Beyond breakfast

Why cereal giant Kellogg's wants a place at the table for every meal?

There's a weighing scale tucked away in a corner of the conference room at Kellogg India's headquarters in Mumbai. No one's really sure why it's there, but it is nevertheless being put to good use these days.

The breakfast cereal behemoth (2007 global sales: $11.8 billion) is currently rolling out Special K, its biggest brand worldwide, across India. Special K's USP? It is a "shape management" cereal that promises to help you lose up to 6 pounds in two weeks. Not surprisingly, the scale at the Kellogg's office is brought out "" and stepped on "" more frequently these days.

Another cereal for a market where typically breakfast is a substantial, hot, cooked meal? Ah, but there's a difference. Kellogg's is promoting Special K as a twice daily meal plan "" suggesting consumers substitute it for dinner as well. And, instead of targeting children and busy male executives "" the usual object of its attention"" this time, Kellogg's is reaching out to women.

There's also Kpak, launched about a year ago. The single-serve cereal pack is being marketed as an evening, after school snack and company sources claim it already accounts for 10 per cent of Kellogg India's revenues.

Agrees Anupam Dutta, managing director, Kellogg's India, "Our equity has acquired far greater pace in the last couple of years."

Clearly, Kellogg's India is changing, reaching out to its customers through the day, rather than restricting itself to an early-morning interaction. What's behind the new strategy?

Moving up the cereal aisle
Globally, Kellogg's strategy has changed over the past few years: not only is the company the world's leading producer of cereals, it is also among the top producers of convenience foods and snacks. And while growing the cereals continues to top its strategy to-do list, there is an increasing emphasis on expanding snacks.

Already, less than half of Kellogg's revenues (about 47 per cent) comes from cereals. And as the public outcry gets louder in the US against sugary, unwholesome cereals, Kellogg's is increasingly turning to growth from new food groups.

That means products like Pop-Tarts, Eggo Waffles and vegetarian foods. It's not just Kellogg's, though. The company's biggest rivals worldwide, General Mills and Kraft, are also following similar strategies.

Naturally, a change in strategy globally will have an impact on subsidiary operations as well. Which explains, in part, Kellogg India's entry into the snacks market. Still, the emphasis in India remains on growing the cereals business. "We have decided to grow from the core (cereals), as it gives us rich dividends," says Dutta.

The 'compete' picture
It won't be a snap, though. The competitive landscape for Kellogg's in India is changing dramatically.

Management guru Michael Porter has listed five competitive forces that shape any market: the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products or services, and the rivalry among existing competitors. Of these, at least three will be at work on the Indian cereal market in the immediate-to-near future.

To begin with, more multinational players are heading towards the breakfast cereal arena. While PepsiCo will step up marketing of Quaker Oats and launch three new variants, Nestle has been test marketing Cerevita, a multigrain breakfast cereal, in Bangalore.

Speaking with Business Standard some time earlier, Martial Rolland, chairman and managing director, Nestle India, commented that Cerevita's national launch depends on customer feedback to the two variants being tested.

At another end, the threat of substitute products is unabated. If anything, it's increased. While traditional breakfast foods still hold sway over Indian stomachs, the launch of new brands and variants of milk additives (products like, say, Horlicks and Bournvita) means greater competition for the "share of milk".

Meanwhile, existing local rivals, like Bagrry's and Mohun's, provide cheaper alternatives and continue to be a source of worry. For instance, compared to Rs 90 for a 290 gm pack of Special K, local breakfast cereals carry price tags of around Rs 55, for 500-gm packs.

These forces could, in turn, trigger off the two remaining competitive forces Porter defines: the bargaining power of suppliers and of buyers. Suppliers (read: retailers) may ask for higher margins in exchange for display space, while increased choice means consumers will become more demanding and choosy.

That may not be such a bad thing. Consultants believe increased competition will help grow the Rs 250-crore breakfast cereal market. "It is a lack of options, and not consumer readiness, that affects cereal sales.

With organised retail, the availability constraints will be removed," says Harminder Sahni, managing director, Technopak Advisors India. Adds marketing consultant Rajeswari D Sheth, "The time for Kellogg's and such food brands is now. Consumers are willing to spend on healthier foods and there is a growing trend of people moving towards fitter lives."

Cereal thriller
For the past 12 years, Kellogg's has been selling itself to Indians as the perfect way to start the day. The results have been mixed (the company, though, claims to be the market leader with a dominant share).

Soon after it launched in India in 1994, Kellogg's discovered that what it delivers as a breakfast option is diametrically opposed to what generations of Indians have eaten.

Granted, tastes and flavours change every 100 km in the country, but the typical Indian breakfast is still hot, home-made, heavy-as-a-meal and savoury, rather than sweet. Compare this with Kellogg's cereals "" ready to eat, best served with cold milk and bland unless you add a sweetener.

Kellogg's kicked off its India business with three variants, expensively packaged and with an emphasis on the crispiness of its flakes compared with local cereals. What it didn't take into account is the Indian aversion to cold milk.

Consumers added piping hot milk to Kellogg's cereals and the flakes turned mushy, just like local brands. Not surprisingly, after the initial novelty factor wore off, there were few repeat takers for the premium-priced American brand.

Accordingly, Kellogg's made changes. In 1996, it substituted the thick, laminated cardboard packages with thinner, plain board ones. A couple of years later, the company launched chocolate covered flakes, Chocos, and quickly followed that up with ethnic flavours (coconut, mango and so on) under the Mazza label. Then came biscuits.

In 1999, Kellogg's began offering fortified cereals. The Iron Shakti product aimed to address iron deficiency in children, and sales increased 17 per cent. Two years later, it test-marketed a fighter brand, Sunrich, that would take on lower-priced brands like Mohun's. And, after the parent company acquired the Keebler biscuits and cookies portfolio in 2001, Kellogg India also launched Cheez-It crackers in 2002.

All the launches, barring Chocos and the Iron Shakti variants, failed. By 2003, Kellogg's had decided to remain tightly focused on cereals. In the following years, it worked to build equity for the existing brands with campaigns that emphasised mental alertness for children (Iron Shakti) and through associations with movies like Spider Man 2 (Chocos).

Vox the talk
That wasn't enough, though. Kellogg's needed to bring more consumers into the fold and make them eat more cereal.

"We worked towards identifying triggers that would enable customers to move towards this category," says Kishore Tadepalli, vice president, JWT, which handles the Kellogg's account. Consumer research in the past couple of years helped identify these triggers.

The learnings: Kellogg's cereals were consumed by the entire family. Mental performance was an all-family need and not restricted to children. Afternoon snacking was a large consumer need and the only options were junk food or other, less healthy, options. And getting in shape is a priority with everyone, especially women.

Using these insights, Kellogg's "decided to craft products for the need state of consumers rather than the other way round," says Dutta. It began by launching Kellogg's Corn Flakes, in a multi-grain, fortified cereal format (rather than one made from a single grain) that would appeal to adult tastebuds.

Ads, too, began showing adults eating the cereal, rather than focusing on children alone. One ad showed a family whose house has been burgled. As the father eats his cereal, he remembers the getaway car's number. "The ads focused on migration from children to an all-family positioning," says Tadepalli.

The assault on the afternoon-snack segment was led by Chocos. The reasoning was simple: the product was already popular with children, who were the key consumers for 4 pm munches.

The launch communication of Kpaks offered the Chocos variant as a nutritious substitute for chips and other junk food. The new ads, though, clearly position the product as an afternoon snack. The single-pack servings "" the sachetisation of cereal "" will help the product reach more homes, the company hopes.

With Special K, the company has a first-mover advantage. Not only is this the first weight management cereal launched in the country, it is also the first that addresses women as the end-consumer, rather than as the meal-provider. The cereal was test-marketed in Bangalore in mid-2007 and Dutta claims the results were extremely encouraging.

"Weight loss is a big concern among women. We have created a new segment with a product offering that's pertinent to this need," he says. The marketing strategy includes trials packs, television advertising and installation of POPs like convex mirrors that reflect a slimmer-image.

The milky way
Consultants point out that Kellogg's' brand extension strategy helps increase its relevance across categories. It is now a player in the Rs 500-crore weight management market and the Rs 750-crore convenience foods market, apart from the Rs 250-crore breakfast cereal market (which, in turn, is part of the Rs 2,000-crore health foods segment).

Of course, competition also increases as a consequence. Kpaks fight wafers and instant noodles in the evening snack category, while Special K is up against weight loss pills, gyms and slimming centres. JWT's Tadepalli adds that the company is also competing for "the share of milk". A new campaign for Chocos, therefore, will address this point, says Dutta.

Clearly, Kellogg has ambitions of becoming a heavyweight in the Indian foods markets. That is probably the real reason behind that conference room weighing scale.

A Special K's?

With the launch of its biggest global brand in India, breakfast cereal giant, Kellogg's is trying to move consumption of cereals beyond breakfast and special ocassion treats, to lunch or even dinner. But, the company might not see Indian consumers eating out of its hands without a lot of effort.

The company recently began rolling out its largest selling global brand, the $ 1.5 billion Special K, across India. After an extensive test market in Bangalore, the diet cereal, Special K was recently launched in Mumbai and Delhi. Positioned as the healthy way to lose weight and targetted at women in the age group of 25-44 years, the cereal is the latest attempt the the US foods giant to expand the wafer-thin Indian market for cereals.

Will Special K meet the same fate as other attempts by the company to expand the market in India? In the late-1990s, Kellogg's had made a much-publicised entry into the biscuit category, a India-specific move to get the brand into Indian homes. The move backfired as the distribution required for biscuits was widely different from selling breakfast cereal. Biscuits find their way into even hole-in-the-wall outlets. But breakfast cereals sell mostly at top-rung outlets.

With Special K, it could be a different case, though. The brand meets a specific consumer need, has been growing at a terrific pace across the globe--it took nearly 50 years to deliver annual sales of $ 1 billion, but took only two more years to grow its annual sales to $ 1.5 billion. Plus it targets Indian consumers who are getting increasingly health conscious.

For all its advantages, even the brand's marketing problems are slightly different. Like all health regimen, even this could end up as a fad, much like the Atkins diet-craze of the 1970s, the aerobics of the 1980s, and the beta-carotene's and anti-oxidants of the 1990s.

Consumer studies in India have highlighted the concern of products that bank on health. Marketing professional Deepali Naair, who spearheaded Draft FCB-Ulka's WomanMood II study in 2006 points out that "the health trend is India is oriented towards 'fitness and looking good' and the longevity of the fitness fad is unpredictable. This could mean shorter life cycles for health brands which focus only on fitness as a proposition."

The study adds that if the fitness trend lasts and gets entrenched, then the fitness oriented brands may have a winning proposition on their hands. Else, the brands need to have a sustained story on larger health issues which can transition from one trend to another.

Marketing consultant, Rajeswari D Sheth however feels that Kellogg's could give consumers a reminder call for consumers to come back to Special K after every eight weeks.

"Giving consumers the hook of maintaining their weight management program over a longer-term will provide a huge impetus for consumers to keep coming back to the brand," she says. Sheth adds that the move will also ensure that a floating population keeps getting into the brand, thereby growing volumes.

Anupam Dutta, managing director, Kellogg's India is confident of Special K's prospects in India. "All health propositions that disappeared like fads were time consuming and required consumers to reset their existing routine. That's not the disadvantage with Special K," he says. Across the world, this point has been well-taken, as Special K is a 57-year-old brand. Will Indian consumers take a special liking for the brand?