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9 July 2015

Kellogg

Company Background

Will Keith Kellogg and his brother John Harvey Kellogg, both staunch seventh day Adventist adherents founded the Kellogg’s cereal company on February 19th the year 1906(Kellogg Company Funding n.p).The company was initially called Battle Creek Toasted Corn Flake Company as it was founded in Battle Creek Michigan. The company was renamed to Kellogg Company in 1922.Presently it is referred to as Kellogg’s (Kellogg CompanyFunding n.p.). The company initially marketed their product as Kellogg’s Toasted Corn Flakes, a product that was well accepted in the market in those days. The company is headquartered in Battle Creek Michigan and in Trafford Park Manchester in the UK (“Global brandlocal values” n.p.). As a result of the great depression, the Kellogg Company to accommodate more workers changed its working hours from 40 to 30 hours. This way they could employ extra staff. This was under the stewardship of Will Keith Kellogg. The company would maintain this trend through World War II and some of its departments kept up with the practise upto the1980’s (Kaplan n.p.).

Corporate Strategy

Kellogg’s is credited with influencing the breakfast practices of most of the world especially so the developed world. Through various strategic acquisitions over the years, the company has set itself up as a food manufacturing giant with a foot print in all of the world’s major markets. Its various acquisitions include Salada foods, Fearn International, Mrs. Smiths's pies, Ego as well as pure packed foods in between 1969 and 1977 (Kellogg company Funding n.p.).The company did have a quiet period when its expansion strategy seemed to have gone out of track compared to competitors such as Quaker Oats and General Mills. Its market share went down to a low of 36.7 percent by the year 1983, but after it was criticized for not keeping up with the times it came up with a whole new market share not exploited by any of the players in the cereal business before. Under the steward ship of its then chairman William E. LMothe, it chose to market its products to an older demographic starting with the 80 million baby boomers born between 1946 and 1964.The company marketed cereal as being a health breakfast alternative therefore moving the masses aged between 25 and 49 to the cereals bandwagon with a 26 percent rise in people eating cereals compared to five years earlier. By 1983 the US cereal market had expanded to about US. $3.7 billion in 1973, and totaled to $5.4 billion in 1988(Patricia n.p.). Keebler was the biggest acquisition that the Kellogg’s company has ever made. This company is the second biggest maker of cookies and cracker snacks. This was one of their biggest diversification moves. Other acquisitions made in subsequent years include Morning star farms and Kashi divisions, Bear naked, Natural touch, cheez-it, Murray, Austin cookies and crackers, Garden burger Famous Amos and Plantation brands (Patricia n.p.). In a cash deal valued at US. $2.7 billion, Kellogg's acquired Pringles potato crisps from Procter and gamble. This strategic move made the company only second to Pepsi in the snack food industry the world over("Kellogg to buy Pringles.." Reuters.com).

All the various acquisitions over the years seem to have paid off well for Kellogg’s. Presently, the company is listed on the NYSE with the letter ‘K’ denoting its presence. Kellogg’s now controls about 40 percent of the breakfast cereals market in the world. Presently it is located in 19 countries worldwide and it has set up about 40 plants in these nations with the biggest of this plants being in Trafford Park Manchester, UK. Kellogg’s products are sold in 180 nations around the world (Kellog.com n.p.).

In the year 2007, Kellogg was ranked as the largest manufacturer of cereal products. The company's share price by 8th July 2015 stood at 63.69-044(0.69%). Its revenue stood at US$ 14. 59 Billion in the last fiscal year . As per the last fiscal year, it had a market value of US. $23.5 Billion as of 5th May, 2015. Investors as of the year 2014 got a return on investment of 10 percent of money invested. Profit as percentage of stockholder equity stood at 22 percent the company has 29,790 employees worldwide. The present CEO of the company is one John A. Bryant and the company has appeared consistently on the Fortune 500 group of top companies for a record 21 years.

Mission, vision, values

Kellogg’s mission statement and vision go hand in hand with their main objectives; The company's mission statement says that “Kellogg is a global company committed to building long – term Growth in volume and profit and to enhance its worldwide leadership position by providing nutritious food products of superior value" From this mission statement it is clear the company main focus is being a world leader with ambitious expansion goals that tie in with their bottom-line goals of profit. The mission statement clearly explains how to achieve this ambitions and this is through supplying value products unrivalled in value to their customers. As regards the vision statement of the company it reads like a slogan’

“To be the food company of choice’ Here Kellogg’s seems to have set out a goal for them and this is to be the customers go to company for their cereal food needs.

Stakeholders

The stake holders of the Kellogg Company comprise of those people that own share stock in the company and this are internal stakeholders. The board of directors also makes up stakeholders in the company as well as the employees of the company who according to the company’s website stood at 29,790 by 2014. External stake holders of the food company include the governments of the nations it operates in. The governments are considered stakeholders as they must follow laws set down in these countries that are set out for various businesses. As well, the environment is a stakeholder in the company’s decisions eventually affects its immediate environment which comprises employees, communities living near their plants, offices, distributors and the end consumers of their products.

Industry perspective

SWOT ANALYSIS FOR KELLOGG

The Kellogg Company has various strengths, opportunities Weaknesses and threats. The four are explained as below:

Strengths.

1. Kellogg’s controls about 40 percent of the sweet cereals market this is thrice what General mills, Weetabix and Quaker oats.

1. As regards brand recognition Kellogg hold the baton on this with Kellogg brands having a 60 percent brand awareness the world over.

1. The company also has an established niche product market.

1. Among a younger demographic Kellogg products have high awareness.

1. Kellogg has strong Research and design capabilities with an incubation hub at the Kellogg business school at Northwestern University.

1. The company also has great control strategies. For example through strategic acquisitions such as Kashi Kellogg’s has been able to cash in on the organic food market with food such as Kashi’s “go lean.

Weaknesses:

1. The company has been slow in diversifying. If the company is to maintain and grow its market share it is advisable that they keep on experimenting with new types of breakfast foods as well as other snack offerings.

1. Its pricing strategies have been uncompetitive. Compared to their competitors like general mills and even store brands the products of Kellogg are pricier, this might lead to the change in loyalty to this other competing brands.

1. Customers are more aware of healthy alternatives and therefore prefer foods such as eggs, yoghurts to processed foods like cereal which Kellogg sells.

1. People perceive that Kellogg products are secondary to real breakfast and that they just complement instead of make up a whole breakfast.

The above mentioned strengths and weaknesses are all factors that Kellogg can alter to their advantage if they so chose.

Below are the company’s sources of opportunities and strengths.

Opportunities

1. There still exist great chances to spread internationally.

1. There is still a large opportunity for the company to diversify its offerings

1. If it were to improve on its pricing strategy it could take advantage of lower market share.

1. As well it has the chance to improve on the healthy options field as well as in customer awareness.

Threats

1. Kellogg competitor’s Quaker oats and general mills have been known to use pricing strategies to be the preferred cereals.

1. High sugar and salt levels in Kellogg products have hurt its sales as well.

1. The use of discounting by the company's competitors has also hurt its sales.

Environmental Factors

1. Identify the important external factors that are influencing your company’s performance. Are there new regulations, or do you see significant changes in the future? Identify technological trends that may impact the company? Are there social and civic groups critical of your firm’s practices?

External factors affecting Kellogg’s company include Kellog’s supplier power whereby the products they use like wheat will have its price rise and fall and these changes affect the price of cereals and therefore affecting the customers that buy from the company. Other external factors are Buyer’s power whereby the buyers like supermarkets determine the price of the cereals, substitutes to Kellogg’s company products which is anything that can be eaten in the morning as breakfast like snacks, food and even fruits, Competitive rivalry which is mostly from General mills and also Weetabix that produce similar products and finally ease of companies entering the cereals market that will pose a huge threat to Kellogg’s company and such companies like PepsiCo that make cereals can easily take over the market and replace Kellogg’s company.

Kellogg’s company is engaging in corporate social responsibility where it participates in events that take place in the society and help and also engage with people in the society by identifying their needs and assisting them and also seeking to know their wants and satisfying them. It also engages in conservation and sustainability of the environment by for instance getting its wheat from sustainable suppliers and ensuring its practices do not harm the environment.

Kellogg’s company has been able to embrace the latest and efficient technology and this is a strength as it has enable the company to keep up and beat competition as it provides good cereals in an efficient manner. Failure to adopt new emerging technology will lead to high costs and unsatisfied customers and therefore leading to losses (Kellog.com n.p.).Kellogg’s company has been criticized for poor branding and its stand on social issues like its support for gay rights.

As regards GMO and organic foods, Kashi a subsidiary of Kellogg in recent times has faced accusations of using GMO in some of its cereal offerings. This arm of Kellogg’s which is specifically an organic products company was hit by a drop in sales volumes as a result of this accusations on Facebook and other social media platforms. An estimated $200 million was lost in sales volumes in five years. John Bryant the company's CEO admitted that Kashi has not been concentration on "progressive nutrition" However there is a silver lining in the horizon as it has been communicated that all of Kashi products will be certified non-GMO come 2016 according to David Denholm the company’s chief executive(NASSAUER n.p.).

Work Cited

"Global brand, local values". Manchester Evening News. May 27,.2008.Web. 2. July.2015.

Kaplan Jeffrey."The Gospel of Consumption".(May– June 2008.Web.2. July 2015.

Kellogg Company FundingUniverse.com. Retrieved on 7-18-09.

  Sellers Patricia."HOW KING KELLOGG BEAT THE BLAHS".August 29, 1988). Web. Fortune.. 3. July. 2015.

"Kellogg to buy Pringles for $2.7 billion". Reuters. February 15, 2012.

NASSAUER SARAH .Does Organic Food Taste as Virtuous If It Goes Mass Market? March.17.2015.Web. 8.Aug.2015.