The Kelloggs Indian fiasco

What mistakes did Kelloggs do when it entered India?

12/17/2012 Great Lakes Institute of Management, Chennai Sandeep Shesham (FT13366)

How can the Kellogg do better in India? What were the mistakes it made? Introduction: The main purpose of this submission is to analyse the reason for Kelloggs Initial Market entry failure during 1995 and some preliminary suggestions on how to further itself in the Indian market and also to hone its new product and new market entry process. Background of Incident: In 1994, the $13 billion US Cereal Giant Kellogg decided to foray into the Indian subcontinent. It made a $63 million investment in India betting on the Untapped potential of the 250 million strong middle class markets. It launched its Standard Cornflakes product and saw good figures on March 1995. But come April 1995, it realised that it had a nationwide drop of 25% in sales (highest ever in Kellogg history). A high level board meeting was organized and it was decided that the Universal Brand champions of Kellogg Chocos and Frosties will be rolled out to shore up the image of Kellogg. As expected, sales came back to satisfactory numbers in 1996.

1994
1995 1996

$60 million investment Labelled a good decision by experts Introduces its international best seller without any modification Sees 25% drop in sales in consecutive months Introduction of Chocos , frosties, All-Bran Sees numbers pick up but not anywhere near its predicted potential performance

Though the Brand image is restored and Kellogg is rolling out several variants to suit local tastes, it has not been able to replicate the international success in India. Factors leading to the Incident: Misreading of Demographic Potential: One of the Main Reasons of Kelloggs Troubles in the subcontinent was its inability to understand the diversive nature

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of the Indian consumer profile. It thought that an opportunity of 250 million middle class customers was impassable. But in reality these 250 million people are spread out over 27 states, 15 languages and more importantly numerous eating habits and preferences. Posed as Alternative than Additive: Kellogg pitched itself as an alternative to the regularly consumed breakfast. The Indian breakfast is heavy and there is a feeling of fullness at the end of an Indian breakfast. What with oily Parantas, Puris and Dosas, the feeling of fullness is real and not imagined. Kelloggs Corn flake breakfast does not give that feeling of fullness and that went against the grain of having a full breakfast. In short after having a corn flake based breakfast the Indian consumers were still hungry. Also Indians have 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 breakfast for the Indians to digest Confused Objectives and Principles: On its entry the company had conflicting statement coming from different channels. The Managing Director of the company in an interview once said Kellogg will fight the existing bad breakfast habits and offer the consumers a healthier choice But in few weeks it was forced to change its rhetoric to we are not here to change the habits but to provide the consumer with a healthier alternative Awareness and sentiments: Low awareness about processed foods and Calorie requirements about various diet plans to be followed from health prospective. Also Kellogg in its advertising campaigns hinted that the Indian breakfast was not nutritious and that Indian breakfast was not very good for health. This deeply hurt the sentiments of the home maker. The home makers said to themselves We have eaten and served the Indian breakfast for decades and centuries. My family is doing fine. Once the home makers ego was hurt they psychologically turned themselves against the concept of corn flake based breakfast.

Actions Taken: The failure that the company witnessed with its launch was not permanent. The mistake that the company did initially in judging the Indian market was revamped as soon as company realized that the globally perfected entry policies is not going to work here . So It took the following actions to deal with the Indian climate Prices reduction Kelloggs increase the retail packs of different sizes to cater the needs of different consumers group Kelloggs repositioned the product as tasty nutritious food Products were not positioned in premium categories Indianising the products by introducing the sweeter product On ground promotion activities like Kellogg health week and free samples distribution in Schools and to housewives. Projection of products as fun-filled' brands rather emphasizing only on the nutrition Value.

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Experts opinion: A marketing consultant who did not want to be named attributes Kellogg's lack of success with its early efforts at localisation with its inability to match the innovation in the category; the flavours chosen were hardly apt for the cereal category. "It was localisation for the sake of it," says the consultant. Adds Debashish Mukherjee, partner and vice-president at global consulting firm A.T. Kearney: "The breakfast cereal category works more for consumers with global palettes... so whether localised variants will be a growth driver for this category will depend on how consumption patterns evolve." Since Kellogg's first attempt at localisation, the convenience foods market has exploded. The breakfast segment alone is estimated at Rs 600 crore, growing at 18-20%, with Kellogg's the leader with a roughly 55% share. Others angling for a slice of this segment include PepsiCo, Marico, Bagrrys, Dr Oetker, Britannia and McCain. So whilst biscuit maker Britannia has launched porridge and poha under its brand Healthy Start, Canadian frozen foods maker McCain has frozen idlis. Oats, an emerging food category, has been riding on health benefits, which marketers like PepsiCo's Quaker, Marico, Kellogg, GlaxoSmith-Kline and Bagrrys are cashing on. Oats by itself is a Rs 200-crore market, growing at a compounded average rate of 25% according to industry estimates. Like for most global consumer goods companies facing weak sales in developed markets, for Kellogg Co, too, India and China figure amongst the top priority markets in which consumption of convenience foods is growing. Kellogg's India revenues are estimated at Rs 350-360 crore, despite the company operating in India for 18 years. "Kellogg is looking for a bigger share of the Indian breakfast market now... it is accelerating its pace of growth to leverage a market that's gradually getting crowded," one of the officials close to the localisation plan quoted earlier said. So Can Kelloggs try again? The answer is yes. In our sideways world, Kelloggs would recall all of their products from India and start again. After one year of targeted research and strategic marketing the company would be able to rebrand and re-launch Kelloggs India. Kelloggs can utilize social media platforms. This strategy should incorporate conversations on popular Indian networking sites like Okrut and Bharastudent and perhaps most effectively using popular bloggers like Gaurav Mishra, Daksha and Vandana Ahuja (to name a few), extensive research on what kinds of snacks are popular to the target audience should also be conducted. Kelloggs can then take a popular snack like Chaat/ Ragda Pattice and brand their own line of the food. (i.e. Kelloggs Chaat). Since Kellogg is largely a company specializing in breakfast, taking into account that in India breakfast should be hot not cold, the company can introduce oatmeal with a special Indian base ingredient included like yogurt or coconut chutney. Mistakes like the one Kellogg made should be avoided as much as possible when trying to launch an American brand in another country, especially today when there are so many ways to segment audiences and utilize popular bloggers and social media platforms to promote a brand correctly. Taking this lesson into account will surely help the next big company contemplating entering India.

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