The Buyer's Behavior in the Breakfast Cereal Market in Australia - Research Paper Example

Buyer’s Behaviour of Executive Summary Kellogg’s is the market leader of breakfast cereal industry with the highest market share of 36%. The company holds a vast geographic presence in several countries, with maximum market penetration in the US. This paper focuses in Kellogg’s operations and buyer’s behaviour in Australia. The company also holds the highest market share in the Australian market despite of strong competition posed by Nestle and Aldi. Kellogg’s has introduced a series of cereal products targeted at different consumer demographics. The promotional activities have been strategically designed to attract the customer and consumer alike. Coco pops is one of the most popular product of Kellogg’s among the kids. The marketing strategy of this product has been discussed in details, which includes promotional activities, packaging, use of reference groups, etc. The segmentation, targeting, positioning of Kellogg’s has also been discussed with the help of perceptual mapping, that shows the relative position of the company with respect to its rivals. Kellogg’s new product development has also been suggested along with future recommendation for improving the company’s marketing and business activities. Table of Contents 1.0 Introduction 5 1.1 Purpose 5 1.2 Scope 5 1.3 Background 5 1.4 Assumption 5 1.5 Limitation 6 2.0 Background Information 6 2.1 Industry 6 2.2 Micro Environment 7 2.3 Competition 8 2.4 Macro-environment 8 2.5 Delivering Value 9 3.0 Segmentation 10 3.1 Product Segmentation 10 3.2 Targeting 11 3.3 Positioning 11 4.0 Analyze Buyer’s Behaviour 13 4.1 Family 13 4.2 Reference Groups 15 Culture, Sub-culture and Cross culture 15 4.3 New Product extension 16 4.4 Global Marketing Strategies 17 5.0 Recommendation 17 5.0 Conclusion 18 References 19 1.0 Introduction 1.1 Purpose The purpose of this paper is to highlight the buyer’s behavior in the breakfast cereal market in Australia. It also covers the business report of Kellogg’s in Australia, along with a thorough discussion of its marketing mix. 1.2 Scope This project will help the reader to analyze the cereal market industry of Australia and it will also give a clear insight about the biggest player in the industry, which is Kellogg’s. This will help the researcher and other companies to gain sufficient information about the Australian cereal market in order to launch a new product or establish a competitive strategy. 1.3 Background The study of buyers behaviours allows the researcher to predict the reactions of the consumers to a newly launched product or towards a particular promotional activity. It also helps a company to monitor any change in the purchase trend among the consumers in a particular industry. 1.4 Assumption This study has been done based on the assumption that the industry of breakfast cereal will not be affected by any unforeseen calamities. Moreover, it has been assumed that all the data collected are accurate. 1.5 Limitation This study is limited by the use of secondary data. Use of primary data would have enhanced the quality and accuracy of the assessment. Moreover, the paper only highlights on a single company Kellogg’s, which largely eliminates the rest of major cereal companies. 2.0 Background Information 2.1 Industry Size The breakfast cereal market in Australia is valued at $1.2 billion, which accounts for 3.81% of the global market value of $31.43 billion (Westenberg, C, 2012). Furthermore, the Australian market is growing at an annual rate of 1.1% (IBISWorld, 2014). The ready to eat breakfast cereals are consumed by about 36% of the population (Australian Bureau of Statistics, 2014). Major Players In Australia, Kellogg’s dominates the breakfast cereal market. Other major players include Nestle Australia, Sanitarium Health Food and some private brands like Goldenvale by Aldi (Euromonitor, 2014). In the global industry, the major players include General Mills, Cereal Partners Worldwide, etc. (Marketline, 2014). Future Projection The global breakfast cereal industry will grow 12.7% between 2013 and 2018. This can be the reason of the growing health concerns among the customers (Marketline, 2014). 2.2 Micro Environment Company Kellogg’s is a multinational breakfast cereal manufacturer headquartered in Michigan. The company is best known for its breakfast cereals. Apart from ready to eat breakfast cereals, the company also sells crackers, cookies, snacks, cereal bars, potato chips, etc (Marketline, 2014a). Size As of fiscal year 2013, Kellogg’s have earned revenue of $14.80 billion, a 4.2% increase over the previous year. The American market accounts for more than 61% of the total revenue generation (Marketline, 2014a). Product Offered Kelloggs offer a wide range of products to its customers. The popular brands of breakfast cereal include All Bran, Coco Pops, Corn Flakes, Crunchy Nut, Froot Loops, Just Right, Mini Wheat, Nutri-Grain, Special K, Rice Bubbles, Sustain, Sultana Bran, etc. The company also offers several products under the brand names Fruity Snacks, Fiber Plus, Cinnabon, etc (Kelloggs, 2014. Our Brands). Market Share Kelloggs holds the maximum market share in the industry which is more than 36%. The company as of 2013, recorded the maximum market share in Australia to be 38%. Trends The Australian market may see a dip in the consumption of the ready to eat breakfast cereal, owing to the growing trend of liquid breakfast consumption. This as a result has reduced the consumption of the breakfast cereals (News.com.au, 2014) 2.3 Competition In Australia, Kellogg’s faces a strong competition from Nestle and the private label brand from Aldi named Goldenvale. 2.4 Macro-environment 1) Demographics: According to the reports of Australian Bureau of Statistics (2014), the maximum consumption of breakfast cereal is done by the young and old population. With the advancement of medical science, the number of old population is increasing every year, which as a result has also increased the overall consumption of breakfast cereals (Australian Government, 2014). 2) Rate of Immigration: According to the data of Australian Government (2012), the rate of immigration in Australia has increased over the years. Most of the immigrants of Australia belong to the UK, where the cereal consumption is quite high. As a result a large number of British immigrants have increased the breakfast cereal consumption in Australia. 2.5 Delivering Value Product Kellogg’s offer breakfast cereals, snacks, health bars, beverages, etc. Price The company priced its products competitively with its rivals, like Nestle. However, the prices of Kellogg’s products are higher than the locally produced breakfast cereal (Woolsworth, 2014). Place The company caters to a wide range of geographically diversified market, like the USA, Europe, Asia-Pacific and Middle East and Africa (Marketline, 2014). Promotion The promotional activities of Kellogg’s mostly include Television commercials, highlighting the health benefits of having cereals as breakfast. The company also attracts customers through billboards and hoardings (YouTube, 2009). 3.0 Segmentation 3.1 Product Segmentation Health Oriented Taste Oriented Kids Cereals Ready made Special K Coco pops Froot Loops K Time All Bran Frosties Crunchy nut LCMs Guardian Corn Flakes The above chart depicts the product segmentation based on certain parameters. The health oriented cereals are targeted at the adult consumers who are concerned about their health and these cereals will offer them to have a healthy breakfast that will help to keep their cholesterol and fat level within control. The taste orientated cereals like coco pops and frosties are offered to the young consumers who are more attracted towards a tasty breakfast. The kids’ cereals are targeted at the age group of 2-10. These products are multicoloured to attract the children with attractive tastes and packaging. The company also offers certain readymade food items like K time for instant consumption. 3.2 Targeting Kellogg’s has targeted the middle and upper classes of the society. People belonging to these social groups possess the necessary affordability and desire for Kellogg’s products. This social segment is particularly concerned about their health, which makes them the perfect target market for the company. The company has also targeted the market based on the customer profile. Products like Special K are targeted at middle aged women, whereas froot loops are targeted at the children (Euromonitor, 2014).). 3.3 Positioning The company has positioned itself in the health platform, by highlighting the perceived value of having Kellogg’s cereal as breakfast. The fitness proposition of the company’s products is perceived to carry a higher value for the consumers. Kellogg’s has also positioned its brands differently depending on their value proposition. The Special K is positioned to have higher nutrition value than Froot loops, but is positioned lower in terms of taste. On the other hand the classic Corn Flakes is inferior in taste but has similar nutritional value as Special K. Kellogg’s is considered to have higher perceived value than Nestle in the breakfast cereal industry. This can be justified by the high brand preference of Kellogg’s and its leading market position. Figure 2: Perceptual Map of several cereal brands Source: (Marketline, 2014) Figure 3: Perceptual Map of Kellogg’s Source: (Marketline, 2014a) 4.0 Analyze Buyer’s Behaviour 4.1 Family The products of Kellogg’s are mostly targeted at the entire family. Different brands have different value proposition for different family members. The coco pops mainly targets the kids in the family, by highlighting the nutritional value for a kid’s growth and the much preferred chocolaty taste. On the other hand, the Special K has been targeted at the adults who want to lower their cholesterol and fat level. Kellogg’s have highlighted the product’s value proposition by pointing out its ability to keep the adults physically fit to go through their hectic schedule. The company has also designed some of its products like the All-Bran with higher fiber content for customers with digestive problems. Moreover, the old members of the family are also targeted with the products like low fat Granola. Kellogg’s has also introduced ready to eat healthy snacks and bars as a substitute for office meals for people who are too busy at work. Thus it can be stated that the company has targeted every member of the family by offering different product for different members. The buying decision of groceries is mainly taken by the mothers in the family. Thus the company designs its promotional activities of Coco pops in order to target the mothers. The company tries to educate them by highlighting the importance of a healthy breakfast for their kids, and how it can improve their daily performance and increase their immunity. By highlighting the benefits for their children, Kellogg’s appeals to the emotional aspect of the consumers, thereby gaining more consumer preference. The special K on the other hand aims to keep the adult consumers healthy and gains brand preference by highlighting how Kellogg’s products can reduce health risks by reducing cholesterol and fat (Kelloggs, 2012). The product line of Kellogg’s has been divided into several SKUs (stock keeping units) by introducing packages of different volumes. The bigger packs are introduced for the families with lots of children consumption. For families with single child, the company offers medium packs of 500 grams (Kelloggs, 2012). The company also has single serving packs that can be easily carried anywhere, which allows parents to prefer Coco pops over other products while they are travelling with the family. The promotional activities are designed in such a manner that it attracts both the customer and the consumer alike. Since, coco pops are for kids, the advertisement and even the packaging contains cartoon character of Coco monkey that acts as the mascot of the brand. The kids can easily refer to the character which will help them to have high brand recall. The advertisement also acts as a trigger that initiates the pestering factor among the children, which in turn forces the parents to buy coco pops. 4.2 Reference Groups Reference groups acts as a vital factor in spreading of word of mouth. The members associated in a particular reference group tend to influence the consumption pattern of each other. Thus members in a same reference group have same consumption pattern. Influencing one child in consuming coco pops will eventually result in spreading of word of mouth among his friends, and as a result they will be influenced to consume it too. Likewise, among the reference group of the parents, the high demands and benefits of coco pops will be discussed as well. Thus the reference groups will act as a passive marketing medium for the company. Culture, Sub-culture and Cross culture According to the reports of ABC News (2014) the obesity rate in Australia is growing at a fast pace, which as a result has become an issue of concern for the Australian public. In order to curb obesity and switch to a healthy life the Australians are switching to healthier diets, like low fat cereals and snacks. This as a result has increased the sales of Kellogg’s products. Moreover, the company has highlighted the obesity and health issue as an immediate need for the customers that has to be met with urgency. Kellogg’s has received the Foodbank award for taking a great initiative to eliminate hunger from Australia. The company has served more than 7 million breakfasts and has made a donation of $ 100,000 to further improve the Foodbank’s charity programs. The company has also launched its own corporate social responsibility program called “Breakfast for Better Days” (Kelloggs, 2014b). This effort has allowed Kellogg’s to server the children in need and at the same time has strengthened its brand image among the consumers. The company has reinforced the nutritional value proposition of its products and it has also uplifted its image as an ethical and socially responsible company. Kellogg’s makes sure that its business operations are environmentally safe and sustainable. The company follows all the necessary environmental standards, which allows it to keep the carbon footprint to a minimum. The company also uses 100% recycled material for packaging, which as a result saves a lot of trees and increases environmental sustainability. Kellogg’s has optimized its operation process over the years, and as a result the company has been able to reduce its water consumption. In the year 2012, the company has reported to use 5.09 cubic meters of water, which is 10.60% less than that of in 2008. Moreover, Kellogg’s has kept its greenhouse gas emission stable at 4.5 metric tons over the past three years (Kelloggs, 2012). 4.3 New Product extension A new product extension needs to be done depending on the consumers’ preference and consumption trends. Almost all the products of Kellogg’s are sweet based, with added or naturally occurring sugar content. Although the company has a wide product portfolio, but all of them are standardized and may eventually bore the customers with similar tastes. A new product, if launched should carry a new experience for the customers. Introducing a corn snacks with salty and spicy flavour may act as a viable option for a new product development. It will act as a healthy substitute for potato chips. Moreover, this product will act as a ready to eat cereal snack, where the consumers will not require milk for consumption. Thus it can be consumed instantly from the packet. 4.4 Global Marketing Strategies In order to introduce coco pops in other countries, the company must ensure that the product is in line with the socio cultural background of the region. Coco pops has been released in different regions in different names, such as in America it has been launched under the name Coco Krispies, in India it goes by the name Chocos. Thus for introducing coco pops to another country, Kellogg’s needs to find another name that will be compatible with the culture and will not pose as a different meaning in their native language. Moreover, the promotional activity must be designed keeping in mind the local cultural trend and preferences. 5.0 Recommendation The extremely big product line up causes internal cannibalization, which leads to increased operating costs and revenue leakage. The company needs to discontinue poorly performing brands, and the ones with nearly same value proposition. This will allow Kellogg’s to focus on the better performing brands. Moreover, it needs to introduce a low price product line, to compete with the local and private label brands. In the near future, apart from third party retail stores, Kellogg’s should introduce its own retail store, stocking its own products. Since, milk is complementary with breakfast cereal; Kellogg’s can diversify its business to produce milk and other dairy products. 5.0 Conclusion Kellogg’s has successfully penetrated in the Australian market and gained the leading position in the country. The company has positioned itself as a healthy cereal manufacturer, which is targeted at the health conscious consumers. The growing health concern among the Australian citizens has led them to increasingly adopt a healthier diet. This as a result has allowed the company to increase its sales by highlighting its value proposition to the customers. The company has designed its marketing and operational strategies in such a way that allows it to gain more consumer preference and a sustainable future for the company. References ABC News. (2014). Australian Obesity rates climbing faster than anywhere else in the world, study show. Retrieved from http://www.abc.net.au/news/2014-05-29/australian-obesity-rates-climbing-fastest-in-the-world/5485724 Australian Bureau of Statistics. (2014). Cereals and Cereal Products. Retrieved from http://www.abs.gov.au/ausstats/abs@.nsf/Lookup/by%20Subject/4364.0.55.007~2011-12~Main%20Features~Cereals%20and%20cereal%20products~720 Euromonitor. (2014). Breakfast Cereals in Australia. Retrieved from http://www.euromonitor.com/breakfast-cereals-in-australia/report IBISWorld. (2014). Cereal, Pasta and Baking Mix Manufacturing in Australia: Market Research Report. Retrieved from http://www.ibisworld.com.au/industry/default.aspx?indid=103 Kelloggs. (2012). Better Days, Brighter Tomorrows. Retrieved from http://www.kelloggcompany.com/content/dam/kelloggcompanyus/corporate_responsibility/pdf/2012/2012_Kelloggs_CRR.pdf Kelloggs. (2014). Our Brands. Retrieved from http://www.kelloggs.com.au/en_AU/product-search.pt-Cereal*.html Kelloggs. (2014a). Our Best Days are Your. Retrieved from http://www.kelloggs.com.au/en_AU/our-history.html Kelloggs.( 2014b). Breakfast for Better Days. Retrieved from www.kelloggs.com.au/en_AU/breakfast-for-days.html Marketline. (2014). Global Breakfast Cereals. Retrieved from www.marketline.com Marketline. (2014a). Kellogg Company. Retrieved from www.marketline.com News.com.au. (2014). Smoothies replace cereals as Australians opt for liquid breakfasts. Retrieved from http://www.news.com.au/lifestyle/food/smoothies-replace-cereals-as-australians-opt-for-liquid-breakfasts/story-fneuz8wn-1226876079037 Westenberg, C. (2012). Australian breakfast cereal makers create group to promote health benefits. Retrieved from http://ausfoodnews.com.au/2012/08/13/australian-breakfast-cereal-makers-create-group-to-promote-health-benefits.html Read More