Executive Summary
The report details the local strategy implemented by Kellogg’s product Coco Pops in the UK and its international strategy for Russia. It shows that the UK cereal market is saturated and needs extensive innovation and new product introduction for customer retention. However, the Russian market is relatively new, and the major market captured by Nestle shows the strong potential for Kellogg to reap profits in this segment. The company positions itself as a fun and healthy option for breakfast. The company targets mothers and children as these are the main buyers and consumers of the cereal Kellogg Coco Pops. The company has shown great commitment to incorporate health concerns by reformulating its product to meet the FSA requirements of fortification. It is done by lowering the content of salts, sugar, and saturated fats in the cereals. The company advertises its cereal for kids by incorporating attractive packaging. The use of monkey animation and the adventure of the jungle themes are targeted at Children. The company also uses gifts, sponsorship of kids’ programs, and merchandising as promotional tools. For having a good start in the Russian market, Kellogg has acquired the leading cereal producer; the United Bakers and its flagship labels. The distribution network, management, and assets of United Bakers along with the strong branding and quality products of Kellogg have reaped profits for Kellogg.
Introduction
At the current time of globalization, the survival of the organization has increasingly become a challenge. Businesses are striving to sustain their operations through continuous innovation and customer retention. The existence of an organization depends on the effectiveness of the strategies implemented by it for catering to the needs of changing preferences of customers and market.
Kellogg’s is one of the leading US companies which has established an effective corporate strategy and sustained in the changing market needs. It exists in the food market of convenience foods and cereals. Kellogg’s has now become a marketing conscious company by focusing on the customer values by doing extensive research and product branding with the aim of aligning to the customer-oriented culture.
The study analyzes and evaluates the environmental, product, and strategic analysis of the Coco Pops brand of Kellogg’s in UK and Russian Market. The study will conduct PESTAL analysis to evaluate the environmental analysis, brand capabilities, and resources for strategy, target positioning analysis, and promotional analysis in the UK and Russian market.
Environmental Analysis for Kellogg’s
The environmental analysis of the company will yield the analysis of the external micro and macro environment that affects all the firms operating in the business environment. These are the factors which are not under the control of a firm and can become a threat or an opportunity for a company.
UK Market:
The most influential factors out of the four PEST factors for the cereal industry are political and social factors.
Critical Factors:
Political Factors for Kellogg’s
There are many political factors which influence Kellogg’s Coco pops as it deals with food. The Association of Cereal Food Manufacturers has announced that 38% of the salt will be reduced from their cereals. Similarly, the initiative taken for product reformulation including the nutritional labeling and guideline for daily intake amounts is welcomed in the UK market. The following of European Regulation no 1924/2006 for implementing the low sugar amount shows that the political environment has a major influence on the activities of Kellogg’s Coco Pops.
The cereal market of UK is matured enough with big multinationals operating in it with big marketing budgets. There are many alternatives which are available for the customers of Kellogg’s Coco Pops. The general frequency of usage of cereals by the UK, consumers of Kellogg’s is high which gives Kellogg’s a good economic environment. The availability of a number of suppliers and distributors provide a flourishing economic environment (Huxley et al., 2011). BREXIT is another factor which influences the food industry on whole, and consequently the cereal industry as well. The agriculture and horticulture development board (AHDB) has warned the cereal industry to not get into a post-BREXIT market without any pre-planning and preparation. The opening of new markets to UK companies after BREXIT will cause high competition for the UK grain industry. Thus, Kellogg, a US-based company would also be facing more competition from new entrants. Considering this political factor will enable Kellogg Coco Pops to get prepared for post-BREXIT conditions. As per the recommendations by AHDB, Kellogg Coco Pops should increase its competitiveness, get associated with a greater number of grain suppliers, and improve productivity. Following these concerns, Kellogg’s can consider looking at the loopholes in its supply chain to be better prepared for competition (AHDB.org.uk, 2017).
Social Factor for Kellogg’s
Another most influential factor is the social factor. The coco pops are targeted at the school going children who usually skip breakfast as they have no time. These children age from 11 to 18 years. The nutritional value of breakfast cereal makes it a healthy breakfast option for the children, living up to the needs of the society. With the saturation of the market, Kellogg is now focusing on targeting the whole family by using the social norms of eating breakfast together.
The ethical obligations to the society for providing with a healthy breakfast option has influenced Kellogg’s coco pops to reformulate its products in order to create cereals with less sugar, salt, and fats.
The Russian Market for Kellogg’s
The Russian cereal market is more captured by Nestle. In 2009, Kellogg’s had launched its products coco pops along with another product in the Russian market. Nestle has about 55% of the breakfast cereal market. The company had shown intentions to spend $21 million in the country to expand its operations (Best, 2009).
Critical Factor:
Economic & Social Factor for Kellogg’s
The Russian society has traditions which give advantage to the grain-based businesses. With the acquisition of the United Bakers; the cereal giant, it has invested majorly in the Russian market, also capturing the flagship Lubyatovo line. Kellogg’s sees strong potential in the Russian market and Kellogg has the potential to exploit these opportunities (Kian.ru, 2011). The Russian market is good for any wheat or grain-based product as the Russian society has great traditions for grain-based food. The economy of Russian Market provides opportunities for the cereal producers to reap benefits with plenty of suppliers and distributors (Filatova, 2010)
Industry Analysis
For the in-depth analysis of the cereal industry in the UK and Russia, we will analyze the micro-environment contributors.
UK Market for Kellogg’s
Critical Factor:
The porter five forces model gives us an in-depth analysis of the industry forces which influences the company Kellogg’s and its performance.
Suppliers of Kellogg’s
The suppliers of this industry have the medium, purchasing power. Kellogg is dependent on the wheat and grain prices, and thus its purchasing power is affected by this (Kellogg’s Company, 2016).
Buyers of Kellogg’s
The buyers of the breakfast cereal include the supermarkets and the grocery stores all around the UK and Ireland market. Although there are a number of buyers, like Asda, Morrison’s, Tesco, Sainsbury and Dunnes Stores, they also store the competitor’s brands. Thus, the bargaining power of the buyers is higher.
Competitor of Kellogg’s
Kellogg is based in a very highly competitive market, which includes companies like General Mills, Nestle, Tesco, Heinz, Britannia, and Conagra Foods. The rivalry in this industry is very high. Businesses like Kellogg coco pops, Nestle coco crunch, Nestle Coco Rise Crispies, are all competing to become the market leader. Supermarkets, on the other hand, are also producing their brand cereals which act as competition for Kellogg coco pops. This strong rivalry requires constant innovation in the products.
Russian Market for Kellogg’s
Critical Factors:
Buyers of Kellogg’s
The Russian cereal market following the norms of set morning routines and ingrained habits typically spanning the lifetime attracts several breakfast cereal businesses. The consumer trend of high consumption of cereals by kids, babies, and early teens shows that the market is healthy for breakfast cereals. The Russian consumers are now seen, preferring the ready-to-eat coco pops and other cereals (Upi.com, 2008).
Rivalry for Kellogg’s
The annual report of 2016 for Kellogg shows that the Russian sector for Kellogg is reaping profits. With Nestle has most of the market share of the Russian cereal market, Kellogg is facing high rivalry from its competitors. The buyers of the Russian market have high bargaining power as alternates are available.
Market Strategy Analysis STP:
UK Market for Kellogg’s
Segmentation-Target-Positioning of Kellogg’s
Generally, the cereal industry targets families and Kellogg’s coco pops naturally targets children. For this purpose, Kellogg’s coco pops usually position itself as a fun and amusing option for breakfast. The target group includes mothers and children as these are the actual buyers and consumers of the product. The brand established by Kellogg coco pops identified as high on fiber, having added vitamins, and whole grain and minerals. The brand has an attractive packaging which is advertised through coco monkey adventures. It attracts the children. The snack bar of coco pops positioned to be considered as a ready-made treat. The brand extension in cookies and chocolate segment can offer great opportunities. The brand reputation as a treat breakfast can be altered to an everyday breakfast to target an expanded market.
The marketing strategy of Kellogg Coco Pops entails the needs of its market. In the market of UK cereal industry, Kellogg targets mothers and children to attract towards its products. The marketing foresight of Kellogg Coco pops has contributed to the overall success of the company and helped in evolving as a strong contender in the UK cereal industry.
The UK sales have been witnessing some down movement because of the lower consumption of the consumers in this region. The UK cereal market witnessed tremendous growth because of the perceived health and convenience of the cereal breakfast. The market of the cereal industry of the UK is led by three big brands; Weetabix, Cereal Partners and Kellogg’s. Kellogg’s is the market leader in this region. The Market players in this industry are focusing on brand loyalty and customer orientation to measure the market value. Frequent mergers and acquisitions are reported in this industry showing high competition.
Russian Market:
In the Russian market, which provides great opportunities to the grain-based businesses is targeted in 2008 by Kellogg by the acquisition of the largest cracker, biscuit and cereal producer United Bakers Group. The company expects to pursue the right kind of opportunities for growth in this business. The established distribution network, management, and property all across the Russian market will aid Kellogg in capturing of the Russian cereal industry with a thrust. By using the brand building and innovative expertise of Kellogg and the assets of United Bakers, Kellogg is up for the competition with Nestle in this segment. The main target market is the children and families specifically the mothers who are buyers of the product (Kellogg Company, 2017).
Market Strategy Analysis- Promotional Analysis of Kellogg’s
The UK Market:
The Kellogg’s Company is operating globally in many countries. The UK market is specifically saturated as the cereal industry here has many participants. Kellogg is an innovation-based company which launches new products periodically for catering to the needs of the market. Kellogg’s Coco Pops is one of the many products of Kellogg which is marketed as a fun and treats breakfast for the children. The association of the cereal with cartoon characters like the monkey and the animation like jungle adventure makes it attractive for the children aged from 11 to 18 years. The current trend of preferences to the healthier snacks has influenced Kellogg as well. The labeling of the nutrition and the amount of the portion to be consumed are one of the many initiatives towards attracting the health-conscious customers. The inclusion of gluten-free, nuts, granolas, fruits in its cereals shows that the company molds its products as per the customer preferences.
The Coco Pops Choc n Roll lunch, which was supported by 3 million Pounds of the advertising campaign, was targeted at mothers. As mothers are the buyers of the Kellogg’s Coco Pops, the product nutritional credentials are advertised targeting the mums. The campaigns include 30 seconds TVC, press and outdoor advertisements, and website information.
The fortified cereal was reformulated as per the initiative was taken by Kellogg to reformulate its product to cater to the FSA regulation (British Nutrition Foundation, 2017). Thus, this product now meets the FSA profile of nutrients.
The positioning of the Kellogg Coco Pops is based on Market Penetration by offering lower prices than its rivals; Nestle Coco Shreddies, Nesquick, Honey Monster Sugar Puffs, and Nestle Cheerios and on product differentiation, as it differs itself by meeting the FSA requirements by lowering the saturated fats, lowering sugar and salt in its cereal.
The branding of Coco Pops is still going to be focused on being a fun brand rather than nutritional. The parents are targeted through this campaign by informing them about the healthy and fun breakfast options available for their children (Baker, 2010).
The Russian Market:
The Russian cereal industry is relatively a new market for the company Kellogg and its product Coco Pops. However, after launching 2009, the company’s Products Coco Pops is doing relatively well in this market. Russia is one of the emerging markets for Kellogg (Kellogg Company, 2015). Its distribution channels include convenience stores, vending, and high-frequency stores along with superstores. For reselling to the grocery stores, it uses direct sales force effectively. Amazon, Wal-Mart, and e-commerce are also utilized by the company to make its products available. Kellogg is one of the sponsors of the kid’s TV program “Dragon tales.” Kellogg uses various promotional activities like prizes in the cereal boxes for targeting children’s market. Merchandising is one of the other promotional tools. It released a PC game called the Mission Nutrition which included specially packaged cereals. Specifically for emerging market like Russia, Kellogg is using brand messaging by special occasions and on-the-go packing for targeting vast markets.
Conclusions and Recommendations
The UK market is found to be saturated for the cereal industry, whereas the Russian market can be termed as an emerging market with strong potential for opportunities. The strategy of Kellogg’s Coco pops to target mothers and children as they are the prime buyers and consumers of their product. Attractive packaging, kid’s gifts, merchandising, and sponsorship of kids’ programs are some of the promotional strategies. Kellogg’s coco pops after reformulating have met the FSA needs, and is using market differentiation and price leadership to position itself as a fun, and healthy breakfast option.
References:
AHDB.org.uk, 2017. Cereals industry must take action. [Online] Available at: https://cereals.ahdb.org.uk/press/2017/june/14/cereals-industry-must-take-action-to-thrive-post-brexit.aspx [Accessed 26 February 2018].
Baker, R., 2010. Kellogg launches “healthy” Coco Pops. [Online] Available at: https://www.marketingweek.com/2010/08/04/kellogg-launches-healthy-coco-pops/ [Accessed 23 February 2018].
Best, D., 2009. Russia’s cereal lovers to wake up to Kellogg brands. [Online] Available at: https://www.just-food.com/the-just-food-blog/russias-cereal-lovers-to-wake-up-to-kellogg-brands_id1762.aspx [Accessed 23 February 2018].
British Nutrition Foundation, 2017. Fortification. [Online] Available at: https://www.nutrition.org.uk/nutritionscience/foodfacts/fortification.html [Accessed 23 February 2018].
Filatova, I., 2010. Kellogg Confident in Russia Despite Drought. [Online] Available at: https://themoscowtimes.com/articles/kellogg-confident-in-russia-despite-drought-1303 [Accessed 23 February 2018].
Huxley, R., Land, J. & Lobley, M., 2011. A Review of the UK Food Market. [Online] Available at: http://www.cornwallac.org/managed/CAC%20website/food-and-drink/reports-and-research/uk-food-market-2011-final-for-publication.pdf [Accessed 23 February 2018].
Kellogg Company, 2015. Kellogg Forward Looking Statement 2015. [Online] Available at: http://investor.kelloggs.com/~/media/Files/K/Kellogg-IR/reports-and-presentations/2015/investor-day-2015/Strategy-Overview_Bryant.pdf [Accessed 23 February 2018].
Kellogg Company, 2017. Kellogg Company Acquires the United Bakers Group, a Leading Russian Biscuit, Ready-to-Eat Cereal Manufacturer. [Online] Available at: http://newsroom.kelloggcompany.com/news-releases?item=76232 [Accessed 23 February 2018].
Kellogg’s Company, 2016. Kellogg’s Annual Report 2016. [Online] Available at: http://investor.kelloggs.com/~/media/Files/K/Kellogg-IR/Annual%20Reports/kellogg-2016-ar-10-k.PDF [Accessed 23 February 2018].
Kian.ru, 2011. Comprehensive support for the Kellogg’s Russia brand. [Online] Available at: http://kian.ru/eng/projects/kelloggrussia/ [Accessed 23 February 2018].
Upi.com, 2008. Kellogg corners Russian cereal market. [Online] Available at: https://www.upi.com/Kellogg-corners-Russian-cereal-market/47341200686463/ [Accessed 23 February 2018].
Appendix:
Appendix A: Porter’s Five Forces Model of Kellogg’s
| Forces | Power of Kellogg Coco Pops |
| Buyers | Moderate- Kellogg has moderate bargaining power against the buyers as the buyers can switch to other alternatives easily |
| Suppliers | Moderate- The cereal providers are dependent on the grain prices. There are number of suppliers available, however, due to price fluctuations, the bargaining power is moderate |
| Rivals | High Rivalry among cereal producers like Nestle and Kellogg’s |
| New Entrants | High- The size and economies of scales of Kellogg gives it the leverage to not get threatened by new entrants |
| Substitutes | Low- Kellogg has low threat of substitutes because of its strong brand positioning and quality products |
Appendix B: SWOT Analysis of Kellogg’s
| Segment | Breakfast Cereal |
| Target | Children and Mothers |
| Position | Fun and Treat breakfast |
Strengths
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Weaknesses
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Opportunities
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Threats
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