kelloggs case opt
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Kellogs failure in indiaTRANSCRIPT
ride in IndiaA study of Indian Consumer
Submitted byAdarsh Kumar
Antony KonnothAnkur TalrejaJoshua Noel
INTRODUCTION
About all the cycles we talk about, perhaps the most important of them is Nature’s cycle “With
good times there comes the anticipation of bad times”. This is a cycle that goes on and on.
Old habits die hard, especially when it comes to Indian eating habits. When Kellogg India Ltd.
(Kellogg’s), the wholly owned subsidiary of the US$ 7-billion Kellogg Company, entered the
3000- ton cereal market in 1994, little did it realize the importance of the adage. It had a clear
game plan to position itself on the health platform, highlighting the nutritional values of the
brand.
With respect to our Project report on
“Kellogg’s India”, the overseas company
has seen the picturesque of high tides to
low tides. Our report will explore the
reasons behind the failure of Kellogg and
how it succeeded after its second entry.
Studying the marketing mix adopted after
second entry. The journey from 1994 to
present, 2011 has been full of large scale
Up’s and Down’s. Our project report is dedicated to get the larger insight of all the related
prospects of the firm. Our project will also discuss about the adopted marketing mix of the
Kellogg.
The marketing mix is the set of marketing tools that the firm used to pursue its marketing
objectives in the target market. McCarthy classified these tools into four broad groups that he
called the four P’s of marketing:
Product: It is a tangible good or an intangible service that is mass produced or manufactured on a large
scale with a specific volume of units.
Price: The price is the amount a customer pays for the product. The business may increase or
decrease the price of product if other stores have the same product.
Place: Place represents the location where a product can be purchased. It is often referred to as
the distribution channel. It can include any physical store as well as virtual stores on the
Internet.
Promotion: Promotion represents all of the communications that a marketer may use in the
marketplace. Promotion has four distinct elements: advertising, public relations, personal
selling and sales promotion.
Marketing mix decisions must be made for influencing the trade channels as well as the final
consumers. The four Ps represent the seller’s view of marketing tools available for influencing
buyers. From the buyer’s point of view, each marketing tool is designed to deliver customer a
benefit.
P a g e | 7
FIRM'S OVERVIEW: KELLOGG’S
A 1906 established firm, it thoroughly enjoyed the status of top most cereals companies around
the globe. When Will Kellogg accidentally invented a new breakfast food in Battle Creek,
Michigan in 1894, he did not realise that he was on the threshold of forming a major food
manufacturing company. His name would become one of the most instantly recognised
throughout the world. It has four main divisions covering North America, South & Central
America, Asia Pacific, and finally Europe, Africa and Middle East.
Today, Kellogg’s is an American owned organisation that has a true global market in the late
1980s, the company had reached an all-time peak, commanding a staggering 40 per cent of the
US ready-to-eat market from its cereal products alone. By that time, Kellogg’s had over 20
plants in 18 countries worldwide, with yearly sales reaching above US $6 billion.
But with inception of 90’s, the company started regaining the pressure from its rival, The
General Mills. The working force of the company was accused of being unimaginative. As a
result the company started looking at the other markets rather than US and that of UK’s.
As a result, in 1994, three years after the barriers to international trade had opened
in India, Kellogg’s decided to invest more than US $30 million into launching
its number one brand, Corn Flakes.
Currently Kellogg is the leading producer of cereal & convenience food
of the world with total revenue in excess of US $ 12 billion. It currently
has 18 plants worldwide which produces
more than 50 different brands and sells in
more than 180 countries across the world.
BREAKING OF STAGNANCY-THE FORAY STORY
With the strategy of the company to break the series of stagnancy in UK and US for a decade,
the alternative to look beyond resulted in foray of Kellogg’s in India. As the Government of
India, open the doors for international trade, new firms found Indian market an interactive
enough to set up their operations here. Kellogg’s was also a part of the series. Kellogg was the
wholly owned Indian subsidiary of the Kellogg Company based in Battle Creek, Michigan in the
United States.
But the Indian consumer as habituated, consumed
regularly the tradition breakfast composed of
“Paranthas, idli sambar, poha, milk “(Varying from
region to region) etc. To make and create a demand
for the people who are already accustomed to their
own eating habits was a mammoth task in front of
the company.
While this meant that Kellogg’s had few direct competitors, it also meant that the company had
to promote not only its product, but also the very idea of eating breakfast cereal in the first
place.
The first sales figures were encouraging, and indicated that breakfast cereal consumption was
on the rise. However, it soon became apparent that many people had bought Corn Flakes as a
one-off, novelty purchase. Even if they liked the taste, the product was too expensive. A 500-
gram box of Corn Flakes cost a third more than its nearest competitor. However, Kellogg’s
remained unwilling to bow to price pressure and decided to launch other products in India,
without doing any further research of the market. Over the next few years, Indian cereal buyers
were introduced to Kellogg’s Wheat Flakes, Frosties, Rice Flakes, Honey Crunch, All Bran,
Special-K and Chocos Chocolate Puffs ± none of which have managed to replicate the success
they have encountered in the West.
INCEPTION OF THE LAUNCH OF PRODUCTS
When Kellogg Company entered India, the per capita consumption of breakfast cereals was a
low 2 gm per annum against 5 kg per annum globally. The Indian ready-to-eat-cereal market,
clearly, posed several challenges. The Indian sub-continent found the whole concept of eating
breakfast cereal a new one. Indeed, the most common way to start the day in India was with a
traditional regional breakfast. While this meant that Kellogg’s had few direct competitors it also
meant that the company had to promote not only its product, but also the very idea of eating
breakfast cereal in the first place.
HURDLES IN INDIAN MARKET AS A NOVICE
Cultural factors and eating habits – population not used to processed foods
Kellogg pitched itself as an alternative to the regularly
consumed breakfast. The Indian breakfast is heavy and there
is a feeling of fullness at the end of an Indian breakfast.
What with oily Parantas, Puris and Dosas, the feeling of
fullness is real and not imagined. Kellogg’s Corn flake
breakfast does not give that feeling of fullness and that went
against the grain of having a full breakfast. In short after
having a corn flake based breakfast the Indian consumers
were still hungry. Also Indians have spicy and hot food for breakfast. To ask them to eat the
sweet tasting and cold corn flake breakfast was too much of a sweet breakfast for the Indians
to digest.
Easy availability of low-priced traditional breakfast
Indian breakfast is known for its variety.
There can be 30 types of Dosas (there is a
restaurant in Hyderabad that offers 99
types of Dosas!) or Idlis, Parantas or other
types of native Indian breakfast items.
Indians are used to a variety and one item
that is eaten will not be on offer for the
next two or three weeks. Asking Indians to
have the same type of corn flake based
breakfast was too much of a cultural change for the Indians to accept.
Low awareness about processed foods
Low awareness about processed foods and Calorie
requirements about various diet plans to be followed
from health prospective. Also Kellogg in its
advertising campaigns hinted that the Indian
breakfast was not nutritious and that Indian
breakfast was not very good for health. This deeply
hurt the sentiments of the home maker. The home
makers said to themselves “We have eaten and
served the Indian breakfast for decades and
centuries. My family is doing fine”. Once the home maker’s ego was hurt they psychologically
turned themselves against the concept of corn flake based breakfast.
Price sensitive customers
Indian customers are very price sensitive. With Kellogg price a third more than its nearest
competitor it created an image of being a high class product and also pushed it out of reach of
just liberated Indian middle class.
Considering all these challenges, Kellogg India required to come up with a real brand equity and
a framework to convince Indian consumer to get out of from the long following breakfast eating
pattern and face to an entirely new range of products offered by the company.
THE INITIAL FAILURE
With so much of global exposure, success and the well renowned value that the company
enjoyed in the world market, the question that stuck in the mind is what is that that led to the
initial failure in Indian market with its foray.
India is a country that has a history that comprises of traditional practices, that also includes
the regular and long followed eating habits.
Kellogg’s believed that it is going to introduce the new breakfast product, heavily on the quality
of its crispy flakes. But pouring hot milk on the flakes made them soggy.
With this it was also failed in understanding the very needs and taste of Indian consumer,
perhaps the HOMEWORK done was not good enough. Kellogg's failure was the fact that the
taste of its products did not suit Indian breakfast habits. Kellogg sources were however quick to
assert that the company was not trying to change these habits; the idea was only to launch its
products on the health platform and make consumers see the benefit of this healthier
alternative.
Another reason for the low demand was deemed to be the premium pricing adopted by the
company. The prices of its products were way too much than the nearest competitors like the
Mohan's Cornflakes.
Kellogg Mohan's Cornflakes (competitor)
Prices Rs. 21 per 100 gm, Rs 16.50 for 100 gm
Focused on Affluent consumer Mass consumer
Market comp Premium and middle-level Small-level consumers & retail stores as well
STEPS TOWARDS SUCCESS
The failure that the company witnessed with its launch, did not stays for longer. The mistake
that the company did initially in judging the Indian market was revamped as soon as company
realized that the long continued policies is not going to work here. There were several factors
that lead to this progress.
Prices reduction
Kellogg’s increase the retail packs of different sizes to cater the needs of different
consumers group
Kellogg’s repositioned the product as tasty nutritious food
Products were not positioned in premium categories
Indianising the products by introducing the sweeter product
On ground promotion activities like Kellogg health week and free samples distribution in
schools and to housewives.
Projection of products as ‘fun-filled' brands rather emphasizing only on the “nutrition
value”.
PROPOSITION & POSITIONING BY KELLOGG
From the day Kellogg’s forayed into INDIAN market, several parameters are taken care of while
launching the product.
When Kellogg’s entered the Indian market in 1994 it positioned itself on the health platform,
highlighting the nutritional values of the brand. This was done keeping in mind the following
fact: The 1991 census had already revealed that 40 per cent of Indians were below the age
of18- its prime target of growing children/ young adults who needed the right nutrition, besides
mothers who needed
Later the company emphasized on more fun filled flavours with the nutrition value.
In 1996 the Chocos brand was heavily advertised.- 50% of the money allocated for advertising
was spent on promotions and- 50% of Money allocated was spent on thematic Advertising- All
the Advertisements were Brand driven- Initially to encourage the consumer to try the product
various sales promotion techniques were used.
Kellogg’s advertising has admittedly not been very compelling thus far. A long-term thematic
line has not been developed in the campaign. Apart from `Jago Jaise bhi, to Kellogg’s hi”.
Getting the brand on the breakfast table really appears to be the main motive behind all the
promotions. Earlier this year, posters with the line `Naye saal ki sahi shuruat, lo Kellogg’s se hi”,
were put up at strategic points.
Later Kellogg’s India shifted its Positioning from nutrition to fun-filled flavours, consumer
promotions that accompanied a Rs.25 crore media-spend. Constant free sampling exercises and
an on-going process of developing price volume packages.
Then the company is attempted to indianise its campaigns instead of simply copying its
international promotions. In the staples campaign, a cross section of individuals ranging from a
yoga instructor to a Kath Kali dancer attribute their morning energy and fitness to Kellogg’s,
suggesting accompaniments as varied as curds, honey, pistachio and bananas. The commercial
ends with line `Jaago jaise bhi, lo Kellogg’s hi’.
But conspicuous in its absence from print and TV advertising, is the famous `cock’ identity,
which symbolizes the morning association the world over. Later the CHOCOS BRAND has been
positioned as “THE IRRESISTIBLE TASTE OF CHOCOLATE”. The Media spend by Kellogg’s on
Chocos brand was distributed equally between Chocos flakes and Chocos Biscuits.
THE JOURNEY SO FAR
Kellogg’s from time to time has come up with different products. The journey from initial failure
to present success has seen the launch of various mix of products from time to time.
Kellogg's initial offerings in India included cornflakes, wheat flakes and Basmati rice flakes.
The hi-tech launch stood out as a failure, because of various technical, financial and other
reasons which would be discussed I detail in this report.
As a comeback strategy, Kellogg decided to launch two of its highly successful brands in
other countries - Chocos (September 1996) and Frosties (April 1997). This time the dice rolled in
the company’s favour and the sales started increasing significantly.
Next in the league was Chocos Breakfast Cereal Biscuits.
The launch continued resulted with the Mazza series in August 1998 - a crunchy, almond-
shaped corn breakfast cereal in three local flavors - ‘Mango Elaichi,' ‘Coconut Kesar' and ‘Rose.'
BRAND BUILDING-THE ADVERTISING WHICH APPEALED INDIAN CONSUMER
Advertising of the product is one of the prominent steps in building and creating the niche in
the market. But the initial brand building strategies, the advertising policy was not that much
impressive.
The rooster and the charm, with which the company did the wonders in the West was missing
here. Later, Kellogg attempted to Indianise its campaigns instead of simply copying its
international promotions. It came out with the taglines such as ‘Jago jaise bhi, lo Kellogg's hi”.
In 1997, Kellogg launched ‘The Kellogg Breakfast Week,' a community-oriented initiative to
generate awareness about the importance of breakfast. The program focused on prevention of
anemia and conducted a series of nutrition workshops activities for both Individuals and
families. The program was launched in Chennai, Delhi and Mumbai. Continuing the success
journey, Iron Shakti variant was launched in 2000 which offered a new dimension to health with
iron fortified cornflakes. One of their ads went like this
Kellogg’s Iron Shakti TVC
A gang of thieves is seen loading
some stolen items in a truck. Just
then a man with his family arrives
at...
...the scene. Thinking that his
neighbour, Pandey Ji, is shifting
home he does not pay much
attention...
...to their activity. As his
daughter worryingly points out
to him, “hamara TV,” our man
cools her off by saying,
“Pandey Ji ka”.
The little girl gets more disturbed
on seeing the thieves with her
cupboard. But the father assures
her, “Pandey Ji ka”.
Not able to take any more of this,
she vehemently protests on
seeing
their refrigerator with the
stealers. But our...
...man still reassures her,
“Pandey Ji ka”. On reaching
home he finds the things
missing and realizes every-
thing.
VO: "Iron kam khaoge toh dimaag
kaise chalega. Aapko chaahiye
Kellogg’s corn flakes jisme hai iron
shakti. Ab poore parivaar ka
dimaag chalega...
...nahin daudega. The ad ends on
our man telling his family the
thieves’ truck number, thereby
proving his better memory.
Following the latest trends in the present scenario, packaging and Today, advertising and
packaging are also key aspects of the marketing mix. Kellogg’s advertise using a whole range of
media: in the press, on posters, radio and cinema, direct mail and, most recently, on the
Internet. However, the main channel for its advertising is on television, where individual brands
are given their own air time, aimed specifically at a target audience. Although breakfast cereals
are consumed by the whole population, individual products may be aimed at specific groups.
For example, Special K is aimed towards women, Start has a sporty image and Frosties and Coco
Pops are primarily aimed at children. Corn Flakes, by contrast, are aimed at the whole family.
This targeting will determine the content of the advert and the time of broadcast.
Kellogg’s Special-K TVC
We see a woman asking her
husband how she looks in the
attire she is wearing?
He turns back and says it's a
perfect fit and she tells him he
has lost the bet.
He explains how till sometime
back his wife couldn't fit into
this dress but she took a
challenge to wear it for her
friend's wedding.
He says that in just 2 weeks
she lost weight with the
challenge.
VO: Take the Kellogg's Special
K Challenge....and lose up to 2
1/2 Kgs of weight.
The ad ends as the husband tells
his wife, "Tonight you'll look
prettier than the bride".
wrong move they resorted back to building the “fun-and-taste” image and took various moves
in the same direction which is evident in the advertising and promotion schemes used. Though,
Kellogg's advertising had not been very impressive in the initial years. Apart from ‘Jago jaise bhi,
lo Kellogg's hi,' the brand had no long-term baseline lines. To set things right, Kellogg attempted
to Indianise its campaigns instead of simply copying its international promotions. The rooster
that was associated with the Kellogg brand the world over was missing from its advertisements
in India. One of its campaigns depicted a cross section of individuals ranging from a yoga
instructor to a kathakali dancer attributing their morning energy and fitness to Kellogg. The
advertisement suggested that cornflakes could be taken with curds, honey, and banana.
In April 1997, Kellogg launched ‘The Kellogg Breakfast Week,' a community-oriented initiative to
generate awareness about the importance of breakfast. The program focussed on prevention of
anemia and conducted a series of nutrition workshops activities for both individuals and
families.
Kellogg also increased its focus on
promotions that sought to induce people
to try their product and targeted schools
across the country for this. By mid-1995,
the company had covered 60 schools in
the metros. In March 1996, the company
offered specially designed 50 gm packs
free to shoppers at select retail stores in
Delhi. This was followed by a house to-
house sampling exercise offering one-
serving sachets to housewives in the city. The company also offered free pencil-boxes, water
bottles, and lunch boxes with every pack. Plastic dispensers offering the product at discounted
rates were also put up in petrol pumps, super markets, airports etc.
Kellogg also launched the Chocos biscuits, claiming that cereals being a ‘narrow category,' the
foray into biscuits would create wider awareness for the Kellogg brand.
LAUNCH OF A NEW PRODUCT: SPECIAL-K UNDERSTANDING THE MIND SET OF INDIAN WOMEN Creating new products can be expensive. It involves making investment decisions now, in the
hope of making a return later. Weighing up future returns against an investment is a crucial
part of a manager’s job. It always involves an element of risk, because the future is never
certain. Managers’ previous experience, together with market research information helps them
to predict future events and outcomes
It follows from this that decisions about a
brand, creating new product or extensions
are an aim to meet a range of objectives
such as:
Growing market share
Developing a unique market position Creating consumer or brand loyalty
Generating a targeted level of profit.
There was a need for change, company had
already achieved a good market share in
Cereals market and growth was saturating. The cereals market in India was mainly had kids as
consumers with some share coming from working young adults but women were missing from
the scene.
Kellogg’s already knew that women who are keen to watch their weight and shape seek a range
of solutions throughout the day - not just at breakfast. With the help of both users and non-
users of existing cereals products, market researchers undertook further quantitative tests of
product ideas across a range of food categories.
Kellogg’s soon came to realise that these kind variants will be responsible for a huge growth in
the revenue, without a drop in sales of the core cereal product. New product development had
transformed the brand within the India. This in turn has given a great opportunity to roll-out
other developments in market which is yet not has been seized by the Kellogg.
Year Market Share
1995 53%
1998 More than 55
2000 More than 60%
2010 More than 66%
INDUSTRY ANALYSIS
There are many players in the Indian Market:
Kellogg's
Mohan Meakins
Murginns
Shanti's
AIM's Aristo
Savour
The target Segment:
Kellogg’s – Premium Segment.
o CHOCOS is targeted towards growing children and young adults
o Special K is targeted toward women who are keen to watch their weight and shape
Others – Middle and Lower Income (Economy Product)
Market Share of the Kellogg’s Brand
The breakfast cereals market has grown well during 1996-1998, and it is believed that
Kellogg’s has been the growth-driver.”
Chocos has 20% share of the Breakfast Cereal Market
India is also fastest growing cereals markets in South Asia with annual growth of 24% and
forecasting of reaching Rs. 14 billion in 2014
CONCLUSION
The compilation of this report bears a judgmental mark on what a company’s approach should be while
entering new markets. The culture and habits of new target group play a pivotal role in success of a
brand. Promoting a product with right proposition is essential. The perception of the consumers and
the attitude of the retailers have no doubt adds a new dimension to the existing advertising strategy in
use by the company worldwide.
The various models explained here in have helped in assimilating the core branding elements of the
proposed brand study. Even though there is no correlation between the advertising of both chocos
cereals and biscuits, cereals still extend leverage on the biscuits. The brand equity of cereals has
developed over a period of many years and has made its brand extensions like biscuits also a success.
There has been considerable success in inculcating new breakfast eating habits in the Indian consumer.
The year changing from the traditional idlis and parantha’s to the convenient way of eating breakfast.
This increased crackle in Kellogg India was brought about by its shift in positioning from nutrition to fun-
filled flavors.
THE HABIT BARRIER
The closer Indian food-habits are to the heart of the meal, the harder it is to change them. Their
approach to offer nutritious and tasty breakfast has worked well in Indian context after initial failure. At
present, Chocos accounts for 20 percent of Kellogg’s sales volumes. While Kellogg’s argues that it is not
looking for volumes for its variants, the search for a product to break down the taste-barrier may force
the company to increasingly rely on sub-brands like Chocos.
THE PRICE BARRIER:
Kellogg’s is able to cater only to the A-class towns or the more affluent consumers. Price is the biggest
element of consumer resistance.” The Indian consumer is not that discerning about quality when it
comes to looking at the whole price quality package.
The Positioning barrier, Hammering home the nutritional benefits of its products, Kellogg have spent
more than Rs.25 crore on advertising over the past few years. This in fact has proven beneficial for them
in the longer run, now consumers attaches importance to the level of iron and vitamin they intake.
Initially However, research showed that the average Indian consumer rarely use to go for Kellogg’s and
instead looks at the quantity, rather than the quality, of the food consumed.
The Kellogg mandate is to develop awareness about nutrition. While retaining its health positioning,
Kellogg’s new product-range promotion schemes, and sampling exercises are now not only aimed at a
younger audience but new products like Special-K are being launched which caters to women. At one
end they are seducing the consumers with promotions. On the other, they are talking to them about
health. So, they can persuade people to eat Kellogg because it is a healthy product.