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ESG Case Study: How corporate purpose strengthens Kellogg’s ESG communications with stakeholders

Natalie Runyon   Director / ESG content / Thomson Reuters Institute

9 Jan 2023 · 5 minute read

The Kellogg Company aims to advance sustainable and equitable access to food through a new initiative that leverages its communications around its ESG activities

The attention of boards of directors are increasingly more “attuned to the importance of talent, culture, and connecting business strategy to purpose,” according to a recent Deloitte report . That means that board members continue to focus on environmental, social, and governance (ESG) issues, as well as concerns around talent retention and development, employee well-being, hybrid work environments, and the future of work.

While talent issues remain high on the board agenda for many companies, organizations need to do more to explicitly tie the well-being of their people and corporate purpose directly to corporate ESG activities on a consistent basis. Indeed, measuring social impact — the S in ESG — through the lens of people’s well-being is not yet mainstream, although it is gaining traction.

Multinational food manufacturing giant the Kellogg Company (Kellogg’s) is among those companies that consistently link their global purpose platform to their sustainability agenda and ensures their purpose is centered on the well-being of their employees and other stakeholders. More specifically, the company, through its Kellogg’s™ Better Days Promise , aims to advance sustainable and equitable access to food by addressing the intersection of well-being, hunger, sustainability, and equity, diversity & inclusion to create better days for 3 billion people by the end of 2030.

Enacting a multi-pronged stakeholder engagement strategy

Kellogg’s also embeds its corporate purpose into its growth strategy. This definitive integration of purpose and growth dates back a century to its founder and is well entrenched within the organization’s business and culture today, says Stephanie Slingerland , Senior Director of Philanthropy and Social Impact at the Kellogg Company.

The Better Days Promise is a key element of Kellogg’s Deploy for Balanced Growth strategy, which includes consideration of the varying sustainability-related preferences, needs, and desires of the company’s multiple stakeholder groups — employees, customers, consumers, investors, and the communities in which the company is based and operates.

With the recognition that the “company should and can do well by doing good,” Kellogg’s has taken a proactive approach to engaging with stakeholders to communicate how its corporate ESG strategy remains central to its operations and growth strategy through a people well-being lens, Slingerland explains.

Kellogg’s has seen positive implications by intentionally collaborating with stakeholders to integrate the organization’s corporate purpose and social impact into its ESG strategy in a variety of ways, including:

• Cross-stakeholder ESG initiatives — Honoring World Food Day is a month-long event at Kellogg’s. It is an opportunity for the company to engage with many of its stakeholders, including food banks, retail partners, and employees, through workplace and community volunteering opportunities, donation drives, communications, and events.
• Employees — Kellogg’s employees regularly engage with ESG initiatives over the course of the year. Indeed, cultivating employees as ambassadors through the promotion of the Better Days Promise to employees’ networks, customers, and partners enables a multiplier effect on the company’s ESG communications and social impact.
• Consumers & community — Kellogg’s has a long history of involving consumers in its philanthropic activities. In the summer of 2022, for example, the company’s launch of the Build for Better program and competition, executed in partnership with Minecraft and the nonprofit KABOOM!, allowed consumers to design a virtual playground on Minecraft and submit it for the chance to see it built in real life. The winning design was built at a Boys and Girl Club of America in Marietta, Georgia in November 2022.
• Customers — Likewise, the company’s retail customers recognize the importance of ESG initiatives and are eager to partner on Better Days Promise. For example, Kellogg’s collaborated with a retailer to launch Kellogg’s InGrained ™, a program that helps rice farmers reduce climate impact. Another retail partner, recognized Kellogg’s commitment, investment, and partnership on philanthropic, sustainability, and well-being initiatives, named the company the first-ever ESG Supplier of the Year.

Storytelling & data are essential

Data and storytelling are key to executing holistic, multi-pronged communications to a wide variety of stakeholders. While it is sometimes tricky to address all audiences’ preferences and expectations, “sharing stories about the people behind our strategy who have such a passion for their work, or the people that the initiative impacts, resonates the most,” Slingerland says. “Data helps to contextualize the impact of the stories.”

One of the most common challenges in implementing an ESG engagement strategy is how to influence late-comers or those who question the validity of the widespread attention that ESG is receiving. To make progress, companies should stay focused and highlight the positive impact company initiatives can have on the surrounding communities, and how these initiatives help drive company’s growth, Slingerland advises.

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Home » Management Case Studies » Case Study: Kellogg’s Business Strategy

Case Study: Kellogg’s Business Strategy

Kellogg’s is the world’s largest cereal maker since 1906 and is located in the United States. Kellogg’s products has become a part of the delicious mornings for the people around the world since a century. Its business is operated in two segments: Kellogg’s North America and Kellogg’s International. 66% of the revenue to the company comes from North America region which consists of the Canada and the United States. The remaining 34% comes from the Kellogg’s international market which consists of Europe (20%), Latin America (8%) and Asia Pacific (6%). The products vary from ready-to-eat cereals to convenience foods such as cereal bars, cookies, toaster pastries, crackers, frozen waffles, snacks and veggie foods. Obesity and Health & Wellness is the primary concern for people in the world today. Kellogg’s has invested on this trend by introducing many health focused products like Kellogg’s ®, Pop-Tarts ®, Cheez-It ®, Mini-Wheats ®, Nutri-Grain ®, Rice Krispies ®, Keebler ®, Special K ®, Chips Deluxe ®, Famous Amos ®, Morningstar Farm ®, Sandies ®, Eggo ®, Austin ®, Club ®, Murray ®, Kashi ®, Bear Naked ®, Gardenburger ®,All-Bran ®,and Stretch Island ®. The demand for its products came from the continuous advertising since 1906. The main competitors are General foods, Quaker Oats, General Mills and Ralston-Purina. It started out in Battle Creek, Michigan with 44 employees which eventually has grown into a multinational company with 30,000 employees. The manufacturing of its products is taking place in 18 countries and selling them over 180 countries successfully with the implementation of intelligent strategies and leadership .

Key Success Factors of Kellogg’s

The main key factors for Kellogg’s Success are it perceived to have a healthy image when compared to other daily breakfasts and snacks like chocolates and crisps. They made the products convenient enough so that they can be carried anywhere easily. They offer a range of cereal bars which are quite useful for people on the morning rush. Few Kellogg’s products are really versatile as mom’s can give them as a snack between breakfast and lunch to their kids. Sodium content in the food is a major issue that the company has to deal with. Kellogg’s are trying to develop products with less salt content and including more amount of fruits in the bars and cereals for people with health concerns. They have created a high level of brand awareness in the people which allowed them to win the customer loyalty. They have designed various products since a century for all age groups from children’s to adults. Innovation has influenced Kellogg’s market to a greater extent. Introducing new products according to the changing markets and tastes of people from time to time has made Kellogg’s to win the customers. They offered the products at a lower price which made an average household to afford, hence retaining the customers at large. Kellogg’s market its products itself. It do not manufacture cereals for any other company who sells them under their own brand. All these factors added for the company to run successfully and become the world market leaders in the highly competitive market.

Kellogg’s Business Strategy

Kellogg’s aim was to be the food company of choice and also make customers understand the importance of a balanced lifestyle which can be achieved by their products. The mission is “to drive sustainable growth through the power of the people and brands by better serving the needs of customers, consumers and communities.” Based on their vision and mission they crafted their strategy to achieve aims and objectives with the power of position and brand image. Kellogg’s targeted various groups of people and deigned the products accordingly to attract their mind sets. ‘Balanced Lifestyle’ is the broad strategic objective of the company. It implemented these strategies by some tactical plans like supporting the physical activity among all age groups and to sponsor these activities with the use of companies resources, the communication of the balance diet to consumers using the cereal packs, and also introduction of food labelling which would allow consumers to understand the balanced diet content of their products. Kellogg’s has introduced the recommended Guideline Daily Amounts (GDA) to their packaging labels. This allowed the customer to have a knowledge of the amount of nutrients in take in a serving of Kellogg’s food. Their strategy is to attract customers by encouraging them to take part in the swimming programs organised by the company in relationship with the Amateur Swimming association (ASA). Kellogg’s has sponsored almost 1.8 million awards every year to the swimmers. This idea of teaming up with ASA has helped the company to reinforce its brand image. It also has started many community programs and breakfast clubs to create awareness of their products in people. By all these activities it shows that the company is trying to create a good CSR image in the industry. Kellogg’s believed that if consumers are given proper information about their products, they can retain them. So, they chose various methods to communicate their objectives to the world such as using cartoon characters, and also through effective advertising. It also distributed nutrition magazines for the employees to make them better understand about the objectives.

Market Research

It is seen that Kellogg’s consumers buying behavior is mostly dependent on the company’s focus towards customers and how well they treat them rather than manufacturing, pricing or merchandising of the products. Consumers tend to purchase the products which are more healthy. Hence they want to know all the available information about the products they want to buy or consume. The product’s information, beliefs, intentions and attitudes of the customers influence the decision process . So Kellogg’s has to perform a market research on whether the consumers buy their products based on the label information or not. The visual inspection of the product or the experience of purchasing the product play a major role in the decision making of the consumer. Advertising and promotion of the product might as well have a greater impact on the buying pattern. It is difficult enough to understand the consumer behavior within the borders of a single country. Understanding and serving the needs of consumers from different countries can be daunting. The values, behaviors and attitudes of the consumers vary greatly across the world. Kellogg’s must design the marketing programs and products according to the peoples needs. For example, in the United Kingdom where most people eat cereal regularly for their breakfast, Kellogg’s should try persuading consumers to buy their brand rather than a competitors brand. In France, however where most people prefer croissants and coffee or no breakfast at all, it should advertise to convince people to eat cereal for breakfast and in India, where many consumers eat heavy fried breakfasts and skip meal all together, the company should make attempts to convince the buyers to shift to a lighter, more nutritious breakfast diet.

Customer Focus and Retention Strategy

There is a huge discussion in the EU market about the food nutrition and labeling and the negative media image produced about the products of the company. The Kellogg’s products are criticized by food standard agency (FSA) as red products and junk food. They said that the company is trying to show their products healthier than they actually are. These statements and actions of FSA has not only affected the overall business and its image but also the consumer attitude towards the products.

To cover up the damage caused due to the labeling issue by FSA, Kellogg’s Should determine the customer’s needs and convert them into requirements. In order to fulfill them, it should fully understand the current and future needs of the customers, identify the customers, determine their key product characteristics, identify and assess market competition, identify opportunities and weakness , define financial and future competitive advantages , ensure that it has sufficient knowledge about the regulatory requirements, identify the benefits to be achieved from exceeding compliance and also identify their role in the protection of community interests. Kellogg’s can start launching some new products aimed at the health conscious consumers. They can start selling them for a lowest price in the market and satisfy them with a good value products for every penny they spend. They can concentrate more on three groups of people like individuals, families and supermarkets who wanted to have a healthy diet. They can focus more on health conscious people from age group from 25-50 by promising them healthy diet with their products. By the introduction of these products in the market they can show the customers that Kellogg’s is being paid attention to what they want and how important their health is to the company. They can start collecting information from consumers and people by conducting surveys about what kind of products they are actually looking for and based on that they can prepare them and position them to win the competitive advantage. So the only mantra to attract the customers again and to cover up the loss created by FSA is obsessive customer attention. Even though making health conscious customers happy might affect the short term profits, yet it helps to acquire a loyal customer base which pays off in the future. Making these products available at all consumer stores and super markets at a lower retail price might assist in building up the brand image yet again. Advertisements play a crucial role in winning the brand image and loyalty of the customers. If the company tries to create an awareness about the product and the low price buying strategy, it would encourage the consumers to buy them that results in the greater sales of the product.

Awareness of changing dynamics of the consumer market will definitely help Kellogg’s to gain a competitive edge in the cereal industry. The increasing trend of health consciousness and the changing tastes can be known time to time by extensive market research. The feed back from consumers and the surveys conducted will allow the company to learn about their drawbacks and work up on them. It enables the business to minimize price sensitivity, improve profitability , differentiate itself from the competition , improve its image in the eyes of customer, achieve a maximum number of advocates for the company, increases customer satisfaction and retention, enhance its reputation, improve staff morale , ensure products and services are delivered right ‘first time’, increase employee satisfaction and retention, encourage employee participation, increase productivity and reduce costs, create a reputation for being caring customer-oriented company, foster internal customer / supply relationships and also bring about continuous improvements to the operation of the company.

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Case Study - Kellogg

Kellogg Company is a multinational food manufacturing company which produces cereal and convenience foods, including cookies, breakfast cereals, frozen waffles, and vegetarian foods. Learn why and how Kellogg set their science-based targets.

Kellogg Company (also known as Kellogg’s) is a multinational food manufacturing company headquartered in Battle Creek, Michigan. The company’s brands include Froot Loops, Corn Flakes, Rice Krispies, Special K, Pringles, Pop-Tarts, Nutri-Grain, and Morningstar Farms.

Kellogg products are manufactured in 18 countries and marketed in over 180 countries. In 2012, Kellogg became the world’s second-largest snack food company (after PepsiCo) by acquiring the Pringles potato crisps brand from Procter & Gamble. We spoke to Kellogg’s Senior Sustainability Manager, Amy Braun, about Kellogg’s science-based targets.

Why did you set a science-based target?

During COP21 we wanted to do something smart and long term that aligned with the ambition of governments going to Paris. We had already committed to setting targets for scopes 1, 2 and 3 and we decided we wanted to incorporate the science, as a way of making the target we set strongly justifiable. It was also a way for us to continuing to establish our leadership. And of course, there’s a strong business case as we need to ensure long-term access to the ingredients and resources needed for our foods.

What was the process like?

We are not subject matter experts in climate science: we make excellent food! So, we partnered with WWF, WRI, and CDP to come up with a plan to set targets using the latest information from the Intergovernmental Panel on Climate Change (IPCC). We really dug into the science from the outset: we wanted to understand the IPCC findings, the related global aspirations, and where we fitted in.

We convened our NGO advisors – including the Science Based Targets Initiative partners – and we looked with them at where the company was at in its journey, and the commitments it had made so far. We asked them: what do we need to do to make this more long term, more ambitious? They introduced us to the methods – the Sectoral Decarbonisation Approach and the 3% Solution – that helped us shape and validate our initial thinking.

It was really critical that we worked with others – the NGOs, but also government, suppliers, other stakeholders – to understand how we could make meaningful impacts.

What challenges did you encounter?

It was a challenge to change our internal culture to think more long-term and to understand how our short-term commitments (up to 2020) contributed to and helped to build a longer-term vision. We needed to think big, to recognise that as an established, successful company we were not going anywhere, and therefore needed to shift our time horizon from 5 to 35 years.

What changes came about as a result of having set the target?

This was the first time we had had a quantifiable emissions reduction target for scope 3 emissions. It meant that we had to engage with our suppliers, establish a baseline, and work with them to decide what changes could be made. Since we set the target, we have already begun to engage 75% of our suppliers (over 400 of them) by requesting they respond to the CDP Supply Chain questionnaire on GHG emissions. We have also developed materials to help them understand the challenge and the options they have.

We have 35 programs globally designed to help farmers decrease their footprint. We have committed to supporting half a million farmers to implement smart agricultural practices focused on emission reduction and resilience. We are collating research and aggregating learning from best practices and then sharing back with individual farmers so they can benefit from the collective information.

Having the headline, long term, science-based targets has also bought everyone in the business together, under the same tent. Now logistics, distribution, and manufacturing are all working together to drive towards the same target. This allows for everyone to be part of one company-wide team that is driving greater sustainability. It creates a different culture.

What benefits have you experienced as a result of setting a science-based target?

The benefits are huge. We are one of just a few companies that have set holistic scope 3 targets for all of our suppliers. This is so powerful and yields a real leadership dividend. It’s a demonstration of how quickly we have upped our game since 2008 when we first set emission reduction targets. This kind of acceleration leads to recognition from internal and external stakeholders, which is really valuable.

Having a science-based target helps us build relationships with government and changes the nature of the conversation we have with them. Overall, this is all part of our wider story as ‘brands with purpose’, and the actions we are taking as result of having set a science-based target are essentially proof points of our commitment to sustainability and to leadership to protect the planet.

Is this something you think your customers wanted you to do?

Our customers are retailers and they really want us to do this. Consumers are perhaps less knowledgeable but awareness is growing, and they are all interested in the ingredients in their food. With our Morningstar Farms brand for example, we can see that people are aware of their carbon footprint, and are excited about actions they can take to reduce it. We are running “Veg of Allegiance” campaign where people substitute one vegetarian product for a meat product they would normally eat. People love it.

What costs have you encountered?

There are obviously trade offs to be made but in most cases we see reductions in energy use as a direct benefit. Some things may be higher cost as a result of efforts to reduce emissions, but we are always looking for the win-win. This might mean we need to look over a longer time line. But the win-wins are there: we believe we can do this without having to accept higher costs.

Has this motivated innovation in the company?

Absolutely. For example, we now have fuel cell technology at our waffle-making facility in San Jose, which generates electricity. This is the first time Kellogg has explored this sort of thing and it was motivated directly by the emissions reduction target. It has led to new learning for the sustainability team, the plant, and the supply chain managers. It took a while to get it off the ground but it’s now working, and we are looking to replicate it in another facility. Overall, I think people are now more willing to try new things to help drive towards the target: it has created a ‘start-up mentality’.

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Case collection: Kellogg School of Management

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Since 1908, the Kellogg School of Management has been at the forefront of transforming business education.

Kellogg is a global business school with a vibrant community of faculty, staff, students and alumni who shape the practice of business and organisations around the world. Kellogg brings a blend of theory and practice to its rigorous academic experience, creating a dynamic research and learning environment.

Kellogg's purpose is to educate, equip and inspire brave leaders who build strong organisations and wisely leverage the power of markets to create lasting value.

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The Kellogg case collection contains more than 500 cases, plus their related teaching notes, technical notes and supplementary materials.

All Kellogg cases are taught in the classroom before being added to the collection. As a result, they create dynamic and effective opportunities for students to understand and apply theories and frameworks, analyse complex situations, evaluate options and formulate innovative solutions. 

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How Kellogg’s Failed, and Then Won, in India

Home » Blog » How Kellogg’s Failed, and Then Won, in India

Kellogg’s initial foray into the Indian market is generally agreed to have been a failure, although it’s now doing well in terms of both market share and sales growth in the subcontinent.

As part of our series of in-depth case studies looking at major brands tackling major new markets, last week we examined how Marks & Spencer are getting along in China .

Whilst local in-store sales have been a touch underwhelming for this British high street brand, it has had success selling dresses online with Tmall (part of the Alibaba group).

One slightly unexpected outcome from the adventures of M&S in Asia is the surprise popularity of teabags and porridge oats with the Chinese consumer. It seems Chinese households are becoming slightly more western in their habits, and breakfast cereals are starting to sneak into their shopping baskets.

But are Indian consumers ready to accept breakfast cereals?

In this article, we’ll examine what went wrong, and discover how Kellogg’s recovered from its initial problems in this challenging market.

An unsuccessful first foray into India

The world’s leading producer of cereals and a major snack foods manufacturer Kellogg’s entered the Indian market way back in 1994.

Kellogg’s is no stranger to international marketing : their products are manufactured in 18 countries and sold in over 180.Despite a high-profile launch and a frenzy of marketing activity, the first breakfast cereals it marketed were an initial failure in India.

There was little appetite for breakfast cereals in India in the early nineties, although milk was a regular part of the Indian diet, so Kellogg’s needed to establish a market for the products if it wanted to win over the Indian consumer.

Following a big media launch effort, initial sales seemed promising but it emerged that consumers were buying the product as a novelty but not repeat purchasing.

Kellogg’s India opened its first manufacturing plant in Mumbai, India in 1994. Image trabantos / Shutterstock.com

Most analysts conclude that the brand was overconfident and overlooked many critical cultural insights that would explain why the market wasn’t ready for the breakfast cereals offered. It also seems that the pricing was far too high to be a regular grocery purchase, explaining the lack of repeat sales.

The Indian palette is considered by many to be a challenging one to crack.

Indians were accustomed to boiling their milk and consuming it hot and sweetened. One key hurdle for Kellogg’s to overcome was persuading the Indian consumer to consume milk cold rather than hot when eating breakfast cereals.

When Kellogg’s initially launched into the Indian market it was with crispy flakes that would go soggy when consumed with hot milk. When Indians tried the unsweetened breakfast flakes with cold milk, they couldn’t get the sugar they added to dissolve properly.

This may explain why Kellogg’s later enjoyed better success with Frosties, which come ready-sweetened with dissolvable sugars which sweeten the milk when it is added to the bowl.

Indian consumers accustomed to gut-busting breakfast staples such as buttery fried parathas  or deep fried vadas found breakfast cereals somewhat insubstantial when eaten as a substitute for India’s more familiar breakfast items.

A bland bowl of cereal flakes also failed to match the variety of foods often eaten at breakfast time, or the habit of eating more flavoursome foods such as chutneys and pickles with various morning staples.

Indian breakfasts tend towards spicy and hot; by offering a dish that was bland, sweet and cold Kellogg’s was proposing the exact opposite of expectations at this time in the day. Essentially Kellogg’s offered a product that failed to match local breakfast habits and expectations – and at twice the price of local competitors.

Other critics of the initial launch also thought that Kellogg’s trod on a few toes with marketing campaigns implying the traditional Indian breakfast was not nutritionally sound.

A revised strategy

Kellogg’s initially launched in India with corn flakes, wheat flakes and basmati rice flakes, none of which were especially successful. When Kellogg’s launched Frosties (sweet, sugar-coated flakes) in 1997, even the company was surprised by their success.

Kellogg’s reduced the price of their products and began to offer a wider range of product sizes to appeal to different customers.

Individual packs were especially popular. Messaging was also changed, to reposition the cereals as a fun choice rather than just a nutritious one.

This approach may have been more successful than the brand’s previous attempt to imply that the traditional Indian breakfast was not nutritious – marketing messaging which may have made the Indian housewife rather indignant. The products were no longer positioned as premium products, in order to make them a regular rather than a one-off buy.

The brand also localised its branding and advertising approach to make it more acceptable.

Gone was the familiar cockerel, and advertising campaigns using local faces such as a yoga instructor and Kathakali dancer attributing their vigour to a Kellogg’s diet. Accompaniments such as curd and pistachio, which suited the local palate, were suggested.

Kellogg’s localised Corn Flakes packaging on Amazon.in. Image credit: trabantos / Shutterstock.com

Kellogg’s took the decision to localise its flavourings, and chose brand names to appeal to the Indian public such as ‘shakti’ (‘power’) when selling products fortified with iron. These days, cornflakes are offered with mango and banana puree to suit local tastes.

Although the brand presently enjoys a colossal 70% market share, it now has to defend from rivals the market it has created. Logistically Kellogg’s is well invested in this territory. All raw materials, including packaging, are sourced in India, and the main plant is located close to the largest market; all of which minimises costs.

Using a network of agents, the brand has established a distribution network including storage facilities. Overheads are minimised by giving distributors large responsibility for sales. In 2010 the market growth was at 20% but following a change in leadership, it is thought to be closer to 30%.

RELATED : How India is Becoming One of the World’s Biggest Markets for Localisation

Kellogg’s remains significantly pricier than local rivals such as Bagrry’s , whose website and logo are breathtakingly similar to Kellogg’s. Larger multinationals including Dr Oetker and PepsiCo are also muscling in on the market. Kellogg’s India is defending its market share by expanding its distribution network by 50%.

It’s arguable that only a massive brand like Kellogg’s was capable of cracking the Indian market, given the amount of market creation and habit changing that was required.

What’s generally agreed is that Kellogg’s was too confident when it entered the market and didn’t do enough research on local tastes and habits before plunging in. Whilst the company has now turned its performance around, it has done so by trying new things but above all by localising its offering and message to suit the market.

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Case Study | Launching Kellogg’s Cornflakes in India

Case Study | Launching Kellogg’s Cornflakes in India 10 min read

“ Mothers know what they want and when; we can’t push our offering to them without giving them a reason they value, ” the Head of Marketing at Kellogg’s India clarified. The Kellogg’s cornflakes marketing team was struggling to find an appropriate positioning platform for the brand to increase sales and ensure brand growth. The brand was globally accepted but its journey in India has been bumpy. They had struggled to find a suitable place in consumer’s heart and mind, and again they were rethinking the growth strategy. Let’s delve into the classic case study of Kellogg’s launch in India and the valuable lessons it departs.

Table of Contents

Breakfast Market in India

The breakfast cereal market in India was pegged at Rs. 12 billion in 2014, an almost 15% growth from Rs. 10.4 billion in 2013, and was expected to grow at a CAGR of 13% over the five-year period. Due to increased health consciousness among consumers, hot cereals and muesli were the fastest growing product categories. Among hot cereals, oats had gained the highest popularity registering a 33% growth in 2014.

Cereal was not a popular breakfast item for Indians, and hence, the market was dominated by international brands from Kellogg’s and Pepsico. Bagry’s India Ltd and Mohan Meakin were the only two Indian players in the market. Kellogg’s India Ltd had the first-mover advantage and was the undisputed market leader with 37% value share in 2014.2 Regional players had a competitive edge over bigger brands because of their robust distribution network. Competition also stemmed from other FMCG chains that did not necessarily have packaged breakfast as their core product offering, for example, ready-to-eat players like MTR and Britannia with its range of ready-to-cook upma, porridge, and poha. These products provided consumers with healthy options that were not just quick but also healthy.

Consumer Behavior Towards Breakfast

India did not have the culture of breakfast. A typical, average middle-class Indian family did not have breakfast on a regular basis like their western counterparts. Breakfast was always combined with lunch—“Brunch” as it was popularly called. Breakfast habits (brunch) in India, for the most part, were inclined towards hot, cooked regional items, like flattened rice flakes (chivda/poha) in western and central India, whole wheat grits (dalia) and parathas in northern India along with traditional regional staples such as idli or dosa in the south. In the earlier days, women prepared fresh breakfast for the family. Serving ready-to-eat meals were not part of the cultural norm and such options were also not widely available.

However with urbanization, dual-working households, and lifestyle changes, there was a greater need for convenience. This was also coupled with increasing disposable income and health consciousness. Increasing awareness of health and susceptibility of Indians towards lifestyle ailments like heart disease and diabetes yielded a greater demand for value-added healthy breakfast options.

Hence, consumers, especially in urban areas, preferred a quick-fix breakfast and cereals would fit the bill. The influence of Western lifestyles and “eating out” trends also played a significant role in opening the gateway for experimenting with different tastes and varying eating preferences. This transition from traditional to modern breakfast took place among young Indians (24–35 years), mostly from dual income families. Choice of breakfast options was induced by personal factors like time constraint, work timings, social groups, and family members.

Kellogg’s Entry in India

In the late 1980s, ready-to-eat cereal giant and market leader, Kellogg’s had reached peak sales occupying a 40% market share in the US. The company had its presence in 18 countries and over 20 plants worldwide with annual sales of over $ 6 billion. However, in the 1990s, competition got tougher and Kellogg’s began to struggle when its nearest rival when General Mills introduced Cheerios brand. There was little room for growth in core markets; therefore, the company started looking beyond its traditional American and European countries as a potential cereal-consuming market.

India was a lucrative target market with population of over 950 million, out of which 250 million were middle class and untapped. In 1991, India went through an economic liberalization and removed the barriers to international trade. Three years later, Kellogg’s decided to invest $ 65 million towards launching its number one brand, Corn Flakes, in India. “ Even if Kellogg’s had 2% market share at 18 million consumers they would have a larger market than US itself , ” said Bhagirat B Merchant, Director of Bombay Stock Exchange in 1994.

Positioning at Launch

Globally, Kellogg’s cornflakes were positioned on the “fun and taste” platform, and they emphasized on the crispiness of its flakes. When Kellogg’s entered the Indian market in 1994, it positioned itself to families/households on the health platform, thus emphasizing on the nutritional benefits of the cereal. They tried to communicate to consumers that traditional Indian breakfast options were not as healthy, and hence, cornflakes were a good choice. This was done based on the insight that Indians consumers were not habituated to cereals as a breakfast item and needed to be educated to create acceptance and liking for not just the brand but cereal as a category.

Kellogg’s kicked off its India entry with three variants of breakfast cereal: Corn Flakes, Wheat Flakes, and Rice Flakes, packaged with an emphasis on the crispiness of its flakes compared to local cereals. These cereals were best served with cold milk without adding sugar. The tagline to reinforce the positioning was- “ Jaago jaise bhi, lo Kellogg’s hi ” (“No matter how you start your day, start it with Kellogg’s”). However, the proposition did not find much credibility with households. Average Indian did not pay much importance to iron/vitamin intake.10 The nutritional benefit was not a differentiated and strong enough proposition for Indians to change their habits and move away from traditional items as they considered their food to be equally or more nutritious.

The initial sales were impressive but Kellogg’s knew that this was a result of one-off purchases. Cereals were a new item for the Indian consumer and after the initial excitement wore off, repeat purchases were few. Another barrier to repeat purchase was the high price. A 500 grams box of corn flakes was almost 30% costlier than its nearest competitor. Indians did not find value in spending so much for an expensive breakfast and often the leftovers from the previous day were cooked or served differently for breakfast next day. In certain households, corn flakes were reserved as a Sunday or special occasions treat.

Also, the emphasis on crispy flakes failed in India as consumers were used to hot milk which made cornflakes soggy. This further diluted the Kellogg’s brand promise. On the heels of continuous unimpressive sales, Kellogg’s realized that their breakfast option was diametrically opposite to what generations of Indians have been eating. The typical Indian breakfast was still hot, home-made, heavy-as-a-meal, and savory rather than sweet. What Kellogg’s was offering was ready-to-eat, best served with cold milk, and bland unless you add a sweetener.

In early 1996, defending the company’s products, Managing Director, Avronsart said, “ Kellogg’s India is not here to change breakfast eating habits. What the company proposes is to offer consumers around the world a healthy, nutritious, convenient, and easy-to-prepare alternative in the breakfast eating habit. It was not just a question of providing a better alternative to traditional breakfast eating habits but also developing a taste for grain-based foods in the morning ”.

Indian consumers did not perceive the Kellogg’s differentiators relevant. They were not looking for thicker and crispier flakes with iron and vitamin. They sought basic health and taste which their traditional food and other competitor brands were also fulfilling.

Repositioning and Product Extensions

Kellogg’s saw that Indian households were difficult to target and moved their focus to kids with the launch of two of its highly successful international brands, Chocos in September 1996 and Frosties in April 1997. Chocos were wheat scoops coated with chocolate, while Frosties had sugar frosting on individual flakes. Frosties addressed the shortcomings of plain cereals because they were ready sweetened which sweeten the milk when it is added to the bowl. Both these variants were not positioned as breakfast items but as snack items on the proposition of fun and taste combined with health. Now the mother was urged to give Chocos as a mid-meal snack to fulfil nutrition requirement.

These variants found feet in the market and targeting kids helped. However, in 1998, Kellogg’s again tried targeting families and households by “Indianizing” its cereal range with the “Mazza” brand. Mazza cereals were available in fusion of local flavours like mango-elaichi, coconut-kesar and rose. The variant did not work. Mazza was more to do with the taste of the product and many consumers thought these were too outlandish.

In 1999, Kellogg’s began offering fortified cereals. The “Iron Shakti” cornflakes positioned on the nutrient value of cornflakes and addressed iron deficiency in children. The nutrition platform was more focused and relevant here as no other brand or product spoke of iron supplement. This became the differentiator and sales increased by 17%. Making the brand and proposition sound Indian by using words like “Iron Shakti” and “Calcium Shakti” gave it a local feel. This approach was more successful than the brand’s previous attempt to imply that the traditional Indian breakfast was not nutritious—messaging which made the Indian housewife rather indignant. The proposition this time was a nutritious and fun breakfast for kids coupled with goodness of iron (which mothers worry about).

Besides positioning, Kellogg’s also changed the communication. It removed the rooster which had an integral association with Kellogg’s globally from all its advertisements in India. The promotions focused on inducing product trial by targeting schools across the country. In March 1996, the company gave out specially designed 50 gm packs to shoppers at select retail stores, and door-to-door sampling exercise offering one-serve sachets to housewives in the city.

However, the company knew that very few Indians had breakfast and they could grow only by growing the category. In 1997, they launched the “Kellogg Breakfast Week” in Mumbai, Delhi, and Chennai, a community-oriented initiative to create and increase awareness. The campaign focused on making people aware about the prevention of anemia, an iron deficiency disorder, and conducted a series of nutrition workshops to educate individuals and families.

As the brand had sub-segmented the market and offered specific customized variants to each with the relevant proposition, its agency, JWT, wanted to identify the triggers that enabled customers to move towards this category. Their research suggested that though Kellogg’s was positioned to kids, they were consumed by the entire family. They also found that healthy afternoon snacking was a large consumer need. Lastly, women in India were becoming more health conscious and desperately wanted to get into shape.

Using these insights, Kellogg’s launched Kellogg’s multi-grain, fortified cornflakes targeted to adult taste buds. Advertisements also began showing adults eating the cereal, rather than focusing on children alone. The assault on the afternoon-snack segment was led by Chocos. This brand was already popular with children, who were their key consumers for “4 pm munches”. The launch communication offered the Chocos variant as a nutritious substitute for chips and other junk food.

Special K: Get into Shape

In 2008, Kellogg’s launched their $1.5 billion “Special K” brand as a weight management cereal targeted at women (25–44 years) who wanted to keep in shape. It was positioned as a low-calorie weight control meal. This was again not categorized as breakfast item but a complete meal. Consultants pointed out that Kellogg’s’ brand extension strategy helped to increase its relevance across categories. It was a player in the Rs 500-crore weight management market and the Rs 750- crore convenience foods market, apart from the Rs 250-crore breakfast cereal market (which, in turn, was part of the Rs 2,000-crore health foods segment).

The marketing team knew that as against other markets, Kellogg’s not only adapted its portfolio to match Indian needs but also made changes to their global positioning to appeal to Indian consumers. Indian market is diverse and unique, and expects the offerings to fit their life pattern. The marketing head at Kellogg’s had recently read an article that incorrect positioning was the reason behind 80% brand failures. Kellogg’s have been relooking at their 5-year strategy as they have always wanted to be confident on the delivering the promise they have made to its consumers.

Also Read: Case Study | Launching And Establishing Oreo in India

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“Simplify and stabilise”: Kellogg Company’s journey to supply chain sustainability

In the second of two blogs ( read the first one here ), Charlotte Durrant, Sedex Marketing Communications Manager, reflects on key learnings from the keynote speech by Alistair Hirst, SVP Global Supply Chains at Kellogg Company, at the Sedex Conference 2016.

Kellogg Company have an organisation of 33,000 people, and Alistair Hirst has 20,000 in supply chain – that’s just his direct employees. When looking at their extended supply it becomes a significantly larger number. At the Sedex Conference Hirst outlined how, “ one of the things that I have learned is that if I don’t have a stable base to build on, then I know whatever I’m doing isn’t going to be sustainable. Simplifying can help you stabilise and vice versa .”

Hirst described the breadth of Kellogg Company’s operations – producing 1,600 foods in 20 countries, which it markets in 180 countries. This breadth makes transparency hugely important. Hirst said: “ Sustainability is no longer just about reducing your greenhouse emissions or energy footprint – it’s your end-to-end supply chain. We have a responsibility – whether it’s tier 1, tier 2, tier 3 or 4 supply chain – to understand what it going on throughout that whole supply chain .“

“ Business has a role to play, and it creates markets and opportunities, especially in the developing world for small farmers to improve their livelihoods. And our customers expect that. Everything we’re doing is being driven by our consumer and our customer. We don’t do it just because we think it’s a good idea, we know our consumers – particularly millennials – want to know where their food comes from. They want to buy from companies that have the same moral compass that they do .”

Hirst described the four things he thinks Kellogg Company needs to be to make sure it has a stable supply chain:

• Resilient : “ We need to be resilient against short term supply shocks, to react quickly, to get supply at short notice .”
• Predicable:  “ We need to predict longer term supply shocks, particularly around climate change, and what we can do to get ahead of it .”
• Rich data or predictive analytics:  “ There’s more data in the world than there’s ever been, but are we using it to predict what could be happening in the future? Predictive analytics can be a big enabler to stabilise the supply chain .”
• Partnership s: “ There’s no way Kellogg can do this on our own, we have to choose the partners who can help us be successful and get the positive outcomes we’re looking for. We work with the World Bank, with Sedex, with SGS; multiple organisations to help understand our supply chain and our sustainability agenda .”

Hirst then outlined four things that Kellogg Company is currently working on in its supply chain:

• Climate Smart Agriculture : “ Is about increasing productivity and crop resilience and reducing greenhouse gas emission. Kellogg Company is partnering with 15,000 farmers by 2020 to work on these practices .”
• Climate and Natural Resource Conservation : “ Two areas we’re particularly interested in are water availability and soil health, because without those crops cannot grow and we can’t be productive .”
• Human Rights:  “ A huge issue for us. We have our global code of ethics which our suppliers are expected to comply with .”
• Reputation : “ We know our reputation is a fragile thing. When information can travel round the world instantaneously, your reputation can be good today and before I’ve finished speaking it can be trashed around the world. This is where audits come in, I love audits. We need audits for continuous improvement – ‘a commitment made is a commitment delivered’ in the Kellogg’s supply chain .”

Hirst stressed the importance of clear metrics in responsible sourcing and gave some key examples of targets Kellogg Company is working towards. He also talked about the difficulty of measuring and meeting these targets: “ this is hard – our supply chain is constantly changing, but we don’t change our target, it stays the same whatever, we keep moving forward .”

He then noted three examples that Kellogg Company are proud of:

• Kellogg’s Origins:  The company has been working with UK farmers to increase biodiversity and take children from inner-city schools to see where their food comes from.
• Thai rice:  Kellogg Company has been working closely with the Thai government since 2008 to grow long grain rice in Thailand, in order to ensure resilience of supply. Last year they got the first commercial crop into the business. The Thai government says it’s the first time a public-private partnership has worked in this agro-space and Kellogg Company has created a market for the Thai farmers which gives them more security.
• Quinoa growers in Bolivia:  Kellogg Company helps farmers with crop husbandry to keep their organic certificate, which is critical for their livelihoods. There is no electricity on the farms, so they also invested in solar power which allows the farmers to irrigate the fields and light their homes at night.

Our customers want to buy real food, they care about where it comes from and who grows it, that we care about the planet. Simplify the work, stabilise the supply base, support the people, communities and environment where we work and source. But never forget, we’re still a business, we have to have front and centre: consumer and customer .

Hirst also talked about the power of partnerships. He described how, in his view, “ supply chains are too simplistic and linear in this VUCA world – we operate in supply webs now – and a spider rarely goes across its web in a straight line .”

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