Beleaguered food giant Kellogg is to throw an extra pounds 20m into
advertising its new business strategy of slashing the prices of famous
brands in an attempt to revive the UK cereals market.
Commercial director Mark Sims announced a 40% increase in its UK
advertising budgets - already amounting to pounds 57m per annum (ACN
Meal) - to convince British families that Kellogg’s cereals represent
value for money.
The announcement followed the company’s decision this week to introduce
swingeing UK price cuts across half a dozen of its leading brands.
In January the firm will begin a TV and press campaign, through J Walter
Thompson, which highlights an average 12% reduction in the retail price
of Rice Krispies, Frosties, Ricicles, Optima, Honey Rice Krispies and
Choco Rice Krispies. The price cuts will be introduced on January
The move will be interpreted as a U-turn for one of the UK’s premium
food brands, which has consistently stressed quality over price through
claims such as ’We don’t make cereal for anyone else’. Kellogg has also
moved to stress the healthy aspects of many of its brands in an attempt
to counter the decline in the breakfast cereals market.
Sims said the new strategy was designed to ’drive sales and get growth
back on track’. He was responding to 1998 market reports which showed
that the UK cereals market has stagnated.
Between 1996 and 1998 the cereals market only grew from pounds 946m to
pounds 987m. Meanwhile, retailers’ private label increased market share
from 23.5% to 32.5% (Taylor Nelson Sofres Superpanel).
One food analyst said: ’This is Kellogg UK being realistic. Although it
has lost share to private label, until now the market has been growing
so it hasn’t been a problem in terms of volume. Now Kellogg feels
responsible for kicking the market into action.’
A comparison of prices between Kellogg brands and Tesco own-label,
carried out by Marketing, shows that the Kellogg brands were on average
33% more expensive. For example, a 600g pack of Kellogg’s Rice Krispies
costs pounds 1.89 at Tesco compared with pounds 1.29 for its own
Clive Vaughan, retail analyst at Verdict Research, said: ’Both retailers
and brands are now competing on price. This doesn’t mean damage to the
brand but consumers will be wary about qualitative changes in the