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What’s in people’s breakfast bowls?

How we helped Kellogg’s make better commercial decisions.
Written by: Foresight Strategy

For questions about this case study contact Andrew Glor.

Fall from fame

Kellogg’s is, without a doubt, a global leader in the food industry, holding six of the ten top brands in the ready-to-eat cereal (RTEC) category. However, a few missteps, such as failing to capitalize on China – the fastest growing RTEC market – left space for their regional competitors to grow.

So, while the competition was getting stronger, Kellogg’s core brands were falling behind. Despite being the global share leader, they were failing to hold the top brand position in 17 key markets, which accounted for >80% of RTEC sales.

The global RTEC market was experiencing notable growth, especially in the AMEA region, creating a favorable opportunity for Kellogg’s to align its regional portfolio and maximize its potential. To avoid additional losses, Kellogg’s wanted to understand the significance of innovation within the category’s future growth strategy. The key question at hand was whether innovation had the potential to compensate for an unhealthy base.

Although Kellogg’s had a wealth of data and analysis on the different elements of the business, there was no connective framework for a comprehensive assessment and prioritization of drivers, resulting in a lack of direction and effective solutions. So, what happened next?

Getting to the bottom of it

At Foresight Strategy, we can evaluate commercial performance and understand growth opportunities at multiple levels of the product hierarchy, from the individual item to an entire company portfolio.

Our Pachinko Model™ helped Kellogg’s make commercial decisions and evaluate trade-offs between revenue “building blocks”. At a high level: should they focus on driving growth through their core business, innovation, or through premiumization?  And, at a lower level, should they be growing the distribution of innovations or increasing the velocity of innovations? Should they be increasing the depth of promotions or frequency of promotions?

We started by breaking down Kellogg’s historical sales into these various building blocks to understand the contribution of each block to past sales growth, using multiple data sources. We were able to apply the same process to competitors and assess what was driving the gap in performance. By prioritizing such building blocks – and related marketing actions – we assessed the future growth potential provided by each one of them. We then presented this information using easy-to-follow visualizations which resemble the look of a pachinko slot machine – hence the name!

Climbing back to the top

We found that the number one driver of share gain in the RTEC category is strong velocity of core products, which was also the main growth opportunity worldwide for Kellogg’s. So, you really do need a healthy base!

To leverage innovation for growth Kellogg’s needed to maintain a strong core product velocity, align its portfolio to the growing sub-segments in the category, and sustain its innovations beyond the first year.

The framework and toolkit we used were extremely helpful in providing data-driven insight and strategic clarity. As a result, Kellogg’s decided to focus on the largest, highest equity brands in the portfolio; launching fewer and bigger innovations which, sustained over time, could represent a key advantage versus the competition. To make this happen, Kellogg’s re-evaluated their licensing strategy for new products and refocused their innovation for long-term growth. They also expanded the analysis to encompass their two other significant food categories.