Characteristics of the breakfast cereal industry Essay

Manufacturer History Lunch break cereals are certainly not a homogenous product. The ready-to-eat breakfast time cereal sector may be seen as a relatively low economies of scale and relatively low levels of technology.

In other words, the entry into this sector is easy. Between your 1950s as well as the 1970s there was clearly no admittance of new businesses in the industry despite the fact that all the incumbent firms such as Kellogg, Basic Mills, Standard Foods and Quaker Oats, made significant profits. Later however , there was clearly the entrance of new low-end companies in the markets plus the number of brands sold by these organizations also improved substantially from 25 to more than eighty, and this number is still on a rise (Cabral, 2k, p. 265-266).

Pricing developments For decades the breakfast food market was one of the most profitable in the United States. The industry had a consolidated structure dominated by Kellogg, Basic Mills and Kraft Foods with its Content brand. Solid brand commitment, coupled with control of the portion of supermarket shelf space, helped to limit the opportunity of new entry. Meanwhile the steady demand growth of around 3% per year kept the industry revenues expanding. Also Kellogg, which in turn accounted for above 40 percent of the business, acted as the price head in the industry for years in the industry.

Yearly Kellogg elevated cereal prices, its competitors followed and industry profits too remained high. Yet , this advantageous structure did start to change in the first 1990s if the growth popular slowed then stagnated while the lifestyle and so food patterns changed plus the market noticed the go up of effective discounters including Wal-Mart that started advertising their own make of cereal. Because sales of cheaper store-brand cereals started to take-ff, supermarkets no longer were as dependent on brand names for growing traffic and hence they did start to demand affordable prices from the branded cereal suppliers.

Initially, the branded cereal manufacturers tried to hold against these negative trends. Yet , in 1996 Kraft that was then possessed by Philip Morris aggressively cut prices by 20 % due to the Post brand in are attempt to gain market share. Kellogg son adopted with a nineteen percent discounted on two-third of their brands and General Generators quickly did the same.

However , this also did not change the consumption routine the growth prices of which remained flat and revenues then started going down for all the branded cereals (Hill, Jones, 2009, p. 52). The trend continuing in 2000s also plus the situation made worse with the private-label sales continuous to make inroads, gaining over 10 percent from the market. To top it all off, the sales of breakfast cereals started to agreement at 1 percent per annum and the period between 1998-2001 noticed the market leader Kellogg slipping down to the second position for the first time in its background since its inception in 1906, by General Mills that continued to launch high-priced price and promotion campaigns.

To cover the rising price General Mills raised rates in 2001 and opponents soon implemented the trend. However , both Kellogg and Basic Mills tried to move further more away from selling price competition in the marketplace by diversifying and focusing on brand extension cables such as Unique K around the behalf of Kellogg and new different types of Cheerios. Exceptional K was instrumental and helping Kellogg recapturing its market command position coming from General Mills and this restored focus on non-price competition stopped years of damaging price warfare (Hill, Roberts, 2009, p. 52). Goal markets The breakfast food industry focuses on several diverse markets but focuses upon two large ones namely the baby boomers and their kids.

Since an increased proportion with the baby boomers are highly educated, health appeals will be paramount. As a result many brands have positioned emphasis on different kinds of oat-bran cereal. The other considerable market, geared to children is likewise highly designed.

Various brands have effectively used sporting activities personality and trade characters such as Tony a2z the Tiger to attract the youngsters towards their products and preserve brand commitment. The breakfast cereal market has been adept at target market segmentation and endorsing favorable company images. The strategy of the overall market especially Kellogg, the market head, has been to get a comprehensive selection for the retailers concentrating on specific marketplace segments (Michman, Mazze, 99, p. 109-111) Competition Breakfast time cereal sector faces competition from hand held breakfast items such as bagels, muffins, doughnuts etc . These kinds of have the truth is led to a decrease in the expansion of the breakfast cereal sector.

The sector also encounters competition by frozen waffles, pancakes, and French toast brands which have proved to be a problem both in days gone by and the present. Many analysts consider the competition is a result of the enhancements made on dietary patterns, though several also declare this has been due to th increase in cereal rates for the branded portion (Michman, Mazze, 1999, g. 112-113). Advertisements and Marketing activities In the time of WH Kellogg, the breakfast cereal industry continues to be dependent on sales strategies and high-priced promotions. In reality in 1909 itself similar budget of Kellogg had reached one particular million per year.

Needless to say this really is a major problem in the market which has become price delicate in present times. This kind of activity has led to a decline in profits and considering that the industry share have not increased since the 1990s, this has become a lot more of a problem. There were likewise many insufficiencies generated by coupons and in-store offers. For instance, much more than 95 percent of the food coupons were thrown away and not redeemed and approximately half the promotional costs did not reach the buyers in the form of lower prices.

Because of these issues, as well as congressional investigations and competitive treats, the lunch break cereal market has relocated to lower prices. While the comes back earned by cereal manufacturers exceed other grocery items, there is fierce competition amongst manufacturers (Michman, Mazze, 1999, p. 113-114). Factors leading to success and failure There is a combination of parameters that help the successes and failure in the breakfast food industry. These kinds of variables and strategies incorporate innovation, target-market segmentation, graphic, physical environment resources, and human resources.

This kind of factors must be combined in numerous degrees to be successful. The breakfast cereal market has shown creativity in item and product packaging strategies. In addition to this, breakfast snack bars certainly are a new innovation.

The image of the breakfast food industry continues to be positive enough to withstand the assault of private-label brand sot a large extent. As well cereal companies with their powerful track documents and huge advertisements budgets don’t have much trouble convincing retailers to give their new product introduction a chance. In 1970s, Kellogg designed shelf space allocation programs for supermarkets. Sophisticated computers and applications developed by members of the breakfast time cereal market now help to allocate shelf space relating to yield. The lunch break cereal market has also been powerful in designing packaging intended for shipping as well as for display purposes.

To sell their product brands and support the company brand value, the breakfast food manufacturers allow us the technique that backlinks the brand term to the business name instead to identifying company products by their individual brands. For instance, Kellogg’s Rice Krispies and Special K, and also General Mills’ Total Raisin Bran and Total Corn Flakes use this strategy. To fend off non-public brand competition by offering products depth and high manufacturer identification (Michman, Mazze, 1999, p. 114-115).