Food for thought

Market leader Kellogg's is expanding the still-small breakfast cereal market on the health and wellness plank.

Kellogg’s came to India about a decade ago with the promise that it will change the breakfast habits of Indians. Till then, regional staples were the norm at the Indian breakfast table — paranthas in the North, idli or dosa in the South, for example. People would give up all the greasy and fatty stuff and eat healthy cornflakes, Kellogg’s had thought. It saw no reason why its global success could not be replicated in India, especially with the growing awareness amongst its large middle-class population.

Over the years, it would seem Kellogg’s has covered all its flanks. It has products in three distinct segments. There is the kids’ category with products like Chocos, Chocos Duet, Planet and Stars and Fruit Loops. Next is the all-family segment which includes corn flakes and its six variants. And finally, up the chronological ladder in the adult space are products like Special K (for weight loss), wheat flakes, Extra muesli and oats.

The market for breakfast cereals is growing at a fast clip — 30 per cent per annum. But Kellogg’s is outgrowing it. Its share of the market stands at 48 per cent. Perfect?

Too small, too many
Not really. There is a fly in the ointment. The market for breakfast cereals is still very small. While the packaged food market is valued at Rs 33,234 crore, the organised breakfast cereal market is just Rs 250 crore. “The unorganised breakfast market,” says Technopak Advisors Vice-president (food and agriculture) Sanjay Sethi, “is far bigger than the organised one. Milk and fruit are the preferred choice.” The import is clear: Kellogg’s will have to work really hard to grow the market.

That the breakfast market holds great potential is beyond doubt. The clearest indication is the growing interest of multinational food companies. PepsiCo has already entered with its bestseller brand, Quaker Oates. Heinz India, which has a hugely strong bond with households because of its Complan health drinks, too has joined the bandwagon.

Even a value-for-money fast-food chain like McDonald’s wants a share of the pie. According to McDonald’s, more and more people are grabbing a quick bite on their way to work. A study carried out by the company threw up some interesting numbers: 18 per cent people in cities prefer eating out of home because of the convenience and variety it offers. Further details reveal that out-of-home breakfast in Mumbai is high during the whole week and in Delhi it peaks during weekends. So, it is carrying out pilots of its breakfast menu across locations in Mumbai and Delhi. The initial response, claims the company, are encouraging.

Clearly, it is not an easy market for Kellogg’s. So, it has decided to take the food safety and nutrition plank for growth. A cue that it perhaps took from its 1999 success story with Iron Shakti, which aimed to address iron deficiencies in children and boosted sales by 17 per cent.

New initiatives
The company recently conducted a study of breakfast habits on more than 1,000 people in Mumbai. The revelations were startling: One in three people does not eat breakfast, young girls skip breakfast regularly (probably linked to weight-control issues) and many children go to school without breakfast or inadequate breakfast resulting in nutritional inadequacy.

Communicating this idea, Kellogg’s hopes, will do the trick. “It’s important for us because we are in the breakfast space and our food provides the micronutrients that are deficient and that’s the message we are going to send out to consumers,” says Kellogg’s India Managing Director Anupam Dutta. The new initiative therefore doesn’t require rolling out new products. “All Kellogg’s cereals are fortified with essential vitamins and minerals according to the daily requirements of nutrients for Indians and therefore are excellent breakfast choices,” adds Dutta. Not surprisingly, even its communication has begun to highlight this with ads emphasising better cognitive performance and academic performance.

Sethi of Technopak Advisors views this positively: “Consumers are getting more health conscious and there is an emerging market for cereals. Going forward, even packed forms of breakfast will gain prominence as people don’t have the time in the morning.”

The problem for Dutta is that rivals are likely to take the same route. Heinz India in March launched its first breakfast cereal, Complan Nutri Bowl Muesli. “Health and wellness is a significant emerging trend and that is our rationale for entering this segment. Breakfast time offers a huge opportunity as the health-conscious consumer is looking for something healthy and convenient,” says Heinz India General Manager (new business) Sundip Shah.

Flavours and pricing
Breakfast cereal players may have a healthy strategy backing them, but their battle with the palate rages on. Experts feel that Indians find it hard to move away from their quintessential hot, cooked meals. During its launch, Kellogg’s emphasised on the crispiness of its flakes without considering Indians’ aversion to cold milk. When mixed with hot milk, Kellogg’s corn flakes were no different from local brands, while they were priced far above.

To tackle that, the company bet big on flavours. So, when the chocolate-covered flakes, Chocos, became a huge success, the company was quick to follow it up with ethnic flavours like coconut, mango and so on. In October 2008, Kellogg’s Extra muesli was launched in four different variants — extra nut delight, extra fruit magic, extra crunchy fruit and nut and extra tropical bonanza. Dutta feels variety is a key need of the Indian consumers and flavours are the best way to provide that.

The company experiments mainly with fruit tastes like mango, strawberry, banana and universally favourite flavours like honey. “Kellogg’s got it right when it started launching flavours,” Sethi points out. “People have begun to take a shine to our products,” smiles Dutta. Quick on the uptake, however, is Heinz which has also come out with three variants of its cereal: Mixed fruit, crunchy and crunchy with saffron.

Kellogg’s may have made the right moves with flavours and variants. What has played spoilsport is its premium pricing. For instance, 250 grams of Kellogg’s cornflakes is priced at Rs 75 while Mohan Meakin’s 200 grams is Rs-32 lighter on the purse. With heavy down trading visible across all consumable categories, this could hurt the company in the current scenario.

Dutta on his part counters that Kellogg’s has not taken a price increase in any of its products since 2005. “This is despite significant increase in all input costs and inflationary pressure. We have so far absorbed the cost increase and delivered the benefit to the consumer,” he says. Alternatively, its Kpak initiative offers a range of Kellogg’s products at Rs 10. “Health and convenience are the two things we offer. As long as consumers have these two things in mind, we’ll be a part of their breakfast choice,” Dutta says.