Marketing Management – In 1980, Peter A, Horekens, marketing director for Kellog company

UpdatedDecember 12, 2024

Q.5 Case study
In 1980, Peter A, Horekens, marketing director for Kellog company, was faced with the problem of developing a market for ready-to-eat cereals in the Latin American region. Although Kellog had no competition in the ready-to eat cereal market in this region, they also had no market. Latin Americans did not eat breakfast as the Americans did. The problem was especially prominent in Brazil. To create a market and increase sales in this region, Horekens had to create a nutritious breakfast habit. This was a crucial part of the company’s marketing management – in 1980.

Kellog Company, which headquartered in Battlecreek, Michigan, was founded in 1906 by W.K. Kellog. The company continued to operate successfully with sales in 1980 amounting to 2,150.9 million U.S. Dollars.

The Kellog Company manufactured and marketed a wide variety of convenience foods with ready-to-eat cereals topping the list. The company’s products were manufactured in 18 countries and distributed in 130 countries. The ready-to-eat cereals sales made up the majority of international sales.

In 1980, Kellog International operations accounted for 38 percent of Kellog Company’s sales of more than $ 2.0 billion. The United Kingdom was by far Kellog’s largest market. Internationally, sales in the ready-to-eat cereal market continued to increase, although in the past few years the competition also had increased. But in Latin America, consumption of ready-to-eat cereals was negligible.
The Latin American Market The Latin American Market, mainly Mexico and Brazil, showed great potential as a Kellog’s ready-to-eat cereal market. The demographics fit the ready-to-eat market, the only problem was that Latin Americans did not eat the traditional American-style breakfast.

The Latin American market included a growing number of families with children. The population mix was becoming younger. The developing economy enabled consumers to spend more of their income on food. Kellog wanted to increase sales in this Latin American region, especially Brazil, but consumers had turned their backs on the American style breakfast. How was Kellog to create a nutritious breakfast habit among the Brazilians? This challenge was a significant aspect of their marketing management in 1980.

The company asked J. Walter Thompson, Kellog’s advertising agency, to help instill the breakfast habit in Brazil. According to Horekens, “In general, Brazilians do what people in novellas do”. Novellas are Brazilian soap operas. J. Walters Thompsons tried to advertise Kellog ready-to-eat cereal and instill the breakfast habit by advertising within a soap opera. The first experience of advertising within a soap opera failed; the advertisement portrayed a boy eating the cereal out of a package. Kellog wanted to teach the Brazilians how to eat a complete, nutritious breakfast, not just Kelloy’s cereal. The commercial did not work, because it made Kellog ready-to-eat cereal seem more like a snack than a major part of a complete breakfast. Kellog wanted to portray ready-to-eat cereal as a part of a complete, wellbalanced nutritious breakfast. Thus, they needed the cereal to be eaten in a bowl with milk alongwith other foods to make a complete breakfast. The company believed that the growing population in this region would reinforce the importance of grains as a basic food source. The 1980 population in Brazil was 119 million, which made it the sixth most populated country in the world and the population was expected to grow to 165 million in the next few years. Within this population growth was an increase in the number of women of childbearing age, which further supported Kellog’s potential for a successful cereal market. The structure of the population in Brazil in 1980 was:

 Thirty seven percent of population under age 15.
 Forty-eight percent of population under age 20.
 Twelve percent population over age 50.
 Six percent of population over age 60.
 These figures showed that the population of Brazil better fit the
market for a ready-to-eat cereal, with the increasing number of children and elderly people as the two largest cereal consuming
segments.

The “cult of the family” continued to be the most important institution in the formation of the Brazilian society. This culture ideal was reflected in the ways they conceptualized and evaluated the range of personal and social relations. This seemed to be the way Kellog would have to demonstrate the importance of a nutritional breakfast – by playing up the family and its importance. Through the use of the novellas, Kellog made a second attempt to teach the Brazilians the importance of breakfast. Most Brazilian families watched these soap operas, composed mostly of family scenes. In their commercials, Kellog opted for scenes that showed the family at the breakfast table. One member of the family, usually the father, took the cereal box, poured the cereal, and then added milk. This scene represented a complete “Kellog” breakfast in a way that Brazilians could relate to.

The advertisement focused first on nutrition, then on flavor, and finally on ease of preparation. As a result of this campaign, sales in Brazil increased. Kellog controlled 99.5 percent of the ready-to-eat cereal market in Brazil; however, per capita cereal consumption was less than one ounce or several spoonfuls per Brazilian annually, even after advertising. Although Kellog controlled the
market, there was not much of a market to control. Brazilians had begun to eat breakfast, but Horekens was not sure whether sales would continue to increase. His problem was – how could Kellog further convince the Brazilians of the importance of eating a nutritional breakfast in order to establish a long-term market?

Question:
(10 × 2 = 20)

What would be your advice – to continue or quit – to the board of Directors of Kellog? Explain with reasons the factors which you would
consider essential in framing your report?

Analyse the case to enable you to prepare a report about the given situation.

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