...Harvard Business School 9-795-191 Rev. February 14, 1997 The Ready-to-Eat Breakfast Cereal Industry in 1994 (A) All is not well in the land of Tony the Tiger.1 In early 1994, the ready-to-eat (RTE) breakfast cereal industry had reached a critical turning point in its evolution. In an industry historically characterized by stability and above average profitability, slowing demand growth and a surge in private label sales threatened to undermine the dominant positions of the Big Three: Kellogg, General Mills, and Philip Morris. The 1993 year-end statistics showed that industry sales growth had slowed to under 2%, while private labels had topped 5% market share by sales and 9% by volume for the first time. Price increases by the Big Three had widened the gap between branded and private label products. The competitors had traditionally avoided destructive head-to-head competition, but this mutual restraint appeared to be crumbling. Each of the firms faced major decisions going forward about whether to break with the industry’s lock-step moves and how to deal with the threat of private labels. History of the RTE Breakfast Cereal Industry2 The ready-to-eat breakfast cereal industry got its start in 1894, when Dr. John Kellogg and his brother W.K. Kellogg invented wheat cereal flakes in an attempt to make whole grains appealing to the vegetarian clients of the Seventh-Day Adventist sanitarium Dr. Kellogg ran in Battle Creek, Michigan. 3 W.K. went on to invent the corn flake...
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...COMPETITIVE STRATEGY The Ready to Eat Breakfast Cereal Industry in 1994 Word count: 1000 (excluding questions & exhibit) 1. Why has cereal breakfast been such a profitable business? Cereal breakfast industry has been highly concentrated industry with top four firms accounting for 80% of market share in 1993. Return-On-Sales in this industry (18%) is also significantly higher than compared to those in general food industry (5%). Primary reason for high profitability is * Barrier to entry: Cereals breakfast industry although had no explicit regulatory barriers to entry, still the list mentioned below were acted as high deterrent for new firms to enter the market: * Brand Proliferation: Big-3 had launched a very successful Brand proliferation strategy, by launching products to serve every foreseeable market category. This strategy also resulted in lowering market-share/brand and profit/brand, making it difficult for new entrants to cover the cost of initial capital. * Advertising & Promotion: Advertising/sales ratio in Cereal industry has although reduced from 18% in 1960’s to 10.2% in 1993, still it was higher than most of the other consumer product business. A typical spend of $20 million in the first year of a new brand can be enough to deter a new firm from entering the market. * Retail Channel: With increase in number of brands to offer, prime shelf space in retail channel was of prime importance in success of a product...
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...RTE Cereal Case Study Number of Firms and Market Shares There were six firms in the industry from 1950 to 1990 represented in the case study. In 1990 private label firms entered the market. The industry grew consistently through the 21st century but, the Big Three, consisting of Kellogg, General Mills, and Nabisco, dominated the market. Kellogg has consistently dominated the market shares in the RTE cereal industry with General Mills and Post following close behind. From 1950 to 1993, Kellogg’s average market share was 40.3, General Mills was second with an average market share of 21.7 and third of the Big Three, Post, had an average market share of 17.4. There were not any significant changes in the market shares from 1960 to 1980. However, in 1990 Post dropped to 11.1, 4.5 less than the value in 1980, General Mills reached 24.4, 4.5 more than the value in 1980, and Kellogg, still leading the pack, decreased to 37.5, 3.4 less than the value in 1980. From 1990 to 1993, there were not any significant changes in the market shares for the Big Three. There are three other firms listed in the case study that represented the remainder of the market shares. During the same time frame, Quaker had an average market share value of 6.8. Quaker market shares decreased dramatically from 1950 to 1960 but made a steady increase beginning in 1970. Nabisco’s average market share was 5.0. The market shares for Nabisco decreased in 1970 and continued to decrease giving them the lowest...
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...launch a new ready-to-eat whole grain children’s cereal called Pirate Oats. Pirate Oats will be the first cereal of its kind offering the health benefits of whole grains while still being preferred by the target market of American children under the age of five. Children will favor Pirate Oats because of the cartoon mascot Captain Grain pictured on the front of the box. Parents will love Pirate Oats because it will keep their children healthy and at lower risk to develop childhood obesity and type two diabetes. This is because Pirate Oats will be lower in excess sugar, and higher in whole grains, than the competition. Pirate Oats will be marketed through an advertising campaign on popular children’s after-school television shows on networks such as Nickelodeon and FOX. First year marketing efforts will result in revenues equalling 10% of the target market as well as a 2% total market share gain for General Mills within the ready-to-eat breakfast cereal market. Achieving these goals will allow General Mills to reliably turn a profit within the first year of sales. 2.0 SITUATION ANALYSIS General Mills has long been a standard in the ready-to-eat breakfast cereal marketplace. It has many cereals marketed to, and designed for children, and has enjoyed a healthy market share to date. With the recent health food craze, the rise in childhood obesity, and poor diet being blamed for heart disease, type two diabetes, as well as cancer; refined flour and high sugar breakfast cereals marketed...
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...my favorite things to eat is breakfast cereal. I have been a cereal eater since I was a kid and have chosen to do my paper on the breakfast cereal industry. The NAICS code is 311320. The SIC code is 2043 Cereal Breakfast Foods. The SIC gives a description of establishments as primarily engaged in manufacturing cereal breakfast foods and related preparations, except breakfast bars. Cereal breakfast foods include: coffee substitutes made grain, hulled corn, farina, granola (except bars and clusters), hominy grits, infant cereal foods, oatmeal, rolled oats, rice breakfast foods and wheat flakes. History Breakfast cereal is one of the most popular forms of breakfast in the United States. Just about all of us have had and enjoyed a bowl of cereal in the morning. The breakfast cereal industry is very profitable and has been around a long time. In 2007, the market value for the industry was $11.2 billion (Datamonitor, 2007). The breakfast cereal was first invented in 1863 by Dr. James Caleb Jackson who made the granula. The granula was a hard wheat that had to soak overnight before it could be eaten. Later the popular Corn Flakes was invented and today there are many varieties of cereal to choose from. There were a number of individuals who made various forms of cereal as a diet for its patients of the Sanitarium in Battle Creek, Michigan. The cereals that were made however were not for mass market. Not until 1906 was there a patent for cereal, and Corn Flakes were mass...
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...the world’s sixth largest food manufacture and the second largest producer of breakfast cereal in the United States. The company makes products in 15 countries and manages 40 production sites in the United States (General Mills, 2014). Within these sites, it employs about 35,000 workers, which allow the company to sell its products in more than 100 countries besides the Unites States. The company’s mission can be stated in two words: Nourishing lives. The company also has a strong international presence, selling its products in more than 100 countries. General Mills operates within three segments: US Retail, International, and Bakeries and Foodservice (General Mills, 2014). The company participates within the Cereal Production industry through its US Retail segment, which includes ready-to-eat cereal, organic cereal, granola bars and grain snacks. The cereal segment of its business is the most significant source of revenue, representing about 23% of US retail sales. Furthermore, it is estimated that US industry-specific revenue will grow at an annualized rate of 3.8% to $2.5 billion during the five years to fiscal 2013 (General Mills, 2014). Industry Analysis: Internationalization The breakfast cereal industry acquires raw materials such as corn, wheat, flour, sugar, malt extract, rice and salt from various sources and processes these ingredients into ready-to-eat cereals, hot cereals and cereal bars. It also purchases raw materials such as plastic and paperboard containers...
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...Cereal: The Complete Story ® Let’s make today great™ Quick facts on breakfast cereal. Average calories per serving by breakfast type. Cereal compares favorably to many other traditional choices.1 Children who eat cereal regularly tend to have lower BMIs.*** Studies have shown that the consumption of cereal for breakfast is associated with lower BMI in children, a relationship that holds regardless of the amount of sugar in the cereal.2, 3 Fewer than 4 servings in 14 days 4 to 7 servings in 14 days More than 7 servings in 14 days Percent overweight age 4-6 48% 35% 26% Percent overweight age 7-9 50% 38% 16% Good mornings begin here. The latest science on breakfast cereals. Since introducing Kellogg’s Corn Flakes in 1906, Kellogg has invested decades of science and product development into health and nutrition. From being the first food company to employ our own dietitian, to running our own research labs and closely monitoring independent studies on breakfast, cereal, grains and fiber all around the world, we aim to keep abreast of the ongoing scientific advancements in nutrition and food research and take this into account as we strive to enhance existing cereals and develop new cereals. What we learn constantly shapes our future direction. In the past few years, it’s helped us respond to consumer and market demands to lower sugar and sodium, as well as to increase the fiber and maintain the great taste in many of our cereals. We’re always looking for ways...
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...Rte Cereal Industry The Ready-to-Eat (RTE) Breakfast Cereal Industry in 1994 The Big Three (Kellogg, General Mills, and Phillip Morris) had been enjoying the stable Ready-to-Eat breakfast cereal industry with above average profitability since its start in 1894 until the recent surge of the private label sales and slowing demand. The Big Three had been extremely profitable because they were able to maintain high prices by restraining from direct price competition among themselves, which would have resulted in a lose-lose situation with a decrease in the overall profitability of the industry. The Big Three monopolized 82.5% on average of the concentrated market through 1950 to 1980, as they controlled the whole value chain. The coopetition was formed through unwritten agreements among the Big Three to limit special offers, which would only increase one firm’s market share temporarily at the expense of its competitors. These tactics would initiate a cycle of escalating costs, decreasing industry profitability. To avoid this sequential game, all major players simply followed the price increase of Kellogg, the market leader, who was aware of its power to effectively determine the price levels of the industry by analyzing prior reactions of the competitors. The major manufactures utilized coupons and trade promotions heavily, which resulted in over one fourth of all cereal purchases made with coupons. These price promotions made the hike of RTE cereal prices possible by...
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...(860) 486-2461 email: fmpc@canr1.cag.uconn.edu http://vm.uconn.edu/~wwware/ fmktc.html No. 17 October 1998 Jawboning Cereal: The Campaign to Lower Cereal Prices by Ronald W. Cotterill Food Marketing Policy Center University of Connecticut Food Marketing Policy Center, Department of Agricultural and Resource Economics, University of Connecticut, 1376 Storrs Road, U-21, Storrs, CT 06269-4021 Jawboning Cereal: The Campaign to Lower Cereal Prices by Ronald W. Cotterill Abstract This article introduces the Forum by explaining the sequence of events related to the jawboning campaign and subsequent reductions in cereal prices. It also introduces the main issues on the vigor of competition and pricing that are analyzed in subsequent papers. Jawboning as a public policy strategy is assessed and found useful in certain circumstances such as those in the breakfast cereal industry in the mid 1990’s. The jawboning campaign was effective in advancing price competition in an industry that successfully resisted repeated antitrust efforts to promote competition. The RTE cereal industry is now undergoing major structural changes that are on balance pro competitive. (ECONLIT Cites: L100, L410, L660) Key words: jawboning, nonprice competition, market power, market concentration, antitrust enforcement Jawboning Cereal: The Campaign to Lower Cereal Prices by Ronald W. Cotterill∗ This Agribusiness Forum contains a...
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...strategic management case that includes the company’s financial statements, organization chart, competitor information, and industry trends. Sufficient internal and external data are provided to enable students to evaluate current strategies and recommend a three-year strategic plan for the company. Kellogg is headquartered in Battle Creek, Michigan, where the company was started in 1906. Kellogg’s common stock is traded on the New York Stock Exchange under the symbol K. Kellogg is the world’s largest producer of ready-to-eat cereals and a leading producer of cookies and snacks, also known as convenience foods. Kellogg manufactures products in 17 countries and markets them in over 180 countries. Kellogg has a long history of international operations. It started marketing its products in Canada, England, and Australia before World War II and then entered the Latin American, European, and Asian markets. Despite its emphasis on international operations, Kellogg receives about two-thirds of its sales and pre-tax income from North America. Kellogg’s primary competition in ready-to-eat cereals comes from General Mills, headquartered in Minneapolis, Minnesota. Kellogg also competes with the Post unit of Kraft Foods and the Quaker Oats unit of PepsiCo in the ready-to-eat cereal market. General Mills’ Cheerios is the world’s best selling cereal. When Kellogg’s market share briefly fell behind that of General Mills in 2001, Kellogg responded quickly to regain the...
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...The Ready-to-Eat (RTE) Breakfast Cereal Industry in 1994 The Big Three (Kellogg, General Mills, and Phillip Morris) had been enjoying the stable Ready-to-Eat breakfast cereal industry with above average profitability since its start in 1894 until the recent surge of the private label sales and slowing demand. The Big Three had been extremely profitable because they were able to maintain high prices by restraining from direct price competition among themselves, which would have resulted in a lose-lose situation with a decrease in the overall profitability of the industry. The Big Three monopolized 82.5% on average of the concentrated market through 1950 to 1980, as they controlled the whole value chain. The coopetition was formed through unwritten agreements among the Big Three to limit special offers, which would only increase one firm’s market share temporarily at the expense of its competitors. These tactics would initiate a cycle of escalating costs, decreasing industry profitability. To avoid this sequential game, all major players simply followed the price increase of Kellogg, the market leader, who was aware of its power to effectively determine the price levels of the industry by analyzing prior reactions of the competitors. The major manufactures utilized coupons and trade promotions heavily, which resulted in over one fourth of all cereal purchases made with coupons. These price promotions made the hike of RTE cereal prices possible by seemingly lowering the...
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...Kellogg’s Special K Our project focuses on one of the leading cereal manufacturer in the ready-to-eat cereal industry today, Kelloggs. Kelloggs is considered one of the top producers in the cereal manufacturing industry, gaining a successful market share of $21.5 billion and earned revenues of $13.2 billion in the year 2011. They introduced their Special K line of products in the year 1955, with their main goal of ‘changing lifestyles’ for their current market segments: working women and busy moms by providing weight management guides through a balanced, nutritious diet, and an online community. However, our marketing team decided to suggest an improved marketing strategy for Kellogg’s Special K, to target a broader range of market segments to satisfy their needs and wants. These market segments would consist of men, ages 20-40, teenage girls, ages 15-19, and children, ages 5-9. This will give them a better competitive edge in the breakfast manufacturing industry as Kellogg’s would be able to gain brand popularity and brand loyalty from different consumer age-groups; a larger share of the breakfast manufacturing industry; increased profitability from increased sales of Special K; reduce their dependence over a single market segment and finally to take advantage of expansion opportunities within the industry. Therefore, our team’s suggested approach for Kellogg’s new marketing mix would involve customizing Special K for men, teenage girls and children. The first P,...
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...Ready To Eat Breakfast Cereal Industry Monday, September 09, 2013 3:09 PM The Big 3 and the industry before the 1990's 1972 Federal trade Commission file a major antitrust suit against the big 3 (Kellogg, General Mills, and General Foods) Argued: Monopolized cereal market and had taken specific steps to deter entry by new firms How? Restrained competition amongst themselves through "unwritten agreements" to limit the in-pack premiums (free toys, gifts, e tc) -Refrain from trade dealing-offering discounts to retailers for special treatment or special promotions -Refrained from widespread fortification of their brands because it was believed to not be in the long run interests of the industry (vitamin fortification) FTC also argued the big three took specific actions to make new entry ventures unprofitable -prevented entry into the RTE cereal industry by encouraging super markets and other retailers to adopt a shelf space plan that ensured the big threes products received the most valued center aisle position Caught off guard with the introduction of natural cereal brands Industry environment in the 1990's Technology Processes utilized in creation of many children's cereals took substantial engineering expertise and production experience to master. -Standard plant was estimated to req. a capacity of 75 million pounds per year to achieve minimum efficient scale -employed 125 people -req. capital in excess of 100 million -a singly plant...
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...DIAGNOSING MARKETING FAILURE OF KELLOG’S BREAKFAST MATES USING FOUR “A” FRAMEWORK COURSE TITLE: MARKETING MANAGEMENT COURSE CODE: GR 523–1DA SUBMITTED TO DR. RAJ SISODIA, PROFESSOR OF MARKETING SUBMITTED BY KHALED MAHMUD MCCALLUM GRADUATE SCHOOL OF BUSINESS BENTLEY UNIVERSITY MARCH 18, 2013 TABLE OF CONTENTS 1. KELLOGG’S AS A COMPANY: ............................................................................................................ 1 2. BACKGROUND OF KELLOGG’S BREAKFAST MATES: ...................................................................... 1 3. KELLOGG’S BREAKFAST MATES’ OFFERING: ................................................................................. 1 4. TARGET MARKET: ........................................................................................................................... 1 5. POSITIONING: ................................................................................................................................... 1 6. FAILURE OF BREAKFAST MATES: ...............................................................................
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...Since 1932, Weetabix has been a popular part of a British family breakfast. Weetabix itself is the nation's favorite breakfast cereal, and the brand includes a wide range of tasty, nutritious cereals, bars and muesli. Weetabix Heapular part of a British family breakfast. Weetabix itself is the nation's favorite breakfast cereal, and the brand includes a wide range of tasty, nutritious cereals, bars and muesli. Weetabix Head Office is located at its main production site, Burton Latimer, a 75 acre site that produces circa 3 billion Weetabix every year. Weetabix is enjoyed all over the world, with further manufacturing facilities in the USA and South Africa and consumers in more than 80 countries. Structure of the industry: Breakfast cereals are an integral part of the British diet, and a key sector of the grocery market in the UK. The total industry value is about 2bn at present in the UK. Since the Second World War, consumption of breakfast cereals has shown steady growth, although in 2008 the UK economy was hit by the recession, which saw the sale of breakfast cereals - alongside other food items - slow. Between 2006 and 2010, Key Note estimates that the entire breakfast cereals market grew by 15.6% in value terms, with particular growth demonstrated in the RTE cereal sector, which accounted for 91.2% of sales by value in 2010, compared with 90.9% in 2006. In addition, the consumption of hot cereals, which had been in long-term decline, has risen over the past 5...
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