The Kellogg Company provides a variety of products such as breakfast cereal, frozen specialty food, and commercial bakeries that offer cookies and crackers. It also possesses multiple brands targeted towards different consumer groups (“Kellogg Company – Company Profile, Information, Business Description, History, Background Information on Kellogg Company”, n. D.). This report’s objective is to examine Kellogg’s market mix and determine its market segments through an analysis using Kellogg’s 2013 annual report, its 2014 third-quarter financial results, and various articles.
It also aims to showcase the process of customer purchase decision-making and compare it with Kellogg’s major competitor, Nestle, in the market. Additionally, it explores marketing mix and market trends. According to the report “Breakfast in Australia” (2014), breakfast cereal experienced a 5% value growth in 2013, with volume growing by 4% after two years of slow or negative growth. The Australia Bureau of Statistics (2013) found that 1 in 7 children in Australia starts the day without breakfast, as revealed by the nationwide project, Concatenations, which gathers relevant real data for students.
The increase in value mentioned above can be attributed to the fact that while certain customers are skipping breakfast, others are willing to spend more on it. Another study reveals that the cereal, pasta, and baking mix manufacturing sector has experienced slight growth over the past five years, with projected annual industry revenue growth of 1.1% until 2013-2014. This includes an expected increase in revenue from 1 to $2.6 billion in 2013-2014 (“Cereal, Pasta and Baking Mix Manufacturing in Australia: Market Research Report”, 2014).
According to the data provided, Kellogg (Australia) Pity Ltd maintains its position as the leading player in the breakfast cereals market in Australia, holding a significant 38% market share in 2013 (“Breakfast in Australia,” 2014). Kellogg Australia Holdings Pity Ltd, a proprietary company, was ranked 724 among the top 2000 companies in Australia. In 2013, the company generated a total revenue of $481,765,000, which includes sales and other incomes (“Kellogg Australia Holdings Pity Ltd – Premium Company Report Australia,” 2014).
When it comes to the geographical distribution of cereal products, they primarily focus on and are located along the eastern coastline of mainland Australia. New South Wales, Queensland, and Victoria are projected to make up around 80% of all industry establishments (“Cereal, Pasta and Baking Mix Manufacturing in Australia: Market Research Report”, 2014). Market segments and opportunities arise from the limited resources, leading organizations to engage in the market by dividing segments and creating various products tailored to meet the specific needs of these segments.
When setting up a market segment and determining the appropriate targeting strategy, it is crucial for a company to identify groups of potential customers or Organizations with similar needs. By doing so, the company can tailor its marketing mix to meet their specific requirements (Pride, W., Ferret, CO, Lukas, B., Shimmer, S., & Out, N., 2012). Kellogg, for example, targets different segments of the market based on the product being offered. For its star product – cereal – Kellogg develops various specific brands and formulas designed for targeting specific groups of customers.
For example, Kellogg Frostiest are targeted towards children with the multicolumn package. The Special K cereal is aimed at female customers, in response to Kellogg’s recognition of the growing demand for healthy diet products among women (“The Importance of Marketing Segments”, 2014). Kellogg Rice Crispies, on the other hand, have a greater appeal to children as a fun cereal that “snap crackle & pops”. Lastly, Kellogg Crunchy Nut Cornflakes target adults by providing daily energy and nutrition (Katherine Mullah, 2011). It is important to note that Kellogg’s target market extends globally, reaching beyond select areas.
Currently, Kellogg products are produced in 18 countries and marketed in over 180 countries worldwide (“Kellogg History’, 2014). These products target not only children and women but also busy individuals who do not have time for breakfast. Kellogg’s ready-to-eat food, formula, packaging, advertisement, promotion, and brand image have successfully met the needs of its target consumers. Many customers now consider Kellogg products to be essential and indispensable.
Kellogg has become the world’s largest cereal manufacturing company due to its high quality products and effective marketing segments. The customer purchase decision-making process, which applies to individuals or households purchasing products for personal or household use rather than for business purposes, is a type of customer behavior (Pride, W., Ferret, CO, Lukas, B., Shimmer, S., & Out, N., 2012, p. 116). This process involves customers solving their problems through routines response behavior, emitted problem-solving, extend problem solving, and limited problem-solving.
Impulse buying is a common phenomenon that occurs during the five stages of the customer buying decision process. These stages include problem recognition evaluation, information search, evaluation of alternatives, purchase, and post-purchase evaluation. In the case of Kellogg customers, the first stage involves identifying the root cause of their problem. For instance, individuals who have busy morning schedules may not have enough time for breakfast. As a result, they are highly motivated to find a product that can meet their needs. This product should be easy to prepare, quick, and provide long-lasting energy throughout the day.
Breakfast cereal is commonly seen as a convenient choice, although the wide variety of brands and options in stores can be overwhelming. When making a purchase, people take into account factors like price, quality, and nutrition. They evaluate various types and brands before ultimately deciding. The preferences and needs of Kellogg cereal customers differ among different groups.
The parents are more likely to consider the ingredient table and taste of the product, based on their children’s preferences. The office-going people may prefer a cereal that can be quickly cooked and easily taken away. The health enthusiasts are primarily concerned with finding a cereal that is low in fat and carbohydrates, but high in fiber to support their balanced diet. According to the Kellogg 2013 Annual Report, the company faces competition from other advertised and branded products that are similar in nature but often sold at lower prices.
The competition in the cereal market was affected by several factors, including new product introductions, decreased quality and taste, convenience, nutritional value, advertising, and promotion. Despite being a leading global brand, Kellogg faces intense competition. Nestle, a Swiss food company, entered the cereal market in 1989 and quickly gained market share from Kellogg in various countries (Company profile, Information, Business Description, History, Background Information on Kellogg Company). Nestle is headquartered in Switzerland and is globally recognized as the top brand for health and nutrition food. It is also the largest food company in terms of revenue. Their product range includes baby food, bottled water, breakfast cereal coffee and tea confectionery dairy products ice cream frozen food pet food and snacks. Nestle operates 447 factories worldwide across 194 countries with approximately 333000 employees. In 2013 alone,Nestle achieved a total revenue of $92.16 billion with a profit of $10.2 billion (Annual Result 2013). According to SWOT Analysis Strengths,Nestle holds the position as the largest food company with an unassailable strong brand image.Earning over $1 billion annually from its 29 operating brands,Nestle offers more than8000 different products(Nestle The Popular Food Brand2009).Their dairy products have earned unwavering loyalty from millions of consumers who use them daily worldwide
Nestle has formed alliances with other major companies, including L’Oreal, the world’s largest cosmetics company, to maintain its top position. However, due to its extensive size, Nestle sometimes faces challenges in maintaining consistent quality in its food products. Consequently, the company has had to issue product recalls that have negatively impacted its brand reputation. Moreover, there have been reports and confirmation of Nestle employing illegal child labor for its cocoa supply chain in developing nations.
Although Nestle’s efforts to address its misconduct have been made, the scandal has had a significant negative impact on its global reputation (“Child Labor and Slavery in the Chocolate Industry,” n.d.). However, there is a chance for Nestle to take advantage of consumers’ increasing emphasis on health by expanding its market and providing a wider range of nutritious food products to meet the growing demand. Furthermore, through partnerships with influential companies such as L’Oreal and Coca-Cola, Nestle could potentially benefit from advantageous promotional opportunities that would aid in expanding its customer base.
Even though Nestle is recognized as a global leader in producing nutritious food, it encounters obstacles related to import resistance from certain countries. The company’s attempts to grow its market are impeded by protectionist policies implemented by numerous developing nations. Moreover, Nestle confronts fierce competition from prominent corporations like Kellogg, particularly within the breakfast cereal sector, which significantly jeopardizes its market dominance.
Nestleg, the leading supplier of chocolate and cocoa products, could experience a decrease in its previous market shares because of the rising desire for healthier food choices and the growing trend of health-conscious eating. According to the 2013 annual report by Kellogg, their main rival is a comparable product available at a cheaper price. Consequently, Kellogg must adopt a strategy that enables them to cut costs throughout different stages of production. In 2013, Kellogg launched Project K as an initiative to achieve this goal.
This four-year project aimed to decrease expenses and boost earnings. In 2013, Kellogg implemented further measures to cut costs by terminating 7% of its worldwide staff. Furthermore, Kellogg has the chance to grow its presence in the global market. Thanks to its achievements in the breakfast cereal sector, Kellogg has acquired a dedicated customer base and strengthened its brand. This allegiance facilitates the introduction and marketing of new products that cater to the health-conscious choices of its customers.
To achieve greater success, it is crucial to be proactive and have a keen understanding of the market.
