….

Post-purchase Experience……………………………………………………………...

Ⅴ. Recommendation………………………………………………………………………XX
Ⅵ. Bibliography & Footnotes…………………………….……………………………...XX
Ⅶ. Appendix………………………………………………………………………………XX
Executive Summary (Do this one)
Objective
Our objective is to be able to provide helpful suggestions in which the Kellogg’s team can then implement in order to better their current marketing strategy. Kellogg’s company is currently facing a marketing issue in that their cereal sales have been decreasing over the years. The decrease in sales has been forcing Kellogg’s to come up with new products while also “pairing their operating costs in order to increase sales and profits” (Peltz, 2016). Another marketing issue the company is facing is that they are having trouble convincing consumers to eat cereal, and more specifically, why they should eat Kellogg brand cereal instead of a competitors such as General Mills.

Our team suggests that an objective that Kellogg should do is increase their media presence like that of competitors General Mills. In where they produce ads and tv commercials aimed at tugging on consumers feeling of nostalgia of having cereal as well as highlighting the nutritious benefits of their cereal. We would suggest that Kellogg perhaps pay merchandisers for premium eye level spots in their shelves, and end caps where their cereal will most likely get a consumer's attention. Kellogg’s could also benefit from making their different variations of their cereal in order for it to be friendly for all diets such as gluten free, whole grains, and fiber. Lastly, our other suggestion would be for Kellogg’s to join the breakfast on the go movement and make products that can be easily consumed while on the run. Some ways that they can do this is by making breakfast bars, and investing in hot cereal in to-go cups where the consumer can just add hot water and instantly have a hearty and filling breakfast wherever they may be. Our goal is that by implementing some or all of these suggestions Kellogg Company will be able to see an increase on their brand cereal consumption, as well as in increase in sales, and overall brand awareness.

Background
Kellogg’s is an American multinational food manufacturing company that sells cereal, cookies, crackers, waffles and other snack varieties. Kellogg’s first began in 1898 when the W.K Kellogg and his brother Dr. John Harvey Kellogg failed their attempts to create granola bars. The brothers accidently flaked wheat berry during their experiments. WK. Kellogg kept experimenting until he flaked corn thus creating the infamous Kellogg’s corn flakes. (Kelloggs, 2017)

With Kellogg’s new creation of flake corn, W.K Kellogg launched a company name as Battle Creek Toasted Corn Flakes. He realized that for his product to expand, he would need advertising and promotion. The company spent a third of its working capital on an ad in Ladies Home Journal. From this early ad, Kellogg’s corn flakes sales skyrocketed. In 1907, outputs had reach 2,900 cases day with a net profit for about a dollar a case. However, in June of 1907, a fire destroyed the main production building of corn flakes. According to Reference for Business, after the fire, W.K Kellogg bought out his brother’s share of the company. Battle Creek Toasted Corn Flakes had been renamed to Kellogg’s Toasted corn flakes. In 1922, Kellogg’s Toasted corn flakes lost the trademark of toasted corn flakes as it no longer accurately described the company, thus becoming Kellogg’s.

Kellogg’s has been strategic of their marketing strategies. Kellogg’s used television advertising in 1950 to attract the postwar baby boomers. To appeal to the younger audience, Kellogg’s introduced sugar into their breakfast cereal. This was when Tony the Tiger was introduced. With the introduction of Tony the Tiger, sales and profits doubled over the decade. The previous marketing strategy used by Kellogg has been shown to be very effective.

Situation Analysis

External Situation

Industry, Competition, and Marketing Boundaries

The Kellogg Company is a global business. Kellogg’s products are manufactured in 21 countries and marketed in more than 180 countries worldwide. The company is best known for its cereal brands Corn Flakes, Rice Krispies, Mini Wheats, Fruit Loops and Frosted Flakes. (Kellogg Company, 2016) As Kellogg first discovered how to make corn flakes, they excelled in the cereal business for some time. Today, Kellogg competes with General Mills for the title of the biggest vendor in the United States. These two companies have been long-term rivals. For years Kellogg was the leading seller of breakfast cereals. In recent years, with shares dropping, General Mills has become the market leader. Kellogg’s fell slightly behind them with a market share of 25%. (Statista, 2015) Other competitors of Kellogg company, although not as threatening, are Kraft, Nestle, Cadbury, and Quaker Oats.

Kellogg is not just competing with other cereal brands. Kellogg is competing against the morning food industry. There is a growing demand for healthier and more convenient options, which is leaving Kellogg’s cereal products on the shelves. U.S. cold-cereal sales dropped 4.1% in a four-week analysis conducted by Bloomberg Intelligence (Lachapelle, 2017). Kellogg has competed, and expects to continue to compete for sales of all of their main products in their major product categories. This competition is seen both domestically and internationally. (Kellogg Company, 2016)

Business Ecosystem

Kellogg Company cereal products are generally marketed under the Kellogg name and sold to the grocery trade through direct sales forces for resale to consumers. For certain products, Kellogg uses broker and distributor arrangements. They also use this strategy in less-developed market areas or in market areas outside of their focus. Kellogg’s convenience foods are marketed under a variety of trademarks and trade names, which include Keebler, Cheez-it, Murray, E.L. Fudge, Austin and many others. Kellogg’s products generally are sold through their own sales forces, through broker and distributor arrangements, and are commonly resold to consumers in retail stores, restaurants, and other food service establishments. (Kellogg Company, 2017)

Internal Situation

Organizational Structure/Decision-making dynamics

Kellogg Company is separated into two operating segments: Kellogg North America and Kellogg International. The majority (68%) of Kellogg’s revenue is generated in North America. (Kellogg Company, 2016) Kellogg Company’s Chief Executive Officer is Steven A. Cahillane. Kellogg’s Board of Directors, unanimously elected Cahillane in October 2017, when CEO John Bryant decided to retire. Bryant will continue as Executive Chairman of the Board until March 15, 2018, which then Cahillane will assume that role. (Kellogg Company, 2017) Kellogg Company has executive officers for their departments of finance, global supply chain, global human resources, and corporate development. Kellogg also has a President for Kellogg International. Recorded December 31, 2016, Kellogg had an estimate of 37,369 employees. (Kellogg Company, 2016).

Kellogg’s research to support and expand existing products, and develop new products, are carried out mainly at the W.K. Kellogg Institute for Food and Nutrition Research in Battle, Creek Michigan. Kellogg’s research and development also takes place at other locations around the world. In 2016, Kellogg’s expenditures for research and development were about $182 million. (Kellogg, 2016)

Product Lines

Kellogg produces cereal and convenience foods. These foods include cookies, crackers, toaster pastries, cereal bars, fruit-flavored snacks, and frozen waffles. Kellogg Company’s acquisitions are what have kept them successful. In 2001, Kellogg made its largest acquisition, when they acquired the Keebler Company. In 2012, Kellogg became the world’s second-largest snack food company by acquiring the Pringles brand. Some of Kellogg’s most iconic and recognizable products are Keebler, Pringles, Cheez-its, Pop-Tarts, Nutri-Grain, Kashi, Fruit snacks, and Eggo. While Kellogg has produced a number of cereal products, some popular ones are: Fruit Loops, Apple Jacks, Corn Flakes, Frosted Flakes, Rice Krispies, Raisin Bran, and Mini-Wheats. Of the 68% revenue generated, snacks make up 33%, cereal 24%, and frozen foods 11%. (Kellogg Company, 2016)

Current Performance

Kellogg’s best selling segment, U.S. morning food, fell behind the U.S. snacks segment in 2013. In 2015, Kellogg’s total net sales were about 13.5 billion dollars. Kellogg’s morning food segment only made up 2.99 billion of those net sales. (Statista, 2015)

As previously stated, in October 2017, Kellogg welcomed a new CEO, Steve Cahillane, to their team. Just four days onto the job, Cahillane signed off on a $600 million deal for protein bars. Kellogg bought Chicago Bar Company LLC, a protein-bar company who makes the RXBAR. This bar is made from eggs, fruits, and nuts, and prominently displays the ingredients on the front. This decision stems from Kellogg’s want to pursue a more health-conscious strategy. (Lachapelle, 2017)

Current Marketing Strategies

Target Market

The target consumers for Kellogg are everybody who eats breakfast. Kellogg target children. This group of consumers should be able to identify Kellogg of cereal boxes in the grocery stores. Kellogg designs attractive to children. The cover of the park is the tiger, or rooster then head attract children attention. When children get attention from the cover pack of Kellogg's cereals, their parent to buy Kellogg's. This is a visual message that children can easily understand. Therefore, for children, it is a convenient and easy way for children to find what they want as well as to buy them. People who don’t like to purchase an unhealthy product for the child likewise, an adult would not buy unhealthy foodstuff. The Kellogg provide various product adding more nutrition product. Such as Special K more nutrition for someone thinks cereals is unhealthy.

Positioning Strategy

Kellogg offered common variables such as quality, energy, taste, natural ingredients, and price, utilizes the popular variable of healthy and convenience breakfast for their customers. Kellogg's by using its extensive experience to develop and position the cereal, appears to have understood and delivered its consumer needs.

Market Analysis -Anna

Bibliography & Footnotes
Baines, P. & Page, K. (2013). Essentials of Marketing. Oxford: Oxford University Press.

Baker, M. & Hart, S. (2016). The Marketing Book. London: Routledge.

Kell, J. (n.d.). Decline in cereal sales bites into Kellogg's results. Retrieved November 09, 2017, from http://fortune.com/2014/10/30/kellogg-breakfast-sales-drop/

Kellogg Company- Company Profile,Information,Business Description,History, Background Information Kellogg Company. (n.d.). Retrieved November 09, 2017, from http://www.referenceforbusiness.com/history2/91/Kellogg-Company.html .

Kellogg Company. (2017, September 28). Steven A. Cahillane Named Kellogg Company CEO as John A. Bryant Retires. Retrieved November 01, 2017, from http://newsroom.kelloggcompany.com/2017-09-28-Steven-A-Cahillane-Named-Kellogg-Company-CEO-as-John-A-Bryant-Retires

Kellogg Company. (2016). Annual Report

http://investor.kelloggs.com/~/media/Files/K/Kellogg-IR/Annual%20Reports/kellogg-2016-ar-10-k.PDF

Kellogg. “Our Business.” – Kellogg Company, investor.kelloggs.com/our-business#overview.

Lachapelle, T. (2017, October 26). Kellogg, It's Grrr-oan! Retrieved November 09, 2017, from https://www.bloomberg.com/gadfly/articles/2017-10-26/kellogg-needs-brands-that-don-t-snap-crackle-flop

Peltz, J. F. (2016, October 10). Why Americans are eating less cold cereal for breakfast. Retrieved November 09, 2017, from http://www.latimes.com/business/la-fi-agenda-breakfast-cereals-20161010-snap-story.html .

Statista. Breakfast cereal market share of the Kellogg Company worldwide in 2010 and 2015. (2015, December). Retrieved November 01, 2017, from https://www.statista.com/statistics/507939/kellogg-company-global-breakfast-cereal-market-share/

Who we are. (n.d.). Retrieved November 09, 2017, from http://www.kelloggs.com/en_US/who-we-are/our-history.html

Appendix
Kellogg Company Comparisons 2014-2016

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Decline of 2014-2015 Fiscal Year

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