How can Kellogg do better in India?

What were the mistakes it

made?

Introduction
Kellogg’s was established in 1906 by Will Kellogg as “Battle Creek toasted Cornflakes Company”. The
company was renamed The Kellogg Company in 1922 by which time it had become a successful
manufacturer of toasted corn flakes. By the year 1994 Kellogg’s was the world’s largest producer of
cereals and convenience foods. Kellogg’s had manufacturing facilities in 19 countries and was marketing
its products in more than 180 countries. The company turned to the Indian markets as the sales in the
US were stagnating and there Kellogg’s sensed huge potential for the untapped Indian markets. When
Kellogg’s decided to enter Indian markets, the per capita consumption of cereals was a meager 2 gm per
annum as opposed to 5 kg per annum worldwide.

Kellogg’s launched its products in India in 1994 with initial market offering including corn flakes, wheat
flakes and basmati rice flakes. They came into the Indian market with a flourish backed by large
economic resources and a global leader brand name, marketing their launch in a high frenzy media
coverage campaign. In spite of such an emphatic launch Kellogg’s cereals failed to grasp the market and
came under a siege from the customers who were outright rejecting the products as it did not appeal to
their taste buds. A survey conducted showed that 98% of the adopters were first time cereal consumers
who did not repeat buy the product. This caused the sales of the products to decrease, and Kellogg’s
perplexed as to why it was unable to penetrate and convert the Indian market when it had already a
record of converting taste buds and preferences in countries like South Korea and other Asian countries.

The Marketing blunders and reasons for failure of Kellogg’s

Kellogg’s had entered the Indian market at a time when the exposure to the western culture was limited
and the population, even the urban population had nil or very minimal exposure to western breakfast
dishes. The strategies and the positioning of Kellogg’s did not specifically target the Indian buyer and
they used the generic international strategies which had been successful elsewhere. Some of the
reasons for their initial failure are listed below.

The Indian Taste bud

Unlike most of the western or the developing Asian countries, Indian taste buds were accustomed to
spicy and savory breakfast items which were high in fats but believed to provide energy for the labor
intensive work during the day in the mostly warm/hot weather conditions. The inception of bland
tasting cereal did not catch on when compared to the sumptuous savory and flavorful dishes from
around the country. The corn flakes were meant to be had with cold milk but the Indian psyche to boil
milk in order to pasteurize it meant that the corn flakes became soggy once they were put in the milk;
this turned the cereal into a lump and did not taste good. Indians also had the habit of adding sugar to
their cereal which did not dissolve in the cold milk. Indian consumers felt that cornflakes or cereal could
not be a fully fledged substitute for the traditional filling and heavy breakfast dishes and often they felt
hungry soon after consuming the cereal.
Hurt sentimentalities

Kellogg’s was the first breakfast product that challenged the nutritional and health value of the pre
existing dishes like dosa, puri, vada and paratha. Trying to demonize their most staple and favored
dishes did not sit well with the ladies of the house who prided themselves on cooking these dishes. The
women of the home were often the ones who made buying decisions and these hurt sentiments played
a part in deterring them from buying Kellogg’s products.

Inaccurate positioning

The company initially positioned its offerings as healthy alternative, easy to make cereal breakfast as
opposed to the staple Indian items like puri, paratha, idly & dosa. This positioning was far away from
how Kellogg’s had managed to capture customer fancies in the US where it was positioned as a fun &
energetic cereal, instead of just a boring health product as in India.

Pricing & Distribution

Kellogg’s followed a premium pricing strategy in India owing to its superior quality. It failed to realize
that the consumer in an emerging economy country looks at the price point as the most important
characteristic before buying. Similar products like Mohun’s was available for Rs.16.50 per 100gm while
Kellogg’s corn flakes was priced at Rs. 21 per 100gm. This price parity for a similar product along with
minimal product differentiation made the consumers believe that they were having an equally healthy
alternative, presumably of lower quality but at a greater value. The distribution and sale was started
initially on for Mumbai area, here the demand grew and the company saw it as a growth in popularity
but this tactic turned out to backfire when they diversified pan India because in reality the demand for
the rest of the country were being satiated by the Mumbai distributers which led to the overestimation
of the actual market. Kellogg’s also looked to target high and mid range retail stores which was caused a
major population that did not access these stores to miss out on the product.

The Turnaround in fortunes

Kellogg’s after its initial failure to capture and penetrate the Indian market took the following steps
keeping in regards the behavior of Indian consumers that made it a success.

 Reducing prices: This move was aimed towards understanding the psyche of the Indian buyer
who always perceived price to be an important factor while deciding on his/her groceries.
Kellogg’s introduces sachet pouches for single usage which reduced the cost of cardboard
pricing and small packs also encouraged the buyers to try the product serving as a trial pack.
 Launch of products pertaining to the Indian taste: In the year 1996 Kellogg’s introduced the
“Chocos” and “Frosties” which became an instant hit because they were sweet and required no
additional sugar concurring with the Indian taste buds. Chocos especially was a runaway success
because it was chocolate in flavor aimed at children and marketed via cartoons and fun activities
 which they could relate to. The cereal in fact became so popular that people were now
consuming it as a snack causing a boom in its sales. It is still a popular product commanding
around 20% of the total sales of Kellogg’s in India. This launch now helped the company position
themselves as a fun and spunky brand instead of a drab health based breakfast alternative.
 Indianisation of products: kellogg’s launched flavors such as ‘Mango elaichi’, ‘Kesar’ & ‘Rose’ to
suit the Indian foray of tastes. The Advertisement campaigns were now being targeted towards
positioning Kellogg’s as a brand which had International quality but understood the needs of the
customer and suggestions were made to add fruits and nuts to the servings in order to tackle
the problem of cornflakes being a light breakfast, now it had become a wholesome meal in the
perception of the consumers.
 Product modification to suit India: Kellogg’s researched the nutrient needs of the Indian
population and realized that iron is one substance which is low among Indians and is a major
cause of anemia amongst women and children. It fortified its product with extra iron and
marketed its product to be a rich source of iron.
 Initiatives and awareness programs: To understand the psyche and become a more responsible
brand, Kellogg’s collaborated with the Indian Dietetic Association (IDA) to create a program and
spread awareness about correct nutritional needs. This gave the brand the goodwill it was
looking for from the Indian consumer. The launch of ‘The Kellogg Breakfast Week was an
initiative aimed at invigorating the importance of breakfast in the country.
 Promotion via samples: Researches have shown that people are more willing to buy a product if
they get to touch, feel and test the product before buying. Kellogg’s explored this strategy by
providing sample packets and trails packs to school children and housewives who helped it gain
an edge over its competitors.
 Launch of memory invoking advertising: Kellogg’s used advertising which invoked in people the
memory of college days and created nostalgia by showing ads where weight loss was achieved
by taking up their challenge and old college mates are impressed at a reunion. This encouraged
many women to try out their women centric Kellogg’s “K plus cornflakes” challenge which was
aimed at middle aged women getting back into shape after undertaking this diet.

How Kellogg’s can improve its position

Currently Kellogg’s commands close to 61% of the breakfast cereal market in India but their sales have
dropped over the past few years owing to entry of new players and traditional Indian breakfasts making
a comeback in the form of processed and easy to use packages. Kellogg’s can follow the following
strategies to maintain and grow its share in the Indian market.

Advertisements to appeal to the heart share: Since Kellogg’s is now an established player it can
advertise itself via nostalgic adds which appeal to the generation which grew up on Kellogg’s and appeal
to their hearts. The advertisements should be centered on evoking pleasant memories from the past
when and relating it to usage in the current scenario. This would allow the company to retain its old
loyal customers and ensure that for them the word ‘breakfast’ becomes synonymous with ‘Kellogg’s’.
Promotion of the trending products: Muesli business is worth close to Rs. 85 crores in India and growing
at a pace far higher than the stable cornflakes. Kellogg’s should look at tapping into this by advertising
its muesli and promoting new flavors and packaging of the same. They can leverage their early mover
advantage to seal the market by providing the high quality and reliability stamp of their brand. Stubbing
out the competition before it becomes a threat.

Keep a track of the local competition: Local players and substitute products are growing in the current
economy; these products are sold at a low price point. Kellogg’s needs to lookout for these upcoming
brands and need to keep the bond strong with its consumers to prevent them from switching.

Try to target new market segments: The population in the tier 2 cities is still averse to cereals as a
replacement for traditional dishes; this segment needs to be targeted by the use of marketing and trial
offers such that they start accepting cornflakes as a legible breakfast.

Diversification in terms of flavors: Bringing in a new spectra of flavors will deter the competition from
exploiting this gap and Kellogg’s will be able to differentiate itself on the basis of being the complete
package when thinking about breakfast cereals both in terms of a healthy choice targeting the middle
and older aged people as well as a fun product which is delectable to children.
Conclusion
Kellogg’s is a strong International brand which over the past decade has captured the Indian cereal
market and taken measures to adapt to the Indian scenario. The initial marketing blunders by the
organization have been eliminated by some stellar market research and implementation. In order to
tackle an ever growing processed breakfast industry with new entrants looming, Kellogg’s needs to
develop and build a trust along with its customers which will cement it as the go to and trustable
product and brand when thinking of breakfast. Kellogg’s should aim at marketing its product in a
manner that makes breakfast and cereals synonymous to Kellogg’s.