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How Can Kelloggs Do Better In India ?

What Are The

Mistakes It Made ?

Submitted by:
Sanjit Pandey FT173080
Kellogg Company (also Kellogg's, Kellogg, and Kellogg's of Battle Creek) is an American
Multinational food manufacturing company which has its headquarter at Battle Creek, Michigan,
United States founded in 1906.
Kelloggs Product lines include basically cereals and packaged convenience foods including
cookies, crackers, toaster pastries, cereal bars, fruit flavoured snacks, frozen waffles.
The company owned brand comprises of Froot Loops, Apple Jacks, Corn Flakes, Frosted Flakes,
Rice Krispies, Special K, Cocoa Krispies, Keebler, Pringles, Pop-Tarts, Kashi, Cheez-It, Eggo, Nutri-
Grain, Morningstar Farms, and many more.
The Organizations vision is "Nourishing families so they can flourish and thrive."
Kelloggs is a dominant player in the world food market and the same can be understood by the fact
that the companys products are marketed in over 180 countries while manufactured in 18 countries.

During the late 1980s, nearly 40% of the total Ready-to-eat breakfast market was captured by
Kelloggs brand alone. However in 1983 the market share of Kelloggs dropped to around 36.7%
due to intense competition from General Mills and Quaker Oats. The American market had
matured as per analysts. The annual sales of the company was 6 billion US$.

So, In the beginning of 1990 Kelloggs was eyeing new potential markets for breakfast cereal
eating customers. This was the time when India Started changing its foreign trade policies and
was opening itself to international trade as result of liberalization. India with a population of 900
million then with 25% population as middle class household was the choice for Kelloggs
market expansion plan.

2.1 Strategy to Launch

Kelloggs initial market outreach Strategies were:

S egmentation : Middle class and upper middle class households.

T arget : Affluent Consumer

P ositioning: POD as a Premium Brand , Positioned itself as an alternative to regular

Indian breakfast

The Marketing mix they focused upon was :

roduct: Most successful Cereal CORN FLAKES

rice : Rs 21 /100gm against the Local Competitor at Rs 16.5 for same qty
(showcasing premium product factor)

lace: Concentrated only in the Indian Metros.

romotion: Promotion showcased the cereal as an health alternative in comparison to

unhealthy Indian breakfast

Kelloggs came in Indian in 1994, a country which was quite different from the markets they
have earlier catered and dominated, India was a country where there were around 25 states then
and even more number of cultures the food habits of all these cultures varied among themselves
to a huge extent. Kelloggs here was looking at just the broader picture it didnt do a market
research to understand the consumer behaviour they did a segmentation and targeting to reach
out to the middle class but they didnt had a closer look at the different lifestyles consumers have
and couldnt meet the market needs.

Kelloggs did a positioning of premium pricing which again backfired on them as the market
was quite price conscious and there was a disconnect in terms of price in terms of product
kelloggs offered sweet, crispy and cold product as a substitute for hot and spicy Indian breakfast
which was just the opposite of what was the requirement of breakfast item. In terms of place part
of kelloggs marketing mix their product was available only in premium and moderate level
stores in the metros which led to lower visibility and exposure of the product.

In terms of competition that Kelloggs was facing was fierce it was not only intense from the
local players of the product but it had to compete with the regular Indian breakfast which was
more culturally significant and had hedonic nostalgia attached with the attributes of spicy taste
as a cherry on the top. So Kelloggs has to not only outdo the local player but also had to take
care of the regular Indian breakfast since Kelloggs was not targeting the cereals product as
breakfast but had an eye for changing the idea of the breakfast.

Over the next few years it introduced Kelloggs Wheat Flakes, Frosties, Rice Flakes, Honey
Crunch, All Bran, Special K and Chocos Chocolate Puffs in the Indian Market none of which
managed to find a firm ground in the Indian market compared to their western counterparts.

Kelloggs also tried to Indianize the taste of its product by introducing flavours of coconut,
mango and rose under Mazza brand also was not received well by the Indian population.

Kelloggs then came up with a new strategy to establish the companys brand equity in the
market by selling biscuits if not cereals.

The news of this brand extension was covered in depth in the Indian Express newspaper in 2000:
The Company has been looking at alternate product categories to counter poor off take for its
breakfast cereal brands in the Indian market, say sources. 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 irrespective of the off take. The focus is entirely on being present
and visible on the retail shelves with a wide range of products, explains a company dealer in

Kellogg launched one new product into the market in an interval of every six months, and these
launches were supported by offers on Kelloggs cereal boxes. Although the biscuit range is
fairing considerably well and is popular among the kids, the cereals sales continues to stagger.
The major factor here is price, the acceptance of the biscuit ranges is also in part due to its lower
prices. Whereas in the cereals category, all efforts of the company like subtle taste alterations did
not increase the sales due to the high prices of the cereals.

According to a research firm PROMAR International, The Sub-Continent in Transition: An

assessment of food, beverage, and agribusiness opportunities in India in 2010, the price factor
will restrict Kelloggs from further market growth. While Kelloggs has ushered in a shift in
Indian breakfast habits and adapted its line of cereal flavours to meet the Indian palate, the
price of the product still restricts consumption to urban centres and affluent households,

3.1 Cultural Factors and Eating habits

Kelloggs pitched itself as an alternative to indigenous regular breakfast. The Indian consumers
were new to packaged food and habituated of heavy tasty breakfasts. The gastronomical map of
India then perceived taste (spicy) and the ability to quench hunger as the criterion for breakfast
and there was a disconnect between what customers wanted and what kelloggs was
offering. Additionally Indians had a wide array to choose from for breakfast and kelloggs just
offered a single variant which reduced the further repeat customers. Mostly the sales achieved
initially was due to novelty.

3.2 Easy Availability of low-priced traditional breakfast

Indian breakfast are known for their variety like for example if we see any of the traditional
breakfast items like if we pick Paranthas there are like options to choose from over 20 types of
customized paranthas or if we choose Dosa there are shops which sell 99 varieties of Dosa.

While Kelloggs offered only one variant so a huge disconnect between the variety seeking
consumer and the offerings made by the brand.

3.3 Low Information about Processed Foods

The market was nave with the knowledge about the standard required calorie intakes and other
calorie related knowledge also Kelloggs pitched in their advertisement that Indian Breakfast
was not nutritious and unhealthy, this hurt the sentiments of Indian homemakers and
psychologically turned them against the product.

3.4 Price Sensitive Customer

Indian consumer are very price sensitive with Kelloggs 27% higher than the nearest competitor
it created an image of being a pricey product and out of reach of the consumer who could get
better gastronomically satisfying substitute in the form of known Indian breakfasts at a much
lower price with rewarding benefits of taste and making them feel full.

3.5 Distribution

The company only focused on middle level and premium stores as it believed it would not be
able to maintain a uniform service quality if it were to supply to large stores as well. However,
this move made the cereals out of reach of a large chunk of population. In terms of place part of
kelloggs marketing mix their product was available only in premium and moderate level stores
in the metros which led to lower visibility and exposure of the product.

4. How can Kelloggs do better in India?

4.1 Market Research to capturing the Market Needs:

Kelloggs India needs to carry out extensive Market research to understand the consumer taste
preference and indianizing their products as per Indian gastronomical map.

Under this research they need to find out various tastes attached with the inner values of the
consumer like tastes which bursts happiness or tastes that inculcates nostalgia and links to some
favoured Indian delicacy and provide that with the healthy standard norms as the current market
has become health and calorie conscious.

After they find out the tastes or factors which would greatly affect the consumers inner self they
should do a saple test run for the most favourable products and do PR activities in Malls ,
Shooping centres & atrium spaces to understand the pulse of the market on the products they
have developed and including the feedback from the consumers they bring the products closer to
the expectations of the consumer.
After which they can carry out a test run of the products in niche market to understand the
acceptance and based on the acceptance let the best products take the market and remove the low
performing products from the market to reduce cannibalization.

To increase the exposures of the new product they next need to make ZMET (Zaltman
Metaphor Elicitation Technique ) based advertisement to connect with the values in the
consumer they have researched upon in their extensive market research and this would help in
connecting better off with the market.

Some values they can target upon are:

Nostalgia of Indian breakfasts which are fading due to more health conscious consumer.
The taste which arouses refreshment and energetic feeling in the mind of people when
had in the morning and substitute it not as a breakfast but as a feeling which you need to
have to have a great day.
It can be marketed as a product which makes your day from good to great it , other than
filling your day with happiness it fill your stomach too.

4.2 Central Route for persuasion of the Elaboration Likelihood Model:

The central route is used when recipients have the motivation as well as the ability to think about
the message. Being at the high end of the elaboration continuum, people assess object-relevant
information in relation to schemas that they already possess, and arrive at a reasonable attitude
that is supported by facts and information.

Here we can highlight products which are high on functional and health quotient.

Products like Kelloggs K and other Health oriented products can be marketed through the
central route which guarantees weight loss post consumption product with other health benefits
could be added to increase the brand quotient of central route.

1. Emphasis should be laid on the nutrition value of cornflakes in advertisement and

promotions, alongside proven results showing health benefits.
2. Kellogg should target kids for long term increase in market share and customer loyalty as
the adult population is very much settled in their old eating habits and rigid to changes.
3. It can use fear appeal, to emphasize on the unhealthy impact of consuming junk food and
the health benefits cereals offer over them.

Elaboration Likelihood Model

4.3 Peripheral Route for persuasion of the Elaboration Likelihood Model:

The peripheral route is used when the recipient has little or no interest in the subject and/or has a
lower ability to process the message to information. Being at the low end of the elaboration
continuum, recipients do not examine the information as thoroughly.

With the peripheral route, they are more likely to rely on general ideas (e.g. "this feels
right/good"), their own mood, positive and negative cues of the persuasion context, etc.

1. They can market products by popular and fit celebrity to link the product with their healthy
lifestyles. This would build fan base as consumers.

2. To affect Children their advertisement should include characters, fun elements and can link it
with popular cartoon characters to build connect with children.

3. They can also highlight the taste feelings with the product like in the first point established
product which makes you feel energetic and refreshing in the morning and makes your day from
good to great.

4. Kelloggs can promote bundling promotions for children like merchandise, cartoon movie
tickets, and toys.

5. Kelloggs can connect with the health conscious consumer with scratch and win offer with
options to win health related prizes like weighing machine , Membership to gold gym, or
bundled with other calorie conscious products.

6. They can associate with health conscious brands to and go on funding or campaign to increase
exposure and show the health values attached.

Like campaigning with IPL , other sports league.

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Dr. Bharadwajs Consumer Behavior class notes at GLIM, Chennai.

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