Submitted By: Group 3

Kelloggs India
Summary:
The case talk about Kelloggs attempts to localize its product offerings and tries to analyse the reasons as to why they failed. The case also discusses whether Kelloggs should go in for an second attempt at localization or not and if yes how should they go about doing it. India has been known for making the companies change their product offerings significantly. This may be attributed to the deep rooted traditional habits of Indians. Kelloggs also experienced this fact when it entered the Indian breakfast market. Initially when Kelloggs entered Indian market it had come up with localised breakfast cereal with flavours like elaichi, rose and coconut. However their attempt failed as there was a lack of marketing push and the localisation was not such which would compel consumers to adopt Kelloggs as their breakfast supplement. Similar has been the case with various other big brands like McDonalds and PepsiCo. Since their first attempt the breakfast market has grown considerably to Rs 600 Cr and is growing at 18-20%. Kelloggs has the maximum market share of 55% and is the market leader. While many companies have launched breakfast options like poha, porridge, idllis etc, oats is one product which has emerged as a popular breakfast alternative. Kelloggs is also relying heavily on this product and is coming up with various flavours of this product as its attempt to tap the breakfast market which likes to have ethnic yet nutritious breakfast. Also the awareness about nutritious breakfast in India is fast increasing and Kelloggs is eyeing this as an opportunity to increase its fortunes by rolling out new flavours of its various products along with the savoury oats. They also are looking forward to reach the smaller towns and are coming up with smaller SKUs to attract them to try and experience the products. The question what should Kelloggs do to achieve a bigger market share in the market which is increasing at a great rate but is also getting overcrowded with other players.

Current Market Situation

Kellogg entered in India around 18 years back and has recently crossed Rs500 Crore sales mark in India. It is a leader in breakfast cereal market with around 55% market share. It being the leader has been able to achieve brand recognition to the extent that Corn Flakes are seen synonymous to Kellog. Indian breakfast industry is worth 700 crores at this point of time. In India big names like Yum Restaurant which owns KFC and Pizza Hut have a thali concept. Companies in India are selling localised food items. In the breakfast industry as well firms need to localise according to the regional taste of Indians. Kellogg faces tough challenge in India due to inherent diversity where the breakfast habits change in distance of each 100Kms. In India, predominantly the pranthas occupy a major position in North and Idli, Wada take the major share in South. These all combined form a major resistance to penetration of Healthy Snacks in the Tier II and Tier III cities. Kellogg in India is facing following problems

Submitted By: Group 3

Ignorance of cultural aspects. Lack of understanding of Indian consumer behaviour & Habits.

Understanding of customer needs and desires are extremely important for any business. Value proposition canvas helps to understand better the needs and desires of customers. In most part of India breakfast is a habit which has developed in so many years. It is tough for them to change it in very short span of time. Kellogg needs to communicate consistently the gains of having Kellogg products as a breakfast meal to Indian consumers (e.g health benefits, blood pressure control, weight control etc.) to capture more share of Indian breakfast market. To combat with such challenges and to give push to trial of Kelloggs products Kellogg has introduced Rs 10 packs and has also introduced local variants to penetrate further. Now in the oats segment as well, it is coming with local variants like pudina flavor. It is important to know a fact that few years back, Kellogg tried a variant in local cereal market Kellogg Mazza which could not hit big in the market. Kellog has been a late entrant in Oats market where pepsico with Quaker oats has been the leader and a dominant player. There are few growth drivers which are expected to give a big boost to Kellogg in coming times which include changing consumer breakfast habits, increasing income levels, increasing number of nuclear families with both individuals being working class, and also increasing health awareness with increasing education levels and new obesity diseases coming up. Segmentation Targeting and Positioning MARKET SEGMENTATION: Markets can be divided into market segments and there are six key segments to the Kellogg market, as shown: Tasty Start - the cereals that most people will eat to begin their day. Kellogg's brands include Kellogg's Corn Flakes and variations, such as Kellogg's Crunchy Nut. Simply Wholesome. These are 'good for you' brands, such as Kellogg's Fruit 'n' Fiber Shape Management. Brands that can enable customers to manage their weight or shape, such as Kellogg's Special K. Mum Approved. Those that mothers see as being good for their children, such as Kellogg's wheat flaks. Kid Preferred. The brands that children themselves prefer, such as Kellogg's Frosties, Kellogg's Choc's and Honey Loops. Inner Health . These are the brands that help people with digestion, such as Kellogg's AllBran and Kellogg's Heart to Heart Oats Kellogg needs to target kids and adolescents more. Their main target segment should be kids because Kellogg can build the habit of eating healthy, nutritious and tasty Kellogg food relatively easy among kids compared to other segments. They will have a high lifetime value. Similar is the case with adolescents but its difficult to influence them. Kellogg should focus

Submitted By: Group 3

more on Mum approved brands first because Mums are the buyers for their children. If they are able to penetrate to kids through Mum approved brand then it will become comparatively easy for Kellogg to target kids directly through those brands which kids will prefer themselves. Brands through which they can target adolescents can be which focusses more on tasty start and inner health. Again communicating continuously the benefits of Kellogg products to target segment is extremely critical because in India consumers are critical and needs continuous communication.

Threats
The market is a growing market and with almost very less product differentiation, competition from Pepsico, Marico is huge and with big players like Nestle and HUL coming to the market, the road doesnot seem to get any smoother in short term. Moreover, with frozen food industry showing a double digit growth over last 2-3 years, there might be a stiff competition from that side as well. With Kellogg having a narrow product range, it is tough to compete with likes of HUL and ITC in terms of distribution networks and reach. So they have to be on their toes and develop loyal customers before big players come in the market. They have been trying hard enough to fight with customer psyche over the fact that Healthy breakfast is the way forward but they have achieved little success in Metro towns and the effort required to change this psyche would be far more difficult in Small towns. This company being in a narrow product but being synonymous to Corn Flakes enjoys great brand recognition and this fact might make it a perfect acquisition target for any big company.

Opportunities
The median age in India is 21.4 which make it a very young country and thus there is a huge potential as this young population is far more aware about need of healthy breakfast and will give Kellogg a large CLV The very fact that this breakfast is ready to eat and does not take much time might induce families to have this as breakfast. Kellogg has been able to develop a connection with young children and that strategy might help in developing connection in Tier II and Tier III cities as well

Objectives
To be the best choice of breakfast for young Indian Consumer in Cities

Issues
Distribution Channel Increasing Competition

Submitted By: Group 3

Consumer Psyche

Marketing Strategy, Action Program, 4P:

1. It should focus its marketing, promotional and R&D efforts more towards the cornflakes and cereal division as a large share of its revenues come from this segment. Also Kelloggs is the market leader in this segment and hence we need to leverage on this position. Also as we can see from the market situation discussed in the case, the eating habits of consumers in India are changing at a very fast rate. People are getting more and more conscious about health and nutrition. With more people working, rise in household income, nuclear families and time constraints, the demand for value added, nutritious, low fat food is increasing at a tremendous rate. Hence Kelloggs must cash on this opportunity. It should try and come up with more innovative products in the cereals category. It can also specifically target kids and youngsters who are not much inclined towards ethnic breakfast. 2. More of new products in the cereals category should be developed. They should go in for flavours, forms, shapes etc which would attract kids. Also they should focus on products which are more nutritious, low fat, having high fibrous contents etc as these would generate high demand from youngsters who often like to maintain their physique, are weight conscious etc. 3. It should also focus on the one serve packs that they have launched to attract new customers from the tier 2 cities. They should focus on having a good distribution for these SKUs in order to reach more and more consumers in the tier 2 cities as this would help Kelloggs in changing the breakfast preferences of people in these cities too. 4. The second most important product for Kelloggs is oats and hence they need to focus on this too. The market for oats has become quite big and is growing at a decent pace. As they are a late entrant in this market they need to do something which attracts the customers who are currently using competitors products. Kelloggs need to do some innovation in this category which can help them localise the product in a way which attracts the segment of consumers who like to have ethnic breakfast only. The huge revenues being generated from cereal segment can give us a cushion to experiment in this segment. However the need to be quick in their innovation as several new players would be eyeing this market and may enter in new future. 5. A small budget can be allocated to develop a new product for the lunch or snack category as none of the companies which are direct competitors of Kelloggs in the nutritional food segment have currently gone for Lunch or snack product. If Kelloggs is able to come up with some product which can be positioned as a nutritious, easy to have, convenient and value added substitute for the regular lunch items then they would get a significant competitive edge over their competitors and would start a new category in itself. The 4Ps of the products can be managed in the following way: 1. The cereal products should be promoted with more focus on their nutritional and health benefits. This will help us tap the young and health conscious consumer. Secondly the cereal products should also be targeted directly towards the kids with promotions which the kids can connect with.

Submitted By: Group 3

2. The smaller size SKU need to be marketed aggressively as the smaller SKUs costing Rs10,15 would be able to attract more consumers. 3. The promotion of the oats category should be done more on the lines of nutritious Indian breakfast. 4. The cereal products should be divided in two categories: Kids products and health products. The kids line should have flavours like chocolate, strawberry etc along with various different shapes and forms of the product. The health line should have products like muselli, high fibre cereal etc. The oats line should focus more and more on Indian tastes and flavours and should have flavours which adult Indians would like. 5. The products must be made available in smaller as well as family size SKU and should be made available not only in supermarkets but even in the mom& pop kirana stores in the localities as these kirana store vendors have quite a large influence on what customers buy.