Breakfast cereal market analysis

The term eat food grains ski bindings a wide variety of grain products that argon usually cooked or processed to improve their texture, flavor and digestibility. Although these products are often made from flours, they disagree from breads and other baked goods in that they are non usually lift instead they whitethorn be toasted to crispiness like crackers. The advanced ready-to eat eat caryopsiss are only about 100 historic period old.They owe their development to the Seventh Day Adventists, an American religious camarilla for whom Dr. JH Kellogg invented a granola-like ready-to-eat breakfast cereal/ later Dr.JH Kellogg and his brother WK Kellogg founded the cereal high society which dormant bears their name. Interestingly yet another pioneer of the constancy was CW mark who had been a patient and ate Dr. JH Kelloggs cereal and was inspired by it enough to take a crap his own version of the product.The establishment of the breakfast cereal patience came about the t ime the United States began a transition from a predominantly agricultural society to a more industrialized urban culture. A strong selling point of the ready-to- eat cereal was and still is, is their convenience (Ensminger, Konlande, 1993, p.261-262). there seems to be indication that at that place will be steady increase in the consumption of commercial cereal products rough the world as the developing countries attempt to feed their burgeoning population. The present musical theme presents an analysis of the Breakfast cereal patience as well as marketplace. Characteristics of the Breakfast cereal industriousness Brand History Breakfast cereals are not a homogenous product. The ready-to-eat breakfast cereal industry may be characterized by relatively busted economies of scale and relatively low levels of technology.In other words, the entry into this industry is easy. Between the 1950s and the 1970s there was no entry of crude firms in the industry even though all the incu mbent firms such as Kellogg, everyday Mills, General Foods and ally Oats, made significant profits. Later however, there was the entry of newly low-end companies in the markets and the number of bulls eyes sold by these firms as well increased substantially from 25 to more than 80, and this number is still on a rise (Cabral, 2000, p. 265-266). price trends For decades the breakfast cereal market was one of the most profitable in the United States.The industry had a consolidated structure dominated by Kellogg, General Mills and Kraft Foods with its Post instigant. Strong brand loyalty, bring together with control over the allocation of supermarket shelf quadrangle, helped to limit the potential for new entry. Meanwhile the steady take ontogeny of around 3% per annum unploughed the industry revenues expanding. Also Kellogg, which accounted for over 40 part of the market share, acted as the price leader in the industry for years in the industry. any year Kellogg increased cereal prices, its rivals followed and industry profits alike remained high.However, this genial structure started to change in the early 1990s when the growth in demand slowed and then stagnated as the lifestyle and hence food patterns changed and the market maxim the rise of powerful discounters such as Wal-Mart that started promoting their own brand of cereal. As sales of cheaper store-brand cereals began to take-ff, supermarkets no longer were as dependent on brand names to bring in traffic and hence they started to demand pull down prices from the branded cereal manufacturers.Initially, the branded cereal manufacturers tried to oppose against these adverse trends. However, in 1996 Kraft which was then owned by Philip Morris sharp cut prices by 20 % for its Post brand in am attempt to gain market share. Kellogg son followed with a 19 percent price cut on two-third of its brands and General Mills quickly did the same. However, this too did not change the consumption pattern the growth rates of which remained even and revenues then started going down for all the branded cereals (Hill, Jones, 2009, p. 52).The trend go on in 2000s also and the situation worsened with the private-label sales continuing to make inroads, gaining over 10 percent of the market. To top it all off, the sales of breakfast cereals started to contract at 1 percent per annum and the period between 1998-2001 saw the market leader Kellogg sliding down to the 2nd slur for the firstborn time in its history since its inception in 1906, by General Mills that continued to launch pricey price and promotion campaigns. To cover the rising cost General Mills raised prices in 2001 and competitors soon followed the trend.However, two Kellogg and General Mills tried to move further external from price competition in the industry by diversifying and focusing on brand extensions such as Special K on the behalf of Kellogg and new varieties of Cheerios. Special K was instrumental and helping Kellogg recapturing its market leadership position from General Mills and this renewed focus on non-price competition halted years of damaging price warfare (Hill, Jones, 2009, p. 52). Target markets The breakfast cereal industry targets several diverse markets but focuses upon two large ones namely the go bad boomers and their children.Since a high proportion of the baby boomers are highly educated, health appeals are paramount. Thus many brands countenance placed emphasis on various types of oat-bran cereal. The other sizeable market, targeted to children is also highly developed. Various brands collapse successfully used sports personality and trade characters such as Tony the tiger to attract the children towards their products and extend brand loyalty. The breakfast cereal industry has been estimable at target market segmentation and promoting favorable brand images.The outline of the overall industry especially Kellogg, the market leader, has been to provide a all-emb racing assortment for the retailers targeting specific market segments (Michman, Mazze, 1999, p. 109-111) Competition Breakfast cereal industry faces competition from hand-held breakfast products such as bagels, muffins, doughnuts etc. These have in fact lead to a decrease in the growth of the breakfast cereal industry. The industry also faces competition from frozen waffles, pancakes, and cut toast brands which have proved to be a concern both in the past and the present.Many analysts consider that the competition is due to the change in dietary habits, though some also say that this has been due to th increase in cereal prices for the branded segment (Michman, Mazze, 1999, p. 112-113). Advertisements and Promotional activities From the time of WH Kellogg, the breakfast cereal industry has been dependent on marketing strategies and expensive promotions. In fact in 1909 itself the publicizing budget of Kellogg had reached 1 gazillion per annum. Needless to say this is a major pr oblem in the industry which has become price sensitive in present times.This activity has led to a decrease in profits and considering that the market share has not increased since the 1990s, this has become even more of a problem. There were also many insufficiencies generated by coupons and in-store promotions. For instance, more than 95 percent of the cereal coupons were thrown and twisted away and not redeemed and approximately half of the promotional expenditures did not reach the consumers in the form of lower prices. Because of these inefficiencies, as well as congressional investigations and competitive treats, the breakfast cereal industry has moved to lower prices.As the returns earned by the cereal manufacturers exceed most other mart products, there is fierce competition among manufacturers (Michman, Mazze, 1999, p. 113-114). Factors contributing to success and failure There are a combination of variables that contribute to the successes and failure of the breakfast cer eal industry. These variables and strategies include intent, target-market segmentation, image, physical environment resources, and human resources. Such factors must be combined in various degrees for success. The breakfast cereal industry has shown innovation in product and packaging strategies.In addition to this, breakfast snack proscribe are a new innovation. The image of the breakfast cereal industry has been positive enough to withstand the assault of private-label brand sot a large extent. Also cereal manufacturers with their successful track records and huge advertisement budgets do not have much difficulty in convincing retailers to give their new product introduction a chance. In 1970s, Kellogg designed shelf space allocation programs for supermarkets. Sophisticated computers and programs developed by members of the breakfast cereal industry now help to allocate shelf space according to turnover.The breakfast cereal industry has also been successful in designing packag ing for shipping and for display purposes. To sell their product brands and retain the company brand value, the breakfast cereal manufacturers have developed the dodge that links the brand name to the company name instead to identifying brand products by their individual brand names. For instance, Kelloggs Rice Krispies and Special K, as well as General Mills Total Raisin Bran and Total corn whiskey Flakes use this strategy. To fend off private brand competition by offering product line depth and high brand denomination (Michman, Mazze, 1999, p. 114-115).