ride in IndiaA study of Indian Consumer

Submitted byAdarsh Kumar

Antony KonnothAnkur TalrejaJoshua Noel

INTRODUCTION

About all the cycles we talk about, perhaps the most important of them is Nature’s cycle “With

good times there comes the anticipation of bad times”. This is a cycle that goes on and on.

Old habits die hard, especially when it comes to Indian eating habits. When Kellogg India Ltd.

(Kellogg’s), the wholly owned subsidiary of the US$ 7-billion Kellogg Company, entered the

3000- ton cereal market in 1994, little did it realize the importance of the adage. It had a clear

game plan to position itself on the health platform, highlighting the nutritional values of the

brand.

With respect to our Project report on

“Kellogg’s India”, the overseas company

has seen the picturesque of high tides to

low tides. Our report will explore the

reasons behind the failure of Kellogg and

how it succeeded after its second entry.

Studying the marketing mix adopted after

second entry. The journey from 1994 to

present, 2011 has been full of large scale

Up’s and Down’s. Our project report is dedicated to get the larger insight of all the related

prospects of the firm. Our project will also discuss about the adopted marketing mix of the

Kellogg.

The marketing mix is the set of marketing tools that the firm used to pursue its marketing

objectives in the target market. McCarthy classified these tools into four broad groups that he

called the four P’s of marketing:

Product: It is a tangible good or an intangible service that is mass produced or manufactured on a large

scale with a specific volume of units.

Price: The price is the amount a customer pays for the product. The business may increase or

decrease the price of product if other stores have the same product.

Place: Place represents the location where a product can be purchased. It is often referred to as

the distribution channel. It can include any physical store as well as virtual stores on the

Internet.

Promotion: Promotion represents all of the communications that a marketer may use in the

marketplace. Promotion has four distinct elements: advertising, public relations, personal

selling and sales promotion.

Marketing mix decisions must be made for influencing the trade channels as well as the final

consumers. The four Ps represent the seller’s view of marketing tools available for influencing

buyers. From the buyer’s point of view, each marketing tool is designed to deliver customer a

benefit.

P a g e | 7

FIRM'S OVERVIEW: KELLOGG’S

A 1906 established firm, it thoroughly enjoyed the status of top most cereals companies around

the globe. When Will Kellogg accidentally invented a new breakfast food in Battle Creek,

Michigan in 1894, he did not realise that he was on the threshold of forming a major food

manufacturing company. His name would become one of the most instantly recognised

throughout the world. It has four main divisions covering North America, South & Central

America, Asia Pacific, and finally Europe, Africa and Middle East.

Today, Kellogg’s is an American owned organisation that has a true global market in the late

1980s, the company had reached an all-time peak, commanding a staggering 40 per cent of the

US ready-to-eat market from its cereal products alone. By that time, Kellogg’s had over 20

plants in 18 countries worldwide, with yearly sales reaching above US $6 billion.

But with inception of 90’s, the company started regaining the pressure from its rival, The

General Mills. The working force of the company was accused of being unimaginative. As a

result the company started looking at the other markets rather than US and that of UK’s.

As a result, in 1994, three years after the barriers to international trade had opened

in India, Kellogg’s decided to invest more than US $30 million into launching

its number one brand, Corn Flakes.

Currently Kellogg is the leading producer of cereal & convenience food

of the world with total revenue in excess of US $ 12 billion. It currently

has 18 plants worldwide which produces

more than 50 different brands and sells in

more than 180 countries across the world.

BREAKING OF STAGNANCY-THE FORAY STORY

With the strategy of the company to break the series of stagnancy in UK and US for a decade,

the alternative to look beyond resulted in foray of Kellogg’s in India. As the Government of

India, open the doors for international trade, new firms found Indian market an interactive

enough to set up their operations here. Kellogg’s was also a part of the series. Kellogg was the

wholly owned Indian subsidiary of the Kellogg Company based in Battle Creek, Michigan in the

United States.

But the Indian consumer as habituated, consumed

regularly the tradition breakfast composed of

“Paranthas, idli sambar, poha, milk “(Varying from

region to region) etc. To make and create a demand

for the people who are already accustomed to their

own eating habits was a mammoth task in front of

the company.

While this meant that Kellogg’s 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 sales 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, Kellogg’s

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, Indian cereal buyers

were introduced to Kellogg’s Wheat Flakes, Frosties, Rice Flakes, Honey Crunch, All Bran,

Special-K and Chocos Chocolate Puffs ± none of which have managed to replicate the success

they have encountered in the West.

INCEPTION OF THE LAUNCH OF PRODUCTS

When Kellogg Company entered India, the per capita consumption of breakfast cereals was a

low 2 gm per annum against 5 kg per annum globally. The Indian ready-to-eat-cereal market,

clearly, posed several challenges. 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

traditional regional breakfast. While this meant that Kellogg’s 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.

HURDLES IN INDIAN MARKET AS A NOVICE

Cultural factors and eating habits – population not used to processed foods

Kellogg pitched itself as an alternative to the regularly

consumed breakfast. The Indian breakfast is heavy and there

is a feeling of fullness at the end of an Indian breakfast.

What with oily Parantas, Puris and Dosas, the feeling of

fullness is real and not imagined. Kellogg’s Corn flake

breakfast does not give that feeling of fullness and that went

against the grain of having a full breakfast. In short after

having a corn flake based breakfast the Indian consumers

were still hungry. Also Indians have spicy and hot food for breakfast. To ask them to eat the

sweet tasting and cold corn flake breakfast was too much of a sweet breakfast for the Indians

to digest.

Easy availability of low-priced traditional breakfast

Indian breakfast is known for its variety.

There can be 30 types of Dosas (there is a

restaurant in Hyderabad that offers 99

types of Dosas!) or Idlis, Parantas or other

types of native Indian breakfast items.

Indians are used to a variety and one item

that is eaten will not be on offer for the

next two or three weeks. Asking Indians to

have the same type of corn flake based

breakfast was too much of a cultural change for the Indians to accept.

Low awareness about processed foods

Low awareness about processed foods and Calorie

requirements about various diet plans to be followed

from health prospective. Also Kellogg in its

advertising campaigns hinted that the Indian

breakfast was not nutritious and that Indian

breakfast was not very good for health. This deeply

hurt the sentiments of the home maker. The home

makers said to themselves “We have eaten and

served the Indian breakfast for decades and

centuries. My family is doing fine”. Once the home maker’s ego was hurt they psychologically

turned themselves against the concept of corn flake based breakfast.

Price sensitive customers

Indian customers are very price sensitive. With Kellogg price a third more than its nearest

competitor it created an image of being a high class product and also pushed it out of reach of

just liberated Indian middle class.

Considering all these challenges, Kellogg India required to come up with a real brand equity and

a framework to convince Indian consumer to get out of from the long following breakfast eating

pattern and face to an entirely new range of products offered by the company.

THE INITIAL FAILURE

With so much of global exposure, success and the well renowned value that the company

enjoyed in the world market, the question that stuck in the mind is what is that that led to the

initial failure in Indian market with its foray.

India is a country that has a history that comprises of traditional practices, that also includes

the regular and long followed eating habits.

Kellogg’s believed that it is going to introduce the new breakfast product, heavily on the quality

of its crispy flakes. But pouring hot milk on the flakes made them soggy.

With this it was also failed in understanding the very needs and taste of Indian consumer,

perhaps the HOMEWORK done was not good enough. Kellogg's failure was the fact that the

taste of its products did not suit Indian breakfast habits. Kellogg sources were however quick to

assert that the company was not trying to change these habits; the idea was only to launch its

products on the health platform and make consumers see the benefit of this healthier

alternative.

Another reason for the low demand was deemed to be the premium pricing adopted by the

company. The prices of its products were way too much than the nearest competitors like the

Mohan's Cornflakes.

Kellogg Mohan's Cornflakes (competitor)

Prices Rs. 21 per 100 gm, Rs 16.50 for 100 gm

Focused on Affluent consumer Mass consumer

Market comp Premium and middle-level Small-level consumers & retail stores as well

STEPS TOWARDS SUCCESS

The failure that the company witnessed with its launch, did not stays for longer. The mistake

that the company did initially in judging the Indian market was revamped as soon as company

realized that the long continued policies is not going to work here. There were several factors

that lead to this progress.

Prices reduction

Kellogg’s increase the retail packs of different sizes to cater the needs of different

consumers group

Kellogg’s repositioned the product as tasty nutritious food

Products were not positioned in premium categories

Indianising the products by introducing the sweeter product

On ground promotion activities like Kellogg health week and free samples distribution in

schools and to housewives.

Projection of products as ‘fun-filled' brands rather emphasizing only on the “nutrition

value”.

PROPOSITION & POSITIONING BY KELLOGG

From the day Kellogg’s forayed into INDIAN market, several parameters are taken care of while

launching the product.

When Kellogg’s entered the Indian market in 1994 it positioned itself on the health platform,

highlighting the nutritional values of the brand. This was done keeping in mind the following

fact: The 1991 census had already revealed that 40 per cent of Indians were below the age

of18- its prime target of growing children/ young adults who needed the right nutrition, besides

mothers who needed

Later the company emphasized on more fun filled flavours with the nutrition value.

In 1996 the Chocos brand was heavily advertised.- 50% of the money allocated for advertising

was spent on promotions and- 50% of Money allocated was spent on thematic Advertising- All

the Advertisements were Brand driven- Initially to encourage the consumer to try the product

various sales promotion techniques were used.

Kellogg’s advertising has admittedly not been very compelling thus far. A long-term thematic

line has not been developed in the campaign. Apart from `Jago Jaise bhi, to Kellogg’s hi”.

Getting the brand on the breakfast table really appears to be the main motive behind all the

promotions. Earlier this year, posters with the line `Naye saal ki sahi shuruat, lo Kellogg’s se hi”,

were put up at strategic points.

Later Kellogg’s India shifted its Positioning from nutrition to fun-filled flavours, consumer

promotions that accompanied a Rs.25 crore media-spend. Constant free sampling exercises and

an on-going process of developing price volume packages.

Then the company is attempted to indianise its campaigns instead of simply copying its

international promotions. In the staples campaign, a cross section of individuals ranging from a

yoga instructor to a Kath Kali dancer attribute their morning energy and fitness to Kellogg’s,

suggesting accompaniments as varied as curds, honey, pistachio and bananas. The commercial

ends with line `Jaago jaise bhi, lo Kellogg’s hi’.

But conspicuous in its absence from print and TV advertising, is the famous `cock’ identity,

which symbolizes the morning association the world over. Later the CHOCOS BRAND has been

positioned as “THE IRRESISTIBLE TASTE OF CHOCOLATE”. The Media spend by Kellogg’s on

Chocos brand was distributed equally between Chocos flakes and Chocos Biscuits.

THE JOURNEY SO FAR

Kellogg’s from time to time has come up with different products. The journey from initial failure

to present success has seen the launch of various mix of products from time to time.

Kellogg's initial offerings in India included cornflakes, wheat flakes and Basmati rice flakes.

The hi-tech launch stood out as a failure, because of various technical, financial and other

reasons which would be discussed I detail in this report.

As a comeback strategy, Kellogg decided to launch two of its highly successful brands in

other countries - Chocos (September 1996) and Frosties (April 1997). This time the dice rolled in

the company’s favour and the sales started increasing significantly.

Next in the league was Chocos Breakfast Cereal Biscuits.

The launch continued resulted with the Mazza series in August 1998 - a crunchy, almond-

shaped corn breakfast cereal in three local flavors - ‘Mango Elaichi,' ‘Coconut Kesar' and ‘Rose.'

THE JOURNEY SO FAR- Timeline

BRAND BUILDING-THE ADVERTISING WHICH APPEALED INDIAN CONSUMER

Advertising of the product is one of the prominent steps in building and creating the niche in

the market. But the initial brand building strategies, the advertising policy was not that much

impressive.

The rooster and the charm, with which the company did the wonders in the West was missing

here. Later, Kellogg attempted to Indianise its campaigns instead of simply copying its

international promotions. It came out with the taglines such as ‘Jago jaise bhi, lo Kellogg's hi”.

In 1997, Kellogg launched ‘The Kellogg Breakfast Week,' a community-oriented initiative to

generate awareness about the importance of breakfast. The program focused on prevention of

anemia and conducted a series of nutrition workshops activities for both Individuals and

families. The program was launched in Chennai, Delhi and Mumbai. Continuing the success

journey, Iron Shakti variant was launched in 2000 which offered a new dimension to health with

iron fortified cornflakes. One of their ads went like this

Kellogg’s Iron Shakti TVC

A gang of thieves is seen loading

some stolen items in a truck. Just

then a man with his family arrives

at...

...the scene. Thinking that his

neighbour, Pandey Ji, is shifting

home he does not pay much

attention...

...to their activity. As his

daughter worryingly points out

to him, “hamara TV,” our man

cools her off by saying,

“Pandey Ji ka”.

The little girl gets more disturbed

on seeing the thieves with her

cupboard. But the father assures

her, “Pandey Ji ka”.

Not able to take any more of this,

she vehemently protests on

seeing

their refrigerator with the

stealers. But our...

...man still reassures her,

“Pandey Ji ka”. On reaching

home he finds the things

missing and realizes every-

thing.

VO: "Iron kam khaoge toh dimaag

kaise chalega. Aapko chaahiye

Kellogg’s corn flakes jisme hai iron

shakti. Ab poore parivaar ka

dimaag chalega...

...nahin daudega. The ad ends on

our man telling his family the

thieves’ truck number, thereby

proving his better memory.

Following the latest trends in the present scenario, packaging and 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.

Kellogg’s Special-K TVC

We see a woman asking her

husband how she looks in the

attire she is wearing?

He turns back and says it's a

perfect fit and she tells him he

has lost the bet.

He explains how till sometime

back his wife couldn't fit into

this dress but she took a

challenge to wear it for her

friend's wedding.

He says that in just 2 weeks

she lost weight with the

challenge.

VO: Take the Kellogg's Special

K Challenge....and lose up to 2

1/2 Kgs of weight.

The ad ends as the husband tells

his wife, "Tonight you'll look

prettier than the bride".

wrong move they resorted back to building the “fun-and-taste” image and took various moves

in the same direction which is evident in the advertising and promotion schemes used. Though,

Kellogg's advertising had not been very impressive in the initial years. Apart from ‘Jago jaise bhi,

lo Kellogg's hi,' the brand had no long-term baseline lines. To set things right, Kellogg attempted

to Indianise its campaigns instead of simply copying its international promotions. The rooster

that was associated with the Kellogg brand the world over was missing from its advertisements

in India. One of its campaigns depicted a cross section of individuals ranging from a yoga

instructor to a kathakali dancer attributing their morning energy and fitness to Kellogg. The

advertisement suggested that cornflakes could be taken with curds, honey, and banana.

In April 1997, Kellogg launched ‘The Kellogg Breakfast Week,' a community-oriented initiative to

generate awareness about the importance of breakfast. The program focussed on prevention of

anemia and conducted a series of nutrition workshops activities for both individuals and

families.

Kellogg also increased its focus on

promotions that sought to induce people

to try their product and targeted schools

across the country for this. By mid-1995,

the company had covered 60 schools in

the metros. In March 1996, the company

offered specially designed 50 gm packs

free to shoppers at select retail stores in

Delhi. This was followed by a house to-

house sampling exercise offering one-

serving sachets to housewives in the city. The company also offered free pencil-boxes, water

bottles, and lunch boxes with every pack. Plastic dispensers offering the product at discounted

rates were also put up in petrol pumps, super markets, airports etc.

Kellogg also launched the Chocos biscuits, claiming that cereals being a ‘narrow category,' the

foray into biscuits would create wider awareness for the Kellogg brand.

LAUNCH OF A NEW PRODUCT: SPECIAL-K UNDERSTANDING THE MIND SET OF INDIAN WOMEN Creating new products can be expensive. It involves making investment decisions now, in the

hope of making a return later. Weighing up future returns against an investment is a crucial

part of a manager’s job. It always involves an element of risk, because the future is never

certain. Managers’ previous experience, together with market research information helps them

to predict future events and outcomes

It follows from this that decisions about a

brand, creating new product or extensions

are an aim to meet a range of objectives

such as:

Growing market share

Developing a unique market position Creating consumer or brand loyalty

Generating a targeted level of profit.

There was a need for change, company had

already achieved a good market share in

Cereals market and growth was saturating. The cereals market in India was mainly had kids as

consumers with some share coming from working young adults but women were missing from

the scene.

Kellogg’s already knew that women who are keen to watch their weight and shape seek a range

of solutions throughout the day - not just at breakfast. With the help of both users and non-

users of existing cereals products, market researchers undertook further quantitative tests of

product ideas across a range of food categories.

Kellogg’s soon came to realise that these kind variants will be responsible for a huge growth in

the revenue, without a drop in sales of the core cereal product. New product development had

transformed the brand within the India. This in turn has given a great opportunity to roll-out

other developments in market which is yet not has been seized by the Kellogg.

Year Market Share

1995 53%

1998 More than 55

2000 More than 60%

2010 More than 66%

INDUSTRY ANALYSIS

There are many players in the Indian Market:

Kellogg's

Mohan Meakins

Murginns

Shanti's

AIM's Aristo

Savour

The target Segment:

Kellogg’s – Premium Segment.

o CHOCOS is targeted towards growing children and young adults

o Special K is targeted toward women who are keen to watch their weight and shape

Others – Middle and Lower Income (Economy Product)

Market Share of the Kellogg’s Brand

The breakfast cereals market has grown well during 1996-1998, and it is believed that

Kellogg’s has been the growth-driver.”

Chocos has 20% share of the Breakfast Cereal Market

India is also fastest growing cereals markets in South Asia with annual growth of 24% and

forecasting of reaching Rs. 14 billion in 2014

CONCLUSION

The compilation of this report bears a judgmental mark on what a company’s approach should be while

entering new markets. The culture and habits of new target group play a pivotal role in success of a

brand. Promoting a product with right proposition is essential. The perception of the consumers and

the attitude of the retailers have no doubt adds a new dimension to the existing advertising strategy in

use by the company worldwide.

The various models explained here in have helped in assimilating the core branding elements of the

proposed brand study. Even though there is no correlation between the advertising of both chocos

cereals and biscuits, cereals still extend leverage on the biscuits. The brand equity of cereals has

developed over a period of many years and has made its brand extensions like biscuits also a success.

There has been considerable success in inculcating new breakfast eating habits in the Indian consumer.

The year changing from the traditional idlis and parantha’s to the convenient way of eating breakfast.

This increased crackle in Kellogg India was brought about by its shift in positioning from nutrition to fun-

filled flavors.

THE HABIT BARRIER

The closer Indian food-habits are to the heart of the meal, the harder it is to change them. Their

approach to offer nutritious and tasty breakfast has worked well in Indian context after initial failure. At

present, Chocos accounts for 20 percent of Kellogg’s sales volumes. While Kellogg’s argues that it is not

looking for volumes for its variants, the search for a product to break down the taste-barrier may force

the company to increasingly rely on sub-brands like Chocos.

THE PRICE BARRIER:

Kellogg’s is able to cater only to the A-class towns or the more affluent consumers. Price is the biggest

element of consumer resistance.” The Indian consumer is not that discerning about quality when it

comes to looking at the whole price quality package.

The Positioning barrier, Hammering home the nutritional benefits of its products, Kellogg have spent

more than Rs.25 crore on advertising over the past few years. This in fact has proven beneficial for them

in the longer run, now consumers attaches importance to the level of iron and vitamin they intake.

Initially However, research showed that the average Indian consumer rarely use to go for Kellogg’s and

instead looks at the quantity, rather than the quality, of the food consumed.

The Kellogg mandate is to develop awareness about nutrition. While retaining its health positioning,

Kellogg’s new product-range promotion schemes, and sampling exercises are now not only aimed at a

younger audience but new products like Special-K are being launched which caters to women. At one

end they are seducing the consumers with promotions. On the other, they are talking to them about

health. So, they can persuade people to eat Kellogg because it is a healthy product.