1. Ready-to-Eat Breakfast Cereal
Here is where we introduce the topic and say why we chose breakfast cereal
Sarah Icke, Kamille Jackson, Julian Ordman

2. Presentation Overview
Introduction
Industry Overview
Advertising Strategies and Raw Data Analysis
Concluding Analysis and Industry Recommendation

3. Why 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 Cereal
An industry with extremely high brand loyalty
An industry with one of the highest ad-to-sales ratios

4. Industry Overview Industry Definition Source: IBISWorld
Acquires raw materials such as wheat, flour, rice, and sugar
Processes raw materials into various cereal products, including ready-to-eat cereals, cereal bars, and hot cereals
Sells through sellers in various channels, including supermarkets, wholesalers, and food service providers
Source: IBISWorld

5. Industry Overview
Acquires raw materials such as wheat, flour, rice, and sugar
Key Supplying Industries:
Baking Mix & Prepared Food Manufacturing
Canned Fruit & Vegetable Processing
Corn Farming
Corn, Wheat & Soybean Wholesaling
Flour Milling
Seasoning, Sauce and Condiment Production
Sugar Processing
Source: IBISWorld

6. Industry Overview
Processes raw materials into various cereal products, including ready-to-eat cereals, cereal bars, and hot cereals
Source: IBISWorld

7. Industry Overview
Sells through sellers in various channels, including supermarkets, wholesalers, and food service providers
Source: IBISWorld

8. Industry Profile Key External Drivers Key Success Factors
Life Cycle Stage
Concentration
Competition
Regulation
Source: IBISWorld

9. Industry Profile Key External Drivers Demand from grocery wholesaling
Per capita disposable income
Healthy eating index
Price of coarse grains
World price of wheat
Source: IBISWorld

10. Industry Profile
Source: IBISWorld

11. Industry Profile Key Success Factors Ability to adapt to change
Ability to pass on cost increases
Product differentiation
Supply contracts for key inputs
Economies of scale and scope
Source: IBISWorld

12. Industry Profile Mature Industry Revenue: $11.7bn (2013)
Per capita consumption is stagnant
Revenue growth: -0.2% ( ), 1% ( )
Source: IBISWorld

13. Industry Profile Highly Concentrated HHI: 1770.57 (top 4 firms)
Top 4 firms: 74.7% market share
Oligopoly
High barriers to entry
Source: IBISWorld

14. Industry Profile
Source: IBISWorld

15. Industry Profile Price-Based Competition Quality-Based Competition
Highly Competitive
Price-Based Competition
Some consumers more price-sensitive
Growing segment of private-label brands
Quality-Based Competition
Affect cereals with high brand equity
Affect cereals with healthy additions (ex. dried fruit or fiber)
Differentiation
Cereals designed to appeal to different segments
Make demand more inelastic
Source: IBISWorld

16. Industry Profile
Source: IBISWorld

17. Industry Profile
Source: IBISWorld

18. Industry Profile
Source: IBISWorld

19. Industry Profile Highly Regulated Expected to continue increasing.
Production & Labeling Standards
FDA
FD&C Act
Fair Packaging and & Labeling Act
Environmental Regulations
CWA, CAA, Pollution Prevention Act, RCRA
Children advertising
Source: IBISWorld

20. Industry 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 products
Children’s Food Better Advertising Initiative (CFBAI) – Pledge to devote at least 50% of child-targeted advertising promoting healthier foods and messages encouraging healthy lifestyles
Kellogg’s, General Mills, and Pepsi have all increased nutritional content of child-oriented brands
Sources:
Nutrition advertising targeting children. (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: /
Under self regulation cereals advertised to children are less sugary. (2012). Retrieved April 8, 2013, from 

21. Industry Profile Non-Compliance With Regulations
Often a lot of resistance
Fines
Reputation damage
Impairs producers credibility
Expensive recalls
Create liability to civil/criminal penalty
Source: IBISWorld

22. Industry Profile Highly Advertised
Advertising-to-sales ratios approximately 13% vs. 2-4% in other food industries
Creates differentiation and demand inelasticity
Cultivates brand loyalty
Prisoners Dilemma
Source:
Nevo, A. (2000). Mergers with differentiated products: The case of the ready-to-eat cereal industry. RAND Journal of Economics, 31(3), 395.

23. Brand Equity & Loyalty
Brand Equity important to create greater loyalty
Loyalty crucial in order to stand out among hundreds of brands
Makes demand less elastic to price
Studies show brand loyalty is a strong feature in consumer product markets
Emotional branding
Source: Shum, Matthew. "Does advertising overcome brand loyalty? Evidence from the breakfast cereals market." Journal of Economics & Management Strategy (2004): Print. Source.:

24. Brand Equity & Loyalty
However, advertising overcomes brand loyalty in this industry
Encourages “switching” behavior at the household level
Persuades households to try new brands
Advertising may be an effective option for new entrants
An example of Brand Equity:
Blind vs. Branded Test
Choice increase from 47% to 59% when Kellogg’s brand identified
Sources: 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.

26. Advertising 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

27. Kellogg’s Company
Their 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 Expenditure
Highest Ad-Sales Ratio
Forbes, "World's Most Powerful Brands“ in 2012 and 2011
Interbrand, "Best 100 Global Brands“ in 2012 and 2011
Forbes, “World's Most Reputable Companies” in 2012 and 2011

29. Advertising Mediums Television Social Media Websites
In-store Marketing

30. Television 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.

31. The Effects of Advertising
Compared to non-TV advertised ready-to-eat cereals:
TV Advertised child-targeted cereals were purchased thirteen times more frequently
Family-targeted brand purchases were ten times more frequently
Adult-targeted cereals were purchased four times more frequently
In a study conducted in 2008, it was found that children ages 5-12 are the primary target market of ready-to-eat cereals
Children see twice as many cereal ads than adults
Source: 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.

32. Cereal Television Ads

33. Brand Percentage of Television Advertisements

34. Advertisement v. Time of day

35. Cereal Industry

36. Top 10 in 2011

40. Social Media Myspace & Facebook
Several children and family brand cereals have significant presence.
Fan Pages

41. Websites Banners & Advertising on 3rd party websites Children Websites
Kellogg’s: separate moderately large websites for Apple Jacks, Froot Loops, Frosted Flakes
Engagement techniques: spokes characters, logos, packaging, branded cereal itself.

43. In-store Marketing Banners Packaging In-store displays & promotions
Shelf Space

44. Primary Advertising Strategies
Persuasive
Complementary
Memory Jamming
Informative
Children’s Advertising
Humor and Emotion
Celeb Endorsement
Sponsorship
Online
In-Store Marketing
Social Media
Product Placement

45. Indirect Advertising Match-products-to-buyer effect
Uninformative advertisements
Cartoon’s
Bright Packaging

46. Product 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.

47. Persuasive Advertising
Effect: increase consumer demand and WTP
Children-oriented cereals
Promotions (ex. Kellogg’s Family Rewards)
Premiums
Emphasize nutritional content – “Nutrition at a Glance” in 2007
Adult-oriented cereals
Emphasize health benefits

48. Persuasive Advertising

49. Memory Jamming Reinforce positive aspects of cereal
Use of characters and catchy slogans
Evident from high ad-to-sales ratios

50. Advertising 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 medium
Children exposed to > 1,000 hours of television annually
Half of advertising is for food products
Cereal 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: /

51. Advertising to Children
Marketing Strategies
Memorable characters – more than 40% of kids cereals
Packaging
Placement on store shelf
Web advertising – “Advergames”

52. Advertising to Children

53. Humor and Emotion Keeps audience attentive
Increase adult motivation through emotional appeal
Difficult to appeal to everyone because people have different senses of humor and values

54. Family Values & Nostalgia
Humor and Emotion
Children
Brand Mascots
Slogans
Songs
Animated
Adults
Situational Comedy
Family Values & Nostalgia

55. Children v. Adult Humor and Emotion

56. Complementary Advertising
Family values: Want to provide for your family and have a great family dynamic
Especially target mothers
Trend towards Healthy Living Lifestyle in the General Public
Want a cereal that will promote healthy living
Trending 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 values
Kellogg’s Complementary “Healthy Lifestyle Advertising”:
Acquired Kashi brand
2011- Gluten-free cereal advertisement and branding, such as Rice Krispies
Is this slide too wordy?

58. Athletic Sponsorship Major International Athletic Events
Individual Amateur/ Professional Athletes
Usually American
Charitable Athletic Events
Community athletic events to raise awareness and funds for specific charities
Tie in athletic achievements to what they eat

59. Corporate Responsibility
Majority of charities sponsored either raise awareness and funds for hunger, healthy lifestyles, or children empowerment

60. Other Sponsorships Non-Athletic Celebrity Sponsorships
Only publicly sponsor celebrities with charitable causes
Blog Sponsorship

61. Analysis 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

62. Investment
Cash Cow
Mature Market
Little growth

63. Recommendations New packaging Market as “anytime” food
Focus on health benefits & keep up with diet trends