Marketing Plan for Kellogg Company 2012-2015 - Essay Example

?Table of contents Introduction 2 1 Current company situation 2 2Growth strategy 2 3 Financial overview 3 2.0 Mission ment 4 3.0 Market share information 3 4.0 Market analysis 5 4.1 PESTEL analysis 6 5.0 Market competitors 7 5.1 SWOT analysis 8 6.1 New product service 9 7.0 Future marketing strategy 11 7.1 SMART objectives 12 7.2 Marketing opportunities 11 7.3 Acquisitions 11 8.0 Financial forecasts 11 9.0 Conclusion 12 References 13 Introduction This report seeks to outline a marketing plan for Kellogg’s Company for 2012-2015. The marketing plan includes the following sections: Financial Summary Mission statement and Market Overview SWOT Analyses An idea for a new product or service Marketing objectives and strategies A summary of the main points discussed in the report will be outlined in the conclusion. 1.0 Current company situation Our company was founded in 1906 in Michigan and it specialises in producing and marketing of breakfast food such as cereals and snacks. It operates in 18 countries and sells its products in more than 180 countries. Since its inception, the company has been guided by innovation and commitment as its principles in the areas it compete in. However, we have witnessed challenges such as rising costs of inputs as well as energy in our operations during the recent years. The company also faces intense competition in this sector. 1.1 Growth strategy According to our founding principles, sustainable growth is part of Kellogg’s broader operating principle given that we try to ensure that we remain focused on profitable and revenue growth. The company continues to invest in innovation and brand building initiatives which are seen as key to sustaining its momentum of business. Through these initiatives, the company witnessed a 17 % increase in sales in 2006 which contributed to its growth. 1.2 Financial overview According to information obtained from its official website, with 2011 sales of more than $13 billion, Kellogg Company is regarded as the world’s leader in production of cereals and is also a leader in production of convenient foods. This implies that net sales increased by 6.5% in 2011 up from $12.4 billion posted in 2010. Consolidated results for 2010 (in millions) 2009 2008 2007 Net sales $12,575 $12,822 $11, 776 Net sales growth As reported -1,9 % 8,9 % 8,0% Internal 3,0 % 5,4% 5,4 % Operating profit $2001 $1953 $1888 Operating profit growth As reported 2,5% 4,5 % 5,8% Internal 10,3 % 4,2% 3,1 % Diluted net earnings per share EPS $3,16 $2,99 $2,76 EPS growth 6% 8 % 10% Currency neutral EPS diluted growth 13 % 8% 7% Source: http://www.wikinvest.com/stock/Kellogg_Company_%28K%29/Filing/10-K/2010/F46736458 2.0 Mission statement “Nourishing families so they can flourish and thrive” The above mission statement is a good one since it shows that the company is committed to provide healthy breakfast foods to different consumers across the globe. Since its inception, the organisation has been guided by its founding principles mentioned above in its operations. 3.0 Market share information Kellogg’s strives to make significant investments in research and development and brand building. As such, the company holds the number one category share position in the U.S. as well as other countries it operates (Globe Newswire, 2012). In the snacks category, the company holds the number one position in wholesome snack business and number two position in the cookie and cracker businesses in the U.S. which is based on category dollar share. Kellogg’s also has a fast growing business in wholesome snacks in different countries around the globe. Its market share as going to be explained below is determined by the product type and geographical location also has a bearing on this particular aspect. The company’s brands include the following: Cheez-It®, Coco Pops®, Corn Flakes®, Eggo®, Frosted Flakes®, Kashi®, Keebler®, Kellogg's®, Mini-Wheats®, Pop-Tarts®, Rice Krispies®, Special K®, and many more (www.kelloggcompany.com, 2011). In terms of market share information, the company’s Annual Report (2010) shows that Kellogg is the leader in the U.S. cereal market and it controls about one-third of the market (34%), followed by General Mills with 31 percent and Quaker. The bulk of the company’s revenue is generated from North America which comprises of Canada and US which accounts for about 68% of the total amount while Kellogg’s international accounts for 32 %. According to the same website mentioned above, the market share is also further divided on the basis of product type especially in North America where cereals accounted for about 24 % of the total revenue while snacks accounted forfor 33 % and the remainder was recorded from Europe, Latin America as well as Asia Pacific. The diagram above shows the US cereal market share. (Source: http://www.wikinvest.com/stock/Kellogg_Company) 4.0 Market analysis For our full year 2009, we were at the high end of our long-term annual net sales target with internal growth of 3% (Annual, Report, 2010). Our net sales declined by 2% and consolidated internal operating profit increased by 10%, exceeding our long-term annual growth target. Our reported operating profit grew by 2% while diluted EPS grew by 13% on a currency neutral basis, exceeding our long-term annual growth target of 7 to 9%. Thus, reported EPS was $3.16, an increase of 6% over last year’s $2.99. 4.1 PESTEL analysis for Kellogg’s Political factors – Our activities in the United States are regulated by various government agencies such as Food and Drug Administration, Federal Trade Commission and the Departments of Agriculture, Commerce and Labor. There are also other state and local agencies that regulate its operations. Outside the US, bodies such as the European Union and bodies such as local governments, municipalities also regulate the activities of the company. Political unrest as well as acts of terrorism in the US and other countries also have a bearing on the operations of the company. Economic- factors such as pricing regimes in different locations characterise the macro environment in which the organisation operates. For instance, the prices of the key inputs which include wheat and corn have been significantly rising especially in US and these have an impact on our operations. The aspect of labour cost is another factor which shapes the macroeconomic environment in which the organisation operates. Labour cost is high in US, Canada and Europe compared to Latin America, Asia Pacific and other African countries. Energy costs are generally high especially in US which is recovering from a global economic crisis. Social factors- These include changes in consumer behaviour and preferences in different parts of the globe. In developing countries, cereals are often regarded as luxury given that some people in these countries are facing hunger and starvation due to shortage of basic food commodities. However, consumption patterns of cereals remain high in developed countries. Technological- the level of technological advancement in different parts of the globe affects the marketing efforts by the company. Marketing tools such as the internet or satellite broadcasting cannot be overly relied on since other parts of the globe have poor information and communication technology. This affects its performance in terms of sales in different geographical locations. The use of ICT is also susceptible to hackers or destruction by other natural disasters. Environmental- According to its Annual report (2010), the company’s facilities are subject to various US and foreign, federal state and local law regulations regarding the discharge of material into the environment the need to protect the environment in other ways. Legal factors- the effect of U.S. and foreign economic policies such as interest rates, statutory tax rates, forex exchange rates, other legal and regulatory factors including changes in food safety, advertising and labelling laws characterise the macroeconomic environment in which the organisation operates. 5.0 Market competitors Kellogg's does not operate in isolation given that there are also other players in the market for cereals. Basically, the major competitors of Kellogg’s are General Mills and Kraft. According to its Annual Report (2010) Kraft which is a leader in the segment of snacks generates the highest amount of revenue compared to General Mills and Kellogg’s. General Mills and Kellogg on the other hand are dominant in the cereal segment which generates the bulk of their revenue. Basically, cereals and snacks are the major products offered by these three competitors in this particular industry. However, in as far as risk is concerned, factors such as oil as well as plastic prices have an impact on the operations of the organisation. The table below shows the market figures of other competitors in the same industry. The table below show the statistics about competitor analysis in this convenience food sector. Company Net revenue (million) International revenue, % of sales Gross margin percent Kellogg $12, 575 32,3 % 42,9% General Mills $14, 796 18,2% 39,7 % Kraft $40,386 41,4% 36,2 % Source: http://www.wikinvest.com/stock/Kellogg_Company_(K) 5.1 SWOT analysis Basically, SWOT analysis is a strategic tool that is used to scan the micro environment of the organisation (Strydom, 2003). SWOT stands for strengths, weaknesses, opportunities as well as threats that confront any given business. Strengths and weaknesses are environmental factors while opportunities and threats are external factors. As such, this part of the marketing plan outlines these factors in detail as well as the extent to which they impact on business. Strengths- the organisation’s ability to develop its brand and value which are satisfactory to the consumers has positively impacted on the growth of the company. A strong brand name and committed workforce by the organisation contributes to its strengths and this has added to its competitive advantage. Since inception, employees at Kellogg’s have been guided by the founding principles of innovation and commitment to satisfy the needs of the customers. Weaknesses- Though to a lesser extent, the company’s over reliance on its brand name is a weakness since there are also other competitors capable of offering quality products. Opportunity- One of Kellogg’s major sources of competitive advantage the development of its global infrastructure which is also seen as a major opportunity. It is able to distribute its products to different retailers through its own infrastructure. The other opportunity is that the company has greatly invested in research which promotes its plans for continual growth. The founding philosophy of strong commitment to nutrition health and quality continues to drive improvement of the products offered by the organisation. The company’s legacy of innovation continues to be a great opportunity in its operations since it is in a position to meet the needs and interests of the customers. Threats- Likewise, this organisation does not operate in a vacuum. As such, the major threat to its operations is the aspect of competition which exists in the market in which it operates. The other threat is the risk associated with changes obtaining in the global economy such as the recent global economic crisis which affected all sectors of the economy across the board. The other threat is that the company can be negatively affected by bad weather conditions in different parts of the globe given that all its inputs produced on farms. Bad weather conditions can threaten the viability of the organisation in its operations. 6.1 New product In order for Kellogg Company to maintain its market share in this particular industry, it is imperative for it to develop new products in order to keep pace with the changing tastes of the consumers. Regardless of our good reputation owing to our branding strategy, it must be realised that consumer needs are not stagnant as they are susceptible to changes taking place in the environment. In order to satisfy the changing needs of the consumers, there is need to conduct market research in a bid to establish their interests. This research can be used in the development of new products or improvement of products that already exist in the market so as to appeal to their interests. In this scenario our company will put concerted efforts in conducting consumer research across the globe given that it operates in different parts of the globe. Since the company is a leader in the cereal market in the US and abroad, there is need for it to develop new products particularly snacks since their popularity is not as widespread as that of the cereals. In this particular case, a new product called Kellorg’s Bite can be introduced to the market. This product seeks to retain its crunchiness but with added nutritional value. This product is energy giving and it can be taken as a light meal. It comes in different flavours such as chocolate as well as vanilla flavour. There are likely chances that a new product will appeal to different people across the globe as it may possess new features that are not present in other products already existing in the market. This strategy of product development is likely to appeal to the interests of both existing and new customers and it is likely to increase the number of sales generated. Source: http://www.quickmba.com/marketing/product/lifecycle/ It is anticipated that the product will go through different stages as illustrated above since its inception and it can gradually appeal to the interests of many customers which can increase the organisation’s market share. Indeed the introduction stage is concerned with building brand awareness of the new product, Kellorg’s Bite while the growth stage will specifically focus on building brand preference. Thus various marketing strategies will be implemented throughout the life span of the product and it is anticipated that this new product will increase the market share for the company. 7.0 Future marketing strategy The organisation seeks to increase its market share through an increase in the sales. Thus, the objective of business in this case is to increase revenue generated by the organisation and the strategy that can be implemented in order to achieve this feat is related to an improved marketing communication system. We are going to implement the following marketing mix for our new product “Kellogg’s Bite.” Product-Kellogg’s Bite is an energy giving type of snacks and it can be consumed at any time of the day. This product contains carbohydrates, low fat and energy giving properties. Price- The ideal price for the smallest package of 500g is $1,50. This price is ideal to different types of people since it is slightly lower than other products already existing in this same sector. Place- various retail stores will be used to distribute the new product. Personal selling will also be improved in order to convince as many people as possible about the new product being offered. It is our hope that there are high chances of positive response if people interact in a face to face situation. Promotion- our target consumers are mainly young people between the ages of 16-45 since these are still very active. We want to appeal to their interests particularly those active in sports since this is an energy giving product. We are going to use the internet to advertise this new product, posters as well as bill boards will also be used to advertise the product. 7.1 SMART objectives In order to improve the marketing communication system for Kellogg Company, the SMART strategy can be adopted. We will outline specific goals these are related to pull communication strategy which can appeal to the interests of as many people as possible to the new product offering. This strategy has to be measurable and his can be done through an observation of the sales patterns of the product. Indeed, our goals have to be achievable hence the message has to be tailored in a favourable way to potential customers. This goes hand in hand with the aspect of realistic goals which have to be attained within a specified time frame. In this case, this can be done in one year. This period is long enough to implement the pilot project that is meant to increase revenue generated from the sales of the products offered. 7.3 Acquisitions The other strategy that we can implement in order to gain a competitive advantage is related to acquisitions. The organisation can acquire other companies that are less performing in this particular sector as this can increase the revenue generated through a rise in the volume of sales. Through acquisition of other companies, competition is minimised which gives the company an advantage in its endeavour to increase the revenue generated. Acquisition also entails growth of the organisation which can translate into an increase in the revenue generated. 8.0 Financial forecast Through concerted efforts in marketing initiatives to be implemented, it is anticipated that our sales should increase by $2 billion in the following three years from the current $13 billion to about $15 billion. The sales will be recorded on a quarterly basis and it is expected that about $250 million has to be realised every quarter of the year. An initial investment of $500 million will be made during the establishment of this new product. It is anticipated that labour and other production costs such as raw materials will consume about 75% of the budget. An initial stock of about 10 000 cartons of the new product is expected to be sold during the first quarter of the launch of the product. Each carton contains 10 boxes and a retail price of $1, 50 per box will be charged. After deducting labour and other operational costs, revenue of about $250 000 will be realised during the first quarter as mentioned above. It is anticipated that new sales will be generated from new markets that are likely to be established during the initiative of launching new products. It is also anticipated that profits should rise by about 6 % during this period given that it is primarily dedicated to improve the sales of the products offered. Given that the organisation has a well developed infrastructure pattern across the world, costs of implementing this project are expected to be lower. 9.0 Conclusion Over and above, the report has been designed to present a marketing plan for Kellogg’s company which specialises in breakfast food and cereals. It has been observed that the company has favourable strengths and opportunities hence there is need for it embark on product development in order to increase its revenue. Conducting a market research is vital for this endeavour to be a success. An improved marketing communication strategy is ideal for the successful launch of a new product which can contribute to an increase in the revenue generated. References Globe Newswire, February, 2 2012, Kellogg’s Kellogg Company Reports Strong Fourth- Quarter 2011 Results and Reaffirms Guidance for 2012, Viewed 07 April, 2012, . Kellogg Company, 2012, viewed 09 April 2012, . Kellogg’s [official website, last updated, 31 December, 2009], viewed 07 April, 2012, . Kotler, P 1999, Kotler on Marketing: How to create, win and dominate Markets, Free Press, London. Lancaster G. & Reynolds P. (1999), Introduction to Marketing: A step by step Guide to all the tools of Marketing, Kogan Page: London. Quick MBA, ND, Product life cycle, viewed 17 April, 2012, Strydom, J 2004, Introduction to marketing,3rd Edition, JUTA: CT. United States Securities and Exchange Commission, 2010, Annual report for Kellogg Company for the Fiscal year ended 2 January, 2010. Viewed 17 April, 2012 . Read More