Tom Dougherty, CEO – Stealing Share
1 November 2018
Kellogg brand represents cereal industry’s failings
Look no further than at what the Kellogg brand says now if you need further proof that breakfast cereals are in trouble. And that it won’t get better anytime soon.
The brand cut its earnings outlook yesterday because of an enormous cereal downturn, even though it’s increasing advertising spending.
The Kellogg brand also suffered with its recent Honey Smacks recall, attempting to ease fears about a salmonella outbreak.
While that definitely hurt sales, that’s not the real issue. This is bigger than that. An industry-wide issue where fewer and fewer people have any reason to choose breakfast cereals that were once the staples for families.
Let’s take a step back. A year or so ago, we wrote an in-depth study of the breakfast cereal brands. We found many roadblocks to the continued success for the Kellogg brand and its competition.
Consumer attitudes have changed. They are looking for healthier options other than the traditional sugary cereals like Froot Loops or Apple Jacks. While that may mean people are eating more yogurt and power bars, it’s not the only market force in play.
Even for those who aren’t as concerned with healthy breakfast meals, there are more options. The fast food industry increases its entry into breakfast every day. Even Taco Bell sports a breakfast menu.
Oh, and we’re all more on the go now. Which is one reason why yogurt and the fast food drive-thru present more convenient options for consumers.
“Refusing to give meaning to the Kellogg brand will mean whatever preference its products have held will continue to erode. Or fully disappear.”
The Kellogg brand means nothing
We’re seeing the effects in the bottom lines of the Kellogg brand and others in stark black and white. Kellogg’s sales decline 1.3% for the third quarter, which represents millions of dollars. Kellogg also cut its outlook for operating profit from a 5 -7% increase to zero.
It doesn’t get any bleaker than that. In the study, we said breakfast cereal brands needed a dramatic shift in strategy. Appealing to children through kooky cereal characters doesn’t work anymore. Parents are taking a larger role in choosing, and they feel little nostalgia over the old brands.
The Kellogg brand and others, not only need healthier options (which they do have), but also more on-the-go options. Kellogg has done that with some of its snacks but it hasn’t fully bought into that strategy for cereals.
Most importantly, however, the Kellogg brand spreads itself thin by depending on the individual cereal brands instead of an umbrella brand. It’s the P&G approach (Tide, Pampers, etc.) but that’s an expensive way to fly. (And the reason why Kellogg has to spend so much money in advertising.)
If the Kellogg brand itself meant something to parents then it could stem the flow of lost earnings. But it means nothing right now. So even if Kellogg makes smarter strategic decisions, those are only short-term solutions.
Refusing to give meaning to the Kellogg brand will mean whatever preference its products have held will continue to erode. Or fully disappear.
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