Kellogg’s is the market leader but although it has a lot of power it still has to compete fiercely against many rivals which are looking for a bigger share of the market. The suppliers to Kellogg’s are relatively small independent farms which have very limited buyer power. On the contrary Kellogg’s has a high level of power due to the size of the organization but chooses not to abuse it.
The threat of entry is relatively low due to various barriers to entry which include large advertising campaigns of existing competitors in the market. Kellogg’s alone spent ₤49,184,000 on advertising in 2006.
The final section refers to the threat of substitutes or alternatives for Kellogg’s. These substitutes don’t only depend on elasticity’s but more and more on the ever changing trends and lifestyles.
The Market size for breakfast cereal in the UK accounted for just over ₤1.45 billion at the retail selling price in 2006 alone. A survey conducted using consumer data from BMRM international Target Group Index confirms that Ready-To-Eat breakfast cereal remains as the family favourite. There is no better way to explain the size of the market than showing it graphically so below you can see a table with the size in terms of sales from 2002 to 2007.
RTE cereals 1,210.391,244.811,279.531,300.371,326.251,349.78 - Family breakfast cereals 870.99885.11907.25924.17945.54964.88 - Children's breakfast cereals 339.40359.70372.29376.20380.71384.90 Hot cereals 65.9070.1882.57106.89126.34147.00
Breakfast cereals 1,276.291,315.001,362.111,407.251,452.591,496.78 Source: Euromonitor International
Just to give a feeling of how big the market is, in 2006, 49.4% of adults had eaten hot cereal over the last 12 months and a further 86% had eaten cold cereal in the same time period. This clearly shows the high levels of penetration.
The breakfast cereal market is segmented into two categories. These categories are hot and ready-to-eat or cold cereal. The RTE cereal market accounts for just over 90 percent of the market sales and hot cereal accounts for just under 10 percent.
The current market growth from breakfast cereal as a whole is 3% in 2007. In recent years hot cereal has really taken off and in the last year alone has benefited from a value growth of 16% and volume growth of 9%. Amazingly, from 2002 to 2007 the value of hot cereal has risen by a staggering 123%, quickly outpacing RTE cereal which benefited from only 11.5% in the same time period. These growth patterns are a reflection of the changing trends as people try to adopt healthier lifestyles and the breakfast cereal market has been very good at innovating to fulfil demand. They have done this both by making breakfast cereal healthier e.g. reducing salt and sugar levels without compromising taste and making the consumption of the product more convenient. In the RTE cereal market you can get cups with individual servings and in the hot cereal market you can get instant sachets which will cook in just 90 seconds. The innovation in convenience explains the great rise in hot cereal consumption and this can be demonstrated by figures showing that over 60% of hot cereal consumed is instant. The future forecasts are that although CAGR volume will decline by 1% due to poor future harvest, changing land use and demand from India and China there will still be a constant CAGR value growth of 1%.
This section measures the competitiveness and rivalry within the breakfast cereal market mostly concentrating on Kellogg’s. Kellogg’s is the leader of the market with 31% share and doubles the...