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Analysis of Kellog’s Indian experiene Assignment

Kellogg India Limited is a wholly owned subsidiary of the Kellogg Company based in Michigan, USA. Kellogg, lured by the prospect of several million breakfast eaters ventured into India in the mid 1990s. Kellogg’s products were introduced to the Indian market in September 1994 with offerings such as cornflakes, wheat flakes and Basmati rice flakes. Kellogg failed to make any impact and gather a foothold in India during the initial period. Although the Indian market provided tremendous opportunities, it was not free of challenges. Kellogg’s brand power which was backed by technical, managerial and financial resources of its parent was severely tested in India.

The entry strategy of Kellogg proved to be unsuccessful in the Indian market. Some of the main reasons for the poor performance of the brand were the following.

1. Insufficient market research. The company assumed people to have similar tastes in food ignoring the fact that food is one item that is heavily influenced by the culture. Traditionally, Indians like hot, savory or spicy, freshly cooked breakfast. This has been the practice for generations. What Kellogg was trying to introduce as a breakfast option was completely conflicting to this age old practice. The concept of a cold breakfast was alien to majority of breakfast eaters. Lack of research led to the over estimation of the demand potential. Kellogg failed in the initial years because it was not sensitive to the cultural factors that influence consumer behavior in India. The quirky consumption patterns in India are heavily influenced by the local culture, a culture that could sometime differ by every 100 kilometers. Sufficient market research would have helped Kellogg identify these issues earlier on and work on an entry strategy that would work in India.

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2. Product features: Kellogg relied heavily on the quality of its crispy flakes, as a unique selling point. But the consumers were not completely educated about the usage of the product. Indians typically consume hot or warm milk and the crispy flakes primarily made for cold milk didn’t hold up to hot or warm milk and ended up as an unappetizing mush. When the consumers tried to eat the cereals with cold milk, the taste did not appeal to them as the flakes were too bland. Adding sugar did not help as it would not dissolve well in cold milk. The taste simply did not match up to the traditional Indian breakfast. Test marketing could have helped identify this problem.

3. Positioning: Kellogg positioned itself as a healthier and lighter alternative to the heavy meal-like breakfast that Indians consumed. The advertisements and promotions highlighted the only the nutrition and health aspects thus giving it a health product image instead of its fun and taste positioning in other markets. Research has shown that the average Indians rarely attaches any importance to nutritional aspects such as level of iron and vitamin intake and paid more attention to the quantity rather than quality. This was mainly due to the lack of awareness regarding problems related to iron and other deficiencies.

4. Pricing Problems: Kellogg used a market skimming price in India. The price charged was much higher than the local competitor’s prices thus making it unaffordable for many consumers. The initial pricing created an image of an expensive, premium “not for me” American brand. Consumers that could afford the product failed to perceive any extra value from the brand. Although the market size in India is of the order of a few millions, it is still primarily a low income market with relatively low purchasing power than their western counterparts. The Indian breakfast in contrast is mostly homemade and very cheap compared to breakfast cereals in general.

5. Packaging: When Kellogg was introduced in the Indian market, they did not have different sizes to cater to different consumption patterns and wallet sizes.

6. Distribution: Kellogg focused on middle level and premium retails stores to carry their products and this put a large section of the target market out of its reach.

To succeed in the Indian market, Kellogg had come to realize that was is necessary to make the products affordable, address the right segment, widen their offerings and adapt their product to Indian needs, and to promote community rather than individual usage. Kellogg used extensive market research and test marketing to identify problem areas and triggers that would enable customers to purchase the product. The following were the initiatives taken by Kellogg in this regard

Product Adaptation: Kellogg revamped its products making the cereal suitable for hot milk. The company subsequently introduced two of its highly successful brands, Chocos and Frosties. These two products were well accepted by the consumers as they were pre-sweetened leading to a substantial increase in sales. These products also became popular as a snack. In 1998, Kellogg introduced three local flavors to satisfy the Indian palate. An effort by Kellogg to adapt to the local preferences has helped break down the taste barrier to some extent. The cereals were also fortified with iron to meet the nutritional needs of Indian consumers. Biscuits and snacks were launched as a brand extension strategy. The company also produced packs of different sizes to suit consumption patterns and purchasing power of Indians.

Pricing Strategy: Mazza series of cereal in three local flavors were priced much lesser than its standard product, the original cornflakes. Kellogg has used market penetration pricing to increase the market size. Some other measures were to introduce a 500 gm family pack which reduced the price per kg by about 20%. Small pouches were introduced in order to make it affordable to the low income group. The thick laminated cardboard packages were replaced by thinner plain board ones to reduce prices. The snacks were priced really low to compete against the products in the impulse snacks category.

Placement: In order to increase the market penetration, Kellogg increased the number of outlets by 10,000 between 1995 and 1998. This has helped enlarge their coverage. Kellogg was even considering setting up more manufacturing units to better cater to the growing demand.

Promotional activities: The advertisements were adapted to feature a cross section of individuals ranging from yoga instructors to dancers attributing their fitness and energy to Kellogg. The company also launched a week long community oriented initiative to educate Indians about the importance of breakfast. Various activities were planned as a part of this initiative that was launched in the metros. Promotional activities such as handing free samples to school children, shoppers at select retain outlets and housewives in Delhi were launched to induce people to try out the products. As mentioned earlier, Indian consumers did not give much importance to the nutritional aspects in a product. In order to maintain this position and still create a demand, Kellogg worked towards developing awareness about nutrition. Chocos and Frosties were positioned as fun-filled brands.

The initiative taken by Kellogg to revamp its marketing mix has paid off. Kellogg’s market share in a Rs. 600 million market had increased to 65% by the year 2000.

Biscuits and snacks were launched as a product extension strategy to provide a wide offering of products to the Indian consumers. The biscuits and snacks instantly became very popular with children. This age group usually has a higher brand recall which helps enhance brand name and image. Kellogg began looking at alternate product categories to counter poor performance of its breakfast cereal brands. The biscuits are relatively low end product. This makes the brand more affordable to a large section of people. This would help change the image of Kellogg being a premium brand and is accessible only to a few select segments of the market.

The company’s main objective was to establish a brand name in India. Hence the focus was to be entirely present and visible on the retail shelf with a wide variety of products. Since biscuit was a mass market product, it required an intensive distribution network. This helped increased the reach and coverage of the brand. The strategy has definitely helped build brand awareness. This can be leveraged to build strong brand in the country.

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