Kelloggs is a US based multinational food-manufacturing
company founded in 1906 by Will Keith Kellogg. Kellogg's is a
leading producer of cereals and convenience foods, cookies,
crackers, cereal bars, toaster pastries, fruit-flavoured snacks,
frozen waffles, and other related vegetarian foods. The brands
offered by company include Froot Loops, Frosted Flakes, Corn
Flakes, Rice Krispies, Cocoa Krispies, Special K, Keebler,
Pringles, Kashi, Pop-Tarts, Cheez-It, Nutri-Grain, Eggo,
Morningstar Farms etc. The stated purpose of Kelloggs has
been "Nourishing families so they can flourish and thrive.
Kelloggs is one of the biggest brands in the field of breakfast
cereals and its breakfast cereals are consumed highest
compared to any of its rivals. During the late 1980s, nearly
40% of the total ready-to-eat breakfast was captured by
Kelloggs brands alone. Internationally, they had over 20
plants covering 18 countries of the world and annual sales
more than 6 billion USD.
However, around 1983, the market share of Kelloggs tipped
to around 36% mainly due to competition given by its rival,
General Mills. After facing extreme competition from General
Mills, in the beginning of 1990s, Kelloggs decided to venture
into the new potential markets for breakfast cereal eating
customers. 1994 was the period when India was changing its
foreign-trade policies and was opening itself to international
trade as a result of liberalization. Hence, India with a
population of around 900 million with nearly 25% of them as
middle-class households was the obvious choice of Kelloggs
for its market expansion plan.
Kelloggs decided to open its subsidiary in India by the name
of Kelloggs India and launching its topmost brand, Corn
Flakes. The company decided to invest around 65 million USD
on this project. This investment is received in a great positive
sense among the Indian economists considering the vast
market size of India and motivation among the households to
improve their life-styles. However, when the Corn-Flakes were
launched, it did not receive the expected response in the
market. Kelloggs also was extremely confident about the
success of their product in Indian market. However, the when
launched, product was a complete disappointment and the
strategy of Kelloggs to position itself as healthy and
nutritional brand totally failed. Indian market did not accept
the whole idea. Eventually, they had to take the product back
and after several months of analysis and market research, they
entered the market again and re-launched the product.
This post analyses the reasons behind the initial failure of
Kelloggs India and the marketing and product-positioning
strategies of Kelloggs India, where did they went wrong. The
write up gives an insight about the marketing-mix adopted by
the company and its marketing strategy for the re-launch and
how such policies worked for them in Indian market.
MARKET RESPONSE
As it is well known in the global economy that India is a
country known for its tradition. This tradition is not just
confined to the dressing style, the festivals but also has its
imprints on the eating habits of the people. Kelloggs believed
it is going to attract the Indian market by introduction of a
new breakfast product. They were initially marketing their
new product on the lines of being crispy flakes. But at the
same time the company didnt create enough awareness about
the eating tradition of the people in the West. Because of this
lack of awareness the Indians used the new product with Hot
milk and hence it made the flakes snoggy. Details of the
failures of the product is explained in details in the section
that follows.
The initial launch of Kelloggs was a nightmare for the
company. The company had invested Rs. 65 million during
the initiation phase to explore the untapped market of 950
million inhabitants. The cereal breakfast segment was
growing at a slow pace of just 3 to 4 % annually. Though the
company gain success in the initial period yet the response
kept on going down.
The cereal manufacturer crossed Rs. 150 crores mark in 1995.
But since then the rate of growth has been very slow. From
1995, for the next 15 years the company grew altogether at a
rate of 8.4% per annum. Initially it was difficult for Kelloggs
to survive in the Indian market but they corrected their steps
and re launched their products. The corrective actions and the
re- launch of the products is discussed in the sections that
follow. An overall glimpe of the different products that was
introduced by Kelloggs in the Indian market are as
mentioned below :
Products
Target Group
Launch
Entire Family
1994
Kids
2009
Kids
2009
Men 30+
2010
Women
2001
Women
2008
Adults
2006
Cornflakes
Chocos
Honey Loops
Oats
Wheat Flakes
Special K
Muesli
** Source: themarketmanager
KELLOGGS FAILURE
Launched in September 1994, Kellogg's initial offerings in
India included cornflakes, wheat flakes and Basmati rice
flakes. Even though it offered good quality products and was
supported by the financial resources of its parent, Kellogg's
products failed in the Indian market.
A high-profile launch backed by intense media activity failed
to make an impact in the marketplace. Negative media
coverage increased and more consumers started rejecting the
taste.
There were complaints that the products were not available in
many cities. According to analysts, out of every 100 packets
sold, only two were being bought by regular customers and
the remaining were first-time buyers. These experimenters
had to be converted into regular buyers and this had become a
major problem for the company.
By September, 1995, sales had virtually come to a standstill.
Marketing experts pointed out various mistakes that Kellogg
had committed and it was being increasingly felt that the
company would find it extremely difficult to sustain itself in
the Indian market.
WRONG POSITIONING AND PRODUCT AWARENESS:
Kellogg pitched itself as an alternative to the regular Indian
breakfast. The usual Indian breakfast is heavy and we get a
feeling of fullness at the end of Indian breakfast full of
Parantas, Puris and Dosas. Kelloggs Corn flake breakfast does
not give that feeling of fullness and that went against the very
concept of having a total breakfast. Indian consumers were
still hungry after having a corn flake based breakfast.
EATING HABITS AND CULTURE:
Indian breakfast is known for variety. Having the same type of
corn flake based breakfast was a big cultural barrier for
Indians. Indians are also used to having spicy and hot food for
breakfast. Asking Indians to have sweet tasting and cold corn
flake breakfast was something that was alien to them.
Indians have spicy and hot food for breakfast. To ask them to
eat the sweet tasting and cold corn flake breakfast was too
much of a sweet breakfast for the Indians to digest.
Kelloggs had to be consumed with cold milk .As Indians were
used to having hot milk right from their child hood ,eating
corn flakes with cold milk was unthinkable.Once hot milk was
poured over the corn, it became soggy and was no longer
edible and tasty
ADVERTISEMENTS HURT INDIAN SENTIMENTS:
Kelloggs in its advertisements indicated that Indian breakfast
was unhealthy and not nutritious which hurt the sentiments
of the Indian home makers and they turned themselves
against the concept of corn flakes based breakfast.
PRICE SENSITIVE CONSUMERS:
Kelloggs was priced very high .The product was 33% more
expensive than the nearest competitor.Indians were unwilling
out to shell out such a high price for a relatively new product
category.
CUSTOMIZATION:
Kelloggs did not customize their offerings for the Indian
market .This created a disconnect between Kelloggs products
and the Indian consumers. They simply copied their products
from US and offered them as such in India.This was a huge
mistake which Kelloggs committed when branding failures
are thought of.
POOR DISTRIBUTION:
Kellogg concentrated only on Indias metros.Kellogg had also
decided to focus only on the premium and middle-level retail
stores. The company thought that it could not maintain
uniform quality of service if it sold its products at a larger
number of shops. Kellogg overlooked was the fact that this
decision put large sections of the Indian population out of its
reach.
CORRECTION IN
MARKETING STRATEGIES
Repositioning of Kellogg
After a disastrous response from the Indian consumers,
Kellogg frantically tried to cover up its mistakes by
introducing a number of variants of corn flakes from its kitty.
In order to make up for the losses in its corn flakes, Kellogg
entered into the aligned food industry with energy bars and
biscuits. Special products aimed at specific segments of
population like Chocos for kids, K special for women, All Bran
for middle aged women etc.
Now, in order to reposition them so that they are appealing to
the Indian audiences, Kellogg adopted a number of methods:
Kellogg was considered a complete western
brand, hence in order compete in the local market,
they came up with indianised product names like IronShakti.
Variation in the sizes of packaging helped them to
address the different variety of consumers. Corn
Flakes was made available in family pack, smaller
pack and also in a onetime pack for Rs. 10.
Kellogg understood the importance of addressing
the different lifestyles of the Indian consumers. Hence,
products with specific nutritional needs like high fibre,
extra iron content were launched.
Advertising Strategy:
Rather than promoting their products, Kellogg
started educating the Indian population about the
different healthy alternatives of breakfast.
Earlier Kellogg had touched a raw nerve when it
accused the Indian breakfast to be unhealthy and
oily. So, now Kellogg concentrated more the nutritional
values of their products.
Catchy phrases like jago jaise bhi,lo Kelloggs hi.
Andar se khush, to bahar se kush, Shuruvat sahi to
din sahi for attributing the daily energy provision to
Kelloggs.
Popular health conscious actresses of that time
were roped in for endorsement.
A variety of promotional events created an
element of convenience and fun
THE RE-LAUNCH
Promotional Strategies
The Re-launch of Kelloggs included heavy promotional
activities. This comprised of Mass Advertisement in which a
new array of TV Commercials were aired targeting the
different audiences. These advertisements were aired during
the Prime time for creating mass awareness.
Kelloggs also launched a series of Consumer
Awareness Campaigns. The company reached out to
the students across a number of schools in the
country. Several other Direct Promotion strategies
were included as well.
Kelloggs kept on introducing new products and
brands in the market as explained in the products
section of the report. These new launches were
accompanied by offers and discounts. It was a
continuously used tool by the company whenever a
new variant was to enter the market.
Kelloggs also improvised on its packaging of the
products. The products now came in attractive
packages and with goodies as well for the kids and the
teens.
Kelloggs introduced the concept of associating a
MASCOT with a particular product. These MASCOTs
were famous cartoon characters or the already
famous Mascots amongst the kids in the West.
Campaigns Launched
New Campaign 1 :
This campaign had the tag line Shuruat sahi to din sahi
which meant a day that starts well goes on well. Sakshi
Tanwar was the celebrity that endorsed this advertisement.
Having used such a celebrity who in those times were
regarded as the ideal Bahu or the Ideal daughter of the house
brought forth the emotional pay off that a mother or a wife
may experience after serving their family with the Kelloggs
corn flakes for breakfast.
This accompanied the new positioning of the product as
explained earlier in the report briefly. The TV Commercial
also made an attempt to bring in the element of Fun.
New Campaign 2:
Karishma Kapur endorsed the second new campaign that was
launched from the company side to promote the product
Kelloggs chocos. She promoted the Rs. 10 Chocos pack as an
evening snacks option. The product positions as a preferred
option amongst the mother as a snacks item for their children.
The ad highlighted the taste as well as the nutritional value of
the product. This ad drove the differentiation both
functionally and economically.
What Kellogg's did wrong?
Effective communication - Clearly the lack of effective
communication and inability to convince the consumers led to
its failure at launch. The Indian consumer was new to this
concept and Kellogg's should have taken time to educate the
consumers prior to the launch. Effective communication
includes not just the message but also how it is communicated
to the consumer so that new beliefs are developed and
accepted.
Kellogg's can adopt strategies from consumer behavior for
effectively communicating the right message for the
consumers. A few recommendations for these strategies are as
follows:
Use the Central Route for persuasion of the
Elaboration Likelihood Model:
This method will work best for the consumers that can be
categorized with the traits of - high need for cognition using
message arguments. Kellogg's can design campaigns that
persuade the consumer towards their products, using the
following:
1.
Kellogg's should give emphasis and highlight the
nutritional value of cornflakes in its advertisements.
The consumer should easily be able to understand the
health benefits of Kellogg's. Communication of the
test done at Kellogg's and their results along with user
feedback to improve credibility of the product. For
example if Kellogg's claims that the product will
reduce weight, it should be able to support these
claims by results.
2.
Kellogg should start with a younger audience, like
small children before moving to the adult population.
The adult population is well settled in their old eating
habits and the introduction of any new product would
not be easily accepted. By targeting small children,
Kellogg's will be able to get them to accept this
product at an early state. This habit of breakfast
cereals will be carried with them as adults. The
parents and teachers can be used to deliver this
message as children are more acceptant of their
recommendations.
3.
Product should be developed as per the Indian
consumer. In India people take hot milk and mix
everything in hot milk. The soft, thin flakes became
soggy and mushy in hot milk, this spoiled the
experience to having cornflakes. Kellogg's should
make thicker flakes for the Indian population. The
right instructions for preparation along with the factor
of time saving and convenience should be highlighted.
This would make the product appealing to the young
working population.
4.
Using the fear appeal of advertising, Kellogg's can
communicate the harmful consequences of junk food
and other unhealthy snacks that children have, thus
encouraging the parents to inculcate healthy eating
habits from an early age.
Use the Peripheral Route for persuasion of the
Elaboration Likelihood Model: This method works
best for the consumers that can be categorized with traits of low need for cognition. For these type of customer the
communication through advertisements should be as follows:
1.
Kellogg's should keep physically fit and healthy
celebrities as the brand ambassadors for the products.
The Celebrities will bring along with them their fan
following that would be easy to persuade for switching
to Kellogg's from their daily routine.
2.
To appeal to the children, Kellogg's should use
animated advertisements to appeal to the children
that include elements of fun, happiness and joy. This
uses the affect appeal. When the kids see others
happy after the consumption of Kellogg's they would
be more willing to accept it in their diet.
3.
Kellogg's should create merchandise and promote
the product with the help of movies and cartoons.
Using the indirect method of communication and
promotion, Kellogg's can grab the attention of the
distant consumers.
From this analysis we can conclude that although Kellogg's
was un-successful in India at the initial stage, India today is
more accepting to new products if they are marketed well.
Kellogg's can work out its strategy to better market itself and
its products for the Indian consumer. There are many venues
that Kellogg's can tap into going forward. Using these
strategies the company can grow its market share and who
knows, one day it can become as staple as biscuits are today
for the Indian consumer.
