Background summary:
Kellogg Company is a manufacturer of cereal and convenience foods, such as cereal bars, fruit-flavored snacks, frozen waffles, cookies, and crackers. Kellogg manufactures its products in 17 countries and sells its products in over a hundred countries. The sales of core products, like cereal, has declined over time in major markets like the United States and Europe. Cereal was a convenient food for breakfast, but now consumers do not have time to “sit down with a bowl, milk, and spoon.” Snacks have become a core product for the company. Kellogg acquired Pringles to expand its market share in international snacks. Kellogg’s investors were pleased with the acquisition. Mr. Bryant paid for Pringles acquisition at a high price of $2.7 billion versus $950 million of Diamond’s deal, because he speculated Pringles would help Kellogg increase profits. Kellogg has faced intense competition from GM & Ralston, Quaker, Post & Nabisco, etc.. Knowledgeable consumers and nutritionists criticized the high caloric content and use too much of salt in Kellogg’s cereals. Mr. Robert Dickerson, Kellogg’s consumer research analyst, believed that the company should refresh its entire portfolio to attract consumers by changing its image on packaging and rebranding the products. Problem statement: Kraft is refocusing their production toward snacks, and Kellogg can face intense competition. Kellogg’s core market sales, profit, and share price have declined. Kellogg must find a solution to increase its sales and to stay competitive in the U.S. and Europe.
Alternative solution: Due to “increasing scrutiny of Kellogg's healthy-eating credentials from ever-more savvy consumers, the company may yet have to more to work to do on its brand.” 2 Kellogg should change its ingredients. Because of high demand for healthy foods, Kellogg should create new products with more fiber and less calories. It also needs to lower the sugar and salt content in new products.
Kellogg’s sales have increased in snacks like Cheez-It crackers, Rice Krispies Treats, and Nutri-Grain Bars, but cereal sales have decreased in the U.S. and Europe. Therefore, Kellogg should decline its breakfast cereal product line and manufacture more snacks.
Recommendation:
The ultimate solution needs to focus on two conditions: (1) satisfying the modern lifestyle convenience and (2) providing healthy products according to the nutritionists’ criteria. Brand Keys researched the Customer Loyalty Engagement Index of both cereals and snacks and results showed that, “for snacks, the most important contributors are brand trust and appeal for the whole family. In the cereal category, however, it’s all about the brands that help you maintain your lifestyle.” 3 The research demonstrates that snacks have more brand-loyal customers than cereals. In response, Kellogg should make a “structural decline in breakfast cereals”1 and focus on snack product. kellogg acquired Pringles was the right decision, but Pringles alone is unable to turn around Kellogg’s future sales. “The company needs to integrate Pringles and come up with a creation of a brand that it can grow sales.” 1 Kellogg needs to create its own snack brand. Kellogg’s ardent R&D with 400 scientists, engineers, and technicians is feasible to introduce a new strong snack brand.
Kellogg should lower the salt and sugar content in its cereals and snacks to avoid criticism from health advovates. The consumers who prefer sweet cereals may not change their habit immediately and completely switch to the new cereals with less sugar. It will take time for consumers to comprehend which products are truly good for their health. Using Kellogg’s existing capacity to produce the new products, it will not cost too much rather than to refresh its products by changing packages and images. Refreshing product branding will not satisfy the two conditions mentioned above.
Tracking metrics:
Intermediate metrics: Kellogg should conduct a survey on customer satisfaction for Kellogg’s new brands: how they think and what more they need. This information is crucial for R&D so that Kellogg can improve the new brand to satisfy consumer needs. If the sales data shows a switch from the “unhealthy” products to the “healthy” products, Kellogg’s solution is on the right track. Conclusion metrics: Kellogg should use the revenue, profit, and share price to indicate its overall performance. In the long term, comparing the Return on Asset ratios of both Pringle (newly acquired brand) and Kellogg’s own brands will help determine whether the acquisition is beneficial or not.
Lesson:
Acquiring Pringles is a good strategy to penetrate the international snack market because almost 70% of Pringles sales are in the North America and Europe. However, the bid was too high for a product that has had stagnant sales for three years. Ms. Bargaret Bath could not have imposed her ideas for a balance of calories and blame on the “sedentary lifestyle” that is different from 30 to 40 years ago. That means she indirectly admitted that there is too much sugar in Kellogg’s products. Indeed, a high consumption of sugar and salt causes health problems. If Kellogg and other manufacturers truly care about people’s health, they should not have focus solely on taste. Due to “good taste”, nearly 80% of the 600,000 Kellogg’s products have a high sugar content. Kellogg leads the industry in many aspects, including reliable scientific evidence. Besides the need of a sales increase, Kellogg needs to educate consumers about health.

Work Cited
1 Samala, L. (2012, April 30). Kellogg Faced Competitive Headwind. Retrieve from http://beta.fool.com/saintgermain/2012/04/30/kellogg/4106/
2 Russell, M. (2012, May 17). In the Spotlight – Kellogg Could Need More than Brand “Refresh”. Retrieve from http://www.just-food.com/analysis/in-the-spotlight-kellogg-could-need-more-than-brand-refresh_id119199.aspx
3 Passikoff, R. (2012, May 03). Snap, Crackle, Pop…Crunch? Kellogg’s adds Pringles to Their Mostly- Cereal Portfolio. Retrieve from http://www.forbes.com/sites/marketshare/2012/05/03/snap-crackle-pop-crunch-kelloggs-adds-pringles-to-their-mostly-cereal-portfolio/