University of San Jose-Recoletos
Accountancy and Finance Department
BREAKFAST GONE BAD… the case of Kellogg’s
rice Krispies
Case Study Analysis
Submitted to:
DR. ROSEMARIE V. JACALAN, CPA
October 10, 2021
Submitted by: Group 4
Coscos, Charmae
Damayo, Zennia Ann
Dy, Madelaine
Flores, Maria Vivian Ysabel
Getalan, Ralph Jayson
EXECUTIVE SUMMARY STATEMENT
Breakfast is the most essential meal of the day, and health experts recommend that
healthy people consume breakfast as their main meal to stay in shape. Breakfast must also
include all of the vital vitamins. As one of the market's top manufacturers of healthful breakfast
cereals, Kellogg's describes itself as a firm that "makes breakfast cereal liked and enjoyed by the
whole family." This company, situated in the United States, was started in 1906 with the purpose
of offering breakfast items that were both pleasant and healthful. Rice Krispies, which were
invented and initially distributed in the United States in 1928, were the company's most famous
product. A rice and sugar paste were called for in the original recipe. This paste was then roasted,
resulting in the trademark "snap, crackle, and pop" sensation when milk was poured over it.
Kellogg's goal was to be the go-to food business and to educate consumers about the
value of leading a healthy, balanced lifestyle, which they did through selling healthy food. The
goal is to "create sustainable growth by better fulfilling the requirements of customers, consumers,
and communities via the power of people and brands." They developed their strategy to
accomplish goals and objectives using the position and brand image strength of their vision and
mission. Kellogg's designed their goods to appeal to different mindsets by focusing on different
demographics. The company's overarching strategy goal is to promote a "Balanced Lifestyle."
These strategies were put into action through tactical plans such as encouraging physical activity
among all age groups and sponsoring these activities with company resources, communicating a
balanced diet to consumers through cereal packaging, and introducing food labeling to help
consumers understand the balanced diet content of their products.
Kellogg began distributing their products in new nations as the company evolved, and by
1923, they were selling their products in South Africa. By 2014, Kellogg had started a campaign
in South Africa called "Breakfast for Better Days," with the purpose of promoting the significance
of having a healthy breakfast. The company subsequently began developing additional goods,
and by August 2018, it had launched a new Rice Krispies Vanilla product in South Africa.
Customers, on the other hand, were dissatisfied with the new Vanilla Rice Krispies and expressed
a wish to buy the original. The company's new product and Kellogg began to receive complaints
due to a variety of issues.
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1.0 STATEMENT of the PROBLEM/S and STRATEGIC ISSUES
The company introduced a new product in South Africa, Rice Krispies Vanilla, as part of
their growth strategy to offer creative items in the year 2018. It was decided to adjust the
product recipe solely for the South African market in order to suit to South African tastes and
palates. Customers, on the other hand, were critical of the company's unique strategy and
expressed their dissatisfaction with it. In the instance of Kellogg's, the following problems have
been raised:
- A dislike for the new product, as well as a liking for the original (now discontinued) - A
lack of understanding of the formula change
- Concerns over the new product's effect on one's health
- A notion that Kellogg's does not care about its customers, as well as a concern about
the quality of their customer service
- Packaging that misleads customers
2.0 VISION and MISSION STATEMENTS and CORE VALUES/CORE PRINCIPLES
2.1 Existing Vision Statement
“To enrich and delight the world through foods and brands that matter.”
2.2 Existing Mission Statement
“Our Purpose is to nourish families so they can flourish and thrive. Our Heritage drives
the future of our company and keeps us excited about tomorrow.”
2.3 Evaluation of the Existing Vision and Mission Statements and Core Values/Core
Principles
The explanation of Kellogg Company's vision is its key arrangement for the future.
It defines what and where Kellogg Company needs to be in the future. Kellogg
Company's vision statement is a repository of the company's goals in order to support
its vital, administrative, and broad dynamic cycles.
Kellogg Company's mission statement is a public report that elucidates the
company's qualities and key themes. Kellogg Company's mission statement also
emphasizes the reason for the company's existence, highlighting the services and
products it provides.
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“Our values are part of our DNA. They guide the way we work with our business
partners, within our communities and with each other.” They have established a vibrant
corporate culture where ideas may bloom, people can grow, and success can flourish
through integrity, accountability, passion, humility, simplicity and a focus on success.
3.0 STATEMENT of QUALITATIVE AND QUANTITATIVE
3.1 Financial Objectives
N/A
3.2 Strategic Objectives
Kellogg's must constantly fulfill customer expectations and adapt to changes or
movements in the external and internal environment if they want to remain ahead in a
competitive business. As the African market expands, so should the company's
thinking on how to expand both their market and production while always keeping their
customers' requirements in mind. Kellogg's strategic objectives include the following
in response to customer demands:
- Provide fresh and creative goods and options to consumers to expand market
reach.
- To accommodate South African preferences, the original Rice Krispies recipe was
reformulated.
- Research into the market and taste testing help new goods get off the ground
successfully.
- Ensuring that customers see you as providing high-quality, nutrient-dense goods.
- Product awareness may be increased via the use of marketing techniques
including the use of brand mascots and eye-catching packaging that includes
important product information.
- Using locally grown grains as a means of obtaining supply chains responsibly.
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4.0 ASSESSMENT/ANALYSIS OF THE EXTERNAL ENVIRONMENT
4.1 Assessment to Opportunities and Threats
4.1.1. – 4.1.5 Pestel Analysis
PESTEL ANALYSIS – KELLOGG COMPANY
P E S T E L
(Political) (Economical) (Social) (Technological) (Environmental) (Legal)
Strong
Sustainable Intellectual
Political Price Community Technological business property
Stability elasticity Programs Advancement practices rights
Good Gross Upholding Adhering
government Domestic Good CSR Investments in environmental to labor
relationship Product Image R&D protection laws
Collaboration
to Amateur
Swimming Taxation
Association policy
4.1.6 Porter’s Five Forces
PORTER’S FIVE FORCES-KELLOGG COMPANY
Threats of Bargaining Bargaining
Threat of Intensity of
New power of power of
Substitutes rivalry
Entrants Customers Suppliers
LOW HIGH HIGH LOW HIGH
Cereal bars
Dominant are growing Competitor's Advantage over
Position and increasing product suppliers General Mills
Substitutes and
Brand Image alternatives Nestle
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4.2 External Factor Evaluation
THE EXTERNAL FACTOR EVALUATION MATRIX
EFE MATRIX ANALYSIS – KELLOGG COMPANY
OPPORTUNITIES Weight Ratio Weighted Ratio
Dominant Positioning 0.05 4 0.20
Innovation 0.20 4 0.80
Existing Partnership 0.15 3 0.45
Technological Advancement 0.10 3 0.30
THREATS
Modified Food Safety Regulation 0.20 1 0.20
Substitutes and Alternatives 0.10 2 0.20
Changing Customers' Preferences 0.15 1 0.15
Intense Competition 0.05 2 0.10
TOTAL 1.00 2.40
The EFE Matrix analysis shows that Kellogg Company is moderately poor in term of its
external factors’ performances. The score of 2.40 which is a bit lower than 2.5 average signifies
that the company need to improve its position through improving some external factors by
optimizing opportunities and minimize threats as much as possible. The Kellogg Company must
focus on monitoring ingredients in the food manufacturing as well as customer’s preferences as
both of these factors are continually changing.
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4.3 The Competitive Matrix
COMPETITIVE PROFILE MATRIX
NESTLE GENERAL
KEY SUCCESS FACTORS WEIGHT KELLOGG USA MILLS
Score WS Score WS Score WS
Brand Reputation 0.25 3 0.75 4 1.00 4 1.00
Price Competitiveness 0.10 3 0.30 2 0.20 4 0.40
Workforce Stability 0.20 3 0.60 3 0.60 4 0.80
R&D Effectiveness 0.10 2 0.20 3 0.30 3 0.30
Customer Service 0.10 4 0.40 3 0.30 4 0.40
Product Differentiation 0.12 3 0.36 3 0.36 3 0.36
Broader Market
Distribution 0.05 3 0.15 3 0.15 3 0.15
Financial Position 0.08 3 0.24 3 0.24 4 0.32
Total 1.00 3.00 3.15 3.73
The CPM Analysis reveals that Kellogg Company is the weakest among the toy industry.
General Mills as the most excellent which prevails on the products offered in the Financial
Position, price competitiveness and other areas of industry. The next in line is the Nestle USA
with a strong brand reputation. Kellogg Company must improve areas in the industry which
includes Research and Development Effectiveness. Based on the case provided, Research must
conduct more reliable study to acquire reliable results. Other areas of the industry must also
improve such as workforce and product innovation.
5.0 ASSESSMENT/ANALYSIS OF INTERNAL ENVIRONMENT
5.1 Profile of Current Strategy
Kellogg's goal is to be the food company of choice, providing not just delicious but
also healthful breakfast options. It is the company’s top priorities for its consumers,
especially the young ones. Kellogg's wants consumers to understand how essential it is
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to have not just good tasting but also nutritious breakfast to start their day. Kellogg’s also
engages in innovation to help the company grow and expand its operations not only
nationally but also globally. The company responded by upgrading their products and
expanding the number of options available.
5.1.1 Concept of Business
The Kellogg Company is the world's largest cereal manufacturer as well as a major
supplier of convenience foods such as cookies, crackers, toaster pastries, cereal bars,
fruit-flavored snacks, frozen waffles, and vegetable meals. Kellogg products are produced
in 18 countries and sold in over 180 countries. They have a variety of retailers, such as
drug stores, club stores, convenience stores, discount and dollar stores, supermarket
chains and different merchandiser stores. Within the respective region, Kellogg’s focuses
almost exclusively on the cereal and wholesome snack categories.
5.1.2 Concept of Competition
Business competitions, according to Kellogg's, provide a crucial and beneficial
learning and growth experience, regardless of one's career ambitions. The business has
faced, and will continue to face, tough competition for sales in all of its major products and
main product segments around the world. Kellogg's products continuously compete with
similar marketed and branded products, as well as unadvertised and private label
products, which are often distributed at lower prices.
5.1.3 Company Self-Concept
The inventor of cereal, Dr. John Harvey Kellogg, was unconcerned about
revenues. Cereal was not merely a healthy food for him because it would help people
digest their diet. He claimed that a diet centered on bland foods such as cereal would lead
people away from sin. One very specific sin: masturbation or self-pleasure. The invention
of cereals was part of Dr. John Harvey Kellogg's health program, which he called
"biological living."
5.2 Assessment of the Firm’s Strength and Weaknesses
STRENGTHS
• Kellogg's being one of the most well-known breakfast cereal brands, with products
sold in more than 180 countries.
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• Kellogg's is dedicated to providing nutritious foods to its customers.
• Kellogg’s has the famous brand recognition and advertising remembrance than other
manufacturers of cereals.
• The company employs great marketing strategies, including several advertisements
focused exclusively at the nutritional needs of children.
• The company has a high degree of customers’ satisfaction, and they place a strong
importance on maintaining healthy customer relationships through providing high-
quality products.
• Several CSR activities, such as "Fighting Hunger" in collaboration with Walmart,
benefit the brand.
• The company’s annual revenue is more than $13 billion
WEAKNESSES
• The company is notorious for taking a long time to develop new products and they are
completely reliant on the success of its current product lines.
• In 2018, Kellogg's brand image was harmed by product recall controversy.
• Consumer’s dislike the new product released last 2018 and have a strong preference
for the original one.
• Competition from various breakfast brands and replacements affected on the
company's operations.
• Research and Development were very limited
5.2.1 Management Dimension
Kellogg's management oversees in creating plans to help the organization achieve
its goals and objectives, as well as managing and implementing such goals and
objectives. The management also ensures that all employees share the common objective
that is closely connected with the larger business mission. Kellogg's employees can put
their efforts in the proper direction, deliver their best performance, and ensure strong
loyalty to the organization since their behaviors, goals, and deeply rooted beliefs are all
properly aligned. As indicated in the case study, Kellogg's issue with its new product was
a turning point for the corporation. When new products are released, they generate a
deluge of negative feedback, which management wasn’t able to adequately handle. The
company's automated reaction has left the customers in a state of despair.
5.2.2 Marketing Dimension
Kellogg's markets over 1600 products in about 180 countries using a combination
of demographic, geographic, and psychographic segmentation. Kellogg’s employs a
differentiating targeting strategy to make its products available across various networks.
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At Kellogg Company, they have always believed in advertising important product
information. At the same time, they believe all of their advertising must be socially
responsible. Their philosophy says it best. Kellogg is committed to providing wholesome,
quality spot advertising that is truthful and not misleading to consumers and to placing its
commercials with quality television programming. In keeping with this commitment,
Kellogg believes it has a responsibility to produce advertising, and to place those ads in
programs that communicate the standards of good taste and fair practice that guide all of
their corporate actions (Yvonne Haller, 2015).
5.2.3 Production/Operations/Technical Dimensions
All aspects of the company's manufacturing, quality, procurement, corporate
facilities, and supply chain are under the control of management's production or technical
department. Kellogg was also intrinsically linked to manufacturing, engineering, and
supply chain management's more traditional components. According to the Kellogg
principle, anything less would not affect and manage all phases of production. The
company always ensures that all their products produced are healthy and safety. The
primary ingredients used were made from paste of rice and sugar. The paste was then
toasted, as a result, “snap, crackle and pop” whenever milk is poured over it. Rice, sugar,
malt extract, vitamins A, C, B1, B2, folic acid, pantothenic acid, and iron were some of the
ingredients included.
5.2.4 Financial/Accounting Dimensions
a. Total Project Cost/Total Investment Cost – N/A
b. Financial Modelling, including Financial Projections – N/A
c. Vertical and Horizontal Analysis – N/A
d. Ratio Analysis – N/A
5.2.5 Research and Developmental Dimensions
Research and development (R&D) costs are expensed as they are incurred and
are categorized as SGA expense. R&D expenditures encompass both new product and
process innovation and substantial technical enhancements to current goods and
processes. Internal salaries, wages, consultancy, and supplies related to time spent on
R&D activities account for the majority of the Company's R&D expenditures.
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Depreciation and maintenance of research facilities and equipment, including assets at
manufacturing sites temporarily engaged in pilot plant operations, are also expenses.
5.2.6 Management Information Systems
Kellogg developed a simplified approach to allow simpler, more comprehensive
product information sharing with both retail customers and their consumers by adopting
product information management (PIM) systems as a single point of data aggregation
between internal systems. The strategy also cleared the path for future Kellogg markets
to benefit from a global corporate solution. In reviewing Kellogg's current and future data
requirements, the team, led by Kellogg's Global Digital Enablement & Operations and
Global IT functions, set out to leverage centralized resources and data sources to improve
data quality, reduce duplicate job functions, cut costs, and meet the ever-increasing
demands of customers and regulatory requirements.
5.3 The Internal Factor Evaluation Matrix
IFE MATRIX ANALYSIS - KELLOGG
STRENGTH Weight Ratio Weighted Ratio
Brand Awareness 0.20 3 0.60
Brand reputation 0.10 4 0.40
Product variety 0.15 4 0.60
Efficient Workforce 0.05 4 0.20
WEAKNESSES
Marketing Concern 0.10 1 0.10
Market saturation 0.05 2 0.10
Health Factor challenge 0.20 1 0.20
R&D effectiveness 0.15 1 0.15
TOTAL 1.00 2.35
The IFE Matrix analysis shows that Kellogg Company is internally poor in terms of
its internal factors’ performances. The score of 2.35 which is lower than 2.5 average which
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signifies that the company need to improve its position through improving some internal
factors by creating more competitive advantage and customer values while mitigating
weaknesses in the industry. The company’s strength is the brand awareness, they must
continue on proving to the market and customers that they could met their satisfaction
through effective innovations.
6.0 STRATEGIC AGENDA/ RECCOMENDATIONS
6.1. Corporate Analysis of Matrices
6.1.1 SWOT MATRIX
STRENGTHS WEAKNESSES
• Have control of over 40% of the • Slow in diversification
sweet cereals which is more than
triple any of its competitors • Product focused
• Have the strongest market brand • Slow market share growth rate in
recognition the past years
• Has established a focused and • Less competitive pricing strategy.
specialized product market
• High awareness among the young
population-
• Strong innovation and R&D
abilities-
• Good cost control strategies.
OPPORTUNITIES THREATS
• Great prospects for international • Weetabix and General Mills are
expansion using pricing strategy and product
diversification to rival Kellogg’s
• High prospects of success in low market
cost and high market share with a
good pricing strategy. • Discounting by competitors is
affecting the marketing position of
• High feasibility to diversify while the company.
staying in the cereals focus.
• Customer awareness of sugar and
• Increase in customer awareness salt level present in breakfast
and interest in health cereals
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6.1.2 SPACE MATRIX
SUB-FACTORS SCORE AVERAGE AXIS VALUE
Industry Attractiveness
Growth Potential 5
Profit Potential 6
Financial Stability 5 5
Complexity of Entering the Market 4
Manufacturer Bargaining Power 5
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Competitive Advantage
Market Share -3
Product Liquidity -2
-3
Product Life Cycle -3
Customer Loyalty -4
Financial Strength
ROI 5
Liquidity 4
Debt Ratio 3 4.2
Cash Flow 4
Inventory Turnover 5
Environmental Stability 0.5
Technological Change -4
Inflation Rate -3
Demand Volatility -2 -3.2
Competitor Price Range -4
Price Elasticity -3
(FS)
(CA) (IA)
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(ES)
There are four (4) quadrants in determining the strategic position of the company that is
based on the SPACE matrix. The first quadrant is the aggressive position (top right). The second
quadrant is the conservative position (top left). The third quadrant is the defensive position
(bottom left). And the fourth quadrant is the competitive position (bottom right).
Based on the SPACE matrix illustrated above, Kellog’s company belongs to the first
quadrant, which is the aggressive position. Meaning, the company is attractive and stable. It also
has a competitive advantage which the company should aim to retain. Moreover, Kellogg's has a
strong attitude on market competition versus competitors, since it is open to manufacturing new
sorts of products to sell to consumers.
6.1.3 BCG MATRIX- N/A
6.1.4 IE MATRIX
THE INTERNAL/EXTERNAL MATRIX-KELLOGG COMPANY
STRONG 3-3.99 AVERAGE 2-2.99 WEAK 1-1.99
I II III
HIGH
IV V VI
(HOLD AND MAINTAIN)
MEDIUM
VII VIII IX
LOW
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The IE Matrix reveals that the KELLOGG Company with the Total Weighted Score
from IFE Analysis of 2.35 and the EFE Analysis of 2.40 met in the fifth quadrant of IE
Matrix. It implies that the Kellogg Company must hold and maintain its position. The
strategies to implement must focus on increasing the market penetration and product
development.
6.1.5 GRAND STRATEGY MATRIX
QUADRANT II QUADRANT I
FROSTIES CORN FLAKES
ORIGINAL RICE KRISPIES SPECIAL K CLASSIC
WEAK COMPETITIVE WEAK COMPETITIVE
POSITION QUADRANT III QUADRANT IV POSITION
NEW RICE KRISIPIES
FRUIT LOOPS
VANILLA
COCO POPS CHOCOS
ALL BRAN FLAKES
Rapid Market Growth
6.2 Strategic Choice
The IE Matrix reveals the appropriate strategy to apply in the Kellogg Company. It
suggests to Hold and Maintain the competitive position in the industry. This strategy
emphasized the need for Kellogg to focus on market penetration. It means the company
must uphold techniques on boosting sales. It may be through reaching wider market area
or investment to promotion or advertising expenses. However, as provided in the case,
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Kellogg need to effectively solved the problem of the recent product launched. The failure
to meet customers satisfaction can greatly affect sales and brand image. Through this, the
Strategy recommends product development. It requires an improvement to product offered
in the market. It may be met through robust investment on Research & Development and
to reached out and meet customers preferences. As a result, the company may be able
to increase the production while optimizing the profits in the long run.
7.0 IMPLICTIONS OF THE STRATEGIC AGENDA
7.1 Management
The Kellogg Company develops a high degree of brand awareness that attracts a
wide range of customers. As a result, Kellogg's management has a bigger influence on
market innovation by providing new goods that cater to changing markets and consumer
tastes. Nevertheless, the management executes modifications to the marketing plan,
which customers refuse to accept by allowing customers to remark on and complain about
the new launch products on social media. These elements play a vital role in the
relationship between management and customers.
7.2 Marketing
N/A
7.3 Production/Operations/Technical
N/A
7.4 Finance/Accounting
N/A
7.5 Research and Development
Consumer buying behavior, according to Kellogg's research and development,
indicates the focus of product manufacturing, price, and merchandising. As a result,
Kellogg's conducts market research in order to discover changes in consumer needs and
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developing technology in order to adapt. Also, to have a thorough awareness of the market
and the needs of consumers in relation to it.
7.6 Management Information Systems
N/A
7.7 Corporate Social Responsibility
Kellogg's company's Corporate Social Responsibility addressed a program to
promote the benefits of breakfast clubs, which has provided over one million breakfasts
around the world, encouraging healthy lifestyles and selling wholesome and nutritional
products to ensure a safe and healthy work environment impact through enriching
communities, with a focus on shifted its community investment programs to strategically
needs on the best align with its objectives.
7.8 Environmental Concerns
The corporation pledged to improve the natural resources and livelihoods of the
communities where its ingredients are sourced. Kellogg's products provide a viable source
of medium grain rice to help farmers improve their livelihoods by implementing agronomic
practices that include the environment, farmer livelihoods, and the creation of a secure
and sustainable supply chain.
8.0 FINANCIAL PROJECTIONS AND GOAL SETTING
8.1 Projected Financial Statements with Assumptions- N/A
8.2 Recommendation for Annual Goals and Policy-N/A
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