Presentation on theme: "Ready-to-Eat Breakfast Cereal Sarah Icke, Kamille Jackson, Julian Ordman."— Presentation transcript:
Ready-to-Eat Breakfast Cereal Sarah Icke, Kamille Jackson, Julian Ordman
Presentation Overview IntroductionIntroduction Industry OverviewIndustry Overview Advertising Strategies and Raw Data AnalysisAdvertising Strategies and Raw Data Analysis Concluding Analysis and Industry RecommendationConcluding Analysis and Industry Recommendation
Why Cereal? Breakfast is the most important meal of the dayBreakfast 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“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 loyaltyAn industry with extremely high brand loyalty An industry with one of the highest ad-to-sales ratiosAn industry with one of the highest ad-to-sales ratios
Industry Overview Industry Definition Source: IBISWorld
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
Industry Overview Processes raw materials into various cereal products, including ready-to-eat cereals, cereal bars, and hot cereals Source: IBISWorld
Sells through sellers in various channels, including supermarkets, wholesalers, and food service providers Industry Overview Source: IBISWorld
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
Industry Profile Mature Industry Revenue: $11.7bn (2013) Per capita consumption is stagnant Revenue growth: -0.2% (2008-2013), 1% (2013-2018) Source: IBISWorld
Industry Profile Highly Concentrated HHI: 1770.57 (top 4 firms) Top 4 firms: 74.7% market share Oligopoly High barriers to entry Source: IBISWorld
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 Industry Profile Source: IBISWorld
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 http://www.cdc.gov/phlp/winnable/advertising_children.htmlhttp://www.cdc.gov/phlp/winnable/advertising_children.html Stitt, C., & Kunkel, D. (2008). Food Advertising During Children's Television Programming on Broadcast and Cable Channels. Health Communication,23(6), 573-584. doi:10.1080/10410230802465258 Under self regulation cereals advertised to children are less sugary. (2012). Retrieved April 8, 2013, from http://www.bbb.org/us/article/under-self-regulation-cereals-advertised-to-children-are-less-sugary-37619 http://www.bbb.org/us/article/under-self-regulation-cereals-advertised-to-children-are-less-sugary-37619
Non-Compliance With Regulations Often a lot of resistance Fines Reputation damage Impairs producers credibility Expensive recalls Create liability to civil/criminal penalty Industry Profile Source: IBISWorld
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.
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. 13.2 (2004): 241-72. Print. Source.:
Brand Equity & Loyalty However, advertising overcomes brand loyalty in this industryHowever, advertising overcomes brand loyalty in this industry Encourages “switching” behavior at the household level Encourages “switching” behavior at the household level Persuades households to try new brandsPersuades households to try new brands Advertising may be an effective option for new entrantsAdvertising may be an effective option for new entrants An example of Brand Equity:An example of Brand Equity: Blind vs. Branded TestBlind vs. Branded Test Choice increase from 47% to 59% when Kellogg’s brand identifiedChoice 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. 13.2 (2004): 241-72. Print. Source.: Harris, Schwartz, Kelly Brownell, and Vishnudas Sarda. ”Evaluating the nutrition quality and marketing of children’s cereals." Cereal FACTS. (2009): 1-102. Online.
Kellogg’s Company Their Purpose: ”Nourishing families so they can flourish and thrive.”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“Create foods and brands that help to fuel the best in everyone everywhere.” Kellogg’s Website Highest Advertising ExpenditureHighest Advertising Expenditure Highest Ad-Sales RatioHighest Ad-Sales Ratio Forbes, "World's Most Powerful Brands“ in 2012 and 2011Forbes, "World's Most Powerful Brands“ in 2012 and 2011 Interbrand, "Best 100 Global Brands“ in 2012 and 2011Interbrand, "Best 100 Global Brands“ in 2012 and 2011 Forbes, “World's Most Reputable Companies” in 2012 and 2011Forbes, “World's Most Reputable Companies” in 2012 and 2011
Advertising Mediums Television Social Media Websites In-store Marketing
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.
The Effects of Advertising Compared to non-TV advertised ready-to-eat cereals: Compared to non-TV advertised ready-to-eat cereals: TV Advertised child-targeted cereals were purchased thirteen times more frequently TV Advertised child-targeted cereals were purchased thirteen times more frequently Family-targeted brand purchases were ten times more frequently Family-targeted brand purchases were ten times more frequently Adult-targeted cereals were purchased four times more frequently Adult-targeted cereals were purchased four times more frequently 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.
Social Media Myspace & Facebook Several children and family brand cereals have significant presence. Fan Pages
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.
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.
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
Memory Jamming Reinforce positive aspects of cereal Use of characters and catchy slogans Evident from high ad-to-sales ratios
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 http://www.foxnews.com/health/2012/06/22/kids-cereals-are-healthier-ads-arent/ http://www.foxnews.com/health/2012/06/22/kids-cereals-are-healthier-ads-arent/ Stitt, C., & Kunkel, D. (2008). Food Advertising During Children’s Television Programming on Broadcast and Cable Channels. Health Communication,23(6), 573-584. Doi:10.1080/10410230802465258
Advertising to Children Marketing Strategies –Memorable characters – more than 40% of kids cereals –Packaging –Placement on store shelf –Web advertising – “Advergames”
Humor and Emotion Keeps audience attentiveKeeps audience attentive Increase adult motivation through emotional appealIncrease adult motivation through emotional appeal Difficult to appeal to everyone because people have different senses of humor and valuesDifficult to appeal to everyone because people have different senses of humor and values
Humor and Emotion Children Brand Mascots SlogansSongsAnimated Adults Situational Comedy Family Values & Nostalgia
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”: 2000 - Acquired Kashi brand 2011- Gluten-free cereal advertisement and branding, such as Rice Krispies
Athletic Sponsorship Major International Athletic EventsMajor International Athletic Events Individual Amateur/ Professional AthletesIndividual Amateur/ Professional Athletes Usually AmericanUsually American Charitable Athletic EventsCharitable Athletic Events Community athletic events to raise awareness and funds for specific charitiesCommunity athletic events to raise awareness and funds for specific charities
Corporate Responsibility Majority of charities sponsored either raise awareness and funds for hunger, healthy lifestyles, or children empowerment
Other Sponsorships Non-Athletic Celebrity SponsorshipsNon-Athletic Celebrity Sponsorships Only publicly sponsor celebrities with charitable causesOnly publicly sponsor celebrities with charitable causes Blog SponsorshipBlog Sponsorship