Kellog’s Indian Experience
April 1995, Kellogg India Ltd. (Kellogg) received unsettling reports of a gradual drop in sales from its
distributors in Mumbai. There was a 25% decline in countrywide sales since March1995, the month
Kellogg products had been made available nationally. Kellogg was the wholly-owned Indian
subsidiary of the Kellogg Company based in Battle Creek, Michigan.
Kellogg Company was the world's leading producer of cereals and convenience foods, including
cookies, crackers, cereal bars, frozen waffles, meat alternatives, piecrusts, and ice cream cones.
Founded in 1906, Kellogg Company had manufacturing facilities in 19 countries and marketed its
products in more than 160 countries. The company's turnover in 1999-00 was $ 7 billion. Kellogg
Company had set up its 30th manufacturing facility in India, with a total investment of $ 30 million.
The Indian market held great significance for the Kellogg Company because its US sales were
stagnating and only regular price increases had helped boost the revenues in the 1990s. Launched in
September 1994, Kellogg's initial offerings in India included cornflakes, wheat flakes and Basmati rice
flakes. Despite offering good quality products and being supported by the technical, managerial and
financial resources of its parent, Kellogg's products failed in the Indian market. Even a high-profile
launch backed by hectic media activity failed to make an impact in the marketplace
Kellogg realized that it was going to be tough to get the Indian consumers to accept its products.
Kellogg banked heavily on the quality of its crispy flakes. But pouring hot milk on the flakes made
them soggy. Indians always boiled their milk unlike in the West and consumed it warm or lukewarm.
They also liked to add sugar to their milk or lukewarm. Disappointed with the poor performance,
Kellogg decided to launch two of its highly successful brands - Chocos (September 1996) and Frosties
(April 1997) in India. The company hoped to repeat the global success of these brands in the Indian
market. Chocos were wheat scoops coated with chocolate, while Frosties had sugar frosting on
individual flakes. The success of these variants took even Kellogg by surprise and sales picked up
significantly. It was even reported that Indian consumers were consuming the products as snacks.
This was followed by the launch of Chocos Breakfast Cereal Biscuits. The success of Chocos and
Frosties also led to Kellogg's decision to focus on totally Indianizing its flavours in the future. This
resulted in the launch of the Mazza series in August 1998 - a crunchy, almond-shaped corn breakfast
cereal in three local flavours -‘Mango Elaichi’, ‘Coconut Kesar' and ‘Rose’.
In 1995, Kellogg had a 53% share of the Rs 150 million breakfast cereal markets, which had been
growing at 4-5% per annum till then. By 2000, the market size was Rs 600 million, and Kellogg's share
had increased to 65%. Analysts claimed that Kellogg' entry was responsible for this growth.
The company's improved prospects were clearly attributed to the shift in positioning, increased
consumer promotions and an enhanced media budget...
