How can the Kellogg do better in India?

What were the mistakes it made?

Aman Abbi FT14105 Section B

 How can the Kellogg do better in India?
What were the mistakes it made?

Aman Abbi FT14105 Section B

Kellogg's An Introduction

Started in February 1906, with just 44 employees, Kelloggs is a

Battle Creek, Michigan-based multinational food manufacturing
company. As of Match 31, 2012, Kelloggs had a turnover of over
$14.2 billion and employed close to 31,000 people. It is the
worlds largest producer of cereal as well as crackers, cookies,
toaster pastries etc. Currently, Kelloggs products are
manufactured in 35 countries and sold in over 180 countries
across the globe. The vision of the company is "To enrich and
delight the world through foods and brands that matter".

Kellogg's in India:

In the 1990s, the core markets of Kelloggs, such as the United

States and the UK, had been stagnant for over a decade. There
also seemed little room for growth, and on top of that, there was
mounting pressure from its biggest competitor General Mills
(Cheerios brand).

To hedge risk and explore other prospective cereal eating

countries, Kelloggs entered the Indian cereal market in 1994. It
didnt take the company too long to decide that India was a
suitable target for Kelloggs products. After all, here was a country
with over 950 million inhabitants, 250 million of whom were
middle class, and a completely untapped market potential. Even
if they can manage a two percent market share in India, they will
have 18 million consumers, a market larger than the US
itself. With the offerings of wheat flakes and basmati rice flakes, it
 How can the Kellogg do better in India?
What were the mistakes it made?

Aman Abbi FT14105 Section B

entered India with an initial budget of $30 million and set up its
30th manufacturing facility.

However, the Indian sub-continent found the whole concept of

eating breakfast cereal a new one. Indeed, the most common way
to start the day in India was with a bowl of hot vegetables. While
this meant that Kelloggs had few direct competitors it

also meant that the company had to promote not only its product,
but also the very idea of eating breakfast cereal in the first place.

The first figures were encouraging, and indicated that breakfast

cereal consumption was on the rise. However, it soon became
apparent that many people had bought Corn Flakes as a one-off,
novelty purchase. Even if they liked the taste, the product was
too expensive. A 500-gram box of Corn Flakes cost a third more
than its nearest competitor. However, Kelloggs remained
unwilling to bow to price pressure and decided to launch other
products in India, without doing any further research of the
market. Over the next few years, cereal buyers were introduced
to Kelloggs Wheat Flakes, Frosties, Rice Flakes, Honey Crunch, All
Bran, Special K and Chocos Chocolate Puffs none of which
managed to replicate the success they had earned in the west.
How can the Kellogg do better in India?
What were the mistakes it made?

Aman Abbi FT14105 Section B

 How can the Kellogg do better in India?
What were the mistakes it made?

Aman Abbi FT14105 Section B

Failure of Kelloggs in the Indian Market

Kelloggs did not get the success it hoped to get on entering

India. Even though they had the best products, the best
packaging, the fact that their marketing strategy was excellent,
and that their advertising campaign was handled by a leading
Indian advertising agency; Kelloggs failed to strike the right
chord with the Indian consumers. Kelloggs only got to realize
their mistake when the marketing research firms (also known as
witch doctors) presented their findings. The areas where Kelloggs
went wrong were:

1. Kellogg's banked heavily on the quality of its crispy flakes.

Unaware to them was the fact that Indians, unlike the
people in the west, like to boil their milk before
consumption. The same lukewarm temperature milk is used
by Indians to supplement cornflakes. This made the
problem for Kellogg's a bit unusual and uniquely complex. If
the cornflakes are had in warm milk then the brands USP of
being crispy goes away and also the taste is not what the
company promises to be. On the other hand even if the
consumer starts using cold milk, the habit of adding sugar
will crop up the issue of not being dissolved properly with
the milk. A bowl of only cornflakes and milk was too bland
for the Indian palate.

2. A typical Indian middle class family did not have a regular

breakfast eating habit. In other words the family, in general,
did not consider breakfast as a proper meal of the day. The
Indian sub-continent found the whole concept of eating
How can the Kellogg do better in India?
What were the mistakes it made?

Aman Abbi FT14105 Section B

breakfast cereal a new one. Indeed, the most common way
to start the day in India was with a bowl of hot vegetables.
While this meant that Kelloggs had few direct competitors
it also meant that the company had to promote not only its
product, but also the very idea of eating breakfast cereal in
the first place.

3. Indian breakfast is known for its variety. There can dozens

of types of Dosas, Idlis, Parantas or other types of native
Indian breakfast items. Because of this, a breakfast item /
menu may not be repeated for several days (if not weeks).
Therefore, by asking Indians to have the same type of corn
flake based breakfast was too much of a cultural change for
the Indians to accept. In addition to this, taste was a major
factor. Indians, generally, like to have spicy food and this
was in stark contract to the some-what bland and sweet
corn flakes that didnt appeal to many.

4. The company's initial advertisement and promotion of the

product heavily focused on the health aspect feature. In the
process, Kellogg's moved away from its tried and tested
theme of "Fun and Taste" running in the United States. This
gave the customer a false impression that the cornflakes
Kellogg's sells is primarily a "health product" instead of the
fun to eat product positioning that was popular in other
countries. On the promotion front in the United States
Kellogg's offered toys to attract young customers and make
them loyal to the product. In India there was no such
attempt made in the initial years.

5. Kellogg's decided to focus their distribution only to premium

and middle level stores. This was primarily because the
 How can the Kellogg do better in India?
What were the mistakes it made?

Aman Abbi FT14105 Section B

company believed that it could maintain a uniform quality
of service if it offered the products at a larger number of
shops. This decision was critical for the lackluster response
of Kellogg's in India since it immediately put the product out
of reach for a large section of the Indian population who did
not have access to these stores.

6. Another reason for Kellogg's not hitting the right cord with
the Indian mass was the pricing. The company adopted a
premium pricing policy. Kellogg's products were priced way
above the products of its rivals. At an

average cost of Rs 21 per 100 gm, Kelloggs products were

clearly priced way above the product of its main
competitor, Mohun Cornflakes (Rs16.50 for 100gm).
Another small- time brand, Champion was selling at prices
almost half that of Kelloggs. This sort of pricing gave the
image of the product being out of bounds for purchase by
the average middle class population. In fact even
customers on the upper segment of the purchase category
failed to recognize and appreciate any extra benefits from
the Kellogg's product.

How can Kellogg's do better in India:

The initial set back to Kelloggs came as a shock and wake-up call
to the company. To tackle this, it undertook the following steps:

1. In order to gain more market share, Kellogg's decided to

launch two highly successful brands internationally-Chocos
How can the Kellogg do better in India?
What were the mistakes it made?

Aman Abbi FT14105 Section B

in 1996 and Frosties in 1997 in India. Both of the brands
were very successful and sales picked up significantly. It
also started providing its offering in retail packs of different
sizes. This enabled the company to cater the needs of
different individuals.

2. Leveraging on the success of Chocos that the company

decided to expand the brand by foraying in to the cereal
biscuit area with the launch of Chocos Cereal Biscuits.
Kelloggs started concentrating on establishing its brand
name in the market irrespective of the off take. The focus
was entirely on being present and visible on the retail
shelves with a wide range of products.

3. Kelloggs are realized that in order to sell more they had to

adopt the local flavor and hence this led to the total
Indianization of its flavors in future. This resulted in the
launch of the "Mazza" line of products in August, 1998 in
three local flavors Mango Elaichi, Coconut Kesar and Rose
after one year extensive research to study consumer
patterns in India. These lines were however discontinued
due to meek response.

4. Furthermore, Kellogg's finally saw their problem with the

current advertising campaign and product positioning. This
made it attempt to Indianize its campaign instead of simply
copying its international promotions while maintaining
branding consistency. A simple example of brand
consistency would be that of the rooster that was
associated with the Kellogg's brand worldwide missing from
How can the Kellogg do better in India?
What were the mistakes it made?

Aman Abbi FT14105 Section B

its advertisements campaigns in India. Another example of
Indianization would be of that of an
advertisement depicting a cross section of individuals from
a kathakali dancer to a yoga instructor attributing their
morning energy and fitness to Kellogg's.

5. Kellogg's significantly increased the spectrum of shops that

would store their products for sale. Distribution was the
need of the hour for Kellogg's and it concentrated on its
distribution network to deliver results. This was also an
important area to look into to improve market penetration.

6. Kellogg's also reduced its prices by focusing on its cost

of production. For example, as Mazza was not positioned in
the premium segment its glossy cardboard packaging was
replaced by packets, which helped in reducing its price. In
addition to this, Kellogg's opened up multiple plants in India
so that the overall cost decreases and they again become
competitive in the market.

7. Finally, the hardest part of being the market leader is

maintaining leadership. Kellogg's needs to up the ante in
terms of media advertising (increasing both spending and
mediums used). New ways of promotion such as social
media need to be leveraged and harnessed for the benefit
of the company.
 How can the Kellogg do better in India?
What were the mistakes it made?

Aman Abbi FT14105 Section B

Conclusion

Today Kelloggs is the market leader in the cereal industry and

holds a commanding position of close to 55% market share.
Kelloggs has also managed to become the common term for
breakfast cereals among households and is also one of the most
looked up to food corporation. This they achieved by correcting
their mistakes, this is, reducing prices and Indianizing its
products.
 How can the Kellogg do better in India?
What were the mistakes it made?

Aman Abbi FT14105 Section B

References
1. Kelloggs Website (www.kelloggs.com)

2. Kelloggs Annual Report

(http://investor.kelloggs.com/files/doc_financials/annual_rep
orts/KELLOGG_12AR.pdf)

3. http://articles.economictimes.indiatimes.com/2012-10-
19/news/34584530_1_kellogg-india-localised-variants-
nimbooz

4. http://en.wikipedia.org/wiki/Kellogg_Company

5. http://www.poweringbrands.com/2012/03/brand-promo-site-
kelloggs-special-k.html

6. https://www.kelloggcompany.co.in/
(S(xwfm0efeabfdap5eeiuieson))/Index.aspx

7. http://dranil-
marketingmusings.blogspot.in/2011/04/marketing-lessons-
from-kelloggs-indian.html

8. http://brandalyzer.wordpress.com/2010/02/07/kelloggs-in-
india/

9. http://brandfailures.blogspot.in/2006/11/brand-culture-
failures-kelloggs-in.html

10. http://themarkmanager.blogspot.in/2011/11/brand-story-
kelloggs-in-india.html