Kellogg’s Cornflakes in India: Finding a Platform that Connects CASE “Mothers know what they want and when; woe can’t push our offering to them sithout giving them a reason they value,” the Head of Marketing at Kellogg's India clarified. The Kellogg's cornflakes marketing team was struggling to find an appropriate positioning platform for the brand to increase sales and ensure brand growth. The brand was globally accepted but its joumey in India has been bumpy. They had struggled to find a suitable place in consumer's heart and mind, and again they were rethinking the growth strategy. > Breakrast Market IN INDIA ‘The breakfast cereal market in India was pegged at Rs. 12 billion in 2014, an almost 15% growth from Rs. 10.4 billion in 2013, and was expected to grow at a CAGR of 13% over the five-year period. Due to increased health consciousness among consumers, hot cereals and muesli were the fastest growing product categories. Among hot cereals, oats had gained the highest popularity registering 2 33% growth in 2014.! Cereal was not a popular breakfast item for Indians, and hence, the market was dominated by intemational brands from Kellogg's and Pepsico. Bagry’s India Ltd and Mohan Meakin were the only two Indian players in the market. Kellogg's India Lid had the first-mover advantage and was the undisputed market leader with 379% value share in 2014, Regional players had a competitive edge over bigger brands because of their robust distribution network. Competition also stemmed from other FMCG chains that did not necessarily have packaged breakfast as their core product offering, for example, ready-to-eat players like MTR and Britannia with its range of ready-to-cook upma, porridge, and poha, These products provided consumers with healthy options that were not just quick but also healthy.> » Consumer BeHavion Towarps BREAKFAST India did not have the culture of breakfast. A typical, average middle-class Indian family did not have breakfast on a regular basis like their western counterparts. Breakfast was always combined with lunch—"Brunch” as it was popularly called. Breakfast habits (brunch) in India, for the most part, were inclined towards hot, cooked regional items, like flattened rice flakes (chieda/poha) in western and central India, whole wheat grits (dalia) and parathas in northern India along with tradi- tional regional staples such as idli or dosa in the south.* In the earlier days, women prepared fresh breakfast for the family. Serving ready-to-eat meals were not part of the cultural norm and such options were also not widely available.102 Case 10 However with urbanization, dual-working households, and lifestyle changes, there was a increasing disposable income and health consciousness. Increasing awareness of health and susceptibility of Indians towards lifestyle ailments althy breakfast options.» Hence, consumers, especially in urban areas, preferred a quick-fix breakfast and cereals would fit the bill. The influence of Westem lifestyles and “eating out” trends also played a significant role in ‘opening the gateway for experimenting with different tastes and varying eating preferences.® This transition from traditional to moder breakfast took place among young Indians (24-35 years), mostly from dual income families. Choice of breakfast options was induced by personal factors like time constraint, work timings, social groups, and family members.” greater need for convenience. This was also coupled wi like heart disease and diabetes yielded a greater demand for value-added hi > Kettoaa’s ENTRY IN INDIA In the late 1980s, ready-to-eat cereal giant and market leader, Kelloggs had reached peak sales occu- pying a 40% market share in the US. The company had its presence in 18 countries and over 20 planis worldwide with annual sales of over $ 6 billion. However, in the 1990s, competition got tougher and Kellogg's began to struggle when its nearest rival when General Mills introduced Cheerios brand There was little room for growth in core markets; therefore, the company started looking beyond its traditional American and European countries as a potential cereal-consuming market. India was a lucrative target market with population of over 950 million, out of which 250 million were middle ss and untapped. In 1991, India went through an economic liberalization and removed the barriers to international trade. Three years later, Kellogg's decided to invest $ 65 million towards launching its number one brand, Corn Flakes, in India. “Even if Kellogg's had 2% market share at 18 million consumers they would have a larger market than US itself,” said Bhagirat B Mer- chant, Director of Bombay Stock Exchange in 1994.9 > Positionina aT LauNcH Globally, Kellogg's cornflakes were positioned on the “fun and taste” platform, and they emphasized on the crispiness of its flakes. When Kellogg's entered the Indian market in 1994, it positioned itself to families/households on the health platform, thus emphasizing on the nutritional benefits of the cereal. They tried to communicate to consumers that traditional Indian breakfast options were not as healthy, and hence, cornflakes were a good choice. This was done based on the insight that Indians consumers were not habituated to cereals as a breakfast item and needed to be educated to create acceptance and liking for not just the brand but cereal as a category. Kellogg's kicked off its India entry with three variants of breakfast cereal: Com Flakes, Wheat ness of its flakes compared to local cereals. These cereals were best served with cold milk without adding sugar. The tagline to reinforce Flakes, and Rice Flakes, packaged with an emphasis on the cr the positioning was- “Jago jaise bhi, lo Kellogg's hi’ (“No matter how you start your day, start it with Kellogg’s"). However, the proposition did not find much credibility with households. Average Indian did not pay much importance to iron/vitamin intake.!° The nutritional benefit was not a differentiated and strong enough proposition for Indians to change thelr habits and move away from traditional items as they considered their food to be equally or more nutritious.Kellogg's Corflakes in India: Finding a Platform that Connects 10.3 The initial sales were impressive but Kelloge’s knew that this was a result of one-off purchases. Cereals were a new item for the Indian consumer and after the initial excitement wore off, repeat purchases were few. Another barrier to repeat purchase was the high price." A 500 grams box of com flakes was almost 30% costlier than its nearest competitor. Indians did not find value in spending so much for an expensive breakfast and often the leftovers from the previous day were cooked or served differently for breakfast next day. In certain households, com flakes were reserved as a Sunday or special occasions treat.'? Also, the emphasis on crispy flakes failed in India as consumers were used to hot milk which made cornflakes soggy. This further diluted the Kellogg's brand promise. On the heels of continuous unimpressive sales, Kellogg's realized that their breakfast option was diametrically opposite to what generations of Indians have been eating. The typical Indian breakfast was still hot, home-made, heavy-as-a-meal, and savory rather than sweet. What Kelloge’s was offering was ready-to-eat, best served with cold milk, and bland unless you add a sweetener. In early 1996, defending the company’s products, Managing Director, Avronsat said, “Kellogg's India is not here to change breakfast eating habits. What the company proposes is to offer consumers around the world a healthy, nutritious, convenient, and easy-to-prepare alternative in the breakfast eating habit. [twas not just a question of providing a better alternative to traditional breakfast eating habits but also developing a taste for grain-based foods in the morning’.!? Indian consumers did not perceive the Kellogg's differentiators relevant. They were not looking for thicker and crispier flakes with fron and vitamin. They sought basic health and taste which their traditional food and other competitor brands were also fulfilling. » REPOSITIONING AND PRopuct ExTENSIONS Kellogg's saw that Indian households were difficult to target and moved their focus to kids with the launch of two of its highly successful international brands, Chocos in September 1996 and Frosties in April 1997. Chocos were wheat scoops coated with chocolate, while Frosties had sugar frosting on individual flakes. Frosties addressed the shortcomings of plain cereals because they were ready-sweetened which sweeten the milk when it is added to the bow!, Both these variants were not positioned as breakfast items but as snack items on the proposition of fun and taste combined with health, Now the mother was urged to give Chocos as a mid-meal snack to fulfil nutrition requirement, These variants found feet in the market and targeting kids helped. However, in 1998, Kellogg's again tried targeting families and households by “Indianizing” its cereal range with the “Mazza” brand. Mazza cereals were available in fusion of local flavours like mango-elaichi, coconut-kesar and rose.!# The variant did not work. Mazza was more to do with the taste of the product and many consumers thought these were too outlandish. In 1999, Kellogg's began offering fortified cereals. The “Iron Shakti" cornflakes positioned on the nutrient value of cornflakes and addressed iron deficiency in children, The nutrition platform was more focused and relevant here as no other brand or product spoke of iron supplement, This became the differentiator and sales incteased by 17%. Making the brand and proposition sound Indian by using words like “Iron Shaktt” and “Calcium Shakti” gave it a local feel. !® This approach10.4 Case 10 was more successful than the brand's previous attempt to imply that the traditional Indian breakfast was not nutritious—messaging which made the Indian housewife rather indignant. The proposition this time was a nutritious and fun breakfast for kids coupled with goodness of iron (which mothers worry about), Besides positioning, Kellogg's also changed the communication. It removed the rooster which had an integral association with Kellogg's globally from all its advertisements in India. The promotions focused on inducing product tial by targeting schools across the country. In March 1996, the company gave out specially designed $0 gm packs to shoppers at select retail stores, and door-to-door sampling exercise offering one-serve sachets to housewives in the city.!7 However, the company knew that very few Indians had breakfast and they could grow only by growing the category. In 1997, they launched the “Kellogg Breakfast Wee” in Mumbai, Delhi, and Chennai, a community-oriented initiative to create and increase awareness. The campaign focused on making people aware about the prevention of anemia, an iron deficiency disorder, and conducted a series of nutrition workshops to educate individuals and families.'® As the brand had sub-segmented the market and offered specific customized variants to each with the relevant proposition, its agency, JWT, wanted to identify the triggers that enabled customers to move towards this category. Their research suggested that though Kelloge’s was positioned to kids, they were consumed by the entire family. They also found that healthy aftemoon snacking was a large consumer need. Lastly, women in India were becoming more health conscious and desperately wanted to get into shape. Using these insights, Kellogg's launched Kellogg's multi-grain, fortified cornflakes targeted to adult taste buds. Advertisements also began showing adults eating the cereal, rather than focusing on children alone. The assault on the aiternoon-snack segment was led by Chocos. This brand w: already popular with children, who were their key consumers for “4 pm munches’. The launch communication offered the Chocos variant as a nutritious substitute for chips and other junk food." > SpEcIAL K: Get INTO SHAPE In 2008, Kellogg's launched their $1.5 billion “Special K” brand as a weight management cereal targeted at women (25~44 years) who wanted to keep in shape. It was positioned as a low-calorie weight control meal. This was again not categorized as breakfast item but a complete meal. Consultants pointed out that Kellogg's’ brand extension strategy helped to increase its relevance across categories. It was a player in the Rs 500-crore weight management market and the Rs 751 crore convenience foods market, apart from the Rs 250-crore breakfast cereal market (which, in turn, was part of the Rs 2,000-crore health foods segment).?° The marketing team knew that as against other markets, Kellogg's not only adapted its portfolio to match Indian needs but also made changes to their global positioning to appeal to Indian consumers. Indian market is diverse and unique, Herings to fit cheir life pattern, The marketing head at Kellogg's had recently read an article that incorrect positioning was the reason behind 80% brand failures. Kellogg's have been relooking at their 5-year strategy be confident on the delivering the promise they have made to its consumers. s they have always wanted toKellogg's Corflakes in India: Finding a Platform that Connects 10.5 EXHIBIT 1 KELLOGG’S IRON SHAKTI TVG 4 gang of thieves is seen loading... the scene. Thinking that _... to their activity. As his some stolen items in a truck, his neighbor, Pandey Ji, is daughter worryingly points Just then aman with his family shifting home he does not _ out to him, “hamara TV.” our arrives at... pay much attention... man cools her off by saying, “Pandey ji ka’ A The little girl gets more Not able to take any more man still reassures disturbed on seeing of this, she vehemently her, “Pandey ji ka”. On the thieves with her protesis on seeing their reaching home he finds cupboard. But the father _ refrigerator with the the things missing and assures her, “Pandey jika’. _stealers. But our .. realizes everything. VO: “Iron kam Khaoge toh dimaag nahin daudega, The ad ends aise chalega. Aapko chaahiye on our man telling his family Kellogg's com flakes jisme hai the thieves’ truck number, iron shakti. Ab poore parivaarka _ thereby proving his better dimaag chalega memory.10.6 Case 10 NCR s Roce ken mets CPUC rey INR million 2009 201020112012 Hot Cereals 775.05 1,099.09 1,520.88 2,137.94 RTE Cereals 2,919.39 3,605.95 4,306.32 5,254.46 = Children’s Breakfast Cereals 166.74 189.05 211.90 250.34 ~ Family Breakfast Cereals 2,752.65. 3,416.90 4,094.42 5,004.13 - Flakes 2,328.88 2,848.08 3,358.19 4,028.58 Muesli 423.77 568.82 736.23 975.54 ~- Other RTE Cereals = 5 E - Breakfast Cereals 3,694.44 4,705.04 % current value growth Hot Cereals RTE Cereals ~ Children’s Breakfast Cereals - Family Breakfast Cereals - Flakes -- Muesti -- Other RTE Cereals Breakfast Cereals 2013 2,999.65 6,361.85 299.75 6,062.10 4,782.14 1,279.96 2014 3,989.47 7,689.07 358.20 7,330.87 5,666.87 1,664.00 5,827.20 7,392.40 9,361.50 11,678.54 Source: Euromonitor International from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources reals by Category: % Value Growth 2013/14 2009-14 CAGR 2009/14 Total 33.00 20.86 19.50 20.93 18.50 30.00 24,75 38.78 137 16.52 21.64 19.46 31.46 25.88 MATA 163.38 114.83 166.32 143.33, 292.67 216.11 Source: Euromonitor Intemational from official statistics, trade associations, trade press, company research, store checks, trade interviews, trade sources eS dete eR Aron 6 retail value rap Kellogg India Lid Bagry’s India Lid Frito-Lay India ‘Mohan Meakin Lid Marico Lid GlaxoSmithKline Consumer Healtheate Lid ‘Avesta Good Earth Foods Pvt Lid Hindustan Vegetable Oil Corp Lid 2010 50.20 13.42 9.46 735 12 LT 201 45.39 14.06 10.07 7.20 1.44 0.32 1.52 1.70 2012, 41 15.43, 10.50 7.02 3.02 1.98 1.65 174 2013, 39.10 16.49 11.28 6.99 5.06 3.81 1.73 175, 2014 37.42 17.36 12.46 6.99 6.09 5.50 1.78 1.76Kelloga's Corflakes in Ina: Finding a Platform that Connects 10:7 Express Foods Pvt Lid 1070127, «136142 1.46 Avee's Products India Ltd 0.28 == 0.26 0.26 0.26 0.25 Pantaloon Retail India Ltd 009° 0.100.100 0.10 Good Earth Foods - - - - - Others 15.20 16.68 14.43 12.03 8.84 Total 100.00 100.00 100.00 100.00 100.00 Source: Euromonitor International from official statisties, trade associations, trade press, company research, store checks, trade interviews, trade sources, Senn 9% retail value rsp Company 2011 2012, 2013 2014 Kellogg's Com Flakes Kellogg India Lid 33.43 30.79 28.20 26.69 Bagny's Bagrry’s India Lid 14.06 15.43 16.49 17.36 Quaker Frito-Lay India 10.07 10.50 11.28 12.46 ‘Mohun’s ‘Mohan Meakin Lid 7.20 7.02 6.99 6.99 Saffola Marico Ltd 144 3.62 5.06 6.09 Horlicks Oats GlaxoSmithKline 0.32 1.98 3.81 5.50 Consumer Healtheare Lid Kellogg's Chocos Kellogg India Lid 2.28 243 2.02 1.95 Good Earth Avesta Good Earth = 1.52 1.65 123 1.78 Foods Put Led Champion Hindustan 158 1.60 1.62 164 Vegetable Oil Corp Ld Kellogg's Mueslix Kellogg India Lid 145 1.49 152 152 Express Foods Express Foods Pvt 1.27 136 142 1.46 Ld Kellogg's Frosties Kellogg India Lid 0.92 0.87 0.82 0.77 Other Private Label Other Private Label 0.06 0.38 0.4 044 Avee's Avee's 0.26 0.26 0.26 0.25 Products India Lid Tasty Treat Pantaloon 0.10 0.10 0.10 0.10 Retail India Lid Farin House Breakfast Cereal Good Earth Foods - - - - Others Others 24.04 20.82 18.27 15.00 Total Total 100.00 100.00 100.00-——100.00 Source: Euromonitor International from official statistics, trade associations, rade press, company th, store checks, trade interviews, trade sources108 Case 10 Beene ee oo) % constant value growth 2014/15 2014-19 CAGR. Hot Cereals 13.05 15.74 RTE Cereals 10.89 191 = Children’s Breakfast Cereals. 1.78 3.82 - Family Breakfast Cereals 1.22 12.25 - Flakes 10.20 10.68 -- Muesli 13.94 16.99 ~- Other RTE Cereals, - - Breakfast Cereals 11,70 13.27 Source: Euromonitor Intemational from trade associations, trade press, Peerage Rese Renee company research, trade interviews, trade sources » QUESTIONS ans 2014/19 Total 107.67 75.49 20.59 78.17 66.13 119.19 86.48 1, What was the positioning for Kellogg's cornflakes at the time of launch? 2, Why was the brand not successful? What changes were made to the positioning? 3. What do you think should be the brand proposition going forward?