KELLOGG’S FAILURE IN INDIA

Group Members
Dinesh Kumar Thpa
Saroj Bhandari
Farrukh Javed
Navaraj Karki
Fazal Din
OVERVIEW

•Founded:1906

•Country : U.S.
•Had manufacturing facilities in 19 countries
•Marketed its product in more than 160 countries.
•Turnover in 1990-00 was $7billion.
•Launched in 1994 in India with initial offerings of
wheat flakes & basmati rice flakes
•Had set up its 30th manufacturing facility in India, with
total investment of $30 million
HISTORY OF KELLOGG’S IN INDIA
 In the 1990’s there was the desire by Kellogg’s to expand.

 Stagnating sales in the U.S strengthened this need.

 Set up its 30th manufacturing facility in India with a total

investment of $30million.

 Launched in September,1994,Kellogg’s initial offerings in India

included cornflakes,wheat flakes and Basmati rice flakes.
FAILURE OF KELLOGGS IN THE
INDIAN MARKET

 Despite offering good quality products and being supported by the

technical,managerial and financial resources of its parent,
 Kellog’s 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 lukewarm,they
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.
FAILED LAUNCH

 In April 1995, KELLOGS received unsettling reports of

gradual drops in sales from its distributors
 25% decline in countrywide sales.

KELLOGS product failed in Indian market even after

 Offerings good quality products, supported by technical,
managerial & financial resources
 High profile launch backed by hectic media activity
REASONS FOR FAILURE

• Positioning – positioned it as health product

• Over confidence and ignorance of cultural aspects
• Non understanding of Indian consumer behavior and habits
• Premium Pricing policy
• Banked heavily on crispy flakes
 MAIN REASONS FOR ITS FAILURE
 Analysts believe that the major reason for Kellogg’s 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, Kellogg's offered toys and other branded merchandise for
children and had a Kellogg’s 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 Kellogg's.
 This gave Kellogg a premium image and unattainable for the average
Indian consumer.
CONTINUE……
 Due to the premium pricing problem faced by Kelloggs,it tried a
dollar to a rupee pricing for its products,still it could not attract the
mass consumer.

 Even those consumers at the higher end of the market failed to

perceive any extra benefits in Kellogg’s products.

 A Business Today report said that like other Multinational

Companies,
 Kellogg had fallen into a price trap by assuming that there was
substantial “latent niche market” in India for premium products.

 In order to maintain quality Kelloggs focused on Premium and

middle-level retail stores.
 This decision made it difficult for the larger population to get its
products.
CORRECTING ITS MISTAKES
 In order to forge ahead,Kellogg decided to launch two of its highly
successful brands-Chocos(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

Chocos Breakfast Cereal Biscuits.

 The success of Chocos and Frosties led to the total indianisation of

the Company’s flavours in future which resulted in the launch of
Mazza series in August,1998 in three local flavors Mango
Elaichi,Coconut Kesar and Rose after one year extensive research to
study consumer patterns in India.
CONTINUE……
 Kelloggs was able to reduce prices by reducing its cost of production.For
example Mazza was not positioned in the premium segment.
 The glossy cardboard packaging was replaced by poaches which helped in
reducing the price.
 Furthermore,Kelloggs saw advertising as a vital tool in promoting its
brand .

 This made it attempt to indianise its campaign instead of simply copying its
international promotions.
 The rooster that was associated with the Kellogg brand worldwide was
missing from its advertisements in India.
 One of the adverts depicted a cross section of individuals from a yoga
instructor to a kathakali dancer attributing their morning energy and fitness
to Kellogg.
 Kellogg saw distribution as an important area to look into to improve its
market penetration.In 1995,Kellogg had 30000 outlets which was increased
to 40000 outlets by 1998.
CRITICISM OF KELLOGGS RECOVERY
PLAN

 Though the decision to reduce prices was a step in the right

direction,Analyst were still not convinced of the success of the
product in the Indian market.

 They pointed Kelloggs did not have packs of different sizes to

cater for the needs of different consumers.

 To repel this the company introduced packs of different sizes to

suit Indian consumption patterns and purchasing power.

 The 500gm family size was launched which reduced the price
by 20%.Also Mazza introduced 60gm pouches priced at Rs9.50
RESULTS
 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 Kellogg’s share had increased to 65 percent.
 Analyst claim Kellogg’s entry was responsible for this growth.
 The Company’s 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.
 However,Kellogg was still viewed as a premium brand and its consumption was
restricted to the high class in the Indian market.
 The company had to realise it will be very difficult to change the eating habit of the
Indians.In 2000,Kellogg unfolded many new brands including Crispix
Banana,Crispix Chocos,Froot loops,Cocoa Frosties,Honey crunch,All Bran and All
Rasin.Kellogg also introduced Krispies Treat,an instant snack targeted at children
priced at the Rs3 and Rs5,this product was placed to compete against the products in
the impulse snacks category. Some Analyst believe the introduction of new cereals
and the launch of biscuits and snacks could be attributed to the fact that the company
had been forced to look at alternate product categories to make-up for the below
expectation of the breakfast cereals brand.
 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

 Free samples in schools and to housewives