Summary

1. Introduction
2. History

3. Industry Analysis

4. Pestle Analysis

5. Mission

6. Challenges

7. SWOT

8. KFS

9. Kellogg’s International

10. Competitive Strategies

11. Product Life Cycle

12. Conclusion
 INTRODUCTION
 The society lifestyle has evolved with time.
 The traditional UK breakfast consisting of beacon and eggs
has slowly been replaced by a less time consuming meal.
 Alongside a growing issue for health.
 There was created the healthy rapid breakfast cereal as a
response the market demand.
 While the breakfast meal change, it has socially become more
than just breakfast.

 It is nowadays a all day meal or snack. Cereals are often

consumed after school at 3-4pm. The market needed cereal bar
as a quick on-the-go meal (i.e. workers in the office at 10am)
ABOUT THE COMPANY

Kellogg Company headquarters

Type Public (NYSE: K)
Industry Food processing
Founded 1906
Founder(s) Will Keith Kellogg
Headquarters Battle Creek, Michigan, U.S.
James Jenness (Chairman)
Key people David Mackay (President, CEO)
John Bryant (COO)
Cereals
Cookies
Crackers
Toaster pastries
Products
Cereal Bars
Fruit-flavored Snacks
Frozen Waffles
Veggie Foods
Revenue US$ 12.6 billion (2009)
Operating income US$ 2.0 billion (2009)
Net income US$ 1.2 billion (2009)
Total assets US$ 11.20 billion (2009)
Total equity US$ 2.27 billion (2009)
Employees approximately 31,000 (2009)
 HISTORY
February 19th 1906 - John Harvey Kellogg and Will Keith Kellogg also
known as W.K Kellogg founded the Battle Creek Toasted Corn Flake
Company in Battle Creek, Michigan.
1914 – The production of the Kellogg’s Corn Flakes expanded world wide.
1922 – The Battle Creek Toasted Corn Flake Company changed there name
to The Kellogg Company.
1938 – The company continued to expand and build plants in England and
Australia.
1951 – W.K. Kellogg died. The Kellogg Company continued to expand and
build plants in Latin America and Asia.
1964 – Kellogg’s Pop Tarts are introduced.
1976 – Acquisition of Mrs. Smith’s Pie Company
1999 – Acquisition of Worthington Foods.
2000 – Acquisition of Kashi
2001 – Kellogg acquires Keebler, its largest acquisition.
2006 – With almost 11 Billion, Kellogg’s is the world’s leading producer of
cereal and other convenience foods.
Mission
Key factors for success (KFS) Critical factors for success (CFS)

Health
Versatility Location
Convenience Availability
Brand Awareness
Marketing
Something for
everyone Research &
development/Innovation
Innovation
Affordable
Low barriers to entry
Value for money
Quality
 PESTLE
Political – The government has the food acts and there is also ACFM (Members
of the Association of Cereal Food Manufacturers) which deal specifically on
cereal issues
Economic – The success is due to high usage but still threaten by the traditional
breakfast. There are still opportunities to grow.
Socio-cultural – Initial target was school student but grew the to whole family
members. The eating habit has evolved.
Technological Factors – The major player are seeking to diversify more and the
production process is highly computerised.
International – The majors are on every market in every countries.
Legal - EU legislation regarding health, ingredients, labeling and storage. This
legislation includes the Food Labeling Regulations and there is ACFM also and
CEEREAL.
Environment – The players are proactive in CSR and do sponsor a lot of event
relating to diet.
ANSOFF MATRIX
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
Kellogg’s Marketing Strategy

and

Marketing Plans
 Organizational Strategies
 Leadership in product innovation
 Strengthening the company’s 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
Key Factor for Success(KFS)
Kellogg’s International
Product Life Cycle
 Product Life Cycle
The Introduction Stage:

 Market Size and Growth is small

 Research & development costs have been incurred in getting product to
the stage
 High Marketing costs
 Hardly to make good profits during this stage
 Products are carefully monitored to ensure the growth
 Product Life Cycle
Growth:

 Identified by rapid growth in sales and profits

 Huge market share
 Less costly for business to expand their market
 Enjoying the overall growth
 Product Life Cycle
Maturity:

 Competition of market share exist

 The most profits made during this stage in the whole entire market
 An organization is recommended in order to get a bigger market share

E.g : Kellogg’s expenditure research and development to product modification

and improvement
 Product Life Cycle
Declined:

 Market is declining
 Decreasing the amount of profits
 Market share is divided between competitors
 End the product if it is not profitable
 Brand Names
 Kellogg’s  Rice Krispies
 Keebler  Morningstar Farms
 Nutri-grain  Kashi
 Pop-Tarts  Murray
 Eggo  Austin
 Cheez-It  Famous Amos
 Special K
 Product Lines
 Cereal  Snacks
 Crackers  Frozen Foods
 Cookies  Water
 Economics
 Consumer Segment
 Products are manufactured in 17 countries and
are marketed in more than 180 countries.
 Top Revenue Regions (Dollars are in Millions):
 North America $6,807.8 67%
 Europe $2,013.6 20%
 Latin America $822.2 8%
 Asia Pacific $533.6 5%
 Total $10,177.2 100%
KELLOGG’S SWOT
ANALYSIS
 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
 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 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.
 Threats
General Mills, Post, and Quaker Oats are
using price competition and product
proliferation 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.
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 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.
 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.
 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
 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.
 Percent of Total Annual Spending
on Presweeter Cereal
(by Age Group)

75+ 8.2

65-74 8.8
Age Groups

55-64 10.3

45-54 22.3

35-44 29.4

25-34 16.3

Percentage
 Kellogg’s
Distribution Channels

Kellogg’s Kellogg’s Kellogg’s

Computer system
Wholesaler

Kroger, Target, distrib. cente

Retailer Retailers

Distrib. In stores
 Suppliers Bargaining Power
Low
No commodity control (Wheat)
Government regulation
Power over processed food
Farmers negotiate prices
 Buyers Bargaining Power
High
Grocery Stores
Historically low
Private label options
Codependent buyer relationship
 Pricing Power

The cost index and the gross margin

are closely correlated
Cost Price
Insulated industry
Strength with purchasing power
 Summary of Porter’s 5 Forces

Supplier Power: Medium

Buyer Power: High
Substitutes: High
Barriers to Entry: Medium-
High
Degree of Rivalry: Very High
 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
 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
FINANCIAL ANALYSIS
CLICK HERE
 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