Kellogg's Marketing Plan the Ready-To-Eat Cereal MarketBook Report

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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 <18n

20.0%

Females <18n

7.0%

Males >45

6.0%

Females >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… [END OF PREVIEW]

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