Mistakes of Kelloggs and how it can do better in India

By M. Siddharth Raman (WPM 14 SID)

Kelloggs in IndiaKelloggs started off in 1906, in the U.S. Gradually it grew so big that it had 40% share of the ready to eat market segment in U.S.A. With sales grossing $6 billion, presence across 150 countries and with 20 plants across 18 countries, Kelloggs was supposed to rock the Indian market which had a 950 million population. To put this in perspective, as reported by Robin Bolton, in his HBR article, just 2% of the Indian population consuming cereals for breakfast would lead to more revenue than the U.S. market. So what went wrong for Kelloggs in India? Let us take a look. Cornflakes for Everyone?Kelloggs invested 65 million dollars in its launch year of 1994 in India yet generated only 70 million dollars in revenue during 2010. Kelloggs had also invested continuously during the years repositioning products, launching new brands and in marketing, yet it could gain only less than 1% of the population.This was a result of simple failure of assuming that all the 950 million people ate breakfast and all those who ate breakfast would be willing to switch. This fundamental error led to a gross miscalculation of estimated revenues leading to substantial investment losses. This was the first mistake.Warm or Cold?

Kelloggs had underestimated the Indian consumers by assuming that all it had as a rival was the traditional Puris and Idlys. This proved to be a major disaster in several aspects.Primarily, Indians were used to having warm food as breakfast. Cereals quashed this desire by making consumers start their mornings by eating a cold and soggy breakfast. Even the adding of sugar didnt so much help as sugar did not dissolve too well in cold milk. Kelloggs had assumed that consumers would change their habits, but the adage Old habits die hard proved to be a formidable foe.

Second, the product was not filling either. The Indian consumer, rich or poor usually have a substantial breakfast. They like their tummy full in the morning, Kelloggs fails to satisfy this fundamental sensation of fullness as cereals hardly filled the stomach and eating large quantities was also distasteful.The third mistake was that cereals were too bland. Almost all India breakfasts are spicy and salty. Cereals had none of these. All its offerings were either bland or sweet, the other end in the preference spectrum of Indian buyers. Thus, Kelloggs could at max coax kids into eating it by introducing multiple variants like honey loops, frosties and Chocs.

These 3 mistakes pertaining to the taste was one major pitfall. Paying the PriceThe Subcontinent in Transition: A strategic assessment of food, beverage and agribusiness opportunities in India (2010) conducted by PROMAR International clearly indicated that price was a major dampener for Kelloggs in India. In a developing nation, price is an important aspect to gain market share. With 100gms costing an average of Rs.20/- , Kelloggs was at least Rs.5/- costlier than its closest Indian rival Mohan Meakin for the same quantity. This was a 33% increase than the closest rival and Indians had not even taken off to cereals yet. Thus, Kelloggs was viewed as a premium product reserved for the niche segment.Thus all the above led to Kelloggs suffering major setbacks in making inroads in the Indian market.The Way AheadKelloggs would do well by answering the below 2 questions:1. What was the objective with which people bought these cereals?

2. How did these cereals meet them?A response to these questions might throw up some interesting data. Some people might have bought it preferring the taste, some to save time of cooking and some other for the health aspects. Maybe Kelloggs would do better to repositions its offering on these lines. In comparison to the traditional India breakfast, cereals were much healthier and quickest to prepare and eat. Maybe Kelloggs can conduct campaigns where the time saved without compromising on the health can be highlighted explicitly. Kelloggs can also probably look to supplying in bulk to schools and companies to promote the concept to healthy breakfast as studies reveal that most of the kids and young working population skip breakfast due to various reasons. Apart from assuring volumes this might break way to a new segment of users that can probably be tapped into.

As an alternative, through R&D, Kelloggs can explore if the cereals can be modified to suit the India taste buds. Making it spicier and preparing it other than by taking it with cold milk can be used. New ways of using products might sometimes push us into unchartered blue oceans.

Also, Kelloggs positions itself as a breakfast meal. Maybe it can try and make ready to eat health bars or other variants which are easier to carry around and possible to eat at any time of the day.

In the U.S. Kelloggs took a fun and taste positioning strategy. However, in India this was not amply conveyed. Similar to Mc Donalds, Kelloggs provided free toys and merchandise on purchase of cereals, however in India, this was not adopted. This can be reinitiated to gauge response. The experience aspect of having Kelloggs as a cereal needs to be reinvented to make it more interesting rather than viewing it as yet another mundane activity.Coupled with a price reduction, Celebrity endorsements and clear communication of benefits will help Kelloggs gain a larger share of the Indian breakfast pie.