Will Keith Kellogg was born in Battle Creek, Michigan, on April 7, 1860. He was a reserved and humble young man who worked hard, but he struggled in the classroom. His teachers labeled him as “dim-witted,” even though it was his vision that was the issue: he could not see the chalkboard during class. Even though he was not as his teachers labeled him, he dropped out of school at the age of 14, a common practice at the time. After dropping out, he worked as a store boy and a traveling broom salesman, among other odd jobs. He served until he was 46 years old, doing nothing. Kellogg got an idea in 1894 while working as a clerk for his brother, Dr. John Harvey Kellogg, at the Battle Creek Sanitarium, a world-renowned church that followed the Seventh Day-Adventist Church’s customs and where many rich people from around the world went when they were sick.
He was a vegetarian Seventh Day Adventist who wanted to find a healthy vegetarian option for breakfast food that many people could enjoy. He forgot about it and let it rest for a few hours as he was cooking wheat to make a dough. The wheat had weakened by the time he returned, but he rolled it anyway. However, as he rolled it, the wheat became flakes. He baked the flakes to make them crunchy, and thus the modern breakfast cereal was born. W.K. and his brother wanted to try their hand at producing more cereal goods, and the result was baked corn flakes. The Kellogg’s wanted to start marketing their corn flakes commercially because it was nutritious and delicious, and the patients at the Sanitarium enjoyed it.
In 1906, the United States was changing from a high-fat food to a high-carbohydrate breakfast that was easy to digest and prepare. Will Kellogg discovered that a good flake was needed to make a good cereal, so he experimented with corn grit, or what he refers to as the “sweetheart of the corn,” and Corn Flakes were born. As Will Kellogg wanted to enter the cereal
business, there were already forty-two other cereal firms in Battle Creek, Michigan. With so many businesses offering cereal, but his being the first to use corn, Will Kellogg decided to make sure his brand stuck out, so he came up with the concept of naming his cereal, Toasted Corn Flakes, “The Original” and signing each package. Will Kellogg’s Toasted Corn Flake Company was able to compete over a plethora of other wheat flake businesses due to the special sweet flavor of Corn Flakes.
Will Kellogg’s Corn Flakes cereal was successful because it catered to the needs of the public, not only those concerned with their wellbeing, but those looking for a simple and tasty meal. Will Kellogg had a great awareness of economics, which is why he knew that by combining a good work ethic with a well-thought-out marketing strategy, he would be able to increase everything from his promotional budgets to his cereal production.
Steven Cahillane was named Chief Executive Officer of Kellogg Company in October 2017. In March 2018, he was appointed as the chairman of the board of directors. Prior to joining Kellogg, Mr. Cahillane was President and Chief Executive Officer of The Nature’s Bounty Co., the world’s largest pure-play maker, marketer, and specialty retailer of health and wellness foods, which he joined in 2014. He successfully aligned the business with major health and wellness trends, established a thriving e-commerce department, and increased shareholder value in this position.
Nicolas Amaya is a member of the Kellogg Company’s executive committee and serves as Senior Vice President and President, Kellogg Latin America. Mr. Amaya’s career began in 2001 as a marketing intern for Eggo in the United States at Kellogg Company. Since then, he has held various leadership positions in the grain, canned and snack food industries in the United States and Latin America. Mr. Amaya’s many achievements include leading the dynamic and difficult geographic unification of Pringles in 2012.
The Kellogg Company is the world’s leading producer of cereals and one of the leaders in the production of convenience foods. The company reported sales of nearly $11 billion for 2006; sales revenue has steadily risen over the last decade. Kellogg’s products are made in seventeen countries and are sold in more than 180 countries. According to the company website, “Kellogg Company has a rich history of corporate social responsibility, a history that has grown and evolved to meet the complexities of today’s business world and the challenges of a global society” (kelloggcompany.com,2006). Kellogg has made it clear that the company was founded with a strong commitment to social responsibility and is proud of the progress that has been made since its creation in 1906.
Environmental Analysis of Kellogg Company
Kellogg Company (commonly known as Kellogg’s) is an American producer of food products. It was founded in 1900 by W.K. Kellogg and J.H. Kellogg in Battle Creek, Michigan, and is most famous for its ready-to-eat cereals (Pierre & Fischetto, 2020). The company has a global presence with customers in at least 180 countries, and this success is attributed to its innovative marketing strategies and the sustained improvement in the quality of its products (Ladd, 2019). The management has always been mindful of the changes in the environment, and their business decisions have consistently been informed by the social/cultural, economic, legal/political, and global trends.
The Social, Cultural, and Environmental Factors
Due to their busy lifestyles, Americans prefer ready-to-eat products to ones which they must dedicate time and effort preparing. Breakfast cereals are popular, especially because they are nonperishable. Americans purchase at least 2.7 billion packages of ready-made cereals a year. Kellogg’s has a 30% market share, and its most famous products include Froot Loops, Frosted Flakes, and Corn Flakes (Pierre & Fischetto, 2020). The company has been in business for over 120 years, and therefore, it has a wealth of experience its rivals lack.
Brand loyalty in the breakfast cereal industry is significantly high. As a consequence, most clients do not normally seek out alternative products. Supposing that Kellogg’s lost clients, therefore, it would be difficult to win them back as they are likely to remain faithful to their chosen substitutes. In accordance with the tradition, the current CEO, Steve Cahillane, emphasizes the need to address all concerns efficiently (Burrows, 2018; Ladd, 2019). This is in an endeavor to satisfy the needs and wants of their consumers while meeting the business goals.
Influence of Advertising on Purchasing Decisions
The industry has a high advertisement-to-sales ratio, and this is because young people are notably influenced by the popular culture. They purchase a product based on how popular they think it is. Kellogg’s appreciates this fact, and it invests about $400 million in marketing on a yearly basis (Serna-Saldivar, 2016). Pierre & Fischetto (2020) argue that the management would enhance their understanding of the emergent trends if they strengthened their social media presence. The discussions on the social media tend to shape public opinion, and can consequently influence the demand (Markel, 2017). In that case, Kellogg’s should consider the social media to be yet another platform where it can share its message with the current as well as the potential clients.
Kellogg’s Economic Environment
The management must understand a lot more than just how Kellogg’s can function on its own. Indeed, the sustainability of a business organization is influenced by both internal and external factors. One of the most impactful components is the status of the economy. Therefore, this element must be part of Kellogg’s strategy. In addition, the fact that it is a multinational corporation means that its success is dependent on the status of the local as well as international production activities and levels of consumption (Ladd, 2019). If the sources of raw materials are obstructed, production is impeded.
When the supply chain is hampered by a crisis like the COVID-19 pandemic, consumers may not satisfy their needs even if they had the finances to do so. This is the current scenario in Europe where strict lockdowns have been imposed for almost a year (Markel, 2017). Other economic problems which affect the performance of a business organization include unemployment and inflation rates. Unemployment translates into individuals having inadequate disposable income, and hence they are compelled to opt for cheap alternatives (Burrows, 2018). Similarly, a high inflation rate causes the consumers to prioritize cost over quality (or even brand loyalty).
Influence of Political/Legal Frameworks on Kellogg’s Business Activities
Although the US is a capitalist economy, agencies of government often impose regulations on business organizations. Regulations are meant to facilitate the control of a particular economic endeavor. For instance, the Food and Drug Branch of the California Department of Public Health may require a decrease in sodium and sugar levels in all breakfast cereals sold in the State of California (Burrows, 2018; Markel, 2017). A federal agency may impose a similar condition, and hence Kellogg’s must always remain informed about the developments of the specifications which must be met in order to avoid fines and/or other punitive measures.
Changes in the political environment must be tracked as well. Every political party in the US seeks to advance ideological views which impact businesses in one way or another. In addition to regulations, political leaders may enact laws which would make it mandatory for every business to operate within specific constraints (Ladd, 2019). Laws endure longer than regulations because the process of repealing them is complicated and often requires a bi-partisan support (Pierre & Fischetto, 2020). Kellogg’s must monitor the legal and political trends and accommodate the changes in its strategic plan, particularly because these developments are beyond the management’s control.
Global Issues with Influence on Kellogg’s Business Endeavors
A misconception about globalization is that the entire world has been turned into one community. While geographical, language, and communication barriers are continually being eliminated, it is erroneous to imagine the planet as a region whose inhabitants share the same cultural and ethical beliefs. In spite of the fact that it had undertaken a massive advertisement campaign and invested over $65 billion in it, Kellogg’s still failed to win royal customers in India during the first few years of operation (Markel, 2017). The management had the mistake of assuming that the Indian market was similar to the US.
The cultural conflict has since been addressed, and the company has a 56% share of the market (Jha, 2016). Cultural sensitivity demands of an organization to involve as many local partners as possible, and to seek their advice while making decisions.
Although such countries as Nigeria and South Africa are democracies, political leaders have the tendency to implement policies which are biased against some organizations and in favor of others. The difference between such countries and the Western world is that while the leaders in the latter are motivated by ideology, those in the former are usually influenced by bribery and nationalistic views (Serna-Saldivar, 2016). For instance, in spite of the benefits that Kellogg’s has brought to communities around South Africa, it has still had to deal with litigations where it was accused of underpaying its employees. Almost all local competitors pay far less than Kellogg’s offers its workers, and hence the main reason for such charges is because it is a foreign company (Jha, 2016; Markel, 2017). Multinational companies face similar problems in Africa, Asia, and Latin America, and hence the management should be mindful of such concerns while strategizing.
Organizations such as Kellogg’s navigate a host of challenges of socio/cultural, economic, political/legal, and global nature. They must, for instance, appreciate the habits of the people living in the markets where they operate. Ignorance of lifestyles and habits would cause a mismatch between products being availed into the market and the needs of the consumers. Companies should also consider the status of the economy as factors like unemployment and inflation rates impact on the consumers’ purchasing power. In case foreign opportunities are to be pursued, a firm must appreciate the fact that every market is unique and there is, therefore, no universal approach to investing in all of them.
Kellogg’s company is a multinational American company, such company is responsible for the production of food in Battle Creek, Michigan, United States. The Kellogg’s company oversees producing cereals and ready-made foods to be eaten, which go from salty cookies, cakes, cereals, among others, are inquinated. This company markets its products through several well-known brands such as Corn Flakes, Frosted Flakes, Pringles, Eggo and Cheez-it. The mission of these companies is to bring well-being to families by providing products of high nutritional value and good quality. The company has sales operations in more than 160 countries all over the world. It has 27 manufacturing facilities in the U.S, and 22 manufacturing facilities outside of the U.S. Tony the Tiger is a well-known character. It is a widely recognized Kellogg’s emblem all over the world by people of all ages.
Kellogg’s has utilized integrated business units and compensation incentive systems to increase the accountability of the cash expenditure and improve the functionality of the organization. Products sales have been increasing in the U.S. As well as in other countries. The pricing and availability of the product determines the profitability of a products. Streamlining many of the operations in recent times has helped the Kellogg increase the profit margin. More resources could therefore be spent on the marketing and advertisement of products. In addition, Kellogg’s also increased the number and frequency of promotional offers more toys in cereal boxes. Adding more value to the products sold to the customer rather than decreasing the cost of the product.
Kellogg’s makes four of the five most popular cereal of all time, Kellogg’s Corn Flakes in the highest selling cereal brand in the world. Kellogg’s is the market leader when it comes to cereal brands and selling. However, General Mill “Cheerios” is the main competitors to Kellogg’s. In 2020, General Mills’ global net sales amounted to almost 18 billion U.S. dollars, an increase of nearly one billion U.S. dollars compared to the previous year. General Mills, Inc. is an American food company, headquartered in Minneapolis, Minnesota. Beginning over 150 years ago, the company now sells various types of food products, such as baking mixes, ice cream, and pet food, across the globe.
In 2020, General Mills’ top selling product categories included snacks, cereal, and convenient meals. The company’s largest global operating segment by far was its North America Retail segment: over ten billion U.S. dollars of net sales was generated within this segment in 2020, while all other segments generated under two billion. The company’s North America Retail segment is comprised of a number of divisions, the largest of which being the U.S. Meals & Baking division. This division alone generated approximately four and a half billion U.S. dollars’ worth of net sales in 2020.
Kellogg’s shares approximately 30 percent, the Kellogg Company led the breakfast cereal market in 2017. General Mill came a close second that year. Kellogg’s, which was founded over 100 years ago, generated more than half of its global net sales in the United States in 2018. Over eight billion U.S. dollars’ worth of net sales were earned in the United States, while net sales numbers from all other countries amounted to almost five and a half billion. In the same year, Kellogg’s advertising expenditures amounted to some 750 million U.S. dollars, a significant decrease when compared to the 2010-2014 period.
Kellogg’s Marketing Strategy
Kellogg is an American-based company that has for decades held a leading position in the production of ready–to–eat cereals. The success of this company may be attributed to the company’s excellent marketing strategy (Brown et al, 2001). This discussion looks into Kellogg’s marketing strategy with a major focus on four major areas: product line, price, promotion, and placement.
Kellogg’s adopts a relatively broad product line strategy. It manufactures a variety of cereals and food products. The product segmentation is based on two categories: morning foods (breakfast cereals), and snacks (MBA Skool Team, 2016). The breakfast cereals include products like cereals, nutritional bars, toaster pastries, and beverages. These include brands like Kellogg’s Chocos, Kellogg’s cornflakes, and Kellogg’s coco-pops among others. Some of the snacks include savory snacks, fruit-flavored snacks, waffles, cookies, crackers, among others as shown in the diagram below. The diagram has the products arranged in the sequence of their demand in thousands.
Kellogg’s follows a competitive pricing strategy that is based on extensive research and customer input (Bhasin, 2019). Before determining the selling price for any of its products, Kellogg’s first seeks to find a balance between all costs involved (cost of production, and advertising) and anticipated profits. It then researches how other competitors price the same products and the customers’ potential to pay for the products.
After analyzing all these aspects, Kellogg’s then sets its prices. Other than being competitive, Kellogg’s prices are also flexible, given the discounts and schemes such as coupons, that the company places on products. In return, the company gets more sales, and consequently more revenues.
Kellogg’s promotional strategy considers all its customers, including direct consumers, distributors, and retailers. To begin with, Kellogg’s lists all its products in every packaging box for all products (Bhasin, 2019). Then, depending on the product, the company lists the nutritional value and benefits associated and any other relevant information.
To attract customers, the company includes gifts in cereal boxes. The company also sponsors various events; for instance, it sponsored Terry Labonte from 1993 to 2006 (MBA Skool Team, 2016). Currently, the company sponsors the US gymnastics and kids’ series such as dragon tales.
Kellogg’s understands that children of this digital era want to play, not traditional games, but modern PC games. For this reason, it has taken a promotional move to have a pc game, namely ‘mission cereals’ that contains special packs of cereals. These packs are mainly samples of Kellogg’s existing and new products.
These promotional activities are then advertised on a variety of platforms including television, newspaper, magazines, and internet advertising. Kellogg’s takes a unique approach to advertising, whereby all its advertisements are based on the target customers. For instance, television advertisements for Kellogg’s products mainly take place in kids’ channels and follow a prime-time slot. This is because most of its customers are children and women or rather mothers who in most cases decide on what the household consumes.
Being a global company, Kellogg’s serves four of the largest world markets including the USA, Canada, Australia, and United Kingdom. The company is also focusing on emerging markets to expand its distribution network. Currently, Kellogg’s sells its products in more than 180 countries worldwide.
The company uses several distribution channels such as high-frequency stores, convenience stores, mini superstores, and vending (MBA Skool Team, 2016). It has also opened adequately stocked warehouses in various locations to ensure that customers get goods in good time and at convenient places. Sales are made by the company’s direct sales force, distributors, or brokers.
Marketing is an important aspect that determines the success of any business. For Kellogg’s, their exemplary marketing strategy has led them into being an industry leader. Businesses looking forward to growing should adopt a similar strategy.
Company’s Financial Resources
Kellogg’s stock prices have been going up and down in recent days. The price of the stock ranged from 56.61-72.69 in the last year, today they have a range of 62.48-63.48. The variation in one year has been -1.22%. In 2018 the profit of this company grew 7% to 1,344 million dollars.
Kellogg’s stock price has risen 6.4%, outperforming the S&P 500, due to the company’s observation of 2021. They observed the potential they could have in the long term and that is why they have grown. Although they have grown positively, they still have a debt of 7.47B dollars, 6.75 in the long term and 729 million in the short term.
The company’s earnings have not grown steadily in the last 10 years. The growth has sometimes been a lot, but they have also had several falls.
The current price of the market capitalization of this company is 21,516B dollars due to the current price of the shares which is 63.5 and for the shares that are currently in circulation, which must be multiplied by each other to obtain the market capitalization. Since the beginning of the pandemic, this value has changed a lot, falling too low.
At the beginning of the pandemic, the market capitalization fell to 19.09 million dollars, being the lowest since 2012. Since the beginning of the pandemic, the highest point has been in August 2020 with a total of 23.84B dollars.
They currently have income of $ 13,770B. this makes Kellogg’s the world’s 862nd most valuable company by market cap. The market capitalization, commonly called market cap, is the total market value of a publicly traded company’s outstanding shares and is commonly used to measure how much a company is worth.
The year that saw the greatest growth in the market capitalization of this company was in 2009 where it had an increase of 21.22%.
Market capitalization is a relatively good way to quickly value a company. That is because stock prices are generally based on investors’ expectations of a company’s earnings. As we can see in the graph, this last month so far has been the best in the company.
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