Marketing environment Essay
Product Offerings Kellogg’s is in the breakfast cereal market. It principal products are related to ready-to-eat cereals. In addition to this the company also manufactures and sells many convenience foods such as crackers, cereal bars, veggie foods, frozen waffles, toaster pastries, fruit snacks cookies etc. As of 2009, the manufacturing of these products took place in 19 countries across the world and were sold in over 180 countries. The company’s brands include Kellogg’s, Keebler, Cheez-It, Murray, Austin and Famous Amos.
The company also has several brand names attached to its products such as: Apple Jacks, Mueslix, Pops, Corn Pops, Cruncheroos, Bran Buds, Cocoa Krispies, special K, Smacks etc in US; Suchrilos and related products and Zucharita and related products in Latin America; Vive and Vector in Canada; Optima, Choco Pops, Muslix, Honey Loops, Country Store, Ricicles etc in Europe; Cerola, Sultana Bran, BeBig, Chex, Frosties etc. in Asia and Australia (Kellogg’s Investor Information). Following is the market share for the different cereal brands over the past 14 years.
Fig – 12 Most Popular Cereal Brands (Topher, 2008) Target markets & Customers Kellogg’s has separated its business into two segments: North America and International. The company generates two thirds of its revenues in North America which consists of United States and Canada. These are shown in the figure below. Fig – 13 Kellogg’s market sales by region, in millions (wikinvest, 2009) In United States, the biggest retail consumer of Kellogg’s are the Wal-Mart Stores that accounts for about 20% of its net sale. In fact no other consumer accounts for more than 10% of its net sales.
Kellogg’s revenue in North America is further divided into different sections based on product types such as cereals, snacks and frozen and specialty categories. This is shown in the figure below. Fig – 14 Kellogg’s sales by Product Category (wikinvest, 2009) Competition The company faces competition for sales of all of its principal products in its major markets, both domestically and internationally. The Company’s products compete with advertised and branded products of a similar nature as well as unadvertised and private label products, which are distributed at lower prices, and also with other food products with different characteristics.
Principal factors for competition include new product introductions, product quality, composition, and nutritional value, price, advertising and promotion (Kellogg). The primary competitors of Kellogg’s are General Mills and Kraft which sells breakfast cereal under the Pos brand. Among this the revenues of Kraft are triple as compared to the other two brands with its leading segment being snacks. However, both Kellogg’s and General Mills receive more of their revenues from the cereal segment. The table below shows the company comparison.
Company Net Revenues (in millions) International Revenues as % of sales Gross Margin % Kellogg’s $ 10,906 32. 6% 44. 2% General Mills $ 12,442 17% 36% Kraft $ 34,356 32. 4 36. 1% Table – 15 Company Comparison (wikinvest, 2009) Supply chain As mentioned, Wal-Mart accounts for about 20% of the company’s product sales in United States. The company uses both its sales force as well as business arrangements with brokers and distributors to sell its products. The products are eventually resold to consumers in retail stores, restaurants and other food service establishments (Kellogg’s Investor Information).
The figure below gives the different types of distribution channels of the company. Fig – 16 Kellogg’s distribution Channels (http://www. docstoc. com/docs/3584505/Kellogg%EF%BF%BDs-Marketing-Strategy-and-Marketing-Plans ) Market position Product Sales Regardless of the bad moments it has faced over the year, especially thorough the 1990s, Kellogg’s still the market leader in the US cereal market. Despite increasing competition Kellogg’s has slowly increased its share in the market and control about 1/3rd of the market. This is followed by General Mills and Quaker and Post.
In addition to this, Kellogg’s controls as much as 50% of the market for new cereals in the United States with the introduction of more new cereals than either of its competitors. The figure below shows the 2008 US cereal market. Fig – 17 US Cereal Market Share (wikinvest, 2009) The figure below shows the market share trends for the top cereal producers over the past 10 years. Fig – 18 Market share trends for the past 10 years (Topher, 2008) Employment & Financial statistics The company employs about 32400 employees worldwide which its latest figures as of 2009.
It has generated about & 12. 8 billion in net worldwide sales of which its earning were $ 1. 1 billion. The company keeps low sales targets for its internal net sales since it is a mature market. The figures are between 1-3 %. The company exceeded this target with a net sales growth of 9% in the year 2008 and a growth rate of 5. 4&. The targets for internal operating margins are between 4-6% which the company achieved by reaching a figure of 4. 5%. The net earnings per share target for the company is between 7-9%.
The company achieved a diluted earning per share grew by 8% which the currency neutral EPS grew by 10% which was more than its target. The figure below shows the financial highlights of the company for the past 3 years. Fig – 19 Kellogg’s 2008 financial highlights (Kellogg’s Investor Information) Since one of the major draws of the company is the innovation of its products,, the company sets aside a considerable budget for R&D. The expenditure figures for this head were $181 million in 2008. The corresponding budget was $ 171 million in 2007 and $191 million in 2006.
Marketing & Advertising The company has an excellent marketing team which has used varied channels for sales and promotion of its products. These include: Mass Advertising – popular characters like Tony the TigerTM and Snap! Crackle! Pop! TM, on TV; Direct Promotions: Coupons; Trade Promotions: In-store displays, Samples; Personal Selling: Prime-account reps, Area reps; Penetration – Chain stores, Independent wholesalers; Sales Channel – Brand equity; Logistics – Finished goods warehouse centers or independent warehouses (Kellogg’s Company – Products).