India had been an extraordinarily tough market for Kellogg’s. The reason being it had to change the ingrained eating habits of consumers. It passed through different phases of life-cycle before it has become the strongest player in the breakfast cereal category in India. Presently, Kellogg’s is estimated to hold about 60-65 % of India’s breakfast cereal market. The total worth of the breakfast cereal market in India is Rs 400 crore. While introducing a new product category, it was not easy for Kellogg’s to establish a foreign brand into the Indian market where the food habits of people change after a few kilometers. The journey of Kellogg’s from failure to success is discussed in this case.
Kellogg’s is one of the most successful brands from the U.S. which was the world’s leading producer of cereal and convenience foods. Their products are manufactured in 18 countries and sold over 180 countries. It is a hugely popular breakfast cereal brand. It sells in 160 countries with a sales turnover of over $9 billion. Indian Market Case Study Analysis of Kelloggs revealed that on its initial entry into the Indian market, it used a similar marketing mix which was used in other global markets.
When Kellogg’s first entered India in 1994, it heavily bet on transforming the Indian breakfast cereal market. It wanted to switch the breakfast habits of Indian consumers who were habitual to hot breakfast foods.
The company wanted the Indian consumer to change its traditional habits of having either Idli Dosas or Paranthas in their breakfast and these habits too varied from region to region with the northern region preferring Paranthas and southern region preferring Idlis, Vadas, etc. and the western region preferred alternatives like Poha. They wanted customers to make an instant switch from their own traditional habits. Also, they wanted people to start having healthier breakfast cereals, which was a huge challenge for the company.
Initial Blunders Kellogg’s made
In its initial advertisements, Kellogg’s showed that what the Indian public was having in their breakfast was not at all healthy. Thus, this ended up to hurt the sentiment of the typical Indian ladies who had been serving traditional breakfast for ages to their families. The advertisement negatively affected the mindset of major influencers and initiator groups in Indian families. Also, the kind of breakfast which Indians like to have was available in many varieties at lower prices than what Kellogg’s offered. It was difficult for the company to convince people to leave their traditional breakfast options and replace them with cereals.
Also, the company could not understand another cultural aspect that Indian consumers have had warm milk in their breakfast. It is a known fact that corn flakes (cereals) taste better with cold milk. When consumed with warm milk, the crispiness of the flakes goes away as soon as they were dipped into the warm milk. This failed to keep their promise of providing crispy flakes when it is to be consumed. Thus, due to all the problems that Kellogg’s was suffering from, its sales declined.
INDIA SPECIFIC STRATEGIES: A TURNAROUND
Innovative marketing and brand-building
Kellogg’s Case Study Analysis also found out that Kellogg India has been taking various initiatives to overcome the low awareness of breakfast cereals:
- Sustained brand-building through advertising and investment.
- Conducting contact programs in schools and having an active interface with opinion leaders – CFTRI, the government, independent agencies, etc.
- Adopting brand names that appeal to the Indian consumer such as ‘Shakti’, meaning power
- Using packaging as an effective marketing tool, for brand communication and on-shelf differentiation
- Introducing Kellogg’s Chocos Spider-Man 2 “web designed cereal”
- Building up of image through recycling and reusing, improving access to health and human services in local communities.
Efficient supply chain network
Price sensitive customers necessitated a constant focus on cost reduction and supply chain efficiency enhancement in India.
Kellogg has taken several steps in this area:
- They localized the entire raw and packing material requirement, saving import duty. Also, it has adopted a single sourcing strategy achieving scale efficiencies.
- Kellogg’s located its manufacturing plant at Taloja, near Mumbai in the state of Maharashtra. Taloja is the largest market for breakfast cereals in the country. This optimized their transportation costs.
- Set up a distribution network with storage hubs in all the key states of the country serving over 200 distributors providing a good reach
- Optimising overheads by giving distributors more responsibility for sales, thus bringing down the strength of its internal sales force
- Deploying Oracle 11i based ERP to enhance supply chain transparency leading to lesser inventories and better service.
- Other locally developed systems help to monitor stocks and their movement.
Customizing products for India
Over time Kellogg India has widened its product portfolio according to the Indian consumer. It expanded its range to include Frosties, chocolate-flavored scoops, and taste variants of Corn Flakes. Kellogg India also adapted its products to address the local need gaps. For example, it focused on iron and calcium fortification with products like Iron Shakti and Calcium Shakti.
Strong support from parent
Kellogg India receives technology inputs about how to customise products to suit the Indian nutritional profile, developing packing material specifically for India, manufacturing process etc. from its parent. Within the larger management and strategic framework, Kellogg India has the flexibility to adapt its operational strategy suited to the local environment.
Leveraging the India Advantage
The company has been leveraging Indian managerial talent by moving Indian managers to other countries. The Indian team also manages neighboring countries like Sri Lanka, Bangladesh, and Nepal.
The company views India as a very important market which has a great future. Taking a longer-term perspective, Kellogg India is planning to continue its investment in the communication of categories and brands to grow the breakfast cereal market in the country.
Kellogg’s stands at 60 per cent of the packaged breakfast foods market share. Competitors include: Quaker (with their cereal and oatmeal range), Nestle (with Koko Krunch, Corn Flakes, and Ceregrow
All these various initiatives taken by the Kellogg’s as discussed in this case study for re-positioning of its brand helped it in gaining around 60-65 per cent of the market share of the breakfast cereals market thus helping themselves to become a market leader. To expand its business further, the company has decided to promote the brand as an evening snack as well.
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