Presentation on theme: "Ready-to-Eat Breakfast Cereal"— Presentation transcript:
1Ready-to-Eat Breakfast Cereal Here is where we introduce the topic and say why we chose breakfast cerealSarah Icke, Kamille Jackson, Julian Ordman
2Presentation Overview IntroductionIndustry OverviewAdvertising Strategies and Raw Data AnalysisConcluding Analysis and Industry Recommendation
3Why Cereal? Breakfast is the most important meal of the day “Americans buy 2.7 billion packages of breakfast cereal each year. If laid end to end, the empty cereal boxes from one year's consumption would stretch to the moon and back. “ – Cerealizing America: The Unsweetened Story of American Breakfast CerealAn industry with extremely high brand loyaltyAn industry with one of the highest ad-to-sales ratios
4Industry Overview Industry Definition Source: IBISWorld Acquires raw materials such as wheat, flour, rice, and sugarProcesses raw materials into various cereal products, including ready-to-eat cereals, cereal bars, and hot cerealsSells through sellers in various channels, including supermarkets, wholesalers, and food service providersSource: IBISWorld
5Industry OverviewAcquires raw materials such as wheat, flour, rice, and sugarKey Supplying Industries:Baking Mix & Prepared Food ManufacturingCanned Fruit & Vegetable ProcessingCorn FarmingCorn, Wheat & Soybean WholesalingFlour MillingSeasoning, Sauce and Condiment ProductionSugar ProcessingSource: IBISWorld
6Industry OverviewProcesses raw materials into various cereal products, including ready-to-eat cereals, cereal bars, and hot cerealsSource: IBISWorld
7Industry OverviewSells through sellers in various channels, including supermarkets, wholesalers, and food service providersSource: IBISWorld
15Industry Profile Price-Based Competition Quality-Based Competition Highly CompetitivePrice-Based CompetitionSome consumers more price-sensitiveGrowing segment of private-label brandsQuality-Based CompetitionAffect cereals with high brand equityAffect cereals with healthy additions (ex. dried fruit or fiber)DifferentiationCereals designed to appeal to different segmentsMake demand more inelasticSource: IBISWorld
19Industry Profile Highly Regulated Expected to continue increasing. Production & Labeling StandardsFDAFD&C ActFair Packaging and & Labeling ActEnvironmental RegulationsCWA, CAA, Pollution Prevention Act, RCRAChildren advertisingSource: IBISWorld
20Industry Profile Regulations Towards Child Advertising Children’s food consumption heavily influenced by advertising (Goldberg and Gorn, 1978)Children’s Television Act (1990) – Limited amount of commercial time dedicated to child-targeted productsChildren’s Food Better Advertising Initiative (CFBAI) – Pledge to devote at least 50% of child-targeted advertising promoting healthier foods and messages encouraging healthy lifestylesKellogg’s, General Mills, and Pepsi have all increased nutritional content of child-oriented brandsSources:Nutrition advertising targeting children. (2012). Retrieved April 8, 2013, from http://www.cdc.gov/phlp/winnable/advertising_children.htmlStitt, C., & Kunkel, D. (2008). Food Advertising During Children's Television Programming on Broadcast and Cable Channels. Health Communication,23(6), doi: /Under self regulation cereals advertised to children are less sugary. (2012). Retrieved April 8, 2013, from
21Industry Profile Non-Compliance With Regulations Often a lot of resistanceFinesReputation damageImpairs producers credibilityExpensive recallsCreate liability to civil/criminal penaltySource: IBISWorld
22Industry Profile Highly Advertised Advertising-to-sales ratios approximately 13% vs. 2-4% in other food industriesCreates differentiation and demand inelasticityCultivates brand loyaltyPrisoners DilemmaSource:Nevo, A. (2000). Mergers with differentiated products: The case of the ready-to-eat cereal industry. RAND Journal of Economics, 31(3), 395.
23Brand Equity & LoyaltyBrand Equity important to create greater loyaltyLoyalty crucial in order to stand out among hundreds of brandsMakes demand less elastic to priceStudies show brand loyalty is a strong feature in consumer product marketsEmotional brandingSource: Shum, Matthew. "Does advertising overcome brand loyalty? Evidence from the breakfast cereals market." Journal of Economics & Management Strategy (2004): Print. Source.:
24Brand Equity & LoyaltyHowever, advertising overcomes brand loyalty in this industryEncourages “switching” behavior at the household levelPersuades households to try new brandsAdvertising may be an effective option for new entrantsAn example of Brand Equity:Blind vs. Branded TestChoice increase from 47% to 59% when Kellogg’s brand identifiedSources: Shum, Matthew. "Does advertising overcome brand loyalty? Evidence from the breakfast cereals market." Journal of Economics & Management Strategy (2004): Print. Source.: Harris, Schwartz, Kelly Brownell, and Vishnudas Sarda. ”Evaluating the nutrition quality and marketing of children’s cereals." Cereal FACTS. (2009): Online.
26Advertising Strategies Here is where we say that breakfast cereal companies all use the same types of advertising strategies, but to give specific examples and to go into a more in depth analysis, we will focus on Kellogg.Advertising Strategies
27Kellogg’s CompanyTheir Purpose: ”Nourishing families so they can flourish and thrive.”“Create foods and brands that help to fuel the best in everyone everywhere.” Kellogg’s Website Highest Advertising ExpenditureHighest Ad-Sales RatioForbes, "World's Most Powerful Brands“ in 2012 and 2011Interbrand, "Best 100 Global Brands“ in 2012 and 2011Forbes, “World's Most Reputable Companies” in 2012 and 2011
29Advertising Mediums Television Social Media Websites In-store Marketing
30Television Most widely used medium to promote cereal to children Average child (6-11 yrs) viewed 721, while average adults viewed 372 television advertisements.Purpose for children: to associate products with positive emotions.Humor is commonly used in Adult & Family cereal advertising.
31The Effects of Advertising Compared to non-TV advertised ready-to-eat cereals:TV Advertised child-targeted cereals were purchased thirteen times more frequentlyFamily-targeted brand purchases were ten times more frequentlyAdult-targeted cereals were purchased four times more frequentlyIn a study conducted in 2008, it was found that children ages 5-12 are the primary target market of ready-to-eat cerealsChildren see twice as many cereal ads than adultsSource: Castetbon, Katia, Jennifer Harris, and Marlene Schwartz. "Purchases of ready-to-eat cereals vary across US household sociodemographic categories according to nutritional value and advertising targets." Public Health Nutrition. (2011): 1-10.
40Social Media Myspace & Facebook Several children and family brand cereals have significant presence.Fan Pages
41Websites Banners & Advertising on 3rd party websites Children Websites Kellogg’s: separate moderately large websites for Apple Jacks, Froot Loops, Frosted FlakesEngagement techniques: spokes characters, logos, packaging, branded cereal itself.
46Product Placement Kellogg’s & The Next Food Network Star Results: 93% adults (18-49) could recall the brand after reviewing the episode.This was up 32% from the brand recall Kellogg’s normally has across cable universe.
47Persuasive Advertising Effect: increase consumer demand and WTPChildren-oriented cerealsPromotions (ex. Kellogg’s Family Rewards)PremiumsEmphasize nutritional content – “Nutrition at a Glance” in 2007Adult-oriented cerealsEmphasize health benefits
49Memory Jamming Reinforce positive aspects of cereal Use of characters and catchy slogansEvident from high ad-to-sales ratios
50Advertising to Children Children heavily influenced by advertising$264 million spent in 2011 promoting child-targeted cereals (increase of 33% from 2008)TV is the most effective mediumChildren exposed to > 1,000 hours of television annuallyHalf of advertising is for food productsCereal is the most advertised food product to children (one quarter of all food ads)Sources:Kids' cereals are healthier, ads aren't. (2012). Retrieved April 8, 2013, from Stitt, C., & Kunkel, D. (2008). Food Advertising During Children’s Television Programming on Broadcast and Cable Channels. Health Communication,23(6), Doi: /
51Advertising to Children Marketing StrategiesMemorable characters – more than 40% of kids cerealsPackagingPlacement on store shelfWeb advertising – “Advergames”
56Complementary Advertising Family values: Want to provide for your family and have a great family dynamicEspecially target mothersTrend towards Healthy Living Lifestyle in the General PublicWant a cereal that will promote healthy livingTrending Buzz words/values:“Good For You,” “Healthy,” “Active,” “Nutritious,” “Low-Fat,” “Gluten-Free,” “Low in Sugar”Make advertisements that link cereal to this lifestyle or set of valuesKellogg’s Complementary “Healthy Lifestyle Advertising”:Acquired Kashi brand2011- Gluten-free cereal advertisement and branding, such as Rice KrispiesIs this slide too wordy?
58Athletic Sponsorship Major International Athletic Events Individual Amateur/ Professional AthletesUsually AmericanCharitable Athletic EventsCommunity athletic events to raise awareness and funds for specific charitiesTie in athletic achievements to what they eat
59Corporate Responsibility Majority of charities sponsored either raise awareness and funds for hunger, healthy lifestyles, or children empowerment
60Other Sponsorships Non-Athletic Celebrity Sponsorships Only publicly sponsor celebrities with charitable causesBlog Sponsorship
61Analysis and Recommendation Here is where we say that breakfast cereal companies all use the same types of advertising strategies, but to give specific examples and to go into a more in depth analysis, we will focus on Kellogg.Analysis and Recommendation