BPMM: MARKETING MANAGEMENT

GROUP PROJECT 3:
BREAKFAST GONE BAD ...the case of
Kellogg’s rice KrispiesV

GROUP MEMBERS:

1. AHMAD FADZIL BIN MOHAMAD (825601)

2. SHUHD SALEH BASURRA (826427)

NAME OF LECTURE: DR. NOR PUJAWATI MD SAID

SUBMISSION DATE: 16 AUGUST 2020

1.0 INTRODUCTION

Kellogg’s is a company which based in United State of America founded in 1906.

The main vision of the company was to supply breakfast food that is tasty and
healthy. The distribution of product fot this company was not only in US, they were
also producing to other countries like UK, Mexico and Australia. For the ten of most
valuable food brands in 2020 Kellogg’s is number 5 in the list. Today, their products
are available in 180 countries.

From the countries which Kellogg’s distribute its product to is South Africa.
Kellogg’s products started to sold in South Africa in 1923, while the first production
plant was opened in in 1948. The company growth has come from the development
of innovative products as part of their growth strategy. This growth involves
investing in business opportunities that provide growth such as the introduction of
Kellogg’s Strawberry Rice Krispies and the international purchase of Pringles. For
South Africa, the growth strategy includes growing the African market for breakfast
and snack products. Growing the market for these products suggested a need to
provide an innovative product, and this was explained as that customers wanted
new products and breakfast solutions. Therefore, the decision to launch a new
product (Rice Krispies Vanilla) was made in 2018. The major benefit identified by
Kellogg’s with this change of ingredients and reformulation included the ability to
source the inputs from South African sources as South Africa does not produce rice.

The move from single grain to whole-grain in both Coco Pops and Strawberry
Pops did not receive an altogether enthusiastic response, but the changes to Rice
Krispies which known as Rice Krispies Vanilla sparked the bigger outrage. Rice
Krispies, which first went on sale in 1928, are traditionally made from a paste of rice
and sugar, which are then toasted. But in South Africa, the US Company replaced
the rice in Rice Krispies with a new formulation. Rice now represents only 48% of
Rice Krispies from 89.8% before. Corn flour (13%) which may be genetically
modified, according to the company as well as whole wheat flour (10%) are some of
the new ingredients. In addition, the company added much more sugar. The new
Rice Krispies Vanilla now contains 21.7g sugar for every 100g – from only 9g
previously. Business Insider South Africa could not see any enthusiasm for this
change in hundreds of social media messages, both on Kellogg’s platforms and
consumer websites.

2.0 CHALLENGE

The company has made some mistakes and were not aware about the dangers
associated with product changes; contrast various strategic marketing issues that
can be considered when implementing changes, including marketing communication
and the use of social media; motivate an approach to customer complaints and
comments on the launch of a new product; and comment on the ethical issues
associated with new product launches. We may conlude this in the points below:

 The taste of the new product was different from the previous product, and the
missing “snap, crackle and pop” when the milk was poured over the cereal.

 The lack of a clear indication of the change in the product ingredients on the
packaging was a complaint for many consumers. Based on the lack of
knowledge of the change in the product and the subsequent dislike of the
product, some customers asked Kellogg’s for the possibility of a refund.

 The increased sugar content was also raised by consumers, as the increase
in sugar counters actions of food companies worldwide that have reduced the
amount of sugar in their products as excessive sugar consumption is
associated with health issues and weight gain.

 Consumers perceived the change in the product formula and the removal of
the original product as a perceived disregard for customer needs and an
associated lack of interest in their opinions.

 An allegation was made that the packaging was not clear about the
ingredients of the product or of the volume of product that was purchased and
the cost of production.
  The change in the Rice Krispies formula impacted other activities besides
breakfast, to which customers reacted.

3.0 SITUATIONAL ANALYSIS

In a S.W.O.T. Analysis, strengths and weaknesses come from assessing the

company’s resources and capabilities, whereas opportunities and threats come
from examining customers, competition, and the external marketing environment.
This analysis can be used to identify strategies that take advantage of strengths
and opportunities while avoiding those weaknesses and threats.

Strengths

Kellogg’s, being the extremely successful company they are, has several strengths.
Since they have been around for over 100 years, they have the one of the strongest
brand recognitions in not only the cereal industry, but in the food industry as a
whole. Nearly everywhere people know exactly what Kellogg’s is, recognizing their
name and logo. Some people even insist on buying only Kellogg’s brand cereals.
This brand recognition and insistence is reinforced by the fact that they sell,
manufacture, and market in 180 countries around the world. They don’t have to
worry about making themselves known anymore, so they go for more of a brand
reminder strategy. Kellogg’s has also been a brand that takes advantage of
breakthrough opportunities. After seeing cereal sales drop, they developed Special
K Red Berries by adding freeze-dried fruit to their Special K cereal. This product
drew customers’ attention away from competing brands, and although General Mills
produced a similar cereal, Kellogg’s had a head start and quickly released a variety
of fruit-added cereals (Perreault Jr. et al.). One last strength is the fact that recently
they’ve expanded into a new international market. On September 28, 2015 Kellogg
Company announced it was buying Egyptian cereal firm Mass Food Group for $50
million. Mass Food Group is the number one cereal company in Egypt, exporting
foods to more than 30 markets, including Europe, East Asia, and Africa (Walker).
Earlier this year Kellogg also acquired Bisco Misr, Egypt’s leading packaged biscuit
company.
Weaknesses

Despite having so many strengths, every successful business has its weaknesses.
Although Kellogg’s is huge in the health-conscious market, some of their products
contain high sugar content. According to the American Heart Association (AHA), the
maximum amount of added sugar someone should consume is 37.5g for men and
25g for women. Kellogg’s Honey Smacks contain 15g of sugar per serving, nearly
half of the maximum recommended amount for men, and over half of that for
women. Kellogg’s Froot Loops and Frosted Flakes contain around 11-12g of sugar
per serving. Marketing themselves as a health-conscious brand and then producing
cereals with high sugar content portrays the company as liars, slightly hurting their
image. Recently, consumers have been increasingly purchasing fresh foods over
cereals because of the amount of sugar in breakfast cereals.

Opportunities

Kellogg’s has several opportunities to keep their company at the top of the market.
The first being the increase in health awareness among consumers. If they were
able to reduce the sugar content in some of their popular cereals and market the
change, they could take away some of the market share from their competitors.
Kellogg’s could also develop a better pricing strategy. If they were able to reduce
costs and lower their prices below that of the other breakfast giants, they could see
an increase in sales. One last opportunity for them is international expansion. As
previously stated, this year Kellogg’s acquired Egyptian companies Mass Food
Group and Bisco Misr, as well as announced a joint venture with Tolaram Africa. If
Kellogg’s is able to utilize their strategies well in these newly emerged markets, their
market share will increase significantly. They will also be able to better understand
and learn about a new kind of foreign market and culture, opening up the possibility
for even more expansion in the future.
Threats

A threat to Kellogg’s success is the competition in the breakfast market. Kellogg’s

doesn’t have a competitive pricing strategy. Several of their big competitors such as
General Mills and Post have slightly lower prices on cereals, but not by much.
Having higher prices allows the generic store brands to capture some of the market,
as these brands make cereals similar to those of big companies, but sell them at a
much lower price. Another threat is rising food prices. According to the Worldwatch
Institute, grain prices are climbing due to growing demand for it in foreign countries,
reducing global stockpiles, as well as the increased interest in the use of corn grain
to produce biofuels. This hike is forcing Kellogg’s to make the choice of either
passing the costs onto their consumers, or swallowing the decline in profits.
Competition from fast food chains is also a factor. The combination of an improving
economy and people having less time on their hands before work, means that more
people are going to drive-thrus at fast food chains in the morning as opposed to
sitting down and eating a bowl of cereal or oatmeal.

4.0 PROPOSED SOLUTION

Segmentation and targeting specific markets are two key elements of marketing
planning. Organizations would obviously rather attract and target a large market
than a specific part of that market, but because markets consist of buyers who have
different needs and wants, companies must segment their market. The main target
markets of the Kellogg Company are health-conscious people, women, families with
children, and snack-eaters. For instance, most of Kellogg’s consumers ate the
products at breakfast, so the company released a campaign encouraging
consumers to eat their products at different times of the day as a snack in hopes of
emerging into a new segment. They are also in the environmentally friendly market,
as nearly all of their products’ boxes are recyclable.

Kellogg’s usually segments their markets by product type. For example, the
introduction of the Special K brand and the “Special K Challenge” was targeted at
women, as Kellogg’s was aware of the rising demand for healthy foods among
women. Another example is Kellogg’s Rice Krispies. This product is targeted
towards children as a fun cereal, using the catchphrase “snap, crackle, pop” in
relation to the noise made by pouring milk onto the cereal. They also associated
the cereal with cartoon characters to catch the kids’ interest, as they have done with
many different cereals including Tony the Tiger with Frosted Flakes and Toucan
Sam with Froot Loops. Kellogg’s used cereal bars to combine the markets that like
and are loyal to their brand, but don’t have the time to sit down and eat a bowl of
cereal before going about their day. Along with encouraging their customers to eat
their cereal throughout the day, Kellogg’s has purchased a couple different snack
food brands to further develop their share in the snack food market. In 2000 they
bought Keebler Foods, the second-largest cookie and cracker maker in the U.S.,
and in 2012 they purchased popular chip brand Pringles from Proctor and Gamble
(Segal). Purchasing these companies expanded their share in the snack food
segment significantly, allowing them to compete with other top brands.

Back when Kellogg’s first started and released Corn Flakes, they formed their
price around a sales-oriented objective that focused on market share leadership.
They focused on getting as many people as possible to buy their products to gain a
large market share before competitors started to enter the market. This objective
worked very well, as their large market share increased their economies of scale.
When Kellogg’s released Special K, they put a profit-oriented strategy in place
because they knew that consumers would be more likely to pay a higher price for a
healthier product. When they added the red berries to their product due to the drop
in cereal sales, their costs increased, but they passed them onto the consumers
with a higher price, allowing them to realize higher profits.

The costs associated with a product can determine the price a company can
charge for it. The price must be enough to be able to cover all costs of producing,
distributing, and selling a particular product, and it must provide a good rate of
return for the effort put into it. Some companies work to keep their costs as low as
possible to result in greater profits, which can take some time to do. Kellogg’s Corn
Flakes are the perfect example. The company has been producing Corn Flakes for
over 100 years, so the product is extremely well-known and they have the
production process perfected. Minimal costs in both promoting and producing the
product allows them to generate a substantial profit.