New Product Strategy at Kellogg case analysis

Memo

Subject: New Product Strategy at Kellogg case analysis

The purpose of this memo is to give recommendations about directions for new product development at Kellogg.

Background

In 1999 Kellogg looses its leadership position on the cereal market due to different factors such as high prices or few successful new products. The same year, Carlos Gutierrez takes over as CEO and rethinks the company's corporate strategy.

By emphasizing new snack products more, as well as launching strings advertising campaigns and promotions around its traditional cereal business and working on products that suit the new obsession with healthy eating, Kellogg regains its number one position on the market by 2002. Therefore, it is by adapting its offer to the change of the market's consumers' demand, and thus launching new products that respond to those new needs, that the company succeeded in increasing its sales and profit, and regaining its leadership position.

In order to maintain its leading position on the cereal market, Kellogg must continue making an impact on the consumer, and differentiating itself from its competitors.

Alternatives

To remain the number-one cereal maker and continue increasing its sales and profit, the company has different alternatives.

As a first alternative, Kellogg could launch new heavy advertising campaigns featuring some famous spokesperson.

On the one hand, this step would help give a stronger image to the brand. But on the other hand, it may lead to a cost increase that will result in higher pricing, which might have a negative impact on sales.

As a second alternative, the company could launch a new range of cereals and snacks that would be focused on their health benefits (not necessarily weight-loss), made with natural, organic, products that are full of nutrients and vitamins and would have scientifically proven health benefits. Each products within this range would correspond to a specific health concern.

On the one hand, this option might give a stronger position to the company on the market, and attract more consumers, and therefore lead to an increase in sales.

On the other hand, it could also confuse the consumers because of the amount of different products from Kellogg that are already out there.

Recommendation

I would recommend following the second alternative, which consists in launching a new health oriented range of cereals and snacks, because it would give Kellogg a more serious health-friendly image, which would suit better the actual evolution of the consumers' demand, and the change their eating habits.

For that reason, the next step Kellogg should take, is to make research about the different health issues in the populations, and which nutrients of vitamins found in various foods that can be incorporated to cereals and snacks. Those claims should be supported by scientific studies in order to make the consumer trust the product and the company.

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