Consumer Behavior

Sach Sehgal
DM 14244
How can the corn flakes companies expand the category in India?

The Background
Corn Flakes in India is a weird story. Though the product having health benefits and an
international success, the story in India hasnt been very bright.
With India Brands like Mohun Cornflakes and Champion the industry wasnt very
appealing. Indians were happy with their traditional delicacies as breakfast and a new
international product was not in demand. Also, people were not very health conscious
as they are today.
After the LPG policy of the Indian Government of India in the 1990s, Kelloggs was one
of the companies which entered the Indian Market in 1994. This entry was made clearly
on the basis population numbers. They didnt do any practical research as such before
entering the Indian Market which had a habit of having a heavy breakfast.
The concept of eating cereal for breakfast was very new and it was hard to accept.
Kelloggs invested $65 million when they entered, which was a mind boggling sum.
When Kelloggs entered the Indian Market its only rival were the home made Paranthas,
Idlys and Vadas according to the MD of Kelloggs, Denis Avronsord. In 1995, Kelloggs
registered a 25 percent drop in sales.
Adding to this Kelloggs didnt even change their international variants and packaging
to attract the entirely different Indian Consumer. Even if people liked the product it was
too expensive initially. Indian Brands like Mohun and Champion were selling at Rs. 16.50
(100 Gms) and about Rs. 12 (100gms) respectively. Whereas Kelloggs was priced Rs.21
(100 gms).
Anupam Dutta, Managing Director, Kelloggs India, says, Low price points help us
reach the Tier II and III towns. We launched Chocos Kpak in Tamil Nadu first and
then rolled it out nationally. The small pack for Kelloggss Corn Flakes was first test-
marketed in Tamil Nadu, and going by the response, we decided to launch it
nationally this year.
In 2006, Kelloggs took a wary decision by introducing Kelloggs cereals and cornflakes
in the Rs. 10 packs. These packs gained huge success due to their convenience and
low price. Kelloggs launched special K in February 2008 to target women section. It is a
low fat breakfast option for specially working woman. In 2010, Kelloggs introduced
Oats, made with 100% natural Australian wholegrain oats.
The international giant got its positioning wrong and pitched Corn Flakes as a
healthy product, which was pitched as fun and taste in the west. Also, it gave
toys and gifts to children in the US which was not done in India.
Consumer Behavior
Sach Sehgal
DM 14244
The concept of pitching it as a healthy product hurt the Indian housewife
sentiments who thought her home cook food is the healthiest thing available under
the sun.
The Indian Customer was happy with his traditional dishes which were filling and
inexpensive. Also, they were homemade and tasty. In North India, Lassi with Paranthas
is like an everyday affair. That kind of a consumer couldnt really understand the concept
of eating Corn Flakes.
Every MNC that has entered India over time has customized its product and has done an
extensive research on the Indian Consumer which has his own different preferences. Be
it companies like Dominos, McDonalds or Car Makers like Hyundai all had something
customized for the Indian Consumer.
What Kelloggs didnt know as Homi Bhabha, director of Harvards faculty of arts,
sciences and humanities center stated at that time, "was that Indians, rather like the
Chinese, think that to start the day with something cold, like cold milk on your cereal, is a
shock to the system. You start it with warm milk."
The Reality
Even after stating all the above facts, we know that the Indian food market has huge
potential. Its just that the consumer should like the product. Brands like ITC, Unilever are
all into foods. Its a fact that many Indians didnt like corn flakes because the product
turned soggy in milk and Indians didnt like the taste and the overall concept.
Also, the new variants introduced over time were good but not great! Products like
Chocos and Frosties gained some popularity amongst kids but the overall sales were not
very appealing. Kelloggs invested $65 million in 1994 which is currently equal to Rs. 392.5
Crore (without considering the inflation over the last two decades).
Currently Kelloggs share is 60-70 percent in the Rs. 700 Crore breakfast cereal market.
That makes it only an Rs.420 Crore brand today. Going by these numbers the story for
Kelloggs is very sad and disheartening. Adding to competition we also have players like
MTR which offer ready to eat foods in breakfast, lunch and dinner at relatively low prices.
What Next?
So it is understood that Kelloggs made a lot of mistakes and there is a huge scope for
improvement. Going by general marketing concepts we can say that the Corn Flakes
market is in the maturity stage and we have to extend the product life cycle.
With the current industrialization, westernization, fast-track life, things are seeing a
change. People want 'healthy' food, oil-free, fat-free, cholesterol - free, etc. and
breakfast cereal promises all that and much more. They can tell the consumers that the
product can be used differently and not only as breakfast. Also, Indians dont like sweet
meals for breakfast, they prefer something salty and heavy for the first meal of the day.

Consumer Behavior
Sach Sehgal
DM 14244

So how do they promote the idea? How will they expand?
Advertise not for the cereal itself but to break the mindset. Make people see a
point in eating cereal over the traditional breakfast options. This can also involve
strategic covert advertising, a technique where the brand is shown not as the
advertised product, but the consumer product as such is the advertised product
and the brand is used in background advertising.

They are already market leaders with a 60-70 percent share, they have to increase
their customer base and give people reasons to eat Corn Flakes. The concept of
Corn Flakes for breakfast is not appealing and thus the ideology has to be
changed.

They initially promoted Corn Flakes as breakfast cereal but now they can give
different uses to it and promote it as an evening snack or something which is edible
at any time of the day like biscuits, fruits, Maggi etc


Brand Extension: Brand extension involves a lot of research and time spent in
developing a new range of products tailored to suit the needs of the Indian
population. Flavoring, texture, colors, packaging, preserving, etc. Everything
needs to be put together to see if a new range can be introduced.

Perhaps they can enter into ready to eat foods as well, riding on the brand
image, they might just do very well. Though competitive pricing is the most
important aspect.

They can also try something like Maggi Noodles which has been an all-time
favorite. Try creating a quick to cook snack which is liked by all age groups.

Kelloggs has to diversify just like McDonalds (Aaloo Tikki Burger) and
introduced more Indianized Variants like Masala Flakes, Tandoori Flakes,
Achari Flakes etc. (Like we have variants in Potato Chips)
Consumer Behavior
Sach Sehgal
DM 14244
A Consumer Behavior Prospective

Elaboration likelihood model (ELM) Model: The ELM Model has to be used as the
mindset has to change and a catchy slogan and we have to effect the decision
making process of the consumer and make them inclined towards the concept
of Corn Flakes.

o Introduce a fun aspect: Give toys to children (McDonalds Happy Meal).
Have something for adults as well like free audio CDs etc.

o Strike a Chord: Get personally involved with the consumer. Use a Hindi
jingle. Also, it should focus on targeting the parents in its ads that they in
turn start bringing Kelloggs at their home for better growth of their
children, just like brands like Complan, Chawanpryash etc.

o Attitude Change: Make it a snack and not a Breakfast product only. Give it
different uses and tell the consumer it can cater different needs.


References

http://articles.economictimes.indiatimes.com/2013-01-
18/news/36415721_1_cereal-maker-kellogg-heart-to-heart-oats-muesli
http://legacy.businesscasestudies.co.uk/company_images/6/301/12150120721.j
pg
http://businesscasestudies.co.uk/kelloggs/new-products-from-market-
research/types-of-research.html#axzz2YIlGqvmX
http://brandsandbottomlines.wordpress.com/tag/corn-flakes/
http://articles.economictimes.indiatimes.com/2012-10-
19/news/34584530_1_kellogg-india-localised-variants-nimbooz
http://www.scribd.com/doc/44602513/Kellogg-s-in-India
Class Notes
http://www.business-standard.com/article/management/kellogg-s-goes-
snacking-110041200097_1.html