Ready to Eat (RTE) Cereal Industry in 1994 - Case Study Example

A popularity of RTE cereal industry can be explained by the concentration of manufacturers in this sector. In 1972 there were the major tendencies of anti-monopolization in this field against the largest manufacturers, such as Kellogg, General Mills, and General Foods. The cereal industry was rather profitable and it is possible to explain such kind of antagonistic moods by an inappropriate level of competitiveness in this field. The major players in this field have used the following tactics in order to deal with the developing practices of trade dealing, in-pack premiums, and vitamin-fortification (Corts 1997, p. 3). The profitability in this industry was intimidated by a potential hazard of short-run advantages of the firms and its mimicking by other competitors.

Moreover, in spite of the popularity of this field of industry, there were a lot of controversies and technological challenges in the manufacturing processes experienced by the firms operating in this field. For example, in 90s in order to manufacture a flake cereal, it was necessary to combine raw ingredients, which was not rather challenging process, actually. It was more complicated to implement the extrusion processes, which were mainly used in the production of children’s cereal. Therefore, in spite of a simple appearance of this industry, it had too intricate system of manufacturing and it was not for everyone to know those secrets.

On the one hand it was not that easy to enter the cereal manufacturing market for private labels. They experienced numerous challenges and brand names prevailed over them. The way for the new companies was open, but it was necessary to facilitate the process of entrance by developing and implementing criteria of a fair price-policy and manufacturing strategies for these companies. Corts (1997) puts it in the following way: “When demand for natural cereals surged