Kellogg's Indian Experience: A Failed Launch (Strategic Failure) In April 1995, Kellogg India Ltd. (Kellogg) received unsettling reports of a gradual drop in sales from its distributors in Mumbai. !ere "as a #5$ decline in countr%"ide sales since Marc!1995, t!e mont! Kellogg products !ad been made available nationall%. Kellogg "as t!e "!oll%&o"ned Indian subsidiar% of t!e Kellogg 'ompan% based in attle 'ree, Mic!igan. Kellogg 'ompan% "as t!e "orld*s leading producer of cereals and convenience foods, including cooies, cracers, cereal bars, fro+en "affles, meat alternatives, piecrusts, and ice cream cones. ounded in 19-, Kellogg 'ompan% !ad manufacturing facilities in 19 countries and mareted its products in more t!an 1- countries. !e compan%*s turnover in 1999&-- "as / 0 billion. Kellogg 'ompan% !ad set up its -t! manufacturing facilit% in India, "it! a total investment of / - million. !e Indian maret !eld great significance for t!e Kellogg 'ompan% because its 23 sales "ere stagnating and onl% regular price increases !ad !elped boost t!e revenues in t!e 199-s. Launc!ed in 3eptember 1994, Kellogg*s initial offerings in India included cornflaes, "!eat flaes and asmati rice flaes. espite offering good 6ualit% products and being supported b% t!e tec!nical, managerial and financial resources of its parent, Kellogg*s products failed in t!e Indian maret. 7ven a !ig!&profile launc! baced b% !ectic media activit% failed to mae an impact in t!e maretplace. Mean"!ile, negative media coverage regarding t!e products increased, as more and more consumers "ere reportedl% re8ecting t!e taste. !ere "ere complaints t!at t!e products "ere not available in man% cities. According to anal%sts, out of ever% 1-- pacets sold, onl% o nl% t"o "ere being boug!t b% b % regular customers "it! t!e rest 9: being first&time bu%ers. 'onverting t!ese e;perimenters into regular bu%ers !ad become a ma8or problem for t!e compan%. % 3eptember, 1995, sales !ad virtuall% stagnated. Mareting e;perts pointed ou t various mistaes t!at Kellogg !ad committed and it "as being b eing increasingl% felt t!at t!e compan% "ould find it e;tremel% difficult to sustain itself in t!e Indian maret.
The Mistakes Kellogg reali+ed t!at it "as going to be toug! to get t!e Indian consumers co nsumers to accept its products. Kellogg baned !eavil% on t!e 6ualit% of its crisp% flaes. ut pouring !ot mil on t!e flaes made t!em sogg%. Indians al"a%s boiled t!eir mil unlie in t!e
master at t!e art, !aving foug!t & and "on & against croissant&and&coffee in rance, biscuits in Ital% and noodles in Korea.= A t%pical, average middle&class Indian famil% did not !ave breafast on a regular basis lie t!eir fun&and&taste* positioning adopted in t!e 23. Anal%sts commented t!at t!is positioning !ad given t!e brand a >!ea lt! product* image, instead of t!e fun?!ealt! plan t!at t!e product stood on in ot!er marets. (In t!e 23 for instance, Kellogg offered to%s and ot!er branded merc!andise for c!ildren and !ad a Kellogg*s fan club as "ell.) Anot!er reason for t!e lo" demand "as deemed to be t!e premium pricing adopted b% t!e compan%. At an average cost of @s #1 per 1-- gm, Kellogg products "ere clearl% priced "a% above t!e product of its main competitor, Mo!un*s 'ornflaes (@s 1.5- for 1-- gm). ina% Mo!an, Managing irector, Mo!an @oc% 3pring"ater B re"eries, t!e maers of Mo!an*s cornflaes said, =Kellogg is able to cater onl% to t!e A&'lass to"ns or t!e more affluent consumers "!ereas Mo!un*s caters to t!e mass maret.= Anot!er small&time brand, '!ampion "as selling at prices almost !alf of t!at of Kellogg. !is gave t!e brand a premium image, maing it seem unattainable for t!e average Indian consumer. According to one anal%st, =
nationall% in Marc! 1995, t!e demand from Mumbai !ad been ver% encouraging. disguised demand* from ot!er places being routed t!roug! Mumbai. Kellogg !ad also decided to focus onl% on t!e premium and middle&level retail stores. !is "as because t!e compan% believed t!at it could not maintain uniform 6ualit% of service if it offered its products at a larger number of s!ops. Mango 7laic!i,* >'oconut Kesar* and >@ose.* eveloped after a one&%ear e;tensive researc! to stud% consumer patterns in India, Ma+aa "as positioned as a tast%, nutritional breafast cereal for families. Kellogg "as careful not to repeat its earlier mistaes. It did not position Ma++a in t!e premium segment. !e gloss% cardboard pacaging "as replaced b% pouc!es, "!ic! !elped in bringing do"n t!e price substantiall%. !e decision to reduce prices seemed to be a step in t!e rig!t direction. Do"ever, anal%sts remained septical about t!e success of t!e product in t!e Indian maret. !e% pointed out t!at Kellogg did not !ave retail pacs of different si+es to cater to t!e needs of different consumer groups. o counter t!is criticism, t!e compan% introduced pacs of suitable si+es to suit Indian consumption patterns and purc!asing po"er. Kellogg introduced t!e 5--gm famil% pac, "!ic! broug!t do"n t!e price per g b% #-$. Also, Ma++a "as introduced in -gm pouc!es, priced at @s 9.5-. Kellogg*s advertising !ad not been ver% impressive in t!e initial %ears. Apart from >Fago 8aise b!i, lo Kellogg*s !i,* t!e brand !ad no long&term baseline lines. Later, Kellogg attempted to indianise its campaigns instead of simpl% cop%ing its international promotions. !e rooster t!at "as associated "it! t!e Kellogg brand t!e "orld over "as missing from its advertisements in India. Gne of its campaigns depicted a cross section of individuals ranging from a %oga instructor to a at!aali dancer attributing t!eir morning energ% and fitness to Kellogg. !e advertisement suggested t!at cornflaes could be taen "it! curds, !one%, and banana.
In April 1990, Kellogg launc!ed >!e Kellogg reafast fun&filled* brands. Kellogg t!en launc!ed t!e '!ocos biscuits, claiming t!at cereals being a >narro" categor%,* t!e fora% into biscuits "ould create "ider a"areness for t!e Kellogg brand. iscuits being a mass maret product re6uiring an intensive distribution net"or, Kellogg*s decision to venture into t!is competitive and cro"ded maret "it! stal"arts lie ritannia, Harle and aeman, "as seen as a bold move not onl% in India, but also globall%. Avronsart said, =
The esults In 1995, Kellogg !ad a 5$ s!are of t!e @s 15- million breafast cereal maret, "!ic! !ad been gro"ing at 4&5$ per annum till t!en. % #---, t!e maret si+e "as @s -- million, and Kellogg*s s!are !ad increased to 5$. Anal%sts claimed t!at Kellogg* entr% "as responsible for t!is gro"t!. !e compan%*s improved prospects "ere clearl% attributed to t!e s!ift in positioning, increased consumer promotions and an en!anced media budget. !e effort to develop products specificall% for t!e Indian maret !elped Kellogg mae significant inroads into t!e Indian maret. Do"ever, Kellogg continued to !ave t!e image of a premium brand and its consumption "as limited to a fe" "ell&off sections of t!e Indian maret. !e compan% !ad to face t!e fact t!at it "ould be reall% ver% difficult to c!ange t!e eating !abits of Indians. In #---, Kellogg launc!ed man% ne" brands including 'rispi; anana, 'rispi; '!ocos, root Loops, 'ocoa rosties, Done% 'runc!, All ran and All @aisin. Kellogg also launc!ed >Krispies reat,* an instant snac targeted at c!ildren. Hriced on t!e lo"er side at @s and @s 5, t!e product "as positioned to compete against t!e products in t!e >impulse snacs* categor%. According to some anal%sts, t!e introduction of ne" cereals and t!e launc! of biscuits and snacs could be attributed to t!e fact t!at t!e compan% !ad been forced to loo at alternate product categories to mae up for t!e belo"&e;pectation performance of t!e breafast cereal brands. Kellogg sources !o"ever revealed t!at t!e compan% "as in India "it! long&term plans and "as not focusing on profits in t!e initial stages. In Me;ico t!e compan% !ad to "ait for t"o decades, and in rance nine %ears, before it could significantl% influence local palates.
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