Product line strategy in the cereal industry: Kellogg's case study

Product Innovation

The Kellogg Company is a producer of cereal and convenience foods with a number of brands. The company is located in Battle Creek, Michigan, and was founded in 1906. Kellogg's posted earnings of almost $13 billion in 2010 and employs about 31,000 people. Facing global sales stagnation and decline, Kellogg promoted Carlos Gutierrez, who had risen in the company from the ground up since 1975, as CEO. Gutierrez believed in the strategy of "Volume to Value," a way to increase sales by focusing resources on Kellogg's highest margin products like Special K, kasha, and Nutri-Grain. This extra income would fund advertising, promotion and R&D, which would also encourage high-margin sales growth. "Volume is a means to an end -- not an end. What counts is dollars" (Boyle, 2004).

PIC Analysis for Rice Kipsies:

Rice Krispies, also known as Rice Bubbles in Australia and New Zealand, is one of the prime breakfast cereal brands produced by Kellogg. It began in 1927-28, and is made of crisped rice, which is rice and sugar paste that are formed, cooked, dried and toasted so that when they expand they form thin and hollowed out walls that are crunchy and crisp. When the cereal is subjected to a change in heat (as in pouring milk), the thin walls tend to collapse creating the famous branding slogan of "Snap, crackle, and pop" (What Makes Snap Crackle and Pop? 2010). This sound, and its immense popularity with children, has led to a long and very successful marketing history. Snap, Crackle, and Pop have become iconic cartoon characters, and even such musical icons as the Rolling Stones recorded a song for a Rice Krispies television advertisement in 1963 (Greenman, 2008).

There has been some controversy over Kellogg's claims that Rice Kipsies was healthy by "supporting your child's immunity," and the Federal Trade Commission found that Kellogg must remove verbiage indicating that Rice Krispies had health benefits (Carey, 2010).

Focus- Rice Krispies fits in with Kellogg's core competencies and market advantages:

The product has a tremendous longevity, over 80 years, and shows no signs of declining.

The iconic branding over decades means that multiple generations are aware of the brand.

The ingredients are relatively inexpensive.

Numerous product extensions have proven successful, with only a few that have not (Cocoa Krispies, Ricicles, Frosted Rice Krispies, Mixed Flavors, Rice Krispy Treats).

The product is poised for the healthy breakfast and healthy meals trends of the 21st century.

Goals and Objectives- Kellogg's has, over the years, tried different adaptations of Rice Krispies; strawberry flavors, marshmallow coatings, adding more sugar, etc. There remains a dichotomy between parent's need to supply a healthy product and a child's desire for participation in the fun and fantasy of the "Snap, Crackle, Pop" Phenomenon. Because of the trend towards healthier foods, Kellogg should "remake" Rice Krispies into an iconic version of a healthier cereal. This can be accomplished fairly easy, and builds on the company's other ingredients already in place with other brands: