How Kellogg’s Almost Failed in India
And how they climbed out of the hole they’d put themselves in
Kellogg’s is a well-established brand in the breakfast space in the entire world.
But it wasn’t an easy ride for them when they tried to enter India, a market they presumed would help them make boatloads of cash.
In this article, I will break down and analyze:
1. Why they decided to enter the Indian market.
2. How and why they struggled in the initial few years.
3. How they finally overcame the hurdles to reach the top.
Kellogg’s Market Capitalization in the 1980s
In the late 1980s, Kellogg’s sales had reached a peak, occupying a 40% market share in the U.S. At that time, they were present in 18 countries with annual sales of over $6 billion.
However, by the 1990s they realized there was little room for growth in their core markets. This started a subsequent search to look beyond the traditional American and European countries for potential cereal-consuming markets.
Of the various markets they could have entered, they chose India for three reasons primarily.
- Large market size: The country had a potentially large customer base, with a population of over 950 million.
- Market share: Even if they captured 2% of the entire customer base, their earnings here would surpass those from the U.S.
- Relaxed regulations: In 1991, India went through economic liberalization, which in simple words, implies that the government had removed the barriers to international trade that were present before.
Hence, from a macroscopic lens, India seemed like a great choice.
But Was the Indian Customer Interested in These Cereals?
Back in the 1990s, breakfast habits in India were inclined towards hot, cooked regional items. Consuming ready-to-eat meals wasn’t a cultural norm.
Despite this, certain factors gave the company some hope.
- Increased demand for convenience: With urbanization spreading across the country, more hectic work schedules, and lifestyle changes, the demand for convenience was larger than ever before. Hence, consumers were now more open to the consumption of ready-to-eat meals.
- Increase in disposable income: People now had a higher capacity to spend money on things they liked.
- Raising health standards: Indians were now more afraid of ailments like heart disease and diabetes. They wanted food options that would keep them safe from such health-related problems.
So clearly, the scope was there. It was an open field and Kellogg’s were confident they could capture this market.
Lo and behold, Kellogg’s invested $65 million towards launching their premier brand, Corn Flakes, in India.
How Kellogg’s Positioned Themselves
Now, they just had to come up with the right advertising strategy.
That’s where they messed up.
- They told Indian customers that the country’s age-old habits weren’t healthy: When Kellogg’s entered the Indian market in 1994, they tried advertising themselves as a healthy alternative to the traditional Indian breakfast options, claiming how the existing options weren’t as healthy as cornflakes. The Indians didn’t feel the same way. Questioning decades-old food habits didn’t go well with the people.
- Contrast with traditional eating habits: Kellogg’s cereals were best served with cold milk without adding sugar. The Indians liked their breakfast hot and savory, if not sweet.
- Higher prices. Corn flakes were almost 30% costlier than their nearest competitor. People didn’t see value in spending extra bucks on them.
- Oh, that crispiness: Kellogg’s massively advertised their crispy flakes. But when the Indian consumers used those flakes with hot milk (they liked it hot, as I said above), they became soggy. This further diluted the Kellogg’s brand.
On the heels of continuous unimpressive sales, Kellogg’s realized that their breakfast option was diametrically opposite to what generations of Indians had been eating.
The typical Indian breakfast was :
What Kellogg’s offered:
1. Best served with cold milk.
3. Bland, unless you added a sweetener.
In early 1996, defending the company’s products, managing director Denis Avronsart said:
“True, some people will not like the way it tastes in hot milk. And not all consumers will want to have it with cold milk. But over a period of time, we expect consumer habits to change. Kellogg is a past master at the art, having fought — and won — against croissant-and-coffee in France, biscuits in Italy and noodles in Korea.”
They were trying to change habits that were deeply ingrained into Indian customers. And because they had succeeded in the European and Korean markets, they believed they would succeed here too.
Eventually, they realized that these strategies weren’t doing them any good.
Kellogg’s Had Two Options Now: Reposition or Leave
With the failures they had seen, Kellogg’s decided to pivot.
Targeting kids: Now, they ditched their breakfast business altogether and positioned the cereals as evening snack items. Their market research found that the kids in Indian households would often have a snack time during the evening, between lunch and dinner. And this is where they could chip in. Their products could be a nutritious substitute for chips and other junk food.
Launching varieties that matched traditional habits: With this new targeting strategy, they launched Chocos in September 1996 and Frosties in April 1997. Chocos were wheat scoops coated with chocolate, while Frosties had sugar frosting. These additions addressed the shortcomings of plain cereals — they were sweetened.
Targetting one specific nutrient: Kellogg’s now marketed with a razor-sharp focus. They stated that the majority of Indian children have iron deficiency and that Kellogg’s products are rich in iron. This increased their sales by 17%. Instead of rendering the entire Indian meal as unhealthy, they simply stated that cornflakes would help fulfill the share of iron nutrients in the children.
Changing their mascot: Kellogg’s removed the rooster from their packages in India. They noticed that the majority of Indian customers were vegetarian and were uncomfortable in purchasing packages having a rooster as the main mascot.
- Kellogg’s tried to enter the Indian market after realizing that the market in the U.S. was more or less saturated.
- While it was a seemingly good business opportunity, Kellogg’s made a few mistakes. They misjudged the correct way to advertise their offerings. This happened because they didn’t fully understand the mindset of Indian customers. Maybe it was impossible to do so without trying and failing once. Who knows. As with anything in business, it’s easier to analyze in hindsight.
- Eventually, they repositioned themselves as an evening snacks brand and captured the market, sitting now at a majestic 70% market share.