The Breakfast Cereal Industry Li Li Jennifer Wang Xin Yiran AEM 4550 April 20,2011
Transcript
1. The Breakfast Cereal Industry Li Li Jennifer Wang Xin Yiran
AEM 4550 April 20,2011
2. Outline Introduction Industry Analysis Advertising
Strategies Investment & Recommendation
3. Why the Breakfast Cereal Industry? Breakfast is the most
important meal of the day Metamorphosis, Franz Kafka, 1915 Body
fasts for 6-9 hours the night prior break- fast- breaks the fasting
93% of respondents reported household use of cold cereal, 68% - hot
cereal (Experian Simmons NCS data) Americans buy 2.7 billion
packages of breakfast cereal each year. If laid end to end, the
empty cereal boxes from one year's consumption would stretch to the
moon and back. Cerealizing America: The Unsweetened Story of
American Breakfast Cereal
4. Industry Analysis
5. Industry Definition US Cereal Production industry takes raw
materials like corn, wheat, flour, and sugar from different sources
and turns these ingredients into ready-to-eat cereals, hot cereals,
and cereal bars Main activities involve manufacturing: - cold and
hot breakfast cereal - breakfast and snack bars
6. Industry Structure
7. Industry Structure HHI = 1822.86 C4 = 76% Mergers will be
challenged since HHI >1800 Industry is an oligopoly with four
main firms
8. Industry Structure Kellogg Company 34% General Mills Inc.
20% Ralhorp Holdings Inc. 14% PepsiCo Inc. 8% Other 24% Major
Companies
9. Industry Analysis Life Cycle Stage Mature Barriers to Entry
High Capital Intensity High Technology Change High Competition
Level High Regulation Level Heavy
10. Key Success Factors Product Differentiation EOS Supply
Contract Adaptability Cost Control
11. Industry Trend Expected Slower Growth -High price of wheat
-Increasing price of coarse grains Attitude change towards health
consciousness e.g. Lower sugar and cholesterol, more fiber More
convenient product to accommodate busy lifestyle e.g. Breakfast
bars
14. Imports & Exports Insignificant as major companies own
facilities internationally Major trading countries: Canada &
Mexico Imports are growing while exports are declining
16. Persuasive Advertising Persuasive advertising is effective
for experience goods Honey Bunches of Oats Theres a box here with
your name on it!
17. Honey Bunches of Oats Commercial
18. Informative Advertising Direct Signaling Educational. Tells
the consumer the health benefits Cheerios:
19. Informative Advertising Indirect Signaling Match product to
buyers effect Saturday morning cartoons Measurable change in
consumer preference and market share of advertised products E.g.
Kelloggs high fiber cereal
20. Memory Jamming Repeated commercial plays Signaling
efficiency effect Recognizable Mascots Catchy slogans and Jingles:
Theyre Gr-r-r-eat! Kelloggs Frosted Flakes Silly Rabbit, Trix are
for kids! Trix
21. Memory Jamming
22. Celebrity Endorsement Celebrities can increase brand equity
Wheaties: The Breakfast of Champions Need to be careful of impact
on brand Michael Phelps
23. Humor Keeps audience attentive Difficult to appeal to
everyone because people have different preferences Cocoa
Puffs:
24. Emotional Appeal Form stronger connection to consumer
General Mills used special promotion boxes with retro designs Seeks
to motivate parents, by using nostalgia
25. Cheerios Commercial
26. Promotions and Giveaways Incentive for the consumers to buy
the cereal Draws attention Include a toy or opportunity to win
Kashi Kick-Off Event at Cornell
27. Segmentation Many commercials targeted children with highly
animated commercials Saturday morning cartoons is perfect time to
target the young audience Capn Crunch:
28. Segmentation After FTCs warnings, cereal companies have
shifted toward targeting the adult audience More health-conscious
Multi-Grain Cheerios:
29. Segmentation General Mills increased Hispanic-targeted
media spending in 2009 and 2010 Cinnamon Toast Crunch particularly
appeals to Hispanics Baby Boomers- another key market Highest per
capita cereal consumption by people over 55 Seek to add fiber to
diets (Fiber One, Multi-Grain Cheerios)
30. Cheerios Targeted Toward Both Children and Adults
31. Advertising Mediums TV Product Placement Print Online
32. Television Advertising Advertised mostly on Mon, Tues, Fri
Mostly Advertised during 7-8 PM, 9 AM Dollars spent most on
Cheerios, Fiber One, Mini- Wheats Largest Ads Spending during July,
Aug Spent most on cold cereals especially the healthy category such
as Honey Nut Cheerios, Fiber One, Multi-Grain Cheerios, but highest
average dollar spent per advertisement on hot cereals
33. Television Advertising Uses segmentation to target
different audience - More colorful, energetic, and animated
commercials for young children - Use character mascots to connect
to kids such as Tony the Tiger, General Mills Trix Rabbit - Focuses
on nutritional content to target adults
34. Average Advertising Cost per Day of Week
35. Top 10 Brands with the Highest Total Advertising
Expenditures
36. Top Program Types to Advertise On
37. Healthy vs. Unhealthy Cereal Popular Program Types to
Advertise Healthy Cereal Popular Program Types to Advertise
Unhealthy Cereal Program Type Number of Ads NEWSCAST (LOCAL ONLY)
138348 SITUATION COMEDY 93336 TALK 59858 SLICE-OF-LIFE 37354
Program Type Number of Ads ANIMATION(LOCAL ONLY) 18347
CHILDRENS/FAMILY ENTERTAINMENT 4047 SITUATION COMEDY 3976 FEATURE
FILM 2956
38. 10 Most Popular Shows to Advertise On
39. Most Expensive Ad Spots for Cereal Ads Show Ad Cost
AMERICAN IDOL $ 823,700 GREY'S ANATOMY $ 577,800 AMERICAN MUSIC
AWARDS $ 361,100 NCAA Basketball Playoff Game 22 $ 281,100 NCAA
Basketball Playoff Game 21 $ 281,100
40. Product Placement More common with the advent of Internet
and TiVo Popular shows feature consumption of certain cereal brands
e.g. Frosted Flakes on Friends Audience are forced to watch the ads
Careful not to overdo it Effective if it is natural and
integrated
41. Product Placement in Days of Our Lives
42. Ad Spending of Top 4 Firms
43. Ad-to- Sales Ratio Comparison
44. Ad-to-Sales Ratio 1.2 times higher than the food sector 3.5
times higher than the average value for all other industries High
profit margin
45. Kellogg Co Corn Flakes, Frosted Flakes, All-Bran, Apple
Jacks, Crispix, Rice Krispies, Froot Loops, Nutri-Grain Highest
Advertising Expenditure Highest Ad-Sales Ratio Focuses on eight top
sellers and Kashi cereal Kashi highlights healthy lifestyle,
including consuming natural foods and staying active Boston,
Portland, LA
46. General Mills Brand Names: Cheerios, Fiber One, Kix,
Wheaties, Lucky Charms, Total Invested heavily in R&D and
product innovation Target Large Cities e.g. New York, San
Francisco, Boston
47. Ralcorp Holdings, Inc. Brand Names: Honey Bunches of Oats,
Pebbles, Shredded Wheat, Post Raisin Bran, Grape-Nuts, Honeycomb
Acquired Post Both private label and branded cereals New Orleans,
Cincinnati, Green Bay
48. PepsiCo Inc. Brand Names: Quaker Foods North America
(QFNA), Quaker Oatmeal, Life , Cap'n Crunch Richmond, Jacksonville,
Norfolk
49. Perceptual Map
50. Print Advertising More informative (direct) but still
persuasive More targeted than TV ads Less common nowadays 1926
2008
51. Online Advertising Social media becoming a more popular
marketing tool Kelloggs uses this for Special K and Frosted
Mini-Wheats Special K strong brand pioneer for new media
advertising weight- loss management (support from peers important
so social media is a great way to do that)
52. Social Media
53. Brand Equity Crucial in order to stand out among hundreds
of brands Makes demand less elastic to price Emotional
branding
54. Regulation Regulation level is high and increasing 2007
Self-regulation of marketing to youth Children's Food and Beverage
Advertising Initiative Kellogg said would not promote foods in TV,
radio, print or Web site ads that reach audiences at least half of
whom are under age 12 unless a serving of the product follows
specific guidelines 2008 Federal Trade Commission published study
on food marketing to children and recommended that companies adopt
and adhere to meaningful, nutrition-based standards for marketing
their products to children under 12
55. False Health Claims Kellogg Co. came under scrutiny in 2009
and 2010 because of false health claims in advertisements Frosted
Mini-Wheats: clinically shown to improve kids attentiveness by
nearly 20% Rice Krispies: now helps support your childs immunity,
with 25 percent Daily Value of Antioxidants and Nutrients Vitamins
A, B, C, and E FTC delivered strong message wont tolerate false
health claims Kellogg prohibited from making claims about any
health benefit unless backed by scientific evidence and not
misleading
56. Recommendation for Management Local newscast is among the
cheapest Sports events such as baseball and basketball are
expensive Talk show or soap opera as they target more towards women
and they control more than 80% of spending Follow FTC regulation,
otherwise would be heavily penalized
57. Recommendation for Investment High profit margin Branded
revenue likely to increase as the US economy recovers Breakfast bar
has great growth potential