Case study
Introduction
The Kellogg Company is the world’s leading producer of cereals. For more than 100 years,
Kellogg’s has been a leader in health and nutrition through providing consumers with a wide variety
of food products. Kellogg’s market leading position and reputation is built on its commitment to
ethical business practices and its values-based culture. Business values identify the beliefs that the
company holds to be the most important. These values then guide decision making and shape the
way the organization behaves. For Kellogg’s, these are referred to as K-Values; Kellogg’s K-Values
guide the way the company interacts with all of its stakeholders. Stakeholders are individuals,
groups and organizations that have an interest in the decisions a company makes and the products
that it produces. They also, depending on their power, affect how businesses perform. Kellogg’s
products are manufactured in 18 countries and are sold in more than 180 countries. This means
Kellogg’s has to manage its relationships with a variety of stakeholders around the world. The
diagram identifies Kellogg’s key stakeholder groups.
Kellogg’s long-term business plans, known as strategies, focus on engaging with its stakeholders to
ensure their needs are being met. For Kellogg’s, this means ensuring the highest ethical standards
and sustainable business practices. Kellogg’s has a Global Code of Ethics governing how it deals
with stakeholders across the world. A sustainable business is one which focuses on minimizing any
negative impact to the environment to ensure future generations can prosper.
Kellogg’s vision and core purpose outline what the company wants to achieve. They guide the
organization’s decision making processes to help meet the expectations of its stakeholders.
Kellogg’s vision, which was refreshed in 2012, sets out the company’s main aim: ‘To enrich and
delight the world through foods and brands that matter.’ This is supported by Kellogg’s purpose of
‘Nourishing families so that they can flourish and thrive.’ Every Kellogg’s employee, no matter
where in the world, is working towards achieving these every single day.
History
1898 — In a fortunately failed attempt at making granola, the company’s founder, W.K. Kellogg,
and his brother, Dr. John Harvey Kellogg, changed breakfast forever when they accidentally flaked
wheat berry. W.K. kept experimenting until he flaked corn, and created the delicious recipe for
Kellogg’s Corn Flakes.
1906 — W.K. Kellogg opened the “Battle Creek Toasted Corn Flake Company” and carefully hired
his first 44 employees. Together they created the initial batch of Kellogg’s Corn Flakes and brought
to life W.K.’s vision for great-tasting, better-for-you breakfast foods.
1914 — Kellogg’s Corn Flakes was introduced to a new country: Canada. (Later the Kellogg
Company will spread the goodness of grain around the world by opening factories in Australia,
England, Mexico, Japan, India and more. Today Kellogg brightens breakfast in over 180 countries
around the world).
1915 — Kellogg introduced Bran Flakes, the first high-fiber cereal, promptly followed by the
introduction of Kellogg’s All-Bran one year later.
1923 — The Kellogg Company made another bold move and become the first in the food industry
to hire a dietitian. Mary Barber started the Kellogg’s Home Economics Department and began
defining the roles different foods played in proper diets.
1930 — As the United States sunk into the Depression, W.K. Kellogg declared, “I’ll invest in
people.” He split shifts and hired new employees to work them. He also founded the W.K. Kellogg
Foundation , whose mission — to help children realize their potential — complements that of the
Kellogg Company to this day. To further its commitment to people, Kellogg became one of the first
companies to proudly display its cereals’ recipes and nutritional info on their boxes — so their
consumers knew exactly what they were eating.
1942-1945 — Kellogg’s employees proudly produced K-rations for the U.S. armed forces overseas
during World War II, and the engineering teams helped manufacture supplies in Kellogg machine
shops. They continued to help America get nutrition by bringing new, whole-grain cereal to life
when they introduced Kellogg’s Raisin Bran.
1969 — The Kellogg Company was honored to provide breakfast for the legendary Neil Armstrong,
Buzz Aldrin and Michael Collins during their groundbreaking Apollo 11 trip to the moon.
1997 — Kellogg Company opened the W.K. Kellogg Institute for Food and Nutrition Research —
where food scientists, nutritionists and engineers transform wholesome grains and other ingredients
into great-tasting and good-for-your-family foods.
2006 — The Kellogg Company celebrated the 100-year commitment to nutrition, health and
quality. It also celebrated its future — by creating new Kellogg’s Special K Bars and other
innovative ways of giving your family the delicious nutrition you need to make the most of every
day.
2009-2010 — After discovering that many people in the U.S. don’t get enough fiber, Kellogg
increased the fiber in many of most popular cereals — including Kellogg’s Froot Loops. Now, in
the U.S., Kellogg Company offers more ready-to-eat cereals that provide at least one good source of
fiber (3 grams) and one-half serving of whole grains (8 grams) than any other U.S. food company.
The market
The value of the UK cereals market is around £1.1 billion per year. Kellogg has a 42% market share
of the value of the UK’s breakfast cereal market. The company has developed a range of products
for the segments within this market, targeted at all age groups over three years old.
This includes 39 brands of cereals as well as different types of cereal bars. Consumers of cereal
products perceive Kellogg to be a high quality manufacturer. As the market leader, Kellogg has a
distinct premium position within the market. This means that it has the confidence of its consumers.
Interacting with stakeholders
Stakeholder engagement, building two-way relationships with its stakeholders, is a key aim for
Kellogg’s. Two-way relationships help build trust between Kellogg’s and its stakeholders. Each
stakeholder group has different needs. Engaging with each group individually helps Kellogg’s
ensure these needs are met. As with any business, its owners are a major stakeholder group.
However, Kellogg’s does not focus on pleasing shareholders at the expense of other stakeholders.
Kellogg’s uses a variety of strategies to maintain positive relationships with its stakeholders. For
example, Kellogg’s commitment to its stakeholders and ethical practices is demonstrated through its
Corporate Social Responsibility (CSR) initiatives. CSR focuses on improving the lives of
communities in which the organization operates. Kellogg’s has identified four pillars to its
Corporate Responsibility strategy:
• Marketplace ambition - meeting the needs of customers. Selling them safe, high quality products
whilst engaging in ethical and responsible marketing.
• Environment ambition - using scarce resources carefully whilst also reducing environmental
impacts and supporting sustainable agriculture.
• Community ambition - contributing to the communities in which the company operates,
concentrating on nutrition and physical fitness.
• Workplace ambition - supporting a talented and diverse workforce which values diversity and
inclusion, abiding by best practice labor standards.
Kellogg’s focuses its CSR activity on initiatives that benefit stakeholders across these pillars. For
example, Kellogg’s Breakfasts for Better Days campaign communicates important information
about the benefits of starting the day with a healthy breakfast. It engages stakeholders across three
of these pillars – customers, suppliers that provide the ingredients so Kellogg’s can guarantee the
nutritional content of its products and also the communities in which it operates where the
campaign’s messages are communicated. A key part of the campaign is Kellogg’s support for
school breakfast clubs to ensure that every child in the UK gets a good start to the day.
An important part of managing the needs of stakeholders is understanding that different stakeholder
groups can sometimes have conflicting interests. It is therefore essential for Kellogg’s to consider
how it can best balance different stakeholder aspirations.
Examples of conflicting stakeholder needs include:
• Government requirements for food content and consumer preferences. Kellogg’s recently changed
the formula of Honey Loops to reduce the sugar content but this had an impact on consumer’s
perceptions of the brand.
• Different interests of charity groups requesting Kellogg’s support. Kellogg’s current CR strategy
focuses on breakfast clubs for children so conflict will occur when charities supporting other causes
cannot be a focus for Kellogg’s at this time.
Why carry out market research?
Many organizations are described as product orientated. This means they develop a product and
then look for a market to sell to. Kellogg’s is market orientated. This means that the whole
organization focuses on the needs of its consumers. It is therefore essential that it identifies and
anticipates changing consumer needs before the development of new products.
Market research adds value to businesses like Kellogg’s by identifying consumers’ needs. It helps
Kellogg’s to plan ahead, for example, looking at what products or extensions it should develop and
for whom. It focuses the business on the needs of its consumers. An organization that does this can
improve its competitive advantage.
In an established market, such as breakfast cereals, there is little room to increase the overall sales
in the market. Kellogg’s is therefore always looking for ways to strengthen its own portfolio.
Designing new products is a good way of doing this. However, this can take a long time and may
involve considerable costs. In addition to the resources required during development, suppliers must
produce an advertising campaign to raise awareness of the product among consumers and
encourage retailers to stock the product. Launching a new product can be a risky business.
Of the hundreds of products launched every year in consumer goods markets, very few reach
significant market share. In order to reduce risks, market research is, therefore, essential.
A product extension is a less risky way of increasing market share by providing consumer products
with new features under an existing brand. New product extensions give more choice to consumers
and help them to feel more favorably about the existing brands.
Types of research
For example, to develop a new Crunchy Nut brand extension, Kellogg’s commissioned primary
research. This is research gathered firsthand to answer questions that are specific to the project.
Although primary research is often time-consuming and expensive, it is considered as a reliable
source of information because it is directly from the consumer and is specifically designed to meet
the objectives of a project. There are a number of different ways of collecting primary data.
Sometimes agencies are employed to collect data using, for example, street interviews or a
questionnaire.
This is a systematic list of questions that obtain feedback from the consumers. For the development
of Crunchy Nut Bites, Kellogg’s used various different methods of primary data collection.
Primary market data may involve qualitative research or quantitative research. Both types of data
are valuable in understanding what consumers want or need. Qualitative data is concerned more
about opinions, feelings and attitudes. Quantitative data is in numerical form and is usually gathered
from a large sample of respondents.
Qualitative research establishes a conversation with consumers. It prompts consumer reaction to, for
example, a new product idea and helps researchers understand what they think of it, how it makes
them feel, why they find it interesting or not. Qualitative research may be obtained through focus
groups, where a moderator captures feedback from a group of six or seven consumers to the ideas
shown to them. Those ideas may take the format of drawings or having new food prototypes to
taste.
Quantitative research may use questionnaires administered to large numbers of respondents. This
allows statistical analysis, such as the calculation of a mean score or percentages. It aims to give a
representative picture of what consumers think of a new product idea or a new (real) food. It may
involve the use of scales, so numbers get associated with a particular meaning – for example, on a
evaluation scale of 1 to 7, where 1 means ‘very poor’ and 7 means ‘excellent’. Crucially those
numbers need to be interpreted to enable the business to understand the consumer’s overall
response. In addition, Kellogg’s used secondary research which is existing research that has already
been collected by other organizations. Sources of secondary data include books, journals, the
internet and government statistics. Market research agencies collect a range of data which they
process and use to provide organizations like Kellogg’s with research. The benefits of secondary
research are that it is quicker and often less expensive than primary, although it may not always be
completely related to the needs of a specific project.
Developing an aim for a business
Today, making the decision to eat a healthy balanced diet is very important for many consumers.
More than ever before people want a lifestyle in which the food they eat and the activities they take
part in contribute equally to keeping them healthy. Research undertaken for Kellogg, as well as
comprehensive news coverage and growing public awareness, helped its decision-takers to
understand the concerns of its consumers. In order to meet these concerns, managers realized it was
essential that Kellogg was part of the debate about health and lifestyle. It needed to promote the
message 'Get the Balance Right'.
Decision-takers also wanted to demonstrate Corporate Responsibility (CR). This means that they
wanted to develop the business responsibly and in a way that was sensitive to all of Kellogg’s
consumers’ needs, particularly with regard to health issues. This is more than the law relating to
food issues requires. It shows how Kellogg informs and supports its consumers fully about lifestyle
issues. Any action within a large organization needs to support a business direction. This direction
is shown in the form of a broad statement of intent or aim, which everybody in the organization
can follow. An aim also helps those outside the organization to understand the beliefs and principles
of that business. Kellogg’s aim was to reinforce the importance of a balanced lifestyle so its
consumers understand how a balanced diet and exercise can improve their lives.
Creating business objectives
Having set an aim, managers make plans which include the right actions. These ensure that the aim
is met. For an aim to be successful, it must be supported by specific business objectives that can be
measured. Each of the objectives set for Kellogg was designed to contribute to a specified aim.
Kellogg’s objectives were to:
• encourage and support physical activity among all sectors of the population
• use resources to sponsor activities and run physical activity focused community programs
for its consumers and the public in general
• increase the association between Kellogg and physical activity
• use the cereal packs to communicate the ‘balance’ message to consumers
• introduce food labeling that would enable consumers to make decisions about the right
balance of food.
Well constructed objectives are SMART objectives. They must be:
• Specific
• Measurable
• Achievable or Agreed
• Realistic
• Time-related.
Each of the objectives set by Kellogg was clear, specific and measurable. This meant Kellogg
would know whether each objective had been achieved. The objectives were considered to be
achievable and were communicated to all staff. This made sure that all staff agreed to follow certain
actions to achieve the stated aims. The objectives were set over a realistic time-period of three
years. By setting these objectives Kellogg set a direction that would take the business to where it
wanted to be three years into the future.
Strategy
Having created an aim and set objectives, Kellogg put in place a process of planning to develop a
strategy and a series of actions. These were designed to meet the stated aim and range of business
objectives. In the area of food labeling, Kellogg introduced the Kellogg’s GDAs to its packaging,
showing the recommended Guideline Daily Amounts. These GDAs allow consumers to understand
what amount of the recommended daily levels of nutrients is in a serving of Kellogg’s food.
Working with a group of other major manufacturers, Kellogg introduced a new format in May
2006, with GDAs clearly identified on brand products and packages. These GDAs have been
adopted by other manufacturers and retailers such as TESCO. For many years Kellogg has been
working to encourage people to take part in more physical activity. The company started working
with the Amateur Swimming Association (ASA) as far back as 1997, with whom it set some longer
term objectives. More than twelve million people in the UK swim regularly. Swimming is inclusive
as it is something that whole families can do together and it is also a life-long skill. The ASA tries
to ensure that ‘everyone has the opportunity to enjoy swimming as part of a healthy lifestyle’. As a
lead body for swimming, the ASA has been a good organization for Kellogg to work with, as its
objectives match closely those of the company. Kellogg became the main sponsor of swimming in
Britain. This ensured that Kellogg’s sponsorship reached all swimming associations so that
swimmers receive the best possible support. Kellogg sponsors the ASA Awards Scheme with more
than 1.8 million awards presented to swimmers each year. This relationship with the ASA has
helped Kellogg contribute in a recognizable way to how individuals achieve an active healthy
balanced lifestyle. This reinforces its brand position.
Working with the ASA helped Kellogg set up links with a number of other bodies and partners. For
example, Sustrans is the UK’s leading sustainable transport organization. Sustrans looks at the
different ways that individuals can meet their transport needs in a way that reduces environmental
impact. It is the coordinator of the National Cycle Network.
This provides more than 10,000 miles of walking and cycle routes on traffic-free paths throughout
the UK. To meet its business objective of encouraging and supporting physical activity Kellogg is
developing a promotion for a free cyclometer which will be advertised on television in 2007.
Walking is one of the easiest ways for people to look after themselves and improve their health. To
encourage people to walk more often, Kellogg has supplied a free pedometer through an offer on
All-Bran so that individuals can measure their daily steps. During 2006 more than 675,000
pedometers were claimed by consumers. From a research sample of 970 consumers, around 70%
said they used the pedometer to help them walk further. Kellogg’s Corn Flakes Great Walk 2005
raised more than £1 million pounds for charity on its way from John O'Groats, through Ireland and
on to Land's End. In 2004, 630,000 people took part in the Special K 10,000 Step Challenge.
Kellogg has also delivered a wide range of community programs over the last 20 years.
For example, the Kellogg’s Active Living Fund encourages voluntary groups to run physical
activity projects for their members. The fund helps organizations like the St John’s Centre in Old
Trafford which runs keep-fit classes, badminton and table tennis.
Since 1998 Kellogg has invested more than £500,000 to help national learning charity ContinYou to
develop nationwide breakfast club initiatives. These include start-up grants for new clubs, the
breakfast Club Plus website, the Kellogg’s National Breakfast Club Awards and the Breakfast
Movers essential guide. Breakfast clubs are important in schools because they improve attendance
and punctuality. They help to ensure that children are fed and ready to learn when the bell goes.
Kellogg promotes breakfast via these clubs, not Kellogg’s breakfast cereals.
Together Kellogg and ContinYou have set up hundreds of breakfast clubs across the UK, serving
well over 500,000 breakfasts each year.
Advertising the Kellogg’s brands
When Kellogg’s Corn Flakes were launched in the UK in the early 1920’s the company faced a
formidable task of persuading a skeptical nation, accustomed to porridge and bacon and eggs, to try
a brand new breakfast food. What followed was one of the most remarkable marketing
achievements of the 20th Century. Kellogg used a team of dedicated salesmen who employed
armies of casual laborers and Boy Scouts to cover the country, to knock on doors and literally give
away millions of sample packets of Corn Flakes and Rice Krispies. The free samples encouraged
consumers to buy the products and within ten years Kellogg’s had revolutionized the eating habits
of a nation.
Today, advertising and packaging are also key aspects of the marketing mix. Kellogg’s advertise
using a whole range of media: in the press, on posters, radio and cinema, direct mail and, most
recently, on the Internet. However, the main channel for its advertising is on television, where
individual brands are given their own air time, aimed specifically at a target audience. Although
breakfast cereals are consumed by the whole population, individual products may be aimed at
specific groups. For example, Special K is aimed towards women, Start has a sporty image and
Frosties and Coco Pops are primarily aimed at children. Corn Flakes, by contrast, are aimed at the
whole family. This targeting will determine the content of the advert and the time of broadcast.
Packaging
The packaging of Kellogg’s breakfast cereals is also a key element of the marketing mix. The
packaging has to provide a representation of the brand identity and appeal to the target market. It
also has to have space for nutritional information and any promotional offers. Kellogg’s has to deal
with the problem that the purchasers of cereal, usually adults and often female, are not always the
consumers, often children. The packaging has to appeal to both groups. By combining some
elements of corporate branding with the individual product’s own identity, it can provide the
assurances of quality and nutrition that come with the Kellogg’s name and also appeal to the end
user. In Spring 2000, Kellogg’s took the major step of launching a bright, colorful new corporate
image for all its cereal brands. This is not a course of action that should be taken lightly.
Once consumers have a popular brand image in mind, it may be risky to change it, but Kellogg’s
was concerned that, in a highly competitive market, it was becoming increasingly difficult to
differentiate between supermarket own label and other manufacturers’ brands.
Consumers were becoming confused when confronted with so many similar packs on the
supermarket shelves.
Communicating with consumers
The completed new designs were further tested on consumers using sophisticated computerized eye
tracking tests to see if the packs stood out on the supermarket shelves. More extensive market
research was carried out to gauge the reactions of consumers. Finally, it was necessary to
communicate with consumers about the new packaging and the new image was flagged on the old
packs for two months before the launch. The top section of the back panels was used to display the
new designs to enable the consumers to become familiar with them. The new designs were also
featured in a direct mail campaign to Kellogg’s consumers as the packs went into market.
Changing the appearance of a well-known range of products can be a risky strategy, particularly in
the highly competitive environment of the supermarket, where purchase decisions are made very
quickly and competitors often try to imitate the packaging of a market leader.
However, with extremely careful preparation and attention to detail and some state of the art design
techniques, Kellogg’s has been able to clearly differentiate its product range from the competition.
Extensive market research helped to reduce the risk, and communication with consumers warning
them of the new changes, eased the period of changeover.
The new designs have been successful in promoting all the familiar attributes associated with the
Kellogg’s name and have also enhanced and up-dated the personalities of the individual brands.
Instructions
Read the text carefully and select relevant information.
Elaborate the SWOT Analysis of Kellogg’s, identifying the most important
Strengths/Weaknesses (Internal Audit) and Opportunities/Threats (External Audit) of
the Company, in order to understand the principal competitive advantage of the
Brand.
Strengths Weaknesses
Opportunities Threats