Kellogg's Marketing Plan

Kellogg's Marketing Plan The Ready-to-Eat cereal market has proven to be increasingly resilient to the recession; in fact it has grown by 2% a year even in the midst of the economic downturn (Emrich, 2008). The Fruit Loops brand is highly respected and has a very high level of customer loyalty associated with it. The costs of producing the brand have dropped significantly over time and the extension of the core product into a Fruit Loops Breakfast Bar shows significant potential given the analysis in this marketing plan.

This marketing plan proposes a six-month cycle of product introduction planning to get all aspects of the marketing strategy synchronized to be able to attain the sales objectives. The development of product launch materials, definition of marketing value propositions, pricing, packaging and the concepts of how the proposed Fruit loops Breakfast bar will compete with others will all be determined. Over the next twelve months the planning of the breakfast bar and its introduction globally is the scope of this marketing plan.

As this marketing plan illustrates, the primary demographic for the proposed product, those adults from 18 to 45, are time-starved more than ever before and need to have a flavorful yet healthy alternative to eating breakfast (Dowdy, 2004). The Fruit Loops Ready-to-Eat Cereal or Breakfast Bar will be positioned to deliver than value to consumers. Finally, the same taste and texture will also be included to keep the existing customer base loyal to the product line extension overall.

Tan integral part of the product introduction plan will also center on the development of forecasts from Kellogg's largest customers including Wal-Mart. Table of Contents Executive Summary Introduction and Situation Analysis Situation Analysis 8 SWOT Analysis 8 GOALS and OBJECTIVES 9 TARGET MARKET(S) and SEGMENTATION 9 MARKETING MIX STRATEGY 10 BUDGET 11 IMPLEMENTATION / ACTION PLAN / SCHEDULE 11 EVALUATION and CONTROL PROCEDURES 12 CONCLUSIONS and RECOMMENDATIONS Introduction and Situation Analysis As of the close of their latest fiscal year, Kellogg Company reported revenues of $12.5B, attaining an Operating Income of $2B and a Net Income of $1.2B.

Despite a global economic recession for the last two years Kellogg Company has continued to have profitable growth (Cioletti, 2005) (Thompson, 2006). Table 1, Kellogg Company Ratio Analysis provides insights into five-year trending of profitability ratios, liquidity indicators, debt management and asset management performance over time. Across the nineteen financial ratios analyzed the highest performance is in the profitability ratios area. Kellogg was able to grow Return on Assets (ROA), Return on Equity (ROE) and Return on Investment (ROI) throughout the last five years.

In terms of Asset Management, Kellogg was able to generate a positive Total Asset Turnover in the same period. In terms of this distribution channel and customer base, Kellogg is highly dependent on Wal-Mart Stores with 21% of Net Sales generated from this mass merchandiser in 2009. As of the beginning of 2010 Wal-Mart also represented 17% of consolidated receivables globally and 26% in the U.S. Kellogg has diligently worked to create a much more diverse customer base outside of their Wal-Mart relationship, with no other customer accounting for greater than 10% of sales in 2009.

The top five customers however including Wal-Mart accounting for 34% of total sales and 44% of sales in the U.S. specifically. Kellogg's relies on primarily on its own distribution sales force and has extensive relationships with multichannel resellers and channel partners throughout the food industry. Their channel management strategies have continued to dominate their specific area of the retailing industry. Kellogg's strongest competitive products include its convenience foods and ready-to-eat cereals many of whose brands are market leaders in their specific product niches (Emrich, 2008).

The company operates one of the food industry's most complex and well-integrated supply chains, with distribution centers and selling relationships in 180 nations (Goldsmith, Flynn, Goldsmith, Stacey, 2010). In addition the production network Kellogg's relies on spans 18 nations and is often in a continual state of new product development between northern and southern hemispheres. The company has also successfully marketed under subsidiary brands for their cookies, crackers and convenience foods under the Austin, Cheez-it, Famous Amos, Keebler and Murray (Erickson, 1995) (Wong, 2009).

Situation Analysis Internal At present Kellogg commands the greatest market share globally and also in the U.S. according to an analysis of their filings with the S.E.C., including 10Q and 10K statements. Figure 1, 2009 Market Shares of Leading Ready-to-Eat and Specialty Food Manufacturers show Kellogg with 34.2%, General Mills, 31.2%, Kraft Foods, 14.2%, PepsiCo, 8% and 12.4% of market shares are attributable to the over fifty different manufacturers who serve this market.

The global industry is expected to grow at 2.5% this year and expected to see further growth in the ready-to-eat cereals market (Riley, 2006). This segment of the market is growing at a compound annual growth rate of 10% which is surpassing all other food categories in this entire industry (Ramage, 2007).

Figure 1: 2009 Market Shares of Leading Ready-to-Eat and Specialty Food Manufacturers Source: (Bainbridge, 2010) and Analysis of Kellogg Company filings with the SEC Company Market Share Kellogg Company 34.2% General Mills, Incorporated 31.2% Kraft Foods, Incorporated 14.2% PepsiCo, Incorporated 8.0% Other 12.4% Their dominance in market share is matched by the ability to continually gain greater levels of profitability across return on assets, return on equity and return on investment as is shown in the financial analysis shown in Table 1, Kellogg Company Ratio Analysis.

Table 1: Kellogg Company Ratio Analysis Profitability Ratios 1/2/2010 1/3/2009 12/29/2007 12/30/2006 12/31/2005 ROA % (Net) 10.98 10.11 10 9.46 9.2 ROE % (Net) 65.34 56.84 48.14 46.26 43.3 ROI % (Operating) 28.55 26.22 25.2 24.77 24.51 EBITDA Margin % 18.79 18.06 19 19.54 20.8 Calculated Tax Rate % 28.27 29.7 28.7 31.7 31.2 Revenue per Employee $407,430 $389,341 $445,598 $422,984 $398,639 Liquidity Indicators Quick Ratio 0.62 0.39 0.38 0.34 0.35 Current Ratio 1.12 0.71 0.67 0.6 0.69 Net Current Assets % TA 2.41 -9.42 -11.64 -14.87 -9.14 Debt Management LT Debt to Equity 2.13 2.81 1.29 1.48 1.62 Total Debt to Equity 2.15 3.77 2.07 2.44 2.14 Interest Coverage 6.78 6.34 5.86 5.74 5.83 Asset Management Total Asset Turnover 1.14 1.13 1.07 1.03 0.96 Receivables Turnover 11.28 11.63 11.98 11.99 12.33 Inventory Turnover 7.95 8.19 7.55 7.89 8.03 Accounts Payable Turnover 11.4 11.39 11.86 12.19 12.37 Accrued Expenses Turnover 17.37 18.26 15.8 14.14 11.12 Property Plant & Equip Turnover 4.24 4.26 4.07 4 3.81 Cash & Equivalents Turnover 42.82 32.39 25.27 34.74 32.07 Promotion and Distribution Kellogg's relies intensively on cross-channel promotions, store detailing, planagrams development and marketing co-op funding to gain market share in distribution channels (Erickson, 1995).

They are also focused on the measurement of promotional strategies from the standpoint of ROI of each marketing program investment (Dowdy, 2004). External The global ready-to-eat market is growing at a 2% compound annual growth rate (CAGR) through 2010 (Tiltman, 2006). Figure 2, Ready-to-Eat Cereal, Cereal Bars and Packaged Cereals. The overall industry continues to expand given the price-sensitive nature of consumers today and the need many have to make their budgets go further on less (Wong, 2009).

Figure 2: Ready-to-Eat Cereal, Cereal Bars and Packaged Cereals Forecast Revenue Revenue Growth Rate Source: (Bainbridge, 2010) The majority of sales in the market are comprised of ready-to-eat cereals (45%), hot cereals (28%) and cereal bars (27%)(Kirsche, 2005). Figure 3 shows the distribution of sales by product. The ready-to-eat cereals of Kellogg's dominate this specific segment of the market given the company's strengths of distribution, promotion and pricing strategies.

Figure 3: 2009 Ready-to-Eat Cereal, Cereal Bars and Packaged Cereals Source: (Bainbridge, 2010) and Analysis of Kellogg Company filings with the SEC Product/Services Share Cereal bars 27.0% Hot cereals 28.0% Ready-to-eat cereals 45.0% The distribution dynamics of this market favor the dominance Kellogg's has in their distribution channels and strategies for gaining the majority of their sales through grocery wholesalers (Facenda, 2008).

As Figure 4, Ready-to-Eat Cereal, Cereal Bars and Packaged Cereals shows, the majority of this market is dominated by grocery wholesalers, a market that Figure 4: 2009 Ready-to-Eat Cereal, Cereal Bars and Packaged Cereals Source: (Bainbridge, 2010) and Analysis of Kellogg Company filings with the SEC Market Segment Share Grocery wholesalers 66.3% Supermarkets and convenience stores 19.7% Export 8.9% Food service providers 5.1% The consumer market segments are dominated by males and females in the 18 -- 45 age groups, the majority of which have the most hectic lifestyles of any of the total market (Facenda, 2008).

The second largest group of ready-to-eat cereal, cereal bars and packaged cereals are young males below 18 years of age. Figure 5: Global Ready-to-Eat Cereal, Cereal Bars and Packaged Cereals Customer Segmentation, 2009 Source: (Bainbridge, 2010) and Analysis of Kellogg Company filings with the SEC Market Segment Share Males 18-45 37.0% Females 18-45 28.0% Males 45 2.0% SWOT Analysis The company's strengths include exceptional level of geographic diversity throughout their distribution and supply chains, strong product innovation practices and very well-known brand awareness and recognition globally.

The weaknesses of the company are first that it relies on just a few top customers for the majority of its revenue growth and its lack of product quality have at times led to recalls. Opportunities include the growing level of health consciousness in globally, higher levels of product demand in Latin America nations that today have relatively low levels of adoption today and the potential to grow through mergers and acquisitions (Kissas, 2007).

The threats Kellogg's is facing include stringent regulations and a lack of strategies for managing foreign exchange risk. In addition there is intensive pricing pressure from competitors as well. GOALS and OBJECTIVES The goal of transforming Kellogg's Fruit Loops into a healthy alterative and also spinning off new products for its widespread popularity is the goal of this marketing plan. Specifically concentrating on product line extensions for the product into the ready-to-eat cereal category is the goal.

TARGET MARKET(S) and SEGMENTATION The target market are men and women in the 18 to 45-year age segment who commute to their jobs and need to have ready-to-eat breakfast cereals they can eat while commuting to their jobs. The secondary market is families with busy moms, dads and kids who need to grab a meal replacement (Thompson, 2006). The well-known Fruit loops brand can be used to launch product line extensions throughout each of the demographic markets shown.

A third demographic segment is defined through psychographic analysis, and these are the highly brand-loyal Kellogg's consumers who will consume nothing but products from this manufacturer. MARKETING MIX STRATEGY The goal of the marketing mix strategy is to synchronize every aspect of product, price, promotion and distribution or place to ensure the product line extension is successful. Beginning with the product, the focus on making Fruit loops product line extensions in the form breakfast bars flavored with the distinctive taste of the cereal is key.

Second, a product line extension of Fruit loops Cookies and other confectionary products would also appeal to the most brand-loyal custoemrs the company has. The product line extensions need to concentrate on being alluring and interesting enough to attract new customers, while also retaining the quality, taste and unique texture of the existing Fruit loops so that brand loyal customers will stay with the product and adopt its extensions as well.

The pricing aspects of the Fruit Loops Breakfast bar needs to be at market parity and comparable to competitive brands. Pricing of the new breakfast bar needs to focus first on market parity and competitive advantage, connoting a price-quality relationship in the process. For promotion, Kellogg's has continued to excel in the area of sales, channel and distribution-based promotions through the use of co-op and funding programs.

For the first year of the launch of the Fruit Loops Breakfast bar the focus needs to be on gaining shelf space and top-of-mind awareness against its dominant competitors. The use of in-store promotions, coupons, free trials and a continual focus on driving up awareness and.