Kelloggs in India

Kelloggs in india

By : Kashyap Joshi Prashant Misra

Background Note Kellogg was the wholly owned Indian subsidiary of the Kellogg company based in Battle Creek, Michigan in the United States. Founded in 1906,had manufacturing facilities in 19 countries and marketed its products in more than 160 countries.

HISTORY OF KELLOGGS IN INDIA

In the 1990s there was the desire by Kelloggs to expand. Stagnating sales in the U.S strengthened this need. Set up its 30thmanufacturing facility in India with a total investment of $30million. Launched in September,1994,Kelloggs initial offerings in India included cornflakes,wheatflakes and Basmati rice flakes.

PROBLEMS OF KELLOGGS IN THE INDIAN MARKET

Despite offering good quality products and being supported by the technical, managerial and financial resources of its parent, Kellogs products failed in the Indian market. Kelloggs knew it will be difficult to get Indian customers to accept its products hence it relied heavily on the quality of its crispy flakes. Indians liked to boil their milk and consume it warm or also like to add sugar to their milk. The rice and wheat versions did not do well because sugar could not easily dissolve in cold milk which made it not sweet enough for the Indians. Some consumers called the rice flakes, rice corn flakes.

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Analysts believe that the major reason for Kelloggs failure in the indian market was the fact that the taste of its products did not suit Indian breakfast habits. The second mistake it made in the Indian market was its positioning front. Its advertisements and promotions focused initially on the health aspects of the product which was a fundamental departure from the successful fun and taste positioning adopted in the United States. In the U.S, Kelloggs offered toys and other branded merchandise for children and had a Kelloggs fan club.

In most third world countries pricing is believed to play a dominant role in the demand for any product but Kellogg did not share this position and this affected the demand for its products. At an average cost of Rs21 per 100gm,Kellogg products were clearly priced way above the product of its main competitor, Mohun Cornflakes(Rs16.50 for 100gm).Another small-time brand, Champion was selling at prices almost half that of Kelloggs. This gave Kellogg a premium image and unattainable for the average Indian consumer.

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CORRECTING ITS MISTAKES

In order to forge ahead,Kelloggdecided to launch two of its highly successful brandsChocos(September,1996) and Frosties(April,1997) in India.

These brands were very successful and sales picked up significantly.

Brands were even consumed as snacks and led to the launch of ChocosBreakfast Cereal Biscuits.

The success of Chocos and Frostiesled to the total Indian is action of the Companys flavoursin future which resulted in the launch of Mazzaseries in August,1998 in three local flavors Mango Elaichi, Coconut Kesar and Rose after one year extensive research to study consumer patterns in India.

EFFECTS OF CORRECTION
In 1995,Kellogg had a 53percent share of the Rs150 million breakfast cereal market, which had been growing at 4 to 5 percent per annum. In 2000,Kellogg share had increased to 65 percent and the market share was Rs600 million, and Kelloggs share had increased to 65 percent. Analyst claim Kelloggs entry was responsible for this growth. The Companys improved prospects was clearly traced to shift in positioning, increased consumer promotions and an enhanced media budget. Effort to develop products specifically for the Indian market helped Kellogg penetrate the Indian market.

Global Strategy
Management continues global strategy Offers brand-differentiated pricing Invests in new product research Brand-building marketing activities Cost structure reduction

Kelloggs Marketing Strategy

and
Marketing Plans

Organizational Strategies
Leadership in product innovation Strengthening the companys seven largest cereal markets Accelerating the growth of convenience foods business Developing a more focused organization Continuing to reduce costs

Market Analysis
Market size: sales of nearly $9.7 billion in the Ready-To-Eat
Market in 2001

Product segments: the best-selling kids cereal brands--GM

Lucky Charms, GM Count Chocula, Post Marshmallow Alphabits, Q Marshmallow Safari, Rice Krispy. Market share: competition is heating up in this market as flat sales and low-priced clones have eroded the market shares of Kellogg and General Mills Market Forecasts: the kidsmarket has been growing at a rate of more than 15% a year, for the 5 to 7 years and shows no sign of slowing through the end of the decade. Growth in the overall kids food market was driven, to the largest extent, by gains in cereals.

FUTURE PLANNING
July 1, 2009 Kellogg India Private Limited, 100% subsidiary of Kelloggs Company, USA, which is the largest player in the Indian breakfast cereal market, has decided to expand its production capacity in India.
Kellogg is now planning to enhance its production capacity at Taloja factory in Raigarh. Also, the company is in the process of launching new products in the country.

Kellogg Company, USA, is the worlds leading producer of cereal and convenience foods. Founded and headquartered in Battle Creek, Michigan, Kellogg Company manufactures products in 19 countries and markets products in more than 160 countries around the world. Kelloggs sales reached US$13 billion in 2008.
Kellogg India has over 100 employees and has invested over US$ 30 million.