Marketing plan for Kellogg's new muesli product

MARKETING
PLAN
Along with Financial
KELLOGG’S
A glance at step by step procedure of Kellogg’s new
sensation. The destiny which began from the
downfall of Kellogg’s Famous Product Corn Flakes,
now has ended up with the discovery of potential
replacement Known as ‘’Organic Muesli With oats’’.
Muhammad Danish
HLA 24

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Title Page
Title: Marketing Plan
Publisher: Muhamad Danish
Student Number: 2751844
Learning arrangement : HLA 24 Fresh Business & Economics VI
Lecturers: Bianca te Lindert
Frank Bunte
Institute: Fontys International Business School
Study Phase: Main phase
Academic Year: 2017
Place: Venlo, the Netherlands
Language: English
Date of completion: 13-06-2017

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Tale of Contents
1- Introduction Company Company: Kellogg’s .................................................................4
2- Mission and strategy...................................................................................................4
3- Sustainable Value Proposition.....................................................................................5
4- Analysis ......................................................................................................................7
Demographic Trends........................................................................................................7
Economic trends.............................................................................................................10
Socio-Culture..................................................................................................................13
Technological..................................................................................................................13
Ecological .......................................................................................................................14
5- Marketing Goals with PLC .........................................................................................22
5- STP Process...............................................................................................................27
3- Positioning strategy ..............................................................................................29
6- Consumer Behavior and trends .................................................................................29
7- Marketing mix ..........................................................................................................30
8- Category and formula management ..........................................................................37
9- Field Research...........................................................................................................41
10- Financial plan ........................................................................................................45
Cost Analysis ..................................................................................................................48
Sales Plan .......................................................................................................................49
Purchase P......................................................................................................................50
Profit and Loss account ..................................................................................................50
Cash flow........................................................................................................................50
Opening and Closing Balance.........................................................................................51
Risk Analysis ..................................................................................................................51
Conclusion......................................................................................................................52
Bibliography ....................................................................................................................53

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1- Introduction Company: Kellogg’s
Kellogg is an American multinational firm, which is famous for producing and selling RTE
cereals. Kellogg’s operates its business mainly in convenience food, and has some of the
renowned convenient food brands under its belt such as Pringles, Cheez-it, Corn Flakes, Special
K, Austin etc. the product portfolio is so diverse, as company says ‘’From snack to frozen foods
to our breakfast icons, we’re passionate about our family of brands and the markets we’re in
(Kelloggcomapny.com)’’.
The Kellogg’s story actually started Hundred years ago when it introduced Corn flakes in the
USA. After 100 years passed, today company is manufacturing its products in 18 different
countries while serving them in around 180 countries (Kelloggcomapny.com). Kellogg has good
reputation when it comes to providing healthy work life balanced environment to its employees.
The leading ingredients in the products produced by the Company include corn grits, wheat and
wheat derivatives, potato flakes, oats, rice, cocoa and chocolate, soybeans and soybean
derivatives, various fruits, sweeteners, vegetable oils, dairy products, eggs and other filling
ingredients, which are obtained from various sources.
Product: Organic Muesli with Oats
The most popular ongoing trend in Nederland is healthy. More precisely, Dutch people in
general are becoming more and more aware of their eating attitudes. More and more people are
doing fitness, and are adopting it as a lifestyle. Consequently, people are trying not to eat
processed and products which contains massive amount of sugars. Some recent research has
shown that breakfast cereals are one of those products which carries massive amount of sugar.
Under given circumstances, my recommendation for Kellogg is to introduce completely Natural
‘’Organic muesli with Oats’’ for breakfast. It should not contain any processed ingredient, and
most importantly no added sugar.
2- Mission and strategy
Company doesn’t have a mission statement, but replaced it with its vision and Purpose, which
can be transformed into Mission.

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Our Vision: To enrich and delight the world through foods and brands that matter.
Our Purpose: Nourishing families so they can flourish and thrive.
We are a company of promise and possibilities. Each day represents a fresh opportunity to share
Our Vision, live Our Purpose
By being mindful and committed to these ideals, we uphold our founder’s dedication to people
and their well-being. And we promote an environment where we can push beyond boundaries
and across borders to create foods and brands that help to fuel the best in everyone everywhere.
It is this belief that brings us together and sets us apart.
Source; www.kelloggcompany.com
3- Sustainable Value Proposition
Kellogg’s new product ‘’Organic Muesli with Oats’’ is a combination of values offered to
consumers for their value of money. Kellogg believes that breakfast is redefined today. It’s no
more just about “sit down at the table,” it’s very much kind of “first food of the day,” so it’s
about really understanding, how do we interact with the way people really do start their day
with food?’’ (Forbes, 2012).
Unique selling point of this product is giving a start to your day in a sustainable way. Breakfast
takes you off for the day, so it is of great importance how you start it. The normal life today is
all about rushing, right from the morning until night, the process brings a lot of stress. Spending
few moments out of your whole day to eat this breakfast Muesli, it will not only just nourish
your body, but also your mind. Addition to that, how about getting peace in top part your body?
The peace of mind, this organic muesli will give you a feeling of responsible citizen. The
organic ingredients in this product come from production which undergoes in a sustainable way.
Paying for this product is not just paying for a healthy food, but it is also promoting the
sustainability productions. Isn’t it the best way to fuel everyone everywhere?
Moreover, for the reflection of this new product on current ongoing trend of Oats which is
considered as’’Super food’’ , and from products branding point of view, we think it’s very
important for our target group know about the use of organic oats in this product.
The one liner Value proposition for Kellogg’s this product is:
‘’Fuelling your Body with Organic Oats’’

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1- Branding
Under the light of recent events and market trend, it’s very crucial for Kellogg’s this product to
brand itself as healthy snack. Kellogg’s Flake product which was a ‘’Milking cow’’ for the
company in recent years, has been facing challenges in the market due to its connection and
built perception as Processed and unhealthy breakfast snacks which contains high amount of
sugars (Euro monitor, 2016).
Consequently, there is a need to change the perception about company. We feel launch of this
new product is going to appeal stronger as ever to its loyal customers. Although, company has
already attempted to building its image as someone concerned with the health and dedicated to
give strong starts to every day.
In 2013 Olympics, Kellogg sponsored US swimming team and introduced itself with a new
strapline as ‘’Let’s Make Today Great’’ and ‘’From Great Starts Comes Great things’’.
(Source: http://cottervisual.com/kelloggs-new-brand-refresh/ )
Moreover, company’s website was also utilized for this cause, where pictures with real stories
are posted with a strong message of a reminder to consumers about the importance of a good
and health breakfast. (Rooney, 2012) (Anon., 2012)

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(Source: http://cottervisual.com/kelloggs-new-brand-refresh/ )
Similarly, this product is going to connect Kellogg’s branding attempts to its consumer, and we
strongly feel this product is not only just going to fulfil company’s mission of Fueling the best
in everyone, but also the hopes and wishes of its loyal customers who are becoming health
conscious.
4- Analysis
1- Destep Analysis
DESTEP is a strategic analysis tool which is used to analyse the external environment around
organizations. The environment, is basically divided into Meso and macro. Organizations are
active in Meso market and can somewhat influence it. But in Macro, organization can’t
influence it, but it has impacts on organizations.
DESTEP is an abbreviation that stands for: Demographic, Economic, Social, Technological,
Ecological and Political (elements).
Demographic Trends
Demography is the study and measurement of the human population, which, then are divided
into different factors and characteristics such as Size of Population, Birth rate and Households
based on number of persons in a family, different nationalities and race.
- Population
As per January 2016, Dutch population is closer to 17 million. And the majority of the Dutch
residents were relatively older people at that time, aged between 40-65, which counts for 34.9%
of the total population. At the same time, percentage of young people aged under 20 years was
22%, and those in category 20-40 were the second highest in the list with 24.5% of the
Population. However, the percentage of women is slightly higher than of men, counts for 50.4%
and 49.6% respectively.

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Moreover, the current ageing trend is expected to grow continually, by 2030, group of people
aged 80+ will expand by 69.7%, making Nederland 35th
in the list of countries with most
number of oldest people (Euro monitor, 2015). There will be 5.3% increase in overall
population by 2030, out of which, 43.1% will be due to migrants.
(Source: Central Bureau of statistics, 2017)
Key findings
- Current trend ageing factor expected to grow
- Percentage of young people decreases
- Mature consumers have different needs than Younger
- Changing from a society dominated by young people with their emphasis on discovery,
consumption, steady change, starting families and developing careers to a society
characterized by retirement and scaling down.
- Marketing opportunities, old people with relatively high purchasing power
- Households
There is an increase in the number of single person households, regardless of aging factor. Date
from statistics Nederland tells there are around 7.7 million families, 38% of them are based
upon single, while 33% are dependent on two persons. There is clear decline is household size,
more and more people are living single.
This trend brings marketers to develop more personal related
(Source: Statistics Netherlands, The Hague/Heerlen/Bonaire, 2016)

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As can be seen, majority of young generation age 20-29 who are living together is without any
children, which is a clear contrast to those ages 30-39, who are not married but living with
children. This disparity gets even bigger to 60% with those ages 40-49 who are married and
living with children.
(Source: Statistics Netherlands, The Hague/Heerlen/Bonaire, 2016)
Key Findings
- Declining average household size
- Rising number of single person parent, without children and one person household
- Need for Products reflecting on one person household
- Education Level
Education level of Dutch population is continually increasing over the past years (CBS, 2013).
Proportion of people with low education has declined, whilst the level of high educated in
population has grown, more rapidly in women (CBS, 2013).
In 2012, out of 11 million people age 15-65, 28% were highly educated, and 30% of them at
the same time were with low education level in that category. The contrast between genders is
varying over the age categories, more women found to be highly educated than men, at age 25-
45 years.
(Source: CBS, 2013)

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In 2015, majority of the Dutch population was educated, with only 10% low or Primary
education level. Share of highly educated population was 69%, making Dutch a highly
sophisticated consumer market.
(Source: CBS, 2015)
Summary/ Key Findings
- Consumers education level is increasing
- More highly educated consumer means;
more sophisticated in evaluating product offerings
more willing to accept new products
more demanding of quality and performance
- More educated women - two working partners - greater purchasing power
Dual incomes in traditional households
- Demand for luxury products will probably increase
- More convenience products demand
Economic trends
- Economic Environment
Dutch economy is flourishing in last couple of years after first showing positive signs in 2014.
Exports are going up, households have more money to spend and there is betterment in the

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business environment enabling companies to invest more, these are all the signs of economic
growth. GDP grew by 2.1 percent in 2016 which was 2.0 in previous year, and this is expected
to increase to 2.3% in 2017 which is the highest since 2007 recessions. Moreover, consumer’s
confidence to spend more is at peak since the crisis decade ago. Many people find new jobs and
wages bloom faster than the average inflation, so consumers are going to spend more.
(Source, CBS, The Hague, 2017)
- Inflation
Consumer price index has fallen sharply to 1.1% in march 2017, which was 1.8% in February
2017 However, these figures exclude food, where prices are raised due to higher excise duties.
The inflation in food is reported to be 1.7 in march 2017 (CBS, 2017).
(Source: CBS, 2017).
- Business Confidence
The business environment in the Netherlands is offering its best since the economic crisis.
Entrepreneurs in the private sector proceeded 2017 with encouraging start, with 14.7 points in the
first quarter of the year, which is the highest in this decade.
Confidence has built in almost every sector, especially comparing to the year 2016. Wholesalers
improved by 25.2 in the quarter of the year, from 18.7 in 2016.
According to CBS data, Dutch retail trade’s turnover has grown by 5% in January with overall
sales upturn of 3.2%. Both food and non-food saw the surge in turnover, whilst online sales

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rose by over 17%. Moreover, shops selling food, drinks, tobacco had turnover and sales growth
of 2.5 and 1% respectively.
- Unemployment
Dutch labour sector had positive downward start of the year, where unemployment has declined
by 9 thousand a month on average during the last three months. In the same time, people with
paid jobs has increased by an average of 13 thousand per month. Unemployment started to
decrease from 2014, which began with young people and 25 to 44 years old. (Source CBA,
2016).
As per February 2017, there are 12.8 million people in the age category of 15-74 in the
Netherlands, out of which 66.2% were on paid employment, it has grown by 13 thousand on
average per month. It also comprises 4.6 million men and 3.9 million women.
- Households Consumption
According to CBS, Dutch households spending bloomed by 2.7% in the first quarter of 2017,
which is an encouraging sign for the business sector. This is the highest level in almost 10 years.
These figures also co-relate to the earlier mentioned Retail turnover growth of 5%. (CBS, 2017).
Moreover, consumer power index showed significant improvement in 2014 when it reached to
1.4%, after four years of continuous drought. This development was observed in almost all
population groups. However, civil servants improved most of all with 3.7% increase, while
employees saw their purchasing power rising with 2.7%. During the same period, self-employed
were the least improved with only 0.3%. (CBS, 2015)
(CBS, 2015)

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Socio-Culture
- Behavioural Norms, Values and Trends
According to a recent survey, Dutch consumers revealed that they are eating healthier food now
than they were one year ago (Rabobank, 2016). The reasons behind are known to be weight
loose or to feel more energetic. 95% of the respondents said one of the major factor which
influences their buying choices is the impact of food on their health. Moreover, they tend to
spend 10% more on average when they keep ‘’health’’ as a priority in their minds while
shopping (Rabobank, 2016).
Generally, Dutch consumers are morally sensitive. They are highly concerned about their
surroundings while being health conscious. Due to this behaviour, some of the recent trends like
sustainability, Fair trade, local, organic (Biologisch) and health has made their ways into the
market. Consumers often base their buying decisions upon these trends especially when it
comes to their food choices. Companies are fully exploiting these opportunities and adopting
these norms to be the favourite brand for the Dutch customers, (Euromonitor, 2016).
In 2016, Breakfast cereals in the Dutch market, experienced a value and volume growth of 5%
and 4% respectively, reaching sales of 190 million euros. This sector took advantage of the
consumers who are quitting the use of bread due to the recent revelations in Books ‘’wheat
belly’’ and ‘The food Hourglass’’ about bread playing a part in obese problems. Consumers
health sensitivity left them excluding the use bread in their breakfasts. (Euromonitor, 2016).
Technological
In this blurred retail industry, it’s very hard for retailers to differentiate themselves. Same
implies to the products, especially in this highly competitive sector where there are countless
breakfast cereals are present. These all technological developments paved way for the online
market which has grown significantly over the last few years. Retailers and companies are
cashing these opportunities in the Dutch market as well.
According to CBS, the number of people shopping online has increased as last year 71% of the
population shopped online which has placed Nederland amongst top 5 in the EU. Moreover, the
average Dutch consumer is spending 100 to 500 euros per purchase.
Out of every 10 people, at least 7 bought something online during the 2015, which is double
than ten years ago. However, these numbers are still lower than UK, Denmark, Luxemburg and
Germany.
Source: CBS

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Ecological
There is growing interest in preserving the natural environment, whilst, its popularity is driven
by social activists and the environmental movements along with Government controls, which
has ultimately given rise to public interest and awareness to maintain ecological balance. As
discussed earlier, many consumers are concerned about the production framework of the
products they consume, and are keeping close eyes to whether the production processes are
depleting the natural resources, or if there are forests being used or cut and if the pollution is
being increased or the waste is being released. They often base their buying decisions on these
factors.
Today, while preparing strategies, companies take into consideration all the impacts of their
actions on the surrounding environment. This consciousness is mainly driven by companies
own interests, to avoid any association with irresponsible practices of natural resources.
- Green Marketing
Many companies are adopting ‘’Green Marketing’’ strategies, in order to be more socially
responsible and acceptable. In this strategy, companies try to limit the waste and invest heavily
in search for sustainable options for its raw materials, alternatives and energy-efficient
production frameworks.
- Cascading use – the concept
In this principle, which is aligned with the EU environmental policies, the use of biomass
resources is ensured to be use in sustainable way. This concept is used to pursue the EU policies
to improve resource efficiency and unsustainable pressure on natural resources. (BirdLife
Europe, European Environmental Bureau)
It involves the recycling and reuse of materials before energy recovery. The productivity of
scarce raw materials is highly increased in this principle, from the point of view of natural
resource, materials and land consumption. It also suggests to allow the reuse and recycling of
products and to use energy only when there are no other options, although this principle is
recognized by several EU institutions, but still being criticised to not make it part of the
legislation. This concept is also a reflection of Circular economy.
- Circular Economy
It has become quite clear that the survival of the prosperity of west and rest of the world is in
serious threats under the current economic model (Hans Stegeman,2015). It is not sustainable
in the long term, since the pressure on natural resources is continually increasing, along with
biodiversity, climate and air quality.
In recent years, ‘Circular Economy’ has become quite a trend, which has drawn the attention of
the many policymakers. It has proven, apparently, to be able to offer more jobs and economic
returns effectively. This economic structure involves efficient use of materials, reducing and
then finally eliminating the waste flows, which known to be sustainable progress or green
growth.

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With ecological footprint of approximately 4.5, since 1960s, Netherlands has been using more
biocapacity than it can support. High level of consumption in combination with limited land
availability, Netherlands is clearly having high pressure on its natural environment. There are
two major factors playing role in this increased pressure, which are excessive use of raw
materials because of food and agri-sector and the chemical industry, and both are very important
industries in the Netherlands. Large share of its production is exported, which gives rise to the
use of materials in the Netherlands comparing to other countries. (Source:
Hans Stegeman,2015)
The goal of the circular economy is to motivate the reuse of raw materials and products while
ensuring the limitation of destruction of
Value. The more economy becomes
circular, the sustainable it gets in
ecological terms. This concept is a clear
contrast to the current economic model,
under which, products are destroyed after
use.
Circular Economy Diagram
(source: Rabobank based on
McKinsey,2012)
The idea of the circular economy can be
most simply described by using the
diagram, where the central axis shows the
linear production process, the arrows show the different possibilities of reusing or recycling the
resources. Biological and technical materials are being used as input for production. The
innermost small arrows show the form of Cascading or multi stage value use. It clearly shows
how goods can be recycled or reused while eliminating all the possibilities of waste in the end.

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2- Porter 5 forces
In order to assess the different forces as Consumers power, Suppliers power, degree of
competition with rivalries in the market, Porter 5 forces tool has been applied.
Threat of new entries - Low
Threat of new entries are low, as the investment requirements to enter the market are high. The
segment is highly competitive and for any new comer, it will be hard to get in and compete with
competitors. Moreover, according to Euro monitor, Kellogg’s advertisement costs touches
billion dollar every year, so Kellogg can utilize that platform in case there are new entries.
Addition to that, Kellogg’s ability to use Economies of scales will allow it to switch prices or
to decrease costs in order to dominate or make it hard for new entries.
Bargaining power of buyers – High

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Considering the number of options customers have available, bargaining power of buyers is
high. As per reports of euro monitor, the health rend is very popular in the Nederland and
consumers are becoming aware of their eating habits. They have become more critical towards
which contains high amounts of sugars and fat – and Kellogg’s products have faced this issue
as one of its popular brand Flakes is continually on the decrease since the last couple of years
(euro monitor, 2016).
However, these threats can be neutralized by using healthy campaigns through advertisements
and certainly by introducing organic product to show Company’s approach towards
environment safety.
Rivalry amongst Competitors – high
Considering latest data from euro monitor, share of Kellogg is continually shrinking whereas,
Quaker oats is growing in the market. The coopetition is high as the difference between AH and
Kellogg for the second highest market shares is also becoming small. The market is highly
sensitive towards foods nutritional quality. According to report from euro monitor, the
introduction of two books in the Nederland criticized bread while praising the benefits of oats
and since then it is known as ‘’Superfood’. Which definitely makes Quaker oats situation even
more comfortable to exploit this opportunity.
However, this can be tackled through the introduction of new product which contains Oats.
Bargaining power of suppliers – Low
Kellogg is established company which is operating in the breakfast market for decades. This
presence has allowed Kellogg to establish its relationship with Suppliers, which makes it
possible for Kellogg to buy products at affordable rates. Moreover, the most important factor
which makes Kellogg’s power high and suppliers low is the amount which Kellogg usually
buys. It’s a big company which always buys in big volumes so it makes Kellogg more
influential.
Threat of substitutes- High
Threat of substitutes is very high in this competitive market. And since Kellogg’s products being
viewed as highly processed and too much sugary, consumers have been very critical and already
switched to another product. The rise of health trends brings Kellogg’s existing product under

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serious threat. At time, when there are options available for consumers, Kellogg needs to realize
the change and trend and should adapt quickly before competitors make strong presence.
3- Porter’s Value Chain Analysis
Value chain analysis is a framework of activities which adds value to the final product Kellogg
offers to its customers. These activities are basically divided into Primary and Supporting
activities. Primary activities are directly involved or have influence on the final product,
whereas, supporting activities are just conducted to encourage primary but have no direct
influence on the product. Figure underneath illustrates these activities in logical framework:
Supporting activities
Kellogg’s have flexible organization, Kellogg operate different services to make sure the
satisfaction level of customers is high. Concerning corporates responsibilities regarding issues
arises at different stages of their values chain, Kellogg has held every department responsible
to solve their part. Corporate’s responsibilities according to values chain is perfectly explained
in the following diagram by Kellogg;
At Kellogg, company doesn’t just value high quality products, but it also stresses to provide
safe, inclusive and value-driven environment to its employees. They encourage ethical and
sustainable behaviour of the employees. The company has developed a culture where they have
deployed Values famously known as ‘’K-Values’’. That includes Accountability, Passion,
Humanity, Simplicity, Integrity and Results. Employees who perform well on scale of these
values is given award at the end of the year.
Diversity and inclusion is of great importance for Kellogg, which why company focuses on
building a working power which is diverse in line of Gender, age, culture etc. and offer training
on these values. Furthermore, recruitment of new employees is also part of Diversity and
inclusion culture.
Kellogg is investing in acquisition of new technology, acquisition of new technology enabled
Kellogg to reduce the 95% amount of trans fatty acids from its products in 2007, after the link
of trans fatty acids with heart disease was growing in evidence.

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Primary activities
Kellogg values its relationships with its suppliers in a transparent manner, and always seeks to
give equal opportunities to all suppliers to be part of their success. It believes in diversity
amongst its suppliers to ensure companies which are led by women or minorities doesn’t leave
out. For that purpose, they have started ‘’Supplier diversity program’’ in US, which
successfully involved more than 300 business that were owned by minorities, disabled veterans
and women. Kellogg buys 1 million dollars worth raw materials from 49 different companies
from around the world.
Kellogg’s operations undergo under the guidelines of their deep knowledge of nutrition and
breakfast cereals. Company runs manufacturing plants in 18 different countries which are then
transported to 180 countries around the world. The process if diverse, and expanded to supply
chain processes. Operations and business of Kellogg is basically divided into two segments, one
Kellogg North America and other is Kellogg international.
The safety and quality of food is high priority for Kellogg. Outbound logistics department of
Kellogg which primarily operates supply chain, runs large extensive operation which integrate
1500 products and transport them to 180 countries. The developments in 21st
century such as
Globalization of food, has made the process quite challenging. However, Kellogg is dealing all
those challenges successfully with the help of new innovative technology.
From marketing perspective, Kellogg is keen to provide high quality products, with diverse
portfolio of 1500 different goods to satisfy different needs of consumers. Kellogg is committed
to help consumers maintain their balanced diet, thus it offers low fat, low salt, portion controlled
along with reduction of calories and sugar. Furthermore, strengthening the transparent
marketing responsibilities, Kellogg introduced Nutrition standards which is known as Global
Nutrition Criteria. The purpose was to regulate products for example to determine which goods
should be marketed and which should not to children under age 12 on the basis of nutrition
benefits.
4- SWOT Analysis
For strategic planning to achieve its objectives, a company needs to have close deep study of
the its strengths and weakness (Internal Analysis) and needs to aware of the opportunities which

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industry offers while figuring out all the threats it might face in the external environment
(External analysis). Together these two analysis are known as ‘Situation analysis’. By
accumulating the results into SWOT analysis and then combining it into confrontation matrix,
we can build guideline for the company’s strategic planning and future management actions to
achieve its desired goals.
- Internal analysis
This analysis includes all the factors which company can influence itself in the long term.
In Interbrand’s annual ranking, Kellogg is ranked 34 in list of top 100 global brands, and was
ranked 7 in Forbes Top brands (Kellogg, 2011). This gives a clear reflection of Kellogg’s strong
brand recognition. Kellogg’s brand is one of most powerful brand name around the world, and
giving tough time to all the local and international competitors in ready to eat cereals segment.
This is also a reflection of Kellogg’s worldwide presence, with 18 production plants in as many
different countries and then supplying products to 180 countries through strong distribution
channels (Kellogg’s 2017). This presence in 180 countries also allows Kellogg’s to be more
flexible and innovative with its products portfolio, and encourage to bring different products for
different consumers in different cultures. Furthermore, this diverse distribution channel and
working in Volumes, allows company to operate efferently, and getting benefits of Economies
of scale and neutralize Bargaining power of suppliers. Kellogg’s 100 years of experience gives
all the knowledge required into new innovative products. Addition to that, Kellogg is also
playing actively its role in the society, by taking initiatives, for example like ‘’Fighting Hunger’’
with Walmart, helped building its soft image and getting Recognition.
Moreover, being a world brand and wide presence, also bring some disadvantages along with
benefits. Due to diverse demographical consumers, sometimes Kellogg faces criticism due to
different opinions of different people about certain things. And some of its campaigns has
brought negative impacts on company’s reputation, when company’s campaigns were giving a
different message than what their product offers. For example, while promoting healthy foods
in marketing campaigns, they were questioned by Food bloggers about their own excessive use
of sugar and high fructose corn syrup in most of its products (Hitesh Bhasin, 2016).
Table 2.1 An analysis of Kellogg’s perceived strengths and weaknesses
Strengths
• Worldwide presence
• Strong manufacturing & distribution
channel
• Socially active
• Local brands
• Economies of scale
• Knowledge of the Breakfast industry
• Strategic acquisition
• Strong Brand Recognition
• High awareness
• Marketing initiative
• Diversified product portfolio
• Product innovation
Weaknesses
• Dropping sales
• Shrinking market share
• Broad Market
• Focus on Volumes
• Slow Innovation
• Questionable marketing campaigns

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- External Analysis
External analysis is equally important to achieve company’s long-term objectives, or else it can
leave company behind, in this rapidly changing environment.
As discussed earlier in DESTEP analysis, there is a change is consumer’s lifestyle, which gave
rise to trends like Health, Organic, and local foods. Consumers have made these trends their
lifestyles, so the demand for products which fits in these trends is at peak these days amongst
Dutch consumers who are looking for food which can help them maintain a balanced and
healthy diet (Euro monitor, 2016). These all developments mean some potential opportunities
for food, especially breakfast cereals companies to cash.
Launch of two books in 2014 in Netherlands, ‘’Wheat belly and the Food Hourglass’’ which
claimed that bread is contributing to the obesity crisis. Thus, it left huge impact on bread
consumption, after some consumers sought to reduce their bread consumption, instead opting
for healthier breakfast cereals (Euro monitor, 2016).
Oatmeal has emerged and viewed as ‘superfood’, and all new innovative products contains
oatmeal as ingredient (Euro monitor, 2016). Quaker Oats, which is the biggest market
shareholder in Netherlands, has introduced most number of products containing oatmeal, which
is the strongest and only competitor Kellogg has threats from. It is noted that this trend has
helped breakfast industry to maintain growth, and is expected to perform well since consumers
will keep on interested in it (Euro monitor, 2016).
Consumers awareness and increasing use of internet, has created some problems for Kellogg
because now they can look over internet for all the information they need to figure out which
food is healthy and which is not. Consequently, Its popular cereals ‘Flakes’ suffered drop in its
sales, due to high content of sugar in it, and it is viewed as unhealthy whilst consumers need
Healthy food (Euro monitor, 2016). This change in consumers eating behaviour is clearly a big
threat for Kellogg, but at the same time aa big opportunity, undoubtedly, Kellogg has all the
knowledge in this sector, which can be used to bring new innovative products which contains
oats.
Moreover, Due to decline in processed food demand, and rise in low carbs diet, Kellogg
encountered serious threats, on the other hand, consumers are increasingly associating breakfast
cereals with overly processed and high in carbohydrates, has just added to worries of Kellogg
(Euro monitor, 2016). However, this development also means Kellogg needs to reformulate its
cereal range.
Table 2.2 An analysis of breakfast cereal industry’s perceived opportunities and threats
Opportunities
- Changing lifestyle
- Health trends
- Oatmeal a ‘’superfood’
- Local
- Biological
- Controversy around ‘BREAD’
- Increasing consumer’s awareness
- Increasing purchasing power of
consumers
Threats
- Dropping sales
- Shrinking market share
- Increasing competition in ready to
eat breakfast cereals
- Changing lifestyles
- Changing consumer behaviour
- Rise in low carbs diets
- Campaigns against sugar
- Strong local competitors

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- Convenient food on demand
- Gluten free
- Decline in processed food demand
- ‘’Quaker Oats BV’’ a strong
competitor
- Confrontation Matrix
Based on SWOT analysis, confrontation matrix is a helpful tool to form possible strategies.
External Internal
Strengths Weaknesses
Opportunities
Threats
Knowledge of breakfast
cereals can be used to avail
Oatmeal breakfast trends.
Strong competitor like
QUAKER OATS, can be
given tough time by
bringing new Oatmeal
products by using deep 100
years of breakfast expertise
and knowledge.
Questionable marketing campaigns
can be neutralized by improving,
and using old experience of being
socially active.
Dropping sales and market share,
especially Kellogg’s ‘’Cash Cow’’
in flakes category.
Threats like too much sugary and
higher carbs association with
breakfast cereals can be
encountered as well through strong
marketing campaigns and new
innovative Oat meal and biological
products.
5- Marketing Goals with PLC
1- Product life cycle
Like every human being, every product has a certain life cycle during which they go through
predictable stages. It begins from introduction in the market where it focuses on successful

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market penetration, followed by rapid growth where the market expands rapidly, eventually the
cycle reaches the maturity phase before it gets to final stage which is known as decline. Each
phase has its own marketing goal.
Since the breakfast cereals is kind of product which is sold throughout the whole year in
response to constant sales and demand. Sales and profit varies over the stage of product life
cycle. Marketing strategy is highly dependent and adapted according to the PLC. A typical life
cycle of breakfast product looks such a way;
Stages in life cycle
Story of every successful product in the market has been through all the 4 stages of its life cycle
(Can be seen in the picture above). Now first let’s have a look at the relationship of product life
cycle and different policies which changes accordingly. Due to the project limitations, our focus
will stay around first two phases of PLC.
Introduction Growth
Profits Company makes a loss or
only negligible profits; high
production and marketing
costs.
Highest profit period; prices
high while costs decline
rapidly with economies of
scale
Pricing strategy Usually very high, or low
penetration price which is
subsequently increased
High price with selective
prices reductions to attract
new customers and enter new
target markets
Communication strategy Primary demand stimulation
through publicity, sampling
and advertising; personal
selling to distributors.
Selective demand
stimulation through
positioning and awareness
communication
Distribution strategy Maximum distribution to
maximum places, high
Expanded numbers of
dealers despite declining

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margins to dealers to justify
their carrying and servicing
the products
margins; vital to build long
term relationships and have
sufficient inventory with
intermediaries
Strategic Marketing
Objectives
Make consumers aware of
the product and stimulate
trial purchases
Emphasis on market
penetration
Differentiation, optimal
distribution and high profits
Emphasis on brand
preferences
Introduction
In the introduction phase, consumers don’t even know the product presence in the market so
this can be regarded as a step towards market penetration. Consequently, the investments on
advertisements and promotions becomes bigger to create awareness and to make people
(innovators) try this new product. It is very important for Kellogg to communicate the product
benefits with consumers through advertisement. However, Kellogg will focus on Place to
ensure the product is available at every shelve before launching the advertisement campaigns.
Moreover, the sales grow slowly throughout this phase, and this is something Kellogg is already
aware of in advance. Advertisement is the central point in this stage. This period normally last
for two to three months.
Growth
Comparing to introduction phase, sales will grow faster, as typically, in this part of the product
cycle. Sales in this period are highest than any other, which normally is driven by snowball
effect, and due to consumers word-of-mouth communication. This is also normally the time
when competition amongst competitors gets strong, but despite that, the prices for Kellogg’s
stays high to protect product’s value and perception. The costs become low comparing to first
phases, whereas profit margin rises.
2- Marketing Objectives
Background
A well-defined and clear marketing strategy begins with the development of marketing goals.
Previous studies and analysis have shown some of the serious threats company is facing in the
market. Whether be it reduction in sales or shrinking market share, Kellogg’s problems are very
basic and are linked to success of the whole company. This all started with the rise of health
trend, and consumers awareness about their eating. Hence, the sales of their flakes not only just
decreased, but it also destructed the image of the company. Now consumer’s perception about
the product is of unhealthy and artificial. And as we all know, Flakes has been a success for
Kellogg’s and they were earning handsome share of amount from it.
However, this study brings Kellogg’s to a point where they have decided to counter react to
these core issues with the launch of new product ‘’Organic Muesli with OATS’’. Kellogg has

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formulated Psychological and Economical goals which it aims to achieve through this new
product.
Economical Goals
Kellogg’s sales have been continually on the decrease which eventually shrinking company’s
market share in the Nederland’s breakfast industry. The recent reports from euro monitor
reveals data as follow;
As it can be seen, Kellogg’s market share was 18.5 in 2012, which kept on reducing in following
years and now it was only 13.3 % 2016.
Under given circumstances, company has now objective to increase market share by 1.7% to
take it to 15% by the end of 2017.
Psychological Gaols
The euro monitor report further revealed the reasons in dropping sales. They are known to be
consumer’s tendency to buy healthy foods and their perception about the Kellogg’s popular
product Flakes which is built as highly processed and artificial cereals (Trends and
development). The reasons are more of psychological related.
However, in response to such perception, Kellogg is going to introduce this new product and it
aims to change the perception. Furthermore, it will help Kellogg’s to create image of itself as a
company who promotes Organic and healthy food cereals. It is clearly a reflection of company’s
mission statement which says ‘’we promote an environment where we can push beyond
boundaries and across borders to create foods and brands that help to fuel the best in
everyone everywhere’’.

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3- Consumer life cycle
The following is mechanism for determining the consumer classes in terms of their adoption of
this new breakfast product from Kellogg. The classes are divided based upon their time cycle
or stage at which they become customers of this new breakfast product. Considering the limits,
this report is only focusing upon first two categories of consumer life cycle.
Those who buys the product for the first time are known as Innovators in this cycle. They are
young who belong to high social class and likes to take risk. They are quite advance in exploring
scientific sources and often have links to other innovators.
The people who follows second after innovators are Early Adopters, however, they are not so
different from innovators in terms of age, education and social class. More discrete in adoption
choices than innovators. Realize judicious choice of adoption will help them maintain central
communication position (Rogers 1962 5th ed, p. 283).
4- Ansoff’s growth strategies
In pursuit of capturing high market share, there are four possible strategies to grow in the
market. Which are market penetration, market development, product development and
diversification.
Considering Kellogg’s product portfolio, they are already present in the breakfast industry from
years with diverse products. Hence, the introduction of the new product in the market will be
product development strategy for the company.

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Product development strategy
The new product of Kellogg is going to potentially target its old consumers who now are health
conscious and only buys healthy product. They were no more interested in Kellogg’s existing
product which is the reason why the company has decided to launch the new breakfast product.
This product is developed ensuring it fulfils consumers expectations and fits in the current
health trend. Moreover, customers also judge companies for their social works, which is the
reason why the new product is organic, it will communicate clear message to customers that
Kellogg cares for the environment. The core benefit of the new product is basically ‘’Organic
Oats’’ which is also a reflection of company’s mission/purpose.
5- STP Process
1- Market segmentation
There are different ways through which a market can be segmented. A successful method for
one product or market doesn’t mean it can be successfully applied to every other product or
market. A person’s social class and age can make him go to a certain shop he likes, but the
choice of products he buys maybe depended on his lifestyle. Consequently, to segment the
market for Kellogg’s new product, we are going to conduct segmentation process from different
perspectives which includes; Demographic, geographic, psychographic and behavioural.
Demographic Segmentation
This is most frequently used basis for doing market segmentation. To get more detailed and
deep overview of the market, it is further divided into sub segments such as social class, Age,
income and lifestyle (Marketing fundamentals, Dr. Bronis Verhage, 2010).
As the findings during DESTEP analysis revealed, ‘’the consumer confidence indicator rose
by 2 points to 26, reaching the highest level since February 2001. Dutch consumers’
opinions on the economic climate and their willingness to buy improved’’ (CBS, 2017).
This surly is a boot up for the manufacturers. This is general overview of the population’s
spending confidence. However, the market for the Kellogg’s new breakfast product can be
segmented as those customers with higher salaries who tend to buy luxury or branded goods.
Their tendency to connect themselves with brands is also a reflection of their social class. They
are mostly student/working singles/couples who pursue a healthy lifestyle or simply because
they don’t have enough time to cook so they demand for convenient products. Moreover, they
belong to age group from 18 to 35.
Geographic segmentation
People from different countries or region have different needs to satisfy their needs. Their
desires are often reflection of their culture, climate and population density (Marketing
fundamentals, Dr. Bronis Verhage, 2010).
However, considering the Dutch market for new breakfast product, there is not huge difference
in people lifestyle from one part of the country to another. They do vary, but not to a degree
where people have completely different breakfast product. Nederland is small country where
climate and culture is almost same throughout the country, so as their needs and lifestyles.

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Psychographic segmentation
Psychographic segmentation focuses on psychological characteristics such as consumers
Values, attitude, perceptions and interests (Marketing fundamentals, Dr. Bronis Verhage,
2010).
From Kellogg’s Point of view, which has been facing problems in the market as their flakes
sales are continuously going down in the Dutch market in response to popularity if health trend
(Euro monitor, 2016). However, this makes it clear for Kellogg to target those old consumers
who are now pursuing healthy lifestyle. They value health and are aware of their eating habits.
Behavioural segmentation
Under this segmentation, people are observed on the basis of their product usage, brand loyalty
and willingness to buy (Marketing fundamentals, Dr. Bronis Verhage, 2010).
The credit for bringing the biggest change in the breakfast industry can be traced with Kellogg’s
footprints (Stealing Share, 2017). They certainly have brand loyalty from its consumers who
made some of its products like Flakes, Special k popular and successful. Thus, it can be
understood that the Kellogg’s old consumers who now values healthy lifestyle, they potentially
fit in this segmentation. Moreover, they are loyal customers who are willing to pay for Kellogg’s
product.
Market
Market or target group for Kellogg’s new breakfast product can be perfectly described as group
of people who are between age 18-35 and live a healthy lifestyle as well as belong to high social
class and they care about the environment. Most importantly, they are interested in Kellogg’s
product (Brand Loyalty) and have willingness to pay the price.
2- Targeting strategy
Post segmentation, the nest step in the process is to figure out the targeting strategy to reach
potential buyers. There are three main strategies in terms of targeting the segmented market;
Undifferentiated marketing, Concentrated marketing and differentiated marketing
(Marketing fundamentals, Dr. Bronis Verhage, 2010).
Capitalizing on the nature, Concentrated marketing emerged to be most suitable for Kellogg’s
new breakfast product. Such strategy allows company to focus on one narrow part of the market
giving firm opportunity to grasp upon capturing high strong position and high market share in
that portion of the market. Addition to that, if company desires to target further segments, it can
do so with the same marketing mix (Marketing fundamentals, Dr. Bronis Verhage, 2010).

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This strategy will allow Kellogg to recover from its dropping sales as well as to regain its old
consumers. Furthermore, It will eventually help company to gain desired market share.
3- Positioning strategy
After segmentation and choosing targeting strategy, now its time for determining the positioning
strategy. This is a process of shaping a clear, powerful and consistent perception of the product
into consumers mind (Marketing fundamentals, Dr. Bronis Verhage, 2010).
Considering the recent events where consumers perceived flakes being too artificial and
unhealthy, it is crucial for Kellogg to build and improve its already built negative image amongst
consumers. Now, It is very clear for Kellogg to have desired image in mind which the company
wants to achieve in the market. That desired image or perception is of a ‘’Breakfast cereals
which has no artificial or processed ingredient with no added sugar, aims to provide great
start of the day’’ which is complete contrast to the image which was built by Flakes.
6- Consumer Behavior and trends
Breakfast cereals In the Netherlands (Euro monitor, 2016)
HIGHLIGHTS
• Breakfast cereals grown by 5% and 4% reaching 190 million Euros and 41000 volume
tones in 2016, respectively
• Consumers dropping interest from bread benefited the cereals segment
• Overall improvement in the quality helped in average prices increment
• Quaker Oats is leading the Dutch breakfast cereals market with 2% of the values shares
• The segment is predicted to grow at 2% CAGR (Compound annual growth rate) value
TRENDS
The Dutch breakfast segment is getting full advantages from the ongoing health trend amongst
Dutch consumers. They demand more and more healthy products to help maintaining the
balanced diet. As discussed above, the category has registered high growth in volume as well
as in value.

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The bread consumption was severely affected by the launch of two books Wheat Belly and The
Food Hourglass, which criticized bread over its connection with obesity issues. This event lead
Dutch consumers to decrease the consumption of bread and instead to prefer healthy breakfast.
However, some consumers did return to bread again, since bread is traditionally part of the
Dutch breakfasts.
Moreover, book The food Hourglass further claimed and tagged Oatmeal as a Superfood .
Surprisingly, this revelation helped category hot cereals to attract customers as the category
performed best in 2016. Addition to that, Oatmeal is under focus of manufacturers, who are
producing more and more products with Oatmeal and fully exploiting the trend. Oats are
suitable for diverse target group, such as Gluten free and those who suffer from high cholesterol
levels. This food is considered to be naturally free from gluten and contains antioxidant which
lowers cell damage and cholesterol levels.
Furthermore, organic products continuing to perform well as consumers demand more and more
natural products. This trend drew manufacturers to offer more and more organic products at
affordable rates, although consumers are willing to pay for healthier products.
Unfortunate for Kellogg, Flakes turned out to be only category on decrease. The reason is
logical, in contrast to rise of Health trend, which automatically means consumers are getting
away from products which contain high sugar and fat. However, flakes contains low sugar and
fat but still its ‘’Unhealthy’’ in consumers perception. The other major reason for flakes
decreasing popularity is its image which is built as highly processed and artificial breakfast
cereals.
Source; www.euromonitor.com
7- Marketing mix
Marketing mix is a strategic tool which is implemented in order to successfully introduce, sell,
create brand loyalty and make profit from a new product. This can also be described as a bridge
between the company’s new product and customers. This marketing tool is based upon 4ps
which are Product, Price, Place and promotion. For Kellogg’s new breakfast cereals, these 4ps
are evaluated in order to build strategies.

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1- Product
A product is a bundle of benefits which comes to invention in response to customer needs. From
marketing perspective, the product is not just a tangible ingredient, but its products attributes,
benefits which are intangible. And this is how consumers evaluate or make their choices, they
prefer one product over another on the basis of products attributes.
According to Philip Kotler, a product has three levels and each of them has its own value for
consumers. These levels can be seen above in the picture, which are Core product, Actual
product and Augmented Product.
Core product or core benefits are regarded as the basic use of product, which in case of
Kellogg’s new breakfast cereals is ‘’Satisfying the hunger’’ with organic Muesli. This is
basically the most fundamental benefit for which customer will pay the price. This is intangible
level, so often are communicated through marketing.
The next level where core benefits are translated into Actual product. Whatever company has
promised at core level has to be delivered through actual product. So, some customers may want
to buy this breakfast muesli because of satisfying hunger, and some maybe due to quality, or
because it fits in health trend and its organic.
The last level is Augmented product, this includes all intangible and psychological benefits
which adds more value to the product. This new Muesli offers its customers feeling of
responsible citizens who promotes organic products because the product is organic. Moreover,
it will also make people think of all the environment friendly procedures which takes place in
order to bring this product on their dining tables.

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2- Price
After carrying out field research and analysis of the formulas where Kellogg is already selling
its products, we have come up with a price of 3.49 euros for this new product. Taking the prices
of the competitors Like Quaker oats, Jordan AH, Lion (Nestle) into consideration and the reason
that our product is Organic, the price 3.49 fit in very well for the value this product offers.
Although, the price is still not highest amongst its competitors but we can afford to introduce
this product at this price. The reason is company’s ability to operate with economies of scale
and producing in big numbers, as Kellogg has second biggest market share. (Euro monitor,
2016). High prices in the market gives us an idea of consumers affordability as well, and our
product’s price easily fits into their affordability level.
Moreover, the formulas such as AH, Jumbo, Plus, Jan linders offers all A brand products as
well as private labels. And Kellogg’s already existing products such as Cruesli in these retails
have prices around 2.70 to 3 euros. But this product is different from existing products in terms
of organic ingredients.

33
3- Place
Considering the introduction of Kellogg’s new breakfast product, company has decided to use
its existing channels where the products are sold in full service super markets. This assessment
has been made during field research where the product was only possible to buy in Premium
and full-service retailers Such as Albert Heijn, Jumbo, Plus, and in some regional players like
Coop, Spar, Jan Linders and Vomar. Addition to that, euro monitor also revealed that 96% of
the breakfast cereals are sold through modern Grocery retailers (Euro monitor 2016). Moreover,
discounters such as Aldi and Lidl has also been ignored as the product doesn’t fit in their
concept.
Optimal level of distribution strategy
The most important determinant of the optimal level of a product’s distribution intensity is
where consumers expect it to be sold (Marketing Fundamentals, Verhage, 2010). Applying this
concept further on Kellogg’s new product, the company is aware of consumers expectation;
where to find the product? Kellogg wants to make sure its marketing strategy such as Brand
image, product price and level of customer service is under control by ensuring the product is
distributed at right places. As we know the price 3.49 belongs to high quality expensive brand
of breakfast cereal amongst competitors (See price). And for a product which is organic, the
company doesn’t want to decrease the value by making it available at discounters where the
presentation is not a priority and also the service level is low. Hence, it is very clear for company
where it wants to make it available and for consumers where to expect it.
Considering the first two phases of PLC, at the start of introduction level, the product is planned
to make available in all selected retailers before the launch of Advertisement campaign. It can
be highly sensitive if there is unavailability of products in the market while the target group is
looking for it. Taking low sales into considerations during introduction phase which is going to
last for 2 to 3 months, the supply of the products will be closely observed to minimize the costs.
After the introduction phase ends, company expects to have created product awareness through

34
advertisement campaigns which, in response will create more sales during the growth phase,
the product might be introduced online (Not final yet) at amazon as Kellogg is already using
that platform for sales.
4- Promotion
Marketing communication and promotions are combination of tool a company uses in order to
create encouraging relationships by informing and persuading a target audience to view the
organization positively, to accept its ideas or to stimulate demand for its products (Marketing
fundamentals, Verhage, 2010).
Historically, Kellogg has been huge fan of promoting its products through advertisement, as per
their annual report – Kellogg have spent Billions on advertisements in period 2011 to 2014, and
including 898 million dollars in 2015. Following on the same pattern, this new breakfast product
will be promoted through three channels I.e. 1- Advertisement, 2- Promotions, 3- Social media.
Kellogg is very much aware of the sales competition in all the segments of the market, both
internationally and domestically. Company finds all advertised or unadvertised, branded or
private labels its competitors which is the reason for company’s high advertisement
investments. The main factor which Kellogg addresses during its advertisements include
product quality, taste, convenience, nutritional value, price and promotions (Kellogg annual
report, 2015). Hence, we can conclude that Kellogg’s new product is going to follow the same
stream but with different theme which has to be related with psychological goals and core
benefit of the product.
Considering Kellogg’s high advertisement standards, we have planned the advertisement
campaign accordingly. As discussed earlier, three mediums have been used which are
Promotions through retail and advertisement through TV and social media. In short, the costs
for Kellogg’s overall campaign are estimated as 155,000.00 euros on both channels. Following
on, they have been discussed in detail in order to show logic in plan according to PLC.
Advertisement
All in all, TV commercials are going to cost company 60,000.00 euros.
These adds will be putted online in January after the products has been delivered to all retailers.
The reason for that is obviously to create awareness about the benefits product offers and to let
them know it’s available. This would be done in start of the introduction phase (see above PLC).
The same time table of advertisements will be repeated again in June during Growth phase to
ensure the relationship between product and consumers stays fresh. One important thing to
mention is the link between the promotional and advertisement, we have not planned any
promotions next to advertisement windows to ensure the profit and value of the product stays
high which is set by our advertisements.

35
Retail Promotional activities
Retails promotional activities such as monthly magazines and leaflets have been taken as
platforms to create brand awareness and high customer traffic (Repeat buying or Buying in
stocks). These promotional activities are going to cost Kellogg’s around 95,000.00 euros which
are relatively higher comparing to Advertisement costs.
The time schedule for these activities can be seen above in the picture, just to motivate this
panning, here is how and why we have chosen certain months in relation to PLC.
These activities will begin in March which is the start of our growth phase (See PLC). Growth
is possible only if there are high sales which can be achieved through repeat buying or high
volume per sale. thus, these promotions are going to help giving encouraging start to our growth
phase.
The second campaign of these promotions is closer to end of the growth phase and at the
beginning of Maturity phase. This is just to make sure we have high turnovers in case the growth
phase didn’t meet expectations regarding sales.
Social media
The advertisements and picture of the product and all infographics will be uploaded time to time
throughout the whole year since the costs are too low and the medium reaches good amount of
target group (18-35) which are mostly young people. For the purpose, Kellogg’s Facebook page
will be used which is already operational and has almost 1 million followers. Addition to that,
Instagram is also into considerations for advertisements purposes, similar to Facebook, Kellogg
has already an Instagram page which is functioning already. The number of followers on
Instagram are 20 thousand which is considered not bad.

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Facebook Page of Kellogg:
(Source: https://www.facebook.com/KelloggsLatinoamerica/)
Instagram page of Kellogg’s (Instagram.com)
(Source : https://www.instagram.com/kelloggsus/?hl=en )

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8- Category and formula management
1- Category management
Category management can be described perfectly by asking some of the questions such as;
- How to figure out which products to stock in a certain store?
- How to customize the shelf sets in all the stores of a chain according to what shoppers
were buying and wanted to buy?
- How to attract and retain specific niches of high-value shoppers?
Category management is the answer to all of these questions. It has allowed managers to manage
product categories as individual business units (ACNielsen, Al Heller, 2006).
There are 5 different roles for known as Destination, Routine, Convenience, traffic builder and
transaction builder. Each of them have their own roles.
Considering Kellogg’s new Breakfast product, it will fit in Destination role of category. In a
destination role, retailers seek to become the primary First choice store by delivering the
consistent and superior consumer value (ACNielsen, Al Heller, 2006). In retailers, this category
becomes important factor of store’s image.
Moreover, Kellogg’s existing products formulas such as AH XL, AH, Plus Benders have huge
assortments in breakfast cereals that they have become a part of the image of those formulas.
Whereas, during my field research (See in field research topic), I found almost less than half of
the Kellogg’s existing products at Jan linders and Jumbo comparing to what AH, AH xl and
Plus Benders offers. Although, we are aware of the Plus benders being not chain store but an
individual single shop.
2- Formula Management
Formula management is the sum of all the different parts of a shop offers its products and service
to its customers (Fontys connect, 2017).
There are 6 different elements which can be applied as criteria to evaluate different retailers.
These elements include Product, Personnel, Place, Price, presentation and Promotion.
However, to make it more logical, we will choose one of the retailer we have chosen as a
distributor and one that retailer which we didn’t for this new Breakfast cereal product.
The picture underneath shows the current structure of the retail according to their preferences
built upon the six elements.

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For the assessment of formula, we have chosen Albert heijn and Lidl, to show the difference on
the above mentioned six elements. Addition to that, we will try to connect it to marketing mix
and goals.
Albert heijn
Product
Albert heijn offers all A brands, Private labels as well as their own brand such as Albert heijn
basic which mainly was introduced in order to counter Lidl. They offer services like coffee,
wifi, and information about the products. Albert heijn offers 7500 private labels products in its
assortment. (Euro monitor 2017)
(Source: AH XL treff center)
Personnel
Employees at albert heijn are relatively high in education, they know about the products in their
shop, and in case if you want to ask something about the product, they always try to
help (personal experience being a regular customer of AH).
Source: google

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Place
Albert heijn has very strong presence in the Dutch retail sector with 950 grocery stores in the
country. Most of the stores are presence in the neighbourhood. Moreover, company has also
AH XL kind of hypermarkets and they are quite popular in the Nederland. Convenience has
always been fascinated for this company, as it has opened several self-service outlets in the
country including one at Schiphol airport. Normally, these supermarkets offer good, mostly free
parking space just in front or at neighbourhood.
Price
Albert heijn is supermarket which is focused on quality stores and products. They are often
regarded as one of the more expensive supermarkets due to the reason they always try to offer
superior products (Wikipedia). They have all A brands, they offer high service which can also
be the reason for being regarded as one of the most expensive supermarkets. However, they
have value shares of 27% in the Dutch market in 2016, which is still a success which shows the
satisfaction of customers. (Euro monitor, 2017)
Presentation
Usually good presentation, especially comparing to its rival Lidl, Albert heijn offers products
placed at shelfs, with nice tidy atmosphere and music always playing in the shop to make the
shopping enjoyable for their customers.
Promotions
Since the perception about the company that its relatively expensive, albert heijn has pushed
itself to get out of this unfavourable tag. For that purpose, they are offering discounts along with

40
some other extensive promotional activities. Bonuskaart is one of their way to offer promotions.
Addition to that, every month they release magazines with all the detail about certain
promotions to create awareness (Euro monitor, 2017).
Lidl
Products
No ‘’A’’ brands, high quality private brands, since 2014, it has started to offer more fresh
products and more added value products such as premium private label (Euro monitor, 2015).
Number of products in assortment risen from 1250 in 2001 to 2000 different products today.
90% of the products are still private label.
Few suppliers: Lidl, Fairglobe and biotrend
(Euro monitor, 2017).
It offers no extra service such as free Wi-Fi, or coffee.
Personnel
Often helpful, busy mostly and a lot mature on average, comparing to employees at Albert
Heijn. They have awareness regarding the products in the shop, and often gives you information
if ask.
Place
Lidl is growing in the Dutch market, but not as fast as Albert heijn. With the addition of 12
more outlets since 2012, they have now 386 stores in the Nederland’s. (Euro monitor, 2015).
They usually offer parking areas as well, sometimes free and sometime not – depending on the
area.
Price
Economies of scale is the central to Lidl, means they always try to minimise the costs to increase
their own margin as well keeping price low. They are discounter, buy famous for good quality
products. Private label products remain highly competitive (Euro monitor, 2015).
Presentation
Usually the focus is not very much on the presentation, but always on bringing costs low. Which
is logical for a discounter. Lidl doesn’t offer its products on shelfs, and normally they put in Big
volumes and put them on the racks. The overall atmosphere is boring as compare to Albert
Heijn, and you often does not enjoy your shopping in such atmosphere.

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Promotions
In the Nederland, their advertisement spending is equal to of albert heijn. They try to attract
consumers on the basis of high quality product, which is kind of working for Lidl.
Lidl has been very successful in promotions through their Facebook page where they have
250,000 likes. Lidl communicates non-food price promotions on weekly basis, which they are
using a way to attract customers. They are quite active on social media also because of low
costs.
Conclusion
Analysis of the study of two different formulas has made things quite clear from Kellogg’s
perspective for choosing one retailer/Formula over another. There are no ‘’A’’ brands at Lidl,
and the assortment is small comparing to AH. Moreover, service for the customers, which Lidl
does not offer whereas Albert heijn has quite good reputation in this regard. Another important
factor for choosing AH over Lidl is presentation, which is always a focus for AH but Lidl does
not give much importance, but it makes sense for that formula since they are discounters.
9- Field Research

45
10- Financial plan
Benchmarking
The purpose of this study is to answer whether Kellogg is performing better than its competitors.
Profitability, liquidity and solvency are considered authentic and coherent rations by business
owners and managers for the measurement of company’s progress towards achieving goals.
Thus, the same tools will be applied on Kellogg and its competitors to evaluate the performance
in given period 2016. Furthermore, this analysis can also help for making future planning in
order to put company of successful track.
For the accountancy, different data such as Balance sheet, Profit loss accounts and cash flow
statements are used from Kellogg and its 4-other competitor’s annual reports from years 2016
and 2015.
Kellogg is the world’s largest breakfast cereals company operating its sales in almost 180
countries after manufacturing its products in 21 countries (Kellogg Annual report, 2016).
Under the light of available data in annual reports, Profitability, Liquidity and solvency rations
are computed and can be seen in the above picture.
Profitability
Profitability ratios are financial metrics that are used to assess a business’s ability to generate
earnings compared to its expense and other relevant costs incurred during specific period of
time (Investopedia). The higher the value of profitability from its competitors, the better
company is performing.

46
Kellogg earned 1,395 million dollars in 2016, whereas, Pepsi earned 9,785 million dollars,
Ahold 13,378 Million euros and Heinz 9, 148 dollars emerged to be relatively big in profit
which is logical in sense these all companies are operating in more than one industry comparing
to Kellogg which primarily focused on Breakfast cereals segment. Associated British foods is
the only company in line with lower profit than Kellogg, and this is the only competitor whose
business segment (Breakfast) is most alike Kellogg.
Profit margin the following indicator, unsurprisingly isn’t much different than the previous
analysis. All companies have higher profit margins than Kellogg except the Associated British
foods. This indicator tells us the weight with which the revenue surpasses the costs.
The last indicator in profitability measurements is Return on Investments, which determines the
amount of profit shareholders will get in return to their investments. Kellogg’s business
performance seems to be quite beneficial for investors as it is offering 23.21% returns, which is
second highest amongst the list of competitors. The highest returns are getting by the Investors
of Pepsi with rate of 36.18%. Associated British foods, Ahold and Heinz are the bottom three
companies in the list with 8.15%, 6.03% and 1.81% respectively.
Liquidity
Liquidity rations gives measurements of a firm’s ability to pay debts and its margin of safety
through the calculation of metrics which includes Net working capital, Current Ration, quick
ration (Investopedia).
Net working capital is the amount which remains after paying current liabilities from current
assets to run the business further. It is used to measure the short-term liquidity of business and
can also be used to obtain general Impression of the company’s ability to capitalize on assets in
an efficient manner (Accounting tools, 2011). Kellogg shows negative measurements in this
regard which tells that Kellogg has more liabilities than assets. Unfortunately, Kellogg is the
only company to be on the negative side comparing to its competitors who all shows
encouraging numbers.
Current ratio is another metric which gives overview of the company’s ability to pay back its
liabilities. Associated British foods and Heinz with both, surprisingly, 141.08% ratio standing
equally happened to be the companies who can survive any decline most successfully. Kellogg
is lowest in the rank with 65.71% ration.
Quick ration is the last indicator in Liquidity, this indicates a company’s ability to meet its short-
term obligations (Investopedia). Noticeably, this excludes inventory and only uses assets which
can be turned into cash quickly. Pepsi and Heinz are topping the list with 115.29 and 103.32%
ratios. Kellogg is placed at the bottom with 38.04%, while other two competitors securing 3rd
and 4th
spot in the list as Associated British foods with 76.44 and Ahold with 64.34%.

47
Solvency
Debt ratio measure the extent of a company’s leverage, and it is defined as the ration of total -
long-term and short-term debts to total assets that are financed by debt. The higher the ration,
the more leveraged the company is which implies grater financial risks (Investopedia).
Associated British foods appears to be in more reliable position with least ration of 37.39%,
whereas Kellogg being in most unfavourable situation which suggests it will have to sell its
87.25% of assets to pay the debts. Other competitors rank as Pepsi, Ahold and Heinz with
84.89%, 55.13% and 46.14% respectively.
The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a
company can pay interest on outstanding debt (Investopedia). Ahold turned up to be most
successful in this regard with 2472.83%, and Kellogg again at the bottom of the list with least
affordability on interests. Heinz is not far away from Kellogg with 598%, whereas Pepsi stands
3rd
in the lost with 729.14% and Associated British foods with 1969.64% is at 2nd
.
Conclusion
This study has brought us to a conclusion to understand that Kellogg’s new product is going to
be operated under not as healthy environment as of its competitors. Starting with Profit margin,
where Kellogg stands lowest in the rank means the profit for one unit of Kellogg’s new product
is not as high as if the product will be sold by any other competitors. However, Kellogg does
surpass some of its competitors as long as returns on investments are concerned. But most
importantly, the thing to understand is the type of competitors Kellogg have in the list. There is
only one Similar company which is Associated British foods, and Kellogg does outclass this
company in Profitability indicators. For me personally, I consider this company as most relative
to compare with. Other companies such as Pepsi, Ahold and Heinz, they have diverse product
portfolios, and that too in so many different markets and segments.
Furthermore, the liquidity indicators are not much in favour of Kellogg as all competitors
including British food surpasses Kellogg with quite healthy margin in all three areas. This is
something the company needs to focus and develop itself.
Unfortunately, Kellogg again is placed at the bottom of and shows how unaffordable the
situation can be if they are to pay their debts through assets.
Financial Plan
Background information

48
In order to conduct financials, we have done some analysis of the financial report of the
company and market data. To get latest data of the Dutch breakfast cereal market, we have used
Euro monitor as a source. According to Euro monitor, market of RTE (Ready to eat) cereals
was 35.1 tonnes in 2016, making turnover of 147 million euros.
In 2016, Kellogg’s market share was 13.3%, helping company earn 19,551,000.00 million
euros. the market share has been on continuous decrease since 2012 when it had 18.5% of the
market share. Consequently, it is aimed to increase that market share of Kellogg to 15% until
2019 which will take turnover to 22.75 million euros. Moreover, Kellogg’s turnover of 19
million in 2016 was made through 14 SKUs which Kellogg had in the market.
In order to determine the number of units (Sales) for Kellogg’s this new product in 2017, we
have taken forecast turnover of Kellogg according to 14% market share and then divided it with
15 SKUs. The number of SKUs are considered 15 because of the addition of this new product
into Kellogg’s existing product portfolio of 14 SKUs.
Before we could get any idea of the sales, it was important for us to know the both prices i.e.
Selling price to consumer and purchasing price of retailer. The initial price was determined by
comparing competitors (see price in Marketing). By comparing competitors and analysing
Kellogg’s existing prices, we underpin the price 3.49 euros. Out of this 3.49 euros, we have
deducted 6% VAT which is 21 cents along with Retailers share of 26% which in this case makes
90 cents. After subtracting both these prices, we are left with 2.37 euros which is happened to
be the price at which retailer buys product from the company. Further on, is discussed the cost
analysis of the 2.37 euros, or in other word, we will be answering question what makes the
prices 2.37 euros?
Cost Analysis
For the purpose of cost analysis, we have used data from CBS (Manufacture of grain mill
products). Although, it would have been even better if there was data for organic products, but
we still think it’s closer and the difference will only be in raw material cost as rest of the cost

49
drivers such as Labour, Emery, transportation, sales and communication would possibly remain
same. Following is the picture which explains all the above-mentioned costs precisely.
Basically, there are two main types of costs i.e. Variable and fixed. To begin with, it’s important
to mention that fixed costs are unknown. Nevertheless, variable costs are taken as of main
concern as the price of the product mainly depends on these costs. The dominant cost driver, as
expected is raw material costs which shares 68.18% of the value amount. Other considerable
amount if marketing/communication which adds nearly 11% of the value, whereas labour,
energy transportation and sales makes small influence on the price.
Important thing to mention here is the Kellogg’s own share, which at this stage appeared to be
21 cents per product. As we have said earlier, fixed costs are not discovered yet so Kellogg’s
share can further decreased.
Sales Plan
Sales plan of this new product is partly dependent upon the PLC (see marketing). The number
of planned units for sales are varying month to month depending on the phase of the product
life cycle. The starting point is introduction phase which lasts January and February. The sales
margin stays low around 5% in first two months as typically it’s always in introduction phase.

50
The highest sales are estimated during growth stage of PLC, where the product touches its peak
15% sales in august, which is closer to the end of growth phase and start of the maturity phase.
As maturity phase starts, the sales starts to drop slowly and the trend follows for the rest of the
sales plan. (Find sales plan in appendix).
Purchase Plan
Purchase plan is closely linked to sales plan as far purchasing amount is concerned, however, a
slightly change is the purchasing of 20% of the sales of next month in advance. As the product
is new and not available in the assortment, there is not safety stock available. despite that, we
know that the sales are expected to be low in first two months i.e. 2% in January and 3% in
February, so it will not be hard for company to meet the demand in short time period. The cash
disbursements on purchases are calculated as 1,442,384.00 euros and can be seen in purchase
plan (See in appendix)
Profit and Loss account
As can be seen in the PLA underneath, company has made turnover of 2,045,110.55 euros.
deducting the sum of all the costs which makes 1,242,647.00 euros, Kellogg is expected to earn
802,463.50 euros as profit.
However, as previously discussed, the fixed costs are unknown yet so there can be any change
at later stage once fixed costs are found and taken into consideration.
Cash flow
This part of the financial plan provides overview of the flow of cash throughout the whole year.
It gives precisely the information about bank balance at the end and start of every month. As
can be seen in the cash flow (see in appendix), the revenues are calculated with the end price
3.49 which adds values from other two stakeholders such as 6% govt. VAT, 26% Retailers part.
Looking at the number at start and beginning of the months, some of the number are negative
during the period of first 4 month. The bank position at the end of these 4 months is negative
due to the reason that; payments of raw materials are higher than of sales collection. And as it

51
can be seen, the higher the sales grow per month, lesser the negative amount becomes. At the
end of the year, the bank position has been observed to have cash of 2,069,651.0 euros.
Opening and Closing Balance
Opening balance is the state of the bank account before the start of the fiscal year 2017 for
Kellogg, whereas the closing balance illustrates opposite story of the bank – end state of the
account.
The opening balance as can be seen in the picture underneath, unsparingly, was without any
balance.
However, closing balance gives the overview of the end balance. After successfully achieving
the estimated amount of sale, the shareholders equity has been increased with value amount of
802,463.50 euros. the same amount is represented at the left side of the closing balance where
it is placed in Bank or available as cash.
Risk Analysis
Having strong completion in the market from companies such Quaker oats, Jordan, AH, there
is always risk of having losses in the end. And for company like Kellogg, which has the second
highest market share of 13.3 (Euro monitor, 2017), the risk of losses can hardly be the change
in raw material costs of energy or labour. Addition to that, these costs have been calculated
efficiently with the help of real data.

52
Under given study, the passible reason could be the over estimation of sales or the low sales
due to bad consumer response. First picture show the planned estimations, with net profit of
179,484.29 euros after deducting all the costs, but this is only possible if the company would be
able to sell all the estimated amount of units.
The second picture of this chapter shows the worst-case scenario. The possibility of not meeting
the aim of selling all planned units. Consequently, we have shown the sales dropping by half.
This change in sales lead company to losses of 789,458.79 euros which are considerably high.
Conclusion
Under the light of this study, we have come to a conclusion after the analysis of positive
indicators in the financial plan. Considering the Kellogg’s continuously dropping market share,
it is extremely important to react with the launch of this new Breakfast cereal product. If the
plan is implemented and conducted successfully, it will help Kellogg capturing the 15% share
of the market by 2019. Addition to that, the launch of this product will earn Kellogg 802,463.50
euros in the fiscal year 2017. However, considering company’s performance in benchmarking
analysis, there is need of urgency as company shows negative numbers in most of the indicators.
With the current situation, If, in any case, there is any bad event, company will not be able to
get through those hard times.

53
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Appendix
Sales Plan
Purrchase plan

Marketing plan for Kellogg's new muesli product

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