Us Morning Foods Case Study

Kellogg’s US Morning Foods segment is the producer of top selling cereals like Frosted Flake, Fruit Loops and Apple Jack. Kellogg’s is also the producer of Special K, a not so famous brand geared towards health-conscious adults. As the second top provider in the US cereal production industry, US Morning Foods has experienced a decrease in revenues from several external factors that have influenced the industry. This is despite the constant increase of consumer discretionary income. External factors like change of customer taste, retailers acting like competitors instead of buyers, and increased expectations of social responsibility have been the main responsible for a negative growth in the industry. Bearing this in mind, one can’t help but

Nowadays, consumers lean towards quicker and/or healthier options. As mentioned in IBIS World, in this recovering economy consumers a prefer a breakfast sandwich rather than sitting down to eat cereal (IBIS World). This is especially true for young professionals that most often have no children and don’t take the time to have a breakfast. Consumers are also looking for healthier options. The internet has provided consumers with free flow of information and that includes education about cereal ingredients and their long-term benefits or complications. A general theme among all the tips on how to be healthy is to stay away from processed and sugary breakfasts. For example, a Huntington Post article as far as recommending filling the shopping cart with at “least a one third of produce” (Klein). Somebody that grew up eating cereal in the morning can’t help but designate a box of Fruit Loops as the perfect example of a process and sugary breakfast. This theme of demonizing morning cereals has steadily decreased US cereal production industry demand (Figure 2, Appendix). Shift in consumer preferences has made customers think twice before adding a cereal to their shopping cart, which translate to less revenue for the cereal production

To respond to these trends Kellogg’s has adopted a cost reduction plan and launched a healthier cereal brand geared towards adults named Special K. Concerning addressing shifting consumer preferences, Kellogg’s has not been as successful as they expected (2017 Annual Report). In 2017 Kellogg’s 10 K reports, Kellogg’s admits not being able to anticipate consumer trends was one of their top concern for future earnings. The last successful launch happened in 2003 after featuring Special K Red Berries brand, but the sales have not kept increasing after 15 years (Fitzgerald). In 2013, US Morning Foods tried to increase brand recognition by issuing a “Special K Challenge”, which was a diet plan that included eating Special K products for a period. This challenge was negatively criticized by professional dietitians as lacking the needed fiber and other vitamins (Roberts). Later in 2017, they launched a Special K Nourish version with probiotics, which was marketed as “the first cereal with probiotics” (Watson). However, figure 3 shows how sales kept the same despite the new launch. A reason for this outcome may be because consumers already have a wide range of yogurt choices with priobiotics, which coincidentally have been one of the product to replace cereal consumption as a morning