ready-to-eat breakfast cereal
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Ready-to-Eat Breakfast Cereal. Sarah Icke, Kamille Jackson, Julian Ordman. Presentation Overview. Introduction Industry Overview Advertising Strategies and Raw Data Analysis Concluding Analysis and Industry Recommendation. Why Cereal?. Breakfast is the most important meal of the day - PowerPoint PPT PresentationTRANSCRIPT
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Ready-to-Eat Breakfast Cereal
Sarah Icke, Kamille Jackson, Julian Ordman
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Presentation Overview• Introduction• Industry Overview• Advertising Strategies and Raw Data
Analysis• Concluding Analysis and Industry
Recommendation
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Why Cereal?• Breakfast is the most important meal of
the day• “Americans buy 2.7 billion packages of
breakfast cereal each year. If laid end to end, the empty cereal boxes from one year's consumption would stretch to the moon and back. “ – Cerealizing America: The Unsweetened Story of American Breakfast Cereal
• An industry with extremely high brand loyalty
• An industry with one of the highest ad-to-sales ratios
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Industry OverviewIndustry Definition
Source: IBISWorld
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Industry OverviewAcquires raw materials such as wheat, flour, rice, and sugar
Key Supplying Industries:• Baking Mix & Prepared Food Manufacturing• Canned Fruit & Vegetable Processing• Corn Farming• Corn, Wheat & Soybean Wholesaling• Flour Milling• Seasoning, Sauce and Condiment Production• Sugar Processing
Source: IBISWorld
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Industry OverviewProcesses raw materials into various cereal products, including ready-to-eat cereals, cereal bars, and hot cereals
Source: IBISWorld
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Sells through sellers in various channels, including supermarkets, wholesalers, and food service providers
Industry Overview
Source: IBISWorld
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Industry Profile
Source: IBISWorld
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Industry ProfileKey External Drivers• Demand from grocery wholesaling• Per capita disposable income• Healthy eating index• Price of coarse grains• World price of wheat
Source: IBISWorld
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Industry Profile
Source: IBISWorld
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Industry ProfileKey Success Factors• Ability to adapt to change• Ability to pass on cost increases• Product differentiation• Supply contracts for key inputs• Economies of scale and scope
Source: IBISWorld
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Industry ProfileMature Industry• Revenue: $11.7bn (2013)• Per capita consumption is stagnant• Revenue growth: -0.2% (2008-2013), 1% (2013-
2018)
Source: IBISWorld
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Industry ProfileHighly Concentrated• HHI: 1770.57 (top 4 firms)• Top 4 firms: 74.7% market share• Oligopoly• High barriers to entry
Source: IBISWorld
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Industry Profile
Source: IBISWorld
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Industry ProfileHighly Competitive
Source: IBISWorld
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Industry Profile
Source: IBISWorld
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Industry Profile
Source: IBISWorld
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Industry Profile
Source: IBISWorld
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Highly Regulated •Expected to continue increasing.•Production & Labeling Standards
– FDA– FD&C Act– Fair Packaging and & Labeling Act
•Environmental Regulations– CWA, CAA, Pollution Prevention Act, RCRA
•Children advertising
Industry Profile
Source: IBISWorld
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Industry ProfileRegulations Towards Child Advertising• Children’s food consumption heavily influenced by
advertising (Goldberg and Gorn, 1978) • Children’s Television Act (1990) – Limited amount of
commercial time dedicated to child-targeted products
• Children’s Food Better Advertising Initiative (CFBAI) – Pledge to devote at least 50% of child-targeted advertising promoting healthier foods and messages encouraging healthy lifestyles• Kellogg’s, General Mills, and Pepsi have all
increased nutritional content of child-oriented brandsSources:
Nutrition advertising targeting children. (2012). Retrieved April 8, 2013, from http://www.cdc.gov/phlp/winnable/advertising_children.htmlStitt, C., & Kunkel, D. (2008). Food Advertising During Children's Television Programming on Broadcast and Cable Channels. Health Communication,23(6), 573-584. doi:10.1080/10410230802465258 Under self regulation cereals advertised to children are less sugary. (2012). Retrieved April 8, 2013, from
http://www.bbb.org/us/article/under-self-regulation-cereals-advertised-to-children-are-less-sugary-37619
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Non-Compliance With Regulations• Often a lot of resistance• Fines• Reputation damage• Impairs producers credibility• Expensive recalls• Create liability to civil/criminal penalty
Industry Profile
Source: IBISWorld
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Industry ProfileHighly Advertised• Advertising-to-sales ratios approximately 13% vs. 2-
4% in other food industries• Creates differentiation and demand inelasticity• Cultivates brand loyalty• Prisoners Dilemma
Source:Nevo, A. (2000). Mergers with differentiated products: The case of the ready-to-eat cereal industry. RAND Journal of Economics, 31(3), 395.
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Brand Equity & Loyalty Brand Equity important to
create greater loyalty Loyalty crucial in order to
stand out among hundreds of brands
Makes demand less elastic to price
Studies show brand loyalty is a strong feature in consumer product markets Emotional branding
Source: Shum, Matthew. "Does advertising overcome brand loyalty? Evidence from the breakfast cereals market." Journal of Economics & Management Strategy. 13.2 (2004): 241-72. Print. Source.:
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Brand Equity & Loyalty• However, advertising overcomes brand loyalty in
this industry• Encourages “switching” behavior at the
household level • Persuades households to try new brands
• Advertising may be an effective option for new entrants
• An example of Brand Equity:• Blind vs. Branded Test• Choice increase from 47% to 59% when
Kellogg’s brand identified
Sources: Shum, Matthew. "Does advertising overcome brand loyalty? Evidence from the breakfast cereals market." Journal of Economics & Management Strategy. 13.2 (2004): 241-72. Print. Source.: Harris, Schwartz, Kelly Brownell, and Vishnudas Sarda. ”Evaluating the nutrition quality and marketing of children’s cereals." Cereal FACTS. (2009): 1-102. Online.
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Advertising Strategies
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Kellogg’s Company• Their Purpose: ”Nourishing families so they can
flourish and thrive.”• “Create foods and brands that help to fuel the
best in everyone everywhere.” Kellogg’s Website • Highest Advertising Expenditure• Highest Ad-Sales Ratio• Forbes, "World's Most Powerful Brands“ in 2012
and 2011• Interbrand, "Best 100 Global Brands“ in 2012 and
2011• Forbes, “World's Most Reputable Companies” in
2012 and 2011
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Advertising Mediums
TelevisionSocial Media
WebsitesIn-store Marketing
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Television• Most widely used medium to promote
cereal to children• Average child (6-11 yrs) viewed 721,
while average adults viewed 372 television advertisements.
• Purpose for children: to associate products with positive emotions.
• Humor is commonly used in Adult & Family cereal advertising.
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The Effects of Advertising
• Compared to non-TV advertised ready-to-eat cereals:• TV Advertised child-targeted cereals
were purchased thirteen times more frequently
• Family-targeted brand purchases were ten times more frequently
• Adult-targeted cereals were purchased four times more frequently
Source: Castetbon, Katia, Jennifer Harris, and Marlene Schwartz. "Purchases of ready-to-eat cereals vary across US household sociodemographic categories according to nutritional value and advertising targets." Public Health Nutrition. (2011): 1-10.
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Cereal Television Ads
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Brand Percentage of Television Advertisements
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Advertisement v. Time of day
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Cereal Industry
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Top 10 in 2011
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Social Media• Myspace &
Facebook• Several children
and family brand cereals have significant presence.
• Fan Pages
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Websites• Banners & Advertising on 3rd party
websites• Children Websites• Kellogg’s: separate moderately large
websites for Apple Jacks, Froot Loops, Frosted Flakes– Engagement techniques: spokes
characters, logos, packaging, branded cereal itself.
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In-store Marketing• Banners• Packaging• In-store displays & promotions• Shelf Space
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Primary Advertising Strategies
PersuasiveComplementary
Memory JammingInformative
Children’s AdvertisingHumor and Emotion
Celeb EndorsementSponsorship
OnlineIn-Store Marketing
Social MediaProduct Placement
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Indirect Advertising• Match-products-to-buyer effect• Uninformative advertisements
– Cartoon’s– Bright Packaging
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Product Placement• Kellogg’s & The Next
Food Network Star• Results:
– 93% adults (18-49) could recall the brand after reviewing the episode.
• This was up 32% from the brand recall Kellogg’s normally has across cable universe.
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Persuasive Advertising• Effect: increase consumer demand and WTP• Children-oriented cereals
– Promotions (ex. Kellogg’s Family Rewards)– Premiums– Emphasize nutritional content – “Nutrition at a Glance”
in 2007• Adult-oriented cereals
– Emphasize health benefits
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Persuasive Advertising
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Memory Jamming• Reinforce positive aspects of cereal• Use of characters and catchy slogans• Evident from high ad-to-sales ratios
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Advertising to Children• Children heavily influenced by advertising• $264 million spent in 2011 promoting child-
targeted cereals (increase of 33% from 2008)• TV is the most effective medium
– Children exposed to > 1,000 hours of television annually– Half of advertising is for food products– Cereal is the most advertised food product to children
(one quarter of all food ads)
Sources:Kids' cereals are healthier, ads aren't. (2012). Retrieved April 8, 2013, from
http://www.foxnews.com/health/2012/06/22/kids-cereals-are-healthier-ads-arent/Stitt, C., & Kunkel, D. (2008). Food Advertising During Children’s Television Programming on Broadcast and Cable Channels. Health Communication,23(6), 573-584. Doi:10.1080/10410230802465258
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Advertising to Children• Marketing Strategies
– Memorable characters – more than 40% of kids cereals– Packaging– Placement on store shelf– Web advertising – “Advergames”
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Advertising to Children
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Humor and Emotion
• Keeps audience attentive• Increase adult motivation through emotional
appeal• Difficult to appeal to everyone because people
have different senses of humor and values
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Humor and Emotion
ChildrenBrand Mascots
SlogansSongs
Animated
AdultsSituational Comedy
Family Values & Nostalgia
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Children v. Adult Humor and Emotion
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Complementary Advertising• Family values: Want to provide for your family
and have a great family dynamic• Especially target mothers
• Trend towards Healthy Living Lifestyle in the General Public
• Want a cereal that will promote healthy living • Trending Buzz words/values:
• “Good For You,” “Healthy,” “Active,” “Nutritious,” “Low-Fat,” “Gluten-Free,” “Low in Sugar”
• Make advertisements that link cereal to this lifestyle or set of values
• Kellogg’s Complementary “Healthy Lifestyle Advertising”:2000 - Acquired Kashi brand2011- Gluten-free cereal advertisement and
branding, such as Rice Krispies
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Athletic Sponsorship• Major International
Athletic Events• Individual Amateur/
Professional Athletes• Usually American
• Charitable Athletic Events• Community athletic
events to raise awareness and funds for specific charities
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Corporate Responsibility
Majority of charities sponsored either raise awareness and funds for hunger, healthy lifestyles, or children empowerment
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Other Sponsorships• Non-Athletic Celebrity
Sponsorships• Only publicly
sponsor celebrities with charitable causes
• Blog Sponsorship
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Analysis and Recommendation
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Investment• Cash Cow• Mature Market• Little growth
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Recommendations• New packaging• Market as “anytime” food• Focus on health benefits & keep up
with diet trends