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United Cereal:

Lora Brills Eurobrand Challenge


About the Company
Established in 1910 in Kalamazoo, Michigan by Jed Thomas
First Product: packaged mix of cracked wheat, rolled oats, and malt flakes
Diversified into snack foods, dairy products, drinks and beverages, frozen foods
and baked goods
2010 revenues: $9 billion one-third contributed by breakfast cereals

Corporate Values Policies and Practices


Managers promoted from within
Commitment Strong commitment to The UC way
Diligence Listen to the customer pioneer in the
Loyalty use of consumer research and focus groups
Spot the trend, make the market-
extensive market testing prior to product
launch
Innovation and Brand Management
Breakfast Cereal Market Scenario
Breakfast cereal was one of the great food commercialization successes of the
20th century
Worldwide revenues: $21 billion in 2009
US Sales ($12 billion)
Hot
Cereals

20%
Top 5
Ready-to-Eat players

(accounted for 90% of Remaining


sales in both the US and 80% 25
Europe)
Highly competitive industry
10% of revenues spent on advertising and marketing
New-product introductions typically occurred every year
Brand extensions were less risky and less expensive compared to
developing a new brand
Growth from expansion to offshore markets
UCs European Operations
UC entered European Market by acquiring and expanded by introducing products
European Industry
Competitive Structure
$7 Billion breakfast cereal market
26% market share
Varies with countries tastes and Kellogg High volume low cost model
breakfast traditions
20% market share
Channels also vary country-wise United Cereal Europe accounts for 20% of UCs sales

17% market share


Cereal Partners JV between General Mills and Nestle
UCs Europe Strategy and
Organization Weetabix
7% market share
Strong branding and promotions
Follows national subsidiary model led
by Country Manager(CM)
CM works as entrepreneurs to maximize the subsidiarys local profit
Each subsidiaries built as mini UCs- exact replica of parent organization
CMs were expected to respect the UC way
Differences in product profiles and market strategies became a problem
Same product positioned differently across different markets
UCs European Operations
Increasing price and profit pressure

Total sales : stable Areas of concern


Market growth : less than 1% Focus on local products and market
annually Market & product development teams
Product mix: lower price outside US had 25% more operating
offerings expenses
Price and promotion Slow new product introduction
pressure: Kellogg and cereal Favor product extension
partners.
UCs European Operations
United Cereal Response
Arne Olsen, UCs European VP invigorate product portfolio and reverse decline in
profitability
Year 2002 Year 2006
1. Re-organised R&D 1. Olsen transferred to Kalamazoo
2. Created European Technical Team (ETT) 2. Lora Brill took over as VP
2.1 link scientists to subsidiary based
technologists
2.2 gain overall product development Aftermath of 2008-09 recession
direction 1. Growing pressure on margins
Year 2004 2. Leverage the marketing resources to
Expanded ETT to European Initiative control budgets
1. Aimed at product market strategies 3. focus on coordinated European
2. Disastrous European Juice Nazi approach for product development
incident 4. Eurobrand' concept test- Healthy
2.1 Standardize product across Berry Crunch
countries
2.2 Challenged local autonomy
The Healthy Berry Crunch Project
The French Opportunity:
Market for organic fruit based cereal in France

Blueberry Organic blueberry based cereal as a product extension of Healthy Crunch

product Blueberries - antioxidant qualities


Implemented a full scale test market in Lyon - mixed results
Intention to repurchase - below UC target of 60%

Raspberry Too expensive to manufacture


Product

Sweeter Taste tested in 6 French cities


Blueberry 64% intention to repurchase
version
Ready to launch
The European Debate
PodCafe Debacle
Before Launch
Podcafe was launched in Germany in
Brill started testing Healthy Berry
2003 for home espresso machines
crunch European wide
French subsidiary launched this
version in 2006
Finance team had estimated that
But in 2006 the market was crowded
coordinated European market strategy
by similar product which took their
would reduce the staff and bring in
market share to third place
more saving

Estimated around 10 to 15% of over the


three years The Launch
Cost would was estimated around
Appropriate time to consider products $20 million in France- 10 times the
for the local market approval level
Problems to get the shelf space for
As the consumer taste is converging, specialty cereal
cultural habits are disappearing The Spanish subsidiary is still under
recession
EU regulations on labeling, advertising Reluctance for this launch as it
and general marketing practices are without proper product, consumer
eroding marketing differences and market research
The proposed UC European Org
Lora Brill,
European VP

Director of European Sales


Director, Manufacturing Director of Admin Engineering
Marketing Manager. Logistics
R&D Director and Finance Manager
Services and Purchase

James Milner
Division VP UK
and
Scandinavian;
Frozen Foods

Jorge Sanchez
Division VP
Southern Europe
Beverages, Juices
and Dairy

Kurt Jaegar
Division VP
Northern Europe;
Cereals, Snacks
and Baked Goods
The Eurobrand team
Apart from their current role of supervising
subsidiary by region, they were offered an
advisory role.
They were tasked with cross-market
coordination and communication of certain
products

Brand managers from every country


subsidiary
Delegates from each functional group such as
logistics, engineering, R&D and so on
One appropriate Vice President who is in
charge of specific regional divisions
Chaired by brand manager of an assigned
lead country
How effective will the Eurobrand team be?
No dilution of CM role; VPs role only as an advisor

Since the team consists of resources from R&D, purchasing & logistics,
increased cost pressures can now be addressed for Europe as whole and not
country specific

Generic strategy allowed CM to make his own market decision and was
responsible for P&L and therefore, current structure lacked consistency

Original strategy was differentiation, but current strategy made them cost
focus as SG&A cost was 25% higher than counterparts in US

How can the team be more efficient?


Structure should allow efficient horizontal and vertical communication lines
Hierarchy of UC will become more complex, which will result in a longer
information chain; hence hierarchical structure is clear and efficient and that
every
Employee feel they are evolved in the decision-making process.
The Dilemma Launch Healthy Berry Crunch?
Industry moving towards Competition
healthy food
Kelloggs special K with strawberries is
Panel results in Germany suggests
the only competitive product in the
trend is to move to more healthy food French market
EU has loosened its regulations of Rumours about launch of Berry Burst
labelling, marketing practicing, which
Cheerios
also indicate an opportunity to UC PodCafe debacle

Strategic Advantage to UC

Savings of 10-15% in the overall costs of all Europe, the launch of Healthy Berries Crunch
seems to meet the companys long-term strategy of streamlining the operations and
product matrix of Europe
Spot the market, make the market - the innovation in the products had been at
the core of UCs history and the launch of Healthy Berry Crunch will be in line with this
core value

Hence, Lora should authorize the launch of Healthy


Berry Crunch in France as UCs first Eurobrand product
SWOT analysis of UC in Europe
STRENGTHS WEAKNESSES

Global competitor in a multi-billion Lack of agreement on a managerial level


dollar industry Everyone has a differing opinion on
Built on three core values - The UC which direction the company should be
Way, Listen to the customer and moving
Spot the trend, make the market In
Willingness to put people with fresh
ideas in leadership positions
OPPORTUNITIES THREATS

Tastes and habits of breakfast Kellogg, the toughest competitor, has


converging already introduced Special K
Natural and less sugar in cereal The competition is growing dramatically
products has become a key trend in the in European market
cereal industry The market growth of cereal industry
EU has loosen its regulation of has slowed to less than 1% annually
labelling, advertising, and general Trend of customers preference to
marketing practices lower-priced products after the global
recession
Porters Five Forces of UCs in Europe
Low
Threat of
new
High entrants

Bargaining
Threat of
substitute
power High
products of customers

Porters Five
Forces for UC
in Europe

High
Competition
Bargaining
High in the
Industry
of Supplier
The Healthy Berry Crunch Project
The European Debate: Monil

The Organizational Challenge: Shirazi


Decision/case Summary and problem: Shirazi
Exhibits
Shirazi, Monil, Kirti, Ashish, Nidhi