The “United Cereal” case is focusing on European division of a giant multinational breakfast food company, which describes a launch decision for a new cereal product. As the case evolves, the decision has major strategic and organizational implications for Lora Brill, European VP. Lora Brill has been concerned with the decision of whether to make some major changes to a company with 100-year success history in order to push growth of the company’s potential to a completely new level.
Lora Brill has been presented much of the information she needs to make a decision, but due to mixed results in past trials of a similar nature, Lora is not sure what to do. United Cereal is a pioneer in the use of research and focus groups. The company puts a very high value on extensive market testing prior to launching a new product. As the initial testing of the blueberry based cereal was not successful, Healthy Berry Crunch was not put through the normal testing to ensure complete customer acceptance. Problem Identification.
United Cereal is an organization embodied with a strong set of core values. Throughout its 100-year history starting back in 1910 the company’s management believed in commitment, diligence and loyalty; attracted people to work for the company and promoted managers from within. Their managers are committed to “The UC Way” and certain deeply rooted beliefs like: • “Listen to the customer”- that led the company to pioneer the use of research and focus groups. • “Spot the trend, make the market”- led the company to place high value on extensive market testing prior to launching new products.
• “Honoring the past and embracing the future”-gave UC a high regard for product development and innovation in marketing. To be able to answer whether the Eurobrand cereal is truly viable it is necessary at first to make clear what the cereal market in Europe looks like. The $7 billion cereal market is very diverse. The per capita consumption varies from 8kg in the United Kingdom to 0. 5 kg a year in Italy due to differences in national tastes and breakfast traditions. Channels also vary a lot by country.
United Cereal is pretty centralized in its organizational policies and practices as the Country Managers confirm to United Cereals embedded values, policies and procedures. But; it is pretty de-centralized concerning its market strategy and product strategy as each Country Manager makes his/her own marketing and product decision to maximize local profit of the subsidiaries. The Country Manager can also customize the products; adapt advertising and promotions keeping United Cereals policies in mind. The United Cereals Company is now facing a problem concerning Europewide launch of a new product – Healthy Crunch with Strawberries.
Should Healthy Berry Crunch become UC’s first Eurobrand? The main challenge is that research and trials conducted in Lyon (France) showed good results concerning consumer’s willingness to repurchase the product, however diversity in tastes and cultural and eating habits across Europe make the market unpredictable. SWOT Analysis Strengths: The company has survived 100 years in cereal business and even has built itself to become a global competitor in a multi-billion dollar industry. The company is built on three core values that have always preserved throughout the company’s history.
“The UC Way” slogan represents the companies drive to “Listen to the customer”, “Spot the trend, make the market”, and “Honouring the past while embracing the future”. UC was able to adapt and be a risk taker in the past. The company has made an effort to be a leading competitor around the curve of innovation and international integration. As a company originally rooted in America’s heartland, it has made some big jumps to become the 2nd leading seller of breakfast products in over Europe. UC’s willingness to promote people with fresh ideas and give them leading positions on the highest managerial level.
Not every decision made by a young aggressive leader is a good one, but knowing they are actively pursuing opportunities that others may not have taken is a great advantage that can be a huge benefit. Weaknesses: As stated previously, it can be a huge benefit to a company to have people in charge who are willing to push the boundaries. However, this can, at times, become a problem if not handled correctly. UC would be the way their chain of command is set up. The vertical communication in the company is great and upper level managers can be not fully informed about all on-goings in every division of the company.
Another weakness for UC is their lack of agreement on a managerial level. It seems that opinions differ very much concerning the company’s future development and its direction. Some people believe that a more organized central leadership should take over and push for a continent-wide Euro brand, while other protest that each individual European country should be treated as its own entity and power should be left with the Country Manager, who is already educated in some the best ways to profit from breakfast products in his/her respective country.
Opportunities: Lora Brill is on the verge of making a decision that will change the face of the whole company. Lora is considering the possibility of transforming the individual sectors of UC into one mass Euro brand. Another opportunity is that moving to a Euro brand would give an opportunity to reorganize the structure of the managers. Making large shifts like this would obviously affect the job of Country Managers, who would probably come across large cut back in their job responsibilities.
Another big opportunity is that United Cereal has the chance to keep pace up with their main competitor, Kellogg. Kellogg has already launched a cereal with fruit in order to meet growing demand for healthy food. They basically run the market to preserve this specific niche. If United Cereal wants to secure a share in this market and enjoy benefits of being a second-mover then the company must act quickly. Kellogg already owns a larger share of the overall cereal market so UC is playing catch up.
By making a move like this and implementing a Euro brand they would provide themselves with a chance to fight back against Kellogg. Threats: United Cereal is facing severe competition, both in domestic market and in Europe. Competitors include Kellogg’s and Cereal Partners. Competitors are also ahead of United Cereal in coordinating of European strategy which is a huge risk for UC The high costs related to the developing and launching of a new product for a single country’s market are also a threat. Country managers now want product extensions rather than new product development.
The launch of Healthy Berry Crunch in France will cost an enormous amount of money which is above the approval of the Division VP. Other countries’ subsidiaries may not be able to launch the Healthy Berry Crunch brand because they are still in the mode of recovery from the recession or they might not be able to get shelf space in stores. If the strategy to create Euro brand Teams is implemented, the country managers might see this as a challenge to their local authority levels. The team members might also not function properly together.
Industry, Competitive and Environmental Analysis Breakfast cereals are spread worldwide. In 2009 there were more than 30 companies with annual revenues of $12 billion in the United States cereal industry. Despite the two types of cereals: hot and ready-to-use, the second one made up 90% of sales in Europe and US. As the industry is highly competitive the US cereal companies grow mostly by entering new markets worldwide. United Cereal by 2010 was a $9 billion business, and more than $3 billion of it was made from the sales of breakfast cereals.
UC has also entered European markets, but only 20% of its worldwide sales are made there. As tastes and traditions vary in Europe, per capita consumption of cereals differs radically through markets; 8 kg. a year in United Kingdom, and 0. 5 kg a year in Italy. United Cereal has faced with lots of competition, with the increasing competitive cereal market in Europe. Competitors include Kellogg, Cereal Partners, Weetabix, and other smaller companies. Furthermore, UC’s biggest rivals are Kellogg and Cereal Partners, respectively with 26% and 20% market share in Europe.
Economical conditions are not stable due to 2008-2009 financial crisis. Though the sales had remained surprisingly stable, market growth slowed to less than 1% annually. These, also, has its negative impact on UC; from 2007 and 2009 its net profit has decreased by more than 4. 3%. From the socio-cultural standpoint, the increased interest in natural and healthy foods in US and Europe is a good opportunity for UC to develop Eurobrand, and gain more market share. However, there are number of challenges for launching Healthy Berry Crunch brand.
Other country subsidiaries may not be able to launch it because they are still in the mode of recovery from the recession or they might not be able to get shelf space in stores. Because of high costs related to the developing and launching of a new product for a single country market, the release of new products has slowed, and country managers are now thinking about product extensions rather than new product introductions. Also, if the strategy to create Eurobrand Teams is implemented, the country managers might see this as a challenge to their local authority levels.
The team members might also not function properly together. Among internal factors it is important to mention UC’s two time-tested values: Customer and market oriented; it is customers who lastingly gave UC inspiration to do innovation and led UC to become a pioneer in the use of consumer research and focus group. UC listens to the customer, spots the trend, and holds the high value placed on extensive market testing prior to launching new products.
Constant innovation; UC had a well-earned reputation as an innovator both in its products and brand management system. Honoring the past while embracing the future, UC rejects the conventional wisdom and creates innovative products being market leaders for more than half a century old. “Porter’s 5-Forces model” analyzes and gives the concise discription of the most probable competitive forces, which in their turn greatly affect on shaping UC’s strategy. This will become an important tool (factor) in decision-making process: wheter launch Eurobrand or not?