Magazine article Marketing

Can Kellogg Regain Its Snap, Crackle and Pop?

Magazine article Marketing

Can Kellogg Regain Its Snap, Crackle and Pop?

Article excerpt

Kellogg is facing falling sales in a shrinking cereals market. Jane Bainbridge looks at how it plans to breathe new life into its sector

"Corn is the Indian's gift to the New World and the corn flake is my gift to the entire world."

So declares Anthony Hopkins in The Road to Wellville, in which he plays Dr John Harvey Kellogg. The corn flake may have been his gift but it was his brother's marketing skill that led to the cereal empire of today.

But Kellogg - so long the undisputed champion of breakfast cereal - is having to face up to reduced profits and a shrinking market.

The cereals category won the dubious prize of being the sector in greatest decline in our annual Biggest Brands survey (Marketing, August 19).The category was down 3.8% - its third consecutive drop. While Kellogg still dominates the sector with six of the top ten products, all but Special K's value of sales fell.

On one side, Kellogg has to fight against own-label products, and on the other, brand owners, such as Cereal Partners and Weetabix, introduce more competitive strategies to stem the flow and protect their share.

Kellogg also has a more worrying prospect: the changing lifestyles of consumers. In a time-pressured society, consumers are less likely to fill up on a bowl of cereal, they are either eating their toast and Marmite in the car, stopping off at Starbucks for a large latte and croissant as they head to the office, or are simply ignoring their tummy rumbles until lunchtime.

Convenience food

"People have less time in the morning and lead busier lives. They want a simple, convenient breakfast. More people are eating breakfast in the office, therefore it's about a long-term consumer trend," says Guy Longworth, marketing manager and media controller at Kellogg.

"There has been some own-label growth in the past two to three years and some very aggressive moves made by the supermarkets," he adds.

Industry observers are split as to why cereals should be suffering so badly at the hands of own-label now. While some think the problem has been that the price premium is higher in the cereal market, others say that it is a reflection of how well cereals have stood up to own-label for so long.

There can be no doubting Kellogg's determination to rejuvenate the category. But observers blame its complacency for not doing enough new product development earlier.

Chris Davies, managing director of Relationship Marketing International, says: "Brands can fight back [against own-label] if they innovate. Many packaged goods companies, which are faced with own-label competition, haven't spent time or money on product innovation. Corn flakes have been corn flakes for 60-odd years. The diversity of Kellogg is recent although it is good."

Kellogg's NPD in the past couple of years has been relatively successful. Its Nutri-Grain bars, launched in 1997, have seen total sales for the year to April 1999 exceed [pounds]20m with a growth of about 20%, according to figures from ACNielsen.

Nutri-Grain falls into a category that Kellogg has dubbed its convenience food range. This is seen as a core area in its strategy.

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"In the past three years, we've been aggressively going for convenience food options and that has grown the market if you add them to the cereal business," says Longworth.

Nutri-Grain was the perfect product development area for Kellogg. It addresses the problem of people with time pressures but plays on the brand heritage. Kellogg has extended the product with Nutri-Grain twists launched last month.

In keeping with the Nutri-Grain innovation last month, Kellogg also introduced its cereal and milk bars aimed at four- to 12-year-olds, which are a combination of cereals such as Frosties and Coco Pops with powdered skimmed milk. The cereal and milk bars are going to be supported on TV from October to December. …

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