Marketing Analysis: Kellogg Cornflakes

Marketing Analysis Kellogg lemonflakesKelloggs has persisted in the market as a strong brand in the FMCG industry. Its cereal flakes is a line of harvesting that has been accepted worldwide as one of the roughly convenient ready to eat meal for breakfast. Over the years wad in most countries has consumed more of Kelloggs products than any of its competitors.Annual report of the corporation shows in late 1980s the company had reached all time peak, gaining a staggering 40 percent in the US ready to eat market and thereby prompting a yearly sales of US $6 billion.In 1990s since the industry in the core markets of U.S and U.K started to face mean competition with rings of players entering, Kelloggs made a decision to migrate into the Indian market. The market potential was huge since it was a tribe of 950 megs, out of which 250 million were middle class and was a completely untapped market.In 1994 Kelloggs entered the Indian Market by investing US$ 65 million into launching it s flagship product Corn Flakes. However the Indian Consumers found it hard to merge the creation of Corn Flakes with their lifestyle. The most prevalent practice was boiled vegetables and so the concept of ready to eat failed in India.Even though the first year sales were encouraging, the sales started falling from the second year. It was becoming app arent that people mainly purchased it as a onetime novelty purchase.This study reflects the possible ways in which the brand brush aside be sustained as a successful one in the Indian market.Devising a Marketing plan apply the SOSTAC ModelSituational Analysis using SWOTStrength amply Global Market Share Kelloggs has 65% spheric market share fit to the audit of March 2010 conducted by KPMG, in the ready-to-eat cereal products and it is also the lead producer in this category.Strong Brand As a brand the worth of Kelloggs is 13 billion USD at the present time, and even in the decimal point of strong economic crisis it is regarded as one of the profitable brands in US and the European Countries. Some of the brands under Kelloggs are widely accepted. Nutri-gain, Pop-tarts, Kebbler and Ego are near to name a few of them.Large Product Line In terms of the depth and width of the product mix, Kelloggs has got a wide variety of package cereal flakes. It has also stated producing products in assorted categories opposite than cereal flakes much(prenominal) as choco flakes for children, and also categories much(prenominal) as vegan, certified halal meat, slump sodium content and gluten free flakes. Kelloggs also has a healthy food category.Continuous Research to reduce cost Kelloggs invests a substantial amount on Research and development in direct to reduce cost. They concord also set up their manufacturing plants in South East Asian countries in order to produce at the expense of cheaper labour and to reduce cost on logistics.WeaknessHigh Price A package of 475 grams of Kelloggs corn flakes cost cxxx INR wh ich is considered to be pretty high from the Indian perspective. Most housewives who are potential shoppers do opine that this pack uttermosts for a maximum of 3 usages. This is not regarded as economical from the Indian perspective.Unsuitable for Indian Lifestyle The general Indian practice was of using warm take out, which was very contradictory to the Ameri croup concept of using cold milk. Due to the usage of warm milk, the flakes became soggy.Declining Sales Asia represents only 2% of the Kelloggs worldwide sales. Since its inception in 1994, the countrywide sales have dropped by 25%.Bad relation with Supermarkets To be in tandem with its pricing Kelloggs should establish itself to sell more through the Supermarkets. However Kelloggs recently had to suffer a lot due to its bad relationship with Supermarkets. For instance Kelloggs products were moved from the shelves of Food Bazaar since it was giving the retailer a much lesser margin than Tasty transact which is its clannis h label.OpportunityGlobalisation Due to the effect of globalisation, Indians are now more exposed to the International Cultures. The youth in India now tries to imitate a lot of the lifestyles prevalent in U.K and U.S.A.Increasing level of Disposable Income Being a growing economy, the income level is rising, hence if Kelloggs can switch over from creation a premium pricing brand to a slightly competitive pricing brand, it would be able to extract the money from Indians.Advent of Television denote Due to a continuous improvement in the quality of television advertising, advertisement campaigns are creating awareness and interest towards a brand at a faster. A brand like Kelloggs Choco can be very popular in this way.ThreatsPrivate Label Brands With supermarkets such as Food Bazaar, Spencer, More, etc gaining more margins on private label brands, it is becoming difficult for Kelloggs to maintain its shelf space in super markets.Local Competitors Some local and regional competitors such as Crunchy Oats are becoming stronger players due to their low pricing strategies.The Environmental Analysis Using Porters 5 ForcesCUsersstephenDesktopimages.jpgDegree of Rivalry (High)Face a stiff competition in Indian market from Local and Regional players such as Crunchy Oats and private label brands such as Tasty Treat. Even global players such as Nestle are giving them tough competition in products within the kids segment.An oligopolistic competition structure exists within the industry.Switching cost is negligible, and most consumers regard switching to be profitable since they get better quality product at a lesser price.Growth is stagnant for the last tail fin years whereas the Industry is expanding.Bargaining Power of Buyers (High)Supermarkets are continuously forcing to reduce price of products to obtain high margins, hence consumers are more inclined towards private label brands.Switching cost is again negligible.In certain semi urban and developing areas of the c ountry, people still find it difficult to associate with the concept of consuming cereal flakes in cold milk.Bargaining Power of Suppliers (Low)The company has a central manufacturing unit in the country and about 20 other units across the world. Raw materials are sourced from the local market. Hence the supplier bargaining power is low.Threat of Substitutes (High)Other ready to eat and packaged food products are more popular among Indian consumers such as Maggie Noodles. Maggie noodles are more preferred since they are served hot.There is no switching cost involved.Threat of current Entrants (High)It is difficult for competitors to develop new products in this category since they would require investment and time to develop.Distribution is a major concern. High slotting promotional fees, limited shelf space, and the need to create retail demand are additions to the manufacturing cost.Capital costs are very high since setting up production facilities and distribution reach takes into account a high upfront investment.Objective Setting at different strategic levelsCorporate Strategy To change magnitude profitability by 23% worldwide by 2011Business level Strategy To gain 50% market share countrywide in India by 2011.Marketing Strategy To mystify the breakfast meal of 70% of the urban Indian Household by 2011.Developing StrategiesCreating a Growth Strategy using the Ansoffs MatrixCDocuments and SettingssoumyadeepMy DocumentsMy Picturesuntitled.bmpKelloggs operates in a country wherein it is an existing brand for the last five years. All products in the product line are known to consumers and a market for such products has also developed. Hence the strategy that Kelloggs should undertake in order to increase its sales is Market Penetration.Kelloggs being an established brand would not have a problem in penetrating the market and increasing its share. The risk factor would also be considerably low.In order to penetrate Kelloggs has to look at twain thingsCre ating a different position for the brand through a better communication and in turn developing a new improve value proposition.Kelloggs must make utilization of cost reduction in order to gain price leadership in the market. Once the product appeals to consumers they allow purchase it readily due to the low price. If the company can sell a higher volume at a lesser margin, then they can combat competition successfully.Creating a competitive strategy using Porters Generic StrategiesKelloggs being an FMCG product has to have an Industry wide strategic scope. However according to the research Kelloggs should practice a combination of Differentiation and Overall Cost leadership.Kelloggs as a brand has a large portfolio of products and each product have its own uniqueness. Hence they should continue to leverage on the differentiation aspect. However a major challenge that Kelloggs faces is its premium pricing, on gaining a cost leadership, it can implement a competitive pricing. This w ill make the brand more disembowelive.Tactics employed in order to achieve strategic objectivesProduct rent Size Since most of the products within the product mix are widely accepted across the globe, Kelloggs should not change the range of cereal flakes that it has. However in order to increase the frequency of purchase, Kelloggs can reduce the minimum pack size from 475g to 250 g so that it becomes more popular amongst young individuals who live a fast life and stay single. For such group of target customers the basket size of purchase is much small. Hence smaller size packs will attract them to a greater extent. Apart from this value packs must be issued initially to pick up sales. These are packs of 500 g at the price of 475g packs. advancement Most of Kelloggs packs do not have the nutritive benefits engraved on them (except for Special K). They only contain a small label showing the nutritional ingredients. Over the recent years the urban Indian population has become more die t conscious. Hence it would be advantageous to engrave the nutritive benefits on them.http//economictimes.indiatimes.com/photo.cms?msid=3190216Present packaging new packagingPriceKelloggs flakes are priced higher than competitors. Prices of three most manufactured Indian Brands are higher than most competitors. 475g of Kelloggs Corn Flakes costs Rs 130, whereas its closest competitor delivers 500g at Rs 109. Kelloggs thus should reduce the price. In the recent company audit report from KPMG it has been found that the most highly purchased product, the Kelloggs choco is priced at Rs 125 for a 375g pack, thus making it difficult for a middle class Indian household to avail it. Kelloggs should promote more of this product by reducing the price.Also in order to obtain better penetration in the market Kelloggs should try and sell more through Supermarkets rather than box seat grocery shops. Hence Kelloggs should supply more volume at lesser margin to supermarkets and hypermarkets.PlaceI nternet One of the medium through which urban customers are purchasing more of their FMCG products is the internet. The advent of online retailing, Kelloggs must try and sell more through online medium. Especially for institutional sales such as to hospitals and school or college hostels, where purchases are made in bulk, Kelloggs should encourage online sale of products. This will help them in reducing the time to deliver their products faster and help them to sell higher units.Also, the negotiation terms with supermarkets, hypermarkets and convenient stores should be laid in a way such that Kelloggs cereal flakes occupies maximum shelf space in its grumpy product category. The main objective should be to gain maximum shelf space rather than trying to earn more margins per unit.PromotionThe most meaning(a) element in the marketing mix of Kelloggs is the promotions.When Kelloggs entered India about fifteen years ago, they lacked research of the behaviour of the Indian consumers. T hey took no notice of the fact that Indians disliked the concept of consuming cold milk, and the flakes became soggy in warm milk. Hence in order to promote the practice of the consuming normal or cold milk Kelloggs should use the television advertising media effectively. This would create a separate value proposition for the brand.For example time can be used as a parameter to create urgency for the brand. A television advertisement showing this concept will create response among customers.Idea- Showing a household wherein each member is rushing for his or her work or school. In such a short time boiling milk and consuming flakes is a protracted process. Hence normal milk is used and it even tastes nice.The new mission statement of the brand could be Kelloggs Your Fast BreakFastThe other forms of communication impart should be advertising hoardings, posters in super markets and magazines such as Graphiti.In order to promote kids products such as Kelloggs Choco the company can org anize matter promotions through various retailers and also through sponsorship of kids activities and competitions at schools.Sales promotion would also be done throughout the year through the distribution of freebies. Freebies such as a bowl can be given with a pack of 475g of Kelloggs Corn Flakes. This would be of utility in the consumption process and would in-turn increase sales.ProcessDistribution is the pivotal processes that should be taken care of in achieving the objectivesAfter the manufacturing process, the distribution chain should be controlled from different snappers. There should be quadruple regional distribution centers (RDC) at the four different zones- Delhi (North), Calcutta (East), Mumbai (West) and Bangalore (South). Each distribution center should supply in its particular zone and each distribution center should use the hub and spoke model. All four distribution centers should be interconnected to each other.The distribution model is as followsActions follo wed to achieve the tacticsThe head contribution of Kelloggs is situated in Mumbai. All plan of action should be coordinated from the Mumbai head office and the decisions should effectively pass on across the distribution centers up to the store level where the product gets handed over to the end consumer.Usage of 2009 Financial Statements (Historical method) The budget is planned based upon an analysis of the income statement of 2009. In the financial year 2009 as per the annual reports of the company the net income $1,212 million. The net cash flow in the last quarter has been $1230 million and also as per the last quarter the liquid cash reserves of the company is $527 millions. Hence Kelloggs Corporation can invest a high amount in the development of the Indian market in order to bring it to a growth.The total budget allocated towards marketing activities of the Indian market is. The allocated amount is divided into five discrete divisions to take to the woods out activities. These divisions are packaging, sponsorship, advertisement, sales promotion, event promotion and value packs.To map the budget according to the activities of the organisation a GNATT action chart is used.Activity clippingStaffAmountJan Feb Mar Apr May Jun Jul Aug Sep Oct Nov DecPackaging1Sponsorship2Advertisement3Sales Promotion4 import Promotion5Value Packs6Gaining Control over the planControl can be gained over the process by using two different approachesPeriodic control A periodic control can be exercised over the plan by performing Marketing Audits from time to time. The company must not rely only on external auditors such as KPMG, they should also gain control through internal audits performed by auditors within the company. Through marketing audits performance gaps should be identified. The extent to which the results vary from the desired targets should be noted and corrective measures should be taken accordingly.Continuous Control A continuous control should be introduced by maintenance of a Balanced Scorecard customized specifically for stakeholders perspective of Kelloggs.