SRI BALAJI SOCIETY

BALAJI INSTITUTE OF INTERNATIONAL BUSINESS

CASE STUDY ON

‘Challenges and opportunities faced by Kellogg’s in breakfast segment in India’

SUBMITTED IN

Partial Fulfilment of the PGDM (Marketing)

Curriculum For Academic Year 2018-2020

By
Yash Jain

IB1816159
 DECLARATION
I, YASH JAIN student of PGDM (Marketing) program at Balaji Institute of Balaji Institute of

International Business (BIIB) Pune, hereby declare to the best of my knowledge and belief that

the case study report entitled ‘Challenges and opportunities faced by Kellogg’s in breakfast

segment in India’ being submitted to the partial fulfilment of post graduate diploma in

management (PGDM) is my original work.The work does not for ma part of any other work

submitted to any other institution or university.

 TABLE OF CONTENTS

Chapterno. Topic Pageno.

1 Executive summary 4
2 Keywords 5
3 Introduction 6
4 Main content 8
5 Analysis 10
6 Status/Learning Objectives 15
7 Case solution 16
8 Annexures 17
9 Reference 18
 Executive Summary
The Indian ready to eat industry has grown over the recent years allowing many
entrepreneurs to take interest in this business. This has resulted into many start-ups and
businesses taking into the global ready-to-eat industry.

This case study gives an insights about the journey of Kellogg’s a cereal making company,
mainly focusing on the success factor over the recent years. It also highlights the inputs
strategies used in the marketing field, product development process, marketing mix and
product placement its funding and its revenue model strategies to result into the number
one cereal making company of india

With the help of and it gives an insight on

The industry overview helps us to get an idea of Kellogg’s position as compared to its
rivalries. It gives answers to questions as how it become such a success story in such a less
time with huge competition. This case study also gives an additional insights on how the
company can moreover expand and become one the worlds leading brand in the breakfast
segment.

Finally it is concluded with its overall journey, its success factors, its additional need to do
things and its achievement. This case study also has some time and data constraint.
Keywords
Cereals
Breakfast segment
Ready-to-eat
cornflakes
Introduction
Kellogg Company (also known as Kellogg’s) is a multinational food manufacturing
company headquartered in Battle Creek, Michigan. Kellogg’s produces cereal and
convenience foods, including cookies, breakfast cereals, frozen waffles,
cornflakes, chocos for kids and vegetarian foods. The company’s brands include
Froot Loops, Corn Flakes, Rice Krispies, Special K, Pringles, Pop-Tarts, Nutri-
Grain, and Morningstar Farms.

Kellogg’s products are manufactured in 18 countries and marketed in over 180

countries currently. In 2012, By acquiring the Pringles potato crisps brand from
Procter & Gamble Kellogg became the world’s second-largest snack food
company (after PepsiCo)

After talking about all the cycles, the most important amongst them is the nature’s
cycle “With good times there always comes the anticipation of the bad times” And
perhaps this cycle goes on and on.

It has been said ‘Old habits die hard’ when it comes to Indian eating habits. When
kellogg’s the wholly owned subsidiary of the US$ 7- billion Kellogg company
entered Indian market in 1994. They had a game plan to position themselves on
the heath sector, highlighting the nutritional values of brand.
MAIN CONTENT

Cereals always hold a good share in the Indian breakfast platter. For instance:
flattened rice flakes i.e (chivda/poha) with milk popular in western and central India
and mainly whole wheat grits (dalia) in northern parts of India. Apart from this the
regional food which is usually preferred i.e pranthas in the north and idli in the
south. For the most part Indians incline towards consuming their breakfast as hot
cooked (naashta). And find it difficult to give in such breakfast options as cereals
with milk. However, lifestyles of people are changing at a fast pase than before
with increasing spending power and time-poverty. People are becoming health
conscious. These factors helped kellogg’s to encourage Indians especially in
urban areas to consume breakfast cereals. The influence of western lifestyle and
changed eating trends has played an effective role in opening the gateway for
kellogg’s to enter into Indian market.

Now, breakfast cereals is a growing market in india which has touched USD
13.547 million in 2018 as shown below and with th promise of double-digit growth
over the next five years. Amongst cereals muesli have been the fastest growing
product categories in the recent past. Apart from this oats have gained higher
popularity.

While there is no doubt about the potential of the breakfast cereal market in India, it is not
going to be easy, with challenges abounding. The biggest challenge is competition, as
there are more than 50 regional players in the segment apart from major players like
Kellogg’s, PepsiCo’s Quaker Oats, Bagrry’s, etc. The confidence of existing players in
terms of enhancing their reach, as well as of new entrants like Marico, Heinz, etc. will add
to the competition. Competition can also be expected from other FMCG chains which are
not currently focusing on packaged breakfast as their core product offering e.g. Ready-to-
Eat players like Britannia with its range of ready-to-cook upmas, porridge, and pohas
under the Healthy Start brand. This provides consumers with varied, healthy options that
both suit the Indian palate and can be termed traditional as well. Additionally, brands like
McDonald’s are eyeing the breakfast market in India with their range of breakfast menus
which cater to travelling professionals.
Marketing Mix
Product- This element relates to how company offers meet the changing needs and wants
of the customers. The growth is healthier lifestyles creats opportunities for Kellogg’s to
increase the number of products for this segment.

Price- The amount a company charges for its product is important in determining sales.
Super brands like kellogg’s can charge a premium price of the strength of the brand and the
quality of the products.

Place- Where customers can purchase the products is also an important factor in
determining sales. If a brand like Special K is not stocked in the supermarkets where most
purchases are made, sales will be lost.

Promotion- Communicating the availability of a product is essential.

Kellogg’s uses various promotional media.
Company offered specially 50 gm packs free to shoppers at select retail stores in delhi

This is followed by a house-to-house sampling exercise offering one serving sachets to

housewives in the city.

They are industry leader in the level of advertising investment with over $1 billion(6,000
cr.) globally.
Kellogg’S & The Indian Market
After riding on the success and commanding the 40% of the US ready-to-eat
market from its cereal products with a yearly sales of $6 billion and 20 plants in
18 countries Kellogg’s understood that the market in US and Europe was stagnant
and it wanted to venture into new markets. The market was getting competitive
and it was getting tougher for the company to maintain its market share. Its rivals,
General Mills was adding onto the pressure with its Cheerios brand. In search of
new cereal eating markets Kellogg’s zeroed in on India, a country with 950
million plus population {in 1990’s) of which 250 million plus consisted of the
middle class. This was a completely untapped market with and it presented Kellogg’s
with an opportunity of which was too good to be left. Kellogg’s invested to the tune of
$65 million to launch its number one brand corn flakes, three years after the Indian
government opened its doors for foreign investors. They planned to replicate their
success story of US and Europe in the Indian sub continent. The market potential for
Kellogg’s in the Indian subcontinent was so lucrative that even if the company managed
to capture a mere 2% of market potential, it would still provide access to a customer base
bigger than United States.
The market size came with its set of challenges. The Indian sub continent wasn’t use to
having cereal for breakfast. The typical breakfast of an average Indian consisted of sabzi
{boiled vegetables with spices) and roti or paratha’s{wheat bread). This meant that there
were very few competitors for Kellogg’s in the market but at the same time they had an
additional task of promoting its product and more importantly the idea of eating cereal
for breakfast.
As most of the other new products, the sale of Kellogg’s shot up giving it encouraging
sales figures. However it was soon analyzed that the purchase of cornflake was one off,
novelty purchase and even though they liked the taste the product was expensive.
Without conducting further market research Kellogg’s continued to launch a range of
new products over the following years and the Indian buyers were introduced to
Kellogg’s Wheat Flakes, Frosties, Rice Flakes, Honey Crunch, All Bran, Special K and
Chocos Chocolate Puffs - none of which were able to replicate the success of the west. In
an attempt to boost its sales the brand tried to ‘Indianize’ its products, which was a
massive failure. The company adopted a new strategy to establish its brand equity in the
market by selling biscuits.
The company has been looking at alternate product categories to counter poor off take for its
breakfast cereal brands in the Indian market. Meanwhile, the Kellogg main stay - breakfast
cereals - has seen marketing activity from the company’s end. The idea behind the effort is to
establish the Kellogg brand equity in the market.

The company is concentrating on establishing its brand name in the market. The focus is
entirely on being present and visible on the retail shelves with a wide rang of products says
Mumbai dealer.
As per the trade, Kellogg India has disclosed to take dealers its intention of launching
more than one new product onto the market every month for the next six months.

Although Kellogg’s tried to be more sensitive to the customer requirements by bringing about
indirect alterations in its taste, however the high price remained in the Indian market. The
prime factor which will restrict the growth of Kellogg’s in India is its price. The report also
suggests that while Kellogg’s has ushered a change in the breakfast habit of Indians and
adapted its line of products to meet the Indian palate, the price of the product restricts
consumption to urban centers and rich households.
The Mistakes
The first and foremost issue, which Kellogg’s faced, was the fact that the cereal had to be
consumed with cold milk. However in the Indian household there was a habit of serving
hot milk for breakfast. Cornflakes when served with hot milk became soggy and spoiled
the taste of the cornflakes. When the cornflakes were tried with cold milk it wasn’t sweet
because sugar didn’t dissolve with cold milk. The rice and wheat versions didn’t do well
in the market as well. In defense of the company the Managing Director, Avronsart said,
“True, some people will not like the way it tastes in hot milk and not all consumers will
like to have it in cold milk. We expect the consumer habits to change over time.
Kellogg’s is a past master of art, having fought and won against croissant and coffee in
France, biscuits in Italy and noodles in Korea.”

A typical Indian middle class family didn’t have breakfast daily like their western
counterparts. Indians usually preferred
biscuit, bread, butter, jam or depending on
geography the staple food of the region.
A major reason for the failure of
Kellogg’s, according to analysts, was the
fact that the taste of Kellogg’s products
didn’t suit the Indian consumers breakfast
habits. The company was quick to clarify
that it wasn’t trying to change the eating
habits, but it was only launching its
products on a health platform and make
consumers see an healthier alternative for
their breakfast. Avronsart remarked,
“Kellogg
India is not here to change the breakfast
eating habits. What the company proposes
is to offer consumers around the world a
healthy, nutritious
convenient and easy to prepare alternative in the breakfast eating habit. It was not just a
question of providing a better alternative to traditional breakfast eating habits but also
developing a habit of eating grain based food in the morning.”
Another mistake that Kellogg’s committed was the positioning of its products. The
advertisements concentrated on the health aspects and hence it was branded as a health product
rather than its ‘fun and taste’ positioning adopted in the US markets. In the US markets it
provided toys and other branded merchandise and also had a Kellogg’s fan club that attracted
children. In addition to this the premium pricing adopted by Kellogg’s contributed to its failure.
In third world countries pricing plays a dominant role in the demand of its product. At an
average cost of Rs 21 for 100 gm. as compared to its competitor Mohan Cornflakes which was
priced at Rs16.50 for 100 gm. Kellogg’s was looked upon as a premium brand by the average
Indian consumer and virtually unattainable. The average Indian customer failed to see the extra
benefits attained by consuming Kellogg’s products. The company believed that quality came at
a price and that the user is ready to pay the price.
Last but not the least Kellogg’s decided to focus its distribution only on the premium and
middle level retail stores. The company believed that it couldn’t maintain a uniform quality of
service if it offered products in larger shops. In the process the company overlooked the fact
that this decision put a large sections of the population out of its reach.
Analysis
STP
Segmentation-
Kellogg’s market is divided into six segments.

As shown under

Tasty start- The cereals that most people will eat to begin their day.
Kellogg’s brand includes: kellogg’s cornflakes, Kellogg’s crunchy nuts

Simply wholesome- these are ‘good for you’ brands, such as Kellogg’s Fruit n Fiber.
Shape management- a brand which can help people to maintain their shape and weight.

Mother approved- those that mothers see as been goodfor their children, such as Kellogg’s
wheat flakes

Kid preferred- The brand that children themselves prefer, such as Kelloggs frosties, kelloggs
chocos and honey loop.

Inner health- these are the brands that health people with doigestion such as Kelloggs All-
bran and kellogg’s heart to heart oats.

Targeting-
To caters the mass market but they only caters to the A-class towns or the more affluent
customers. Disappointed with the poor performance, kellogg’s decided to launch two of its
highly successful brands- Chocos and frosties for kids. This resulted in the launch of the mzza
series – a cruchny , almond shaped corn breakfast cereal in three local flavours- mango elaichi,
coconut kesar and rose.

POSITIONING

The company’s advertisements and promotions initially focused only on the health aspects of the
product.

In doing this, kellogs’s had to moved away from its successful ‘fun and taste’ positioning
adopted in the US.
Ansoff’s Matrix
Kellogg’s decided to try to extend the life of the products rather than withdraw it from the
market. This meant developing an extention strategy for the product.

Ansoff’s matrix is a tool that helps to analyse which strategy is appropriate.

It shows both market oriented and product oriented possibilities.

Market development-
Finding or creating new markets by targeting new parts of the market or by expansion into
different markets.

Market development comes with medium costs and risks.

Under market development Kellogg’s introduced new products like: Kellogg’s Ricicles,
Kellogg’s honey loop.

Product Diversification
Seeking to create or develop new products, lines or product ranges, such as when Nutri-Grain
was first launched.

Product diversification comes with high risks.

Market penetration
Trying to take a greater share of an existing market with an existing product. This could involve
a product re-launch or increased brand awareness.

Kellogg’s done its market penetration by introducing new products like:

Rice Crispies, Frosted flakes, new Nutri- grain

Market penetration comes with a low risk factor.

Product Development
Using the base of existing producxts to grow others.

For example once a range has been established, new tyoe of products can be launched within that
range.

Such as introducing- Elevenses, Minis and Twists to the Nutri-Grain range.

Product development comes with a medium range.

 What are Porter Five (5) Forces
In his revolutionary article - "Five Forces that Shape Strategy", Michael Porter observed five
forces that have significant impact on a firm's profitability in its industry. These five forces
analysis today in business world is also known as -Porter Five Forces Analysis. The Porter Five
(5) Forces are -

 Threat of New Entrants

 Bargaining Power of Suppliers
 Bargaining Power of Buyers
 Threat from Substitute Products
 Rivalry among the existing players.

Porter Five Forces is a holistic strategy framework that took strategic decision away from just
analyzing the present competition. Porter Five Forces focuses on - how Kellogg Company can
build a sustainable competitive advantage in Processed & Packaged Goods industry. Managers at
Kellogg Company can not only use Porter Five Forces to develop a strategic position with in
Processed & Packaged Goods industry but also can explore profitable opportunities in whole
Consumer Goods sector.

Kellogg Company Porter Five (5) Forces Analysis for Consumer Goods
 Industry

Threats of New Entrants

New entrants in Processed & Packaged Goods brings innovation, new ways of doing things and
put pressure on Kellogg Company through lower pricing strategy, reducing  costs, and providing
new value propositions to the customers. Kellogg Company has to manage all these challenges
and build effective barriers to safeguard its competitive edge.

How Kellogg Company can tackle the Threats of New Entrants

 By innovating new products and services. New products not only brings new customers to the
fold but also give old customer a reason to buy Kellogg Company ‘s products.
 By building economies of scale so that it can lower the fixed cost per unit. 
 Building capacities and spending money on research and development. New entrants are less
likely to enter a dynamic industry where the established players such as Kellogg Company keep
defining the standards regularly. It significantly reduces the window of extraordinary profits for
the new firms thus discourage new players in the industry.

Bargaining Power of Suppliers

All most all the companies in the Processed & Packaged Goods industry buy their raw material
from numerous suppliers. Suppliers in dominant position can decrease the margins Kellogg
Company can earn in the market. Powerful suppliers in Consumer Goods sector use their
negotiating power to extract higher prices from the firms in Processed & Packaged Goods field.
The overall impact of higher supplier bargaining power is that it lowers the overall profitability
of Processed & Packaged Goods.

How Kellogg Company can tackle Bargaining Power of the Suppliers

 By building efficient supply chain with multiple suppliers.
 By experimenting with product designs using different materials so that if the prices go up of one
raw material then company can shift to another.
 Developing dedicated suppliers whose business depends upon the firm. One of the lessons
Kellogg Company can learn from Wal-Mart and Nike is how these companies developed third
party manufacturers whose business solely depends on them thus creating a scenario where these
third party manufacturers have significantly less bargaining power compare to Wal-Mart and
Nike.

 Bargaining Power of Buyers

Buyers are often a demanding lot. They want to buy the best offerings available by paying the
minimum price as possible. This put pressure on Kellogg Company profitability in the long run.
The smaller and more powerful the customer base is of Kellogg Company the higher the
 bargaining power of the customers and higher their ability to seek increasing discounts and
offers.

How Kellogg Company can tackle the Bargaining Power of Buyers

 By building a large base of customers. This will be helpful in two ways. It will reduce the
bargaining power of the buyers plus it will provide an opportunity to the firm to streamline its
sales and production process.
 By rapidly innovating new products. Customers often seek discounts and offerings on
established products so if Kellogg Company keep on coming up with new products then it can
limit the bargaining power of buyers.
 New products will also reduce the defection of existing customers of Kellogg Company to its
competitors.

Threats of Substitute Products or Services

When a new product or service meets a similar customer needs in different ways, industry
profitability suffers. For example services like Dropbox and Google Drive are substitute to
storage hardware drives. The threat of a substitute product or service is high if it offers a value
proposition that is uniquely different from present offerings of the industry.

How Kellogg Company can tackle the Treat of Substitute Products / Services
 By being service oriented rather than just product oriented.
 By understanding the core need of the customer rather than what the customer is buying.
 By increasing the switching cost for the customers.

Rivalry among the Existing Competitors

If the rivalry among the existing players in an industry is intense then it will drive down prices
and decrease the overall profitability of the industry. Kellogg Company operates in a very
competitive Processed & Packaged Goods industry. This competition does take toll on the
overall long term profitability of the organization.

How Kellogg Company can tackle Intense Rivalry among the Existing
Competitors in Processed & Packaged Goods industry
 By building a sustainable differentiation
 By building scale so that it can compete better
 Collaborating with competitors to increase the market size rather than just competing for small
market.
Implications of Porter Five Forces on Kellogg Company
By analyzing all the five competitive forces Kellogg Company strategists can gain a complete
picture of what impacts the profitability of the organization in Processed & Packaged Goods
industry. They can identify game changing trends early on and can swiftly respond to exploit the
emerging opportunity. By understanding the Porter Five Forces in great detail Kellogg Company
's managers can shape those forces in their favor.

PESTEL Analysis

Political Analysis:

India is a stable democracy with political equilibrium which confides international companies to
invest in India. Kellogg’s being an US-based company did not have problems entering the Indian
market due to the friendly relations the two nations share.

Economic Analysis:

India has a developing economy with moderate spending power of its residents. Before
investing in the country, a MNC like Kellogg’s will want to determine this factor. Moreover the
economic benefits sought after investing will also be analysed. India has even introduced Special
Economic Zones (SEZs) which offer free trade and many tax exemptions.

Social Analysis:

Social aspects like the acceptance of the products and the availability and willingness of the
people of the country to work for that company are also analysed. Kellogg’s being a global brand
had no concerns with the acceptance of the product. By entering a country with a population of
100 billion, it was a boon as it created employment. It also engages in employee development
programs which will improve skills of the employees.

Technological Analysis:

In a developing country like India, the use technology is also increasing. With the entry of
Kellogg’s automation in the food industry was also introduced. With the amount spent on R&D
the company will still introduce technological advancements.

Environmental Analysis:
Kellogg’s decided to enter India where there is a potential to meet the raw material requirement
adequately. (Ministry of Food Processing Industries, Govt. Of India, 2007). Also Kellogg’s has
undertaken many initiatives to reduce the usage of energy and water and properly plan the waste
management and CO2 emission

Legal Analysis:

Legally, India has some flexible rules for a MNC to establish itself, but the company has to
follow the laws regarding the food and packaging laid by the Food Corporation of India.
Kellogg’s staunchly follows all these laws.

Looking at a friendly marketing environment that was available, Kellogg’s just had to go ahead
by properly managing marketing strategy and the marketing mix.
Solution (StepS towardS SucceSS)
In order to capture the Indian market Kellogg’s take the
following steps,
 Market Research: In addition to the below
mentioned activities it’s important that the company carries out a thorough market
research, analyze it and then enter the market.
 Price Reduction: As mentioned earlier in third world countries the success for any
product is on the price it sets for its product as compared to its competitors. Hence
Kellogg’s should reduce the price to cater to the middle class and lower middle
class population as well.
 Packaging: It should reduce the family size packs and introduce lower size packs
including pouches etc. Moreover it can use alternate materials for packaging that
will in turn help in price reduction.
 Advertising: The Company should modify its existing advertising campaign and
connect with the average Indian identity. It should get celebrity endorsements done
attributing their health and fitness success to the brand. It should also start giving
alternatives to ‘milk’ with which an individual can enjoy cornflakes. This will
address its basic problem of supplementary ingredients

 Target new customers: Kellogg’s should target the schools and colleges
and hold promotional activities for the school students. This will make them aware
of the cereal breakfast and thereby help them develop taste for cornflakes. In
addition to this they should start door-to-door promotional activities by giving free
samples to housewives. Since in India the wife is the decision maker in the family
when it comes to grocery shopping it will have direct impact on sales.
 Don’t Underestimate Local competition: Although the local players are worried
about international competition, the international players shouldn’t take them for
granted. The trick is not to be too big. MNC’s shouldn’t treat India as a barren land
and then start business.
 Customizing the strategy to the market: Its important that Kellogg’s customize
its strategy to suit the Indian market. After its initial failure it should re-strategize
to ensure success. In addition to this Kellogg’s should introduce some more local
flavors as done by many pizza companies to succeed.
 Promotion: Kellogg’s should hold promotional events and activities to generate
awareness about the importance of breakfast. It should also educate the masses
about the various vitamins and minerals necessary for a body to maintain fitness.
In addition to this getting expert opinion in advertising will help the cause.
Refrences
https://casepillar.com/kellogg/closing-time/porters-analysis.php

https://businesscasestudies.co.uk/stakeholder-engagement/