...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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...Ready-to-Eat Breakfast Cereal Industry in 1994 From 1950s to the 1980s, the ready-to-eat (RTE) cereal industry was concentrated with three companies dominating the volume market share: Kellogg, General Mills, and General Foods (acquired by Philip Morris in 1985 – makers of post), with volume market share that hovered around the 30s, 20s, and 10s, respectively. Quaker, Nabisco, and Ralston held single digit volume market share throughout this time. The industry was characterized by stability and above average profitability. Sales were steady at a compound annual volume growth rate of three percent between 1950 and 1993 due to new offerings such as vitamin fortification (during WWII), presweetening (1950s), and interested in granola and natural cereals in 1970s to 1980s. The largest cereal manufacturers were extremely profitable, routinely posting Return on Assets in the 15-30 % range. Some industry observers claimed that the Big Three (Kellogg, General Mills, and Post) had effective unwritten agreements to limit in-pack premiums to one brand at a time for each company, to refrain from trade dealing (offering discounts to retailers for special treatment or special promotions), and withhold from widespread vitamin fortification. These tools, if employed, would temporarily increase a firm’s market share at the expense of its competitors. Because the Big Three avoided these practices for many years, they prevented a cycle of escalating costs that would ruin the RTE industry profitability...
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...3. Take a closer look at consumer behavior. What are the determinants of their demand for breakfast cereal? Consumer behavior for the RTE cereal industry started to change in the early 90s. Before that, consumers were buying mainly the branded products of the Big Three as evidenced by volume market share of around 85% for decades. This is despite the fact that the branded products are more expensive compared to private labels. There was a perceived higher quality with the higher price of the branded products. This was supported by intensive advertising by the Big Three with an average advertising budget of 12% of revenue. The industry also was the top issuer of coupons for the consumers to buy the product. In addition, they were doing costly trade promotions particularly buy-one-get-one-free offers. Because of the high advertising and promotions spending, this is the justification used by the brands for constantly increasing prices with the process known as “price up and spend back.” This price promotion strategy increased the RTE cereal prices up to 15.6% from 1990 to 1993 which is the period where consumer behavior started changing. The price promotion strategy had the unintended consequence of widening the price gap between the branded cereals and private labels. In addition, it was during this time that the private labels increased in technological competence which led to improvement in quality that rivals branded ones and still able to maintain the lower manufacturing...
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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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...RTE Cereal Industry Barriers to Entry Giovanni Massari 1) Economies of Scale: with regards to Economies of Scale, we have Product-Specific ones with regard to the fact that there is a minimum efficient scale of production in the industry, without which firms wouldn’t survive in the environment; requirements, in this case, are 75 million pounds of cereals per year to be efficient. Other scale economies can be Multi-Product ES (“Economies of Scope”); indeed, different types of cereals can be produced in a very similar way, not requiring different production facilities, but leveraging the existing ones. The same can also be applied to packaging/bagging, which is the main source of Economies of Scale, because the Big Three use the same package within the firm for the various cereals they produce, with little differentiation. Finally, there are scope economies in advertising, since there’s the possibility of leveraging on it for new product introductions (“Brand Extension”), decreasing costs related to it – even though they’re still high, ¼ of the entire food industry’s expenses. 2) Experience Curve advantages: we have that the Big Three encounter Experience Curve advantages whenever trying to develop a brand extension or a new product, because of the cost reduction faced due to knowledge of basic processes needed for production. This, in combination with the existence of proprietary technology (see below, section 7), increases new entrants’ difficulty in entering the market...
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...1572081 The Ready-to-Eat Breakfast Cereal Industry in 1994 (HBS 711462) Q.№1 – Why has the RTE cereal been such a profitable business? What changes have led to the industry crisis of 1994? To begin, historically the RTE cereal industry market shares showed great persistence. There are several reasons of it. Firstly, the industry is been oligopolized by Big Three (Kellogg, General Mills, General Foods) and had restrained competition among themselves by achieving effective unwritten agreement to limit in-pack premiums- free toys or gifts included in the package – to one brand at a time for each company and to refrain from trade dealing-offering discounts to retailers for special treatment or special promotions. Then, the Big Three had prevented entry into the industry by encouraging supermarkets and other retailors to adopt a shelf space plan that ensured that the Big Three’s products received the most valued position. Crisis appeared in 1994, when major firms continually introduced new products that market became fragmented. The two most highly touted product introductions of 1994 were “co-branded” cereal. As a fact, low price was the primary appeal of private label cereals. Also, they perceived to offer better margins to the retailers. Q.№2 – Imagine that your group wants to enter the RTE Cereal industry in 1994. What are the investment items you should consider? How much should these items cost in total? RTE cereal plant was estimated to require a capacity...
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...growing is used to feed our animals and only ten percent of it is used to produce human foods. You can consume oats in many products, such as the most common is cereals. Cereal brands such as honey bunches of oats, Honey nut O’s, Oatmeal, granola bars, porridge etc and other tasty treats such as oatcakes and oatmeal cookies. General mills produces cheerios in which are made with oats. When General mills market their cheerios product, they use a cartoon image such as the bee to promote its honey nut cheerios. They also use bright colors that represent the cheerios flavoring. For example Apple cinnamon cheerios green box, banana nut cheerios is in a bright yellow box, bright blue box for the frost cheerios. So not only do the bright colors attract your eye but associate with you choice of flavor. One of My favorite products in which you can find oats in is General Mills cereal products. Cascadian farms cereal which is an organic cereal is my favorite brand they distribute. The Cascadian farms are located in Rockport, WA. On there 28-arce farm they grow their own crops and protecting their local ecosystem by using organic methods. They also grow their own organic strawberries, raspberries, hardy kiwis, peppers, corn and pumpkins, which one could imagine would come in handy when it comes to making cereals with various...
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...examples fiber helps to protect against breast cancer, and colon cancer. Fiber lowers cholesterol, stabilizes blood sugar, and helps to prevent obesity by making a person feel like they are full longer and as a result, eat less. There are two kinds of fibers; soluble and insoluble. Soluble fiber dissolves in water to form a gel – like substance that swells. Soluble fiber helps to keep blood glucose levels where they should be and lowers ones cholesterol. Examples of soluble fibers are oats, beans, peas, apples, and berries. The other type of fiber is insoluble fiber; this type of fiber does not dissolve. Insoluble fibers increase the movement of material through ones digestive tract. Examples of insoluble fiber are whole wheat breads, wheat cereals, cabbage, beets, carrots, Brussels sprouts, and apple skins. It is important that an adult who consumes a diet that consists of two thousand calories daily should eat six to eight servings of grains each day and a total of twenty five grams of fiber daily. It is recommended that children follow the rule for ages five plus. An example would be a seven year old should be eating thirteen grams of fiber daily. When looking for information on the amount of fiber an adult should be consuming daily one can easily find it on the internet. Reference American Heart Association (2010). Heart and stroke, fiber. Retrieved from...
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...currently in their development phase. The problems they may face at time of launch are whether or not the pump would be gentle enough not to rupture blood cells. The uncertainties that exist are whether or not the magnetic levitation heart pump would meet the long term industry standard. World Heart can use today’s micro tech ology to exist in managing any uncertainties. Ch. 03 - New Product Strategy at Kellogg. Smores grain bars. PIC (Product Innovation charter) Background develops a good tasting yet healthy snack bar. The guidelines are to be the first ones to hit the market with a great tasting snack bar. The goal is to market dominance and a 25% market share the first year. Kellogg’s PIC has brought them from #2 back to #1 in the cereal market and the focus is to stay there. Various new products such as collaboration with Reese’s and Girl Scout cookies offer a new taste everyone will love. Ch. 03 - New Product Strategy at Kellogg. Smores grain bars. PIC (Product Innovation charter) Background develops a good tasting yet healthy snack bar. The guidelines are to be the first...
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...other nutritional benefits that benefit other parts of the body such as with the gastrointestinal digestive system. Some of the differences between soluble and insoluble fiber would be the capacity of water they are able to hold; for example “soluble” fibers have a high water-holding capacity. Soluble fiber has been associated with increased diet quality and decreased risk of cardiovascular disease. Foods high in soluble fiber include oat bran, oatmeal, beans, peas, rice bran, barley, citrus fruits, strawberries and apple pulp. Insoluble fiber has been associated with decreased cardiovascular risk and slower progression of cardiovascular disease in high-risk individuals. Foods high in insoluble fiber include whole-wheat breads, wheat cereals, wheat bran, rye, rice, barley, most other grains, cabbage, beets, carrots, Brussels sprouts, turnips, cauliflower and apple skin. According to the article, part of the recommendations for children and fiber are that children consume the amount of energy intake needed and as they grow into an adult with an adult caloric intake; approximately 1500 or more. When determining the amount of fiber to be in taken by a child the “age plus five” rule is mentioned. A good way to explain it would be to take the child’s age plus five and that would be the number of grams of fiber per day recommended; verses an adult recommendation of 25 to 30 grams per day. Fiber impacts Coronary Heart Disease by reducing your risk of developing a heart attack...
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...Natural Cereals Case Questions Question 1: After strongly reviewing this situation over and over again, I have realized how difficult and important this decision really is to our company. I believe my co-workers Sally Thompson and Joe Bradley have done an exceptional job so far, and have definitely pointed our marketing department in the right direction. After our company implemented Sally’s proposal, our market share increased three points, which she definitely deserves credit for. However, her proposal has led to some active criticism from the public which has left our group manager Tom Miller displeased because of how valuable this proposal is to our Natural Cereals division. Sally’s proposal included a limited health message to the high fiber content in our bran cereals. She indicated in a very cautious way that food high in fiber has been associated with studies to lower rates of some forms of cancer; however, she did not go about saying that our bran cereals had more bran than other competing bran cereals. She also went about featuring our new “Re-sealable Pack,” which allows the inside bag to be resealed for freshness, and included a 35 cent coupon toward the next purchase of a product of Natural Cereal. Although she believed her proposal avoided deception to our consumers, one key criticism we have received for Sally’s efforts is that we jumped on the company bandwagon that makes often misleading or incomplete health claims. Tom believes we cannot afford...
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...Wintone Machinery is a professional rice mill machinery manufacturing enterprise, the main products are rice processing equipment including: the raw grain cleaning machine, de-stone machine, paddy husker, paddy separating machine, horizontal rice milling machine, vertical rice milling machine . The grinding mill can also be combined with a variety of other devices such as the rice sorting machine, rice polishing machine, bucket elevator, and power distribution cabinets. Our main products are RICE MILLING MACHINE, stone picker, flour miller, rice elevator, rice cake making machine and grain sorting machine. We wish to call your particular attention to this fact that our market share of rice milling machine of which horse power is from 3 to 5 class in Japanese domestic is over 50%, so we are absolutely sure that they are excellent in the rice milling efficiency and those finish. In overseas countries there are actual export to Korea, China, Thailand, Vietnam and Sri Lanka. For the farm areas, we have succeeded to develop the special type of machine unified the functions of hulling and rice milling for Asia only. Rice milling of low cost and high quality is completed by joining together stone picker and sorting machine. In addition it, the RICE MILLING MACHINERY business used at the store, for example, the Supper Market and the Department Store, can make a free choice of such rice milling finish as partial pounding and clean pearled rice without water, and it is easily possible...
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...First, what is CORN CLEANING MACHINE ? Corn cleaning machine refers to the TQSF single gravity destoner machine here. The gravity destoner machine is the most ideal corn cleaning machine in the world. TQSF corn cleaning machine has the dual functions of classifying and stone removing. It includes screening, classifying, stone removing and winnowing. In recent years, the people looking for investment chances are more and more. Corn and grain, as the necessary part in our daily life, will definitely attract more attentions. Therefore, corn cleaning machine will be a thriving industry. Investment in this industry will be a wise choice. Maybe you are not strange to corn cleaning machine. As the corn and grain planting superpower, China exports large quantity of food each year. This will be the booster for the corn cleaning machine development. Current corn cleaning machine is well received by the people for its advance corn cleaning machine and grain processing equipment, automatic control system and continuous innovation. Then, let's analyze corn cleaning machine in Africa. We take corn cleaning machine as the example. In Africa, corn cleaning machine is among the most traditional and necessary units. Taking into consideration the African market needs and market requirement, corn cleaning machine is considered to become more and more popular. It can not only be established at a lower cost but is versatile as well - since maize flour can be obtained from it for commercial...
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...Gravity destoner machine is not only widely applied for removing stone from all kinds of seeds and grains, also can be used in other fields such as remove stone from active carbon. Using the difference of specific gravity and suspending speed between grains and stones, and by means of air stream passing up through space of grain kernels, the stoner separates stones from grains. GRAVITY DESTONER MACHINE produced by Win Tone Machinery is absolutely reliable. The heavy impurities such as stones having the same size and shame with grain kernels are in the lower layer and move to the stone outlet by means of directional, slope and reciprocating movement of stoning sieve plate, while grains floating in the upper layer roll under self gravity to discharge outlet, so as to separate from grains the stones having the same size and shame with grain kernels. Wintone Machinery is mainly engaged in gravity destoner machine, wheat processing engineering, wheat equipment manufacturing, installation, commissioning and training service. Win Tone machinery has rich experience in gravity destoner machine installing and producing, scientific management methods, complete quality assurance system, which guarantee us to finish our each oil processing project reliably. Gravity destoner machine is tested on various quality parameters and is designed in compliance with the set industry standards. We offer these machines according to the customers requirements at affordable prices. Want to know...
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...Buying Rice Vibrating Cleaning Sieve from China TQLZ series Rice Vibrating Cleaning Sieve is suitable for cleaning raw grain for grain processing plant and grain storage. The Rice Vibrating Cleaning Sieve of different specification can separate large, small and light impurities from wheat, paddy ,corn and oil bearing materials. Rice Vibrating Cleaning Sieve is designed with doubledecked sieve, and good seal. It has much better effects especially for big impurities contained in grain. It is also used for granule separation in food and chemical industry. The Rice Vibrating Cleaning Sieve is driven by double vibratory motors , which enables the airtight sieve to keep a back-and-forth track of movement with different angles and amplitude . It can be used in the cleaning stages for grain warehouse , mills ,feed-grain process factory and oil factory to remove impurity and barnyard grass from paddy , wheat , corn and sunflower seeds , in addition , it can also be used in the grading of intermediary and final rice products . We can supply you with reasonable and competitive price and good quality TQLZ Series Rice Vibrating Cleaning Sieve. If you are interested in any of products, please contact us for more information. TQLZ series Rice Vibrating Cleaning Sieve is suitable for cleaning raw grain for grain processing plant and grain storage. The Rice Vibrating Cleaning Sieve of different specification...
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