International Business

Introduction

The Kellogg Company is the world's leading producer of breakfast cereals and convenience foods, such as cereal bars founded in 1906

In 2006, Kellogg's had total worldwide sales of almost $11 billion (£5.5 billion). In 2007, it was Britain's biggest selling grocery brand, with sales of more than £550 million. Product lines include ready-to-eat cereals (i.e. not hot cereals like porridge) and nutritious snacks, such as cereal bars.

Kellogg's brands are household names around the world and include Rice Krispies, Special K and Nutri-Grain, whilst some of its brand characters, like Snap, Crackle and Pop, are amongst the most well-known in the world.

Kellogg's is an American owned organisation that has a true global market in the late 1980s; the company had reached an all-time peak.

By the 90s Kellogg started gaining pressure from its rival General Mill. Three years after India has lifted its international trade barriers; Kellogg decided to launch its Corn flakes to capture more market share instead of just concentrating in US and UK's market as their rival has been gaining a foothold in the breakfast cereal market.

Kellogg was the wholly owned Indian subsidiary of the Kellogg Company based in Battle Creek, Michigan in the United States.

Problem Identification

But the Indian consumer has a different breakfast habit. The company did everything they usually did while entering new markets without realizing that they were about to enter an emerging market with strong cultural backgrounds and essentially a very low-price breakfast which includes Hot milk, Idli, Dosa, Vadaa, etc depending on various regions.

In order to capture the market and create a demand for the people who are accustomed to their own eating habits was a challenging task for the company. It also meant that the company had to promote not only its product, but also the idea of eating breakfast cereal.

The Indian ready-to-eat-cereal market posed several difficulties. The Indians found the whole concept of eating breakfast cereal a new one.

Kellogg's believed that its brand equity carried forward from the West would mirror its success in India. It started building its brand by promoting its quality crispy flakes which were a worldwide success that was accepted throughout the western countries. But what sounded like a safe plan, turned out to be total failure for the company.

Firstly, Indians have always preferred their milk hot. When the Kellogg's crispy flakes are mixed with hot milk, they turned out to be soggy thereby out rightly rejected by the consumers. Kellogg's later had to modify their products to suit hot milk but the damage had been done.

Secondly, the cost of Kellogg's cornflakes was way higher than its traditional rivals Mohan's. Kellogg's brand was mostly meant to be targeted at the middle-class consumer. But the premium pricing resulted in the consumers buying their products on one-off basis rather than a necessity for a nutritionally rich breakfast.

In addition, Kellogg overlooked the cultural dimensions of India. Apart from the high pricing, it proved to be an unachievable task of convincing consumers about the highly nutritional contents of the corn flakes. The Indian consumer typically holds extremely strong cultural values and refuses to let off traditional (eating) habits. The company should have known and researched well into these factors.

Cause of Problem

Instead of adapting to the Indian's lifestyle Kellogg wants the people to adopt a brand new culture of eating breakfast cereals. India is a place that has a rich history and the people are strict followers of tradition. Indians are not used to the idea of eating processed food. It is a culture shock to them. Kellogg pitched itself as a breakfast alternative. The Indian are used to eating a heavy breakfast and there is a feeling of fullness at the end of the meal that will last them through noon.

Kellogg's Corn flake does not give the feeling of fullness and have also went against the culture of eating grains for breakfast. In short after having a corn flake based breakfast the Indian consumer would still be hungry. The Indians also have the habit of eating spicy and hot food for breakfast.

To ask them to eat the sweet tasting and cold corn flake breakfast was too much of a sweet for the Indians to accept as their breakfast.

Indians haves easy availability of low cost breakfast. Indian breakfasts are best known for its variety.

There can be dosas, roti prata, paratha or idli or other varieties of native Indian breakfast items.

Indians are used to a variety of food one item that is eaten will not be on offer for the next two or three weeks. Asking Indians to have the same type of corn flake based breakfast everyday was impossible for the Indians to accept.

There is low awareness about processed foods and calorie counting from various diet plans to be followed from health prospective. Kellogg also hinted in its advertising campaigns that the Indian breakfast was not nutritious and that Indian breakfast was not very good for health. This