Kellog Quaker Oats Case

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KEL182

CHRISTIE L. NORDHIELM

Quaker Oats’s Oatmeal Division
Polly Kawalek emerged from Bob Morrison’s office after her annual review in December 1998. By any measure, 1998 had not been a successful year for Quaker Oats’s oatmeal division (“Oatmeal”), and culpability fell on Kawalek’s shoulders. It had been the warmest winter in memory across the country, causing demand for oatmeal to drop, and failed product releases had cost sales and led to trade marketing spending deficits. Furthermore, consumer interest in the oatmeal category was waning, and the relevance of a 125-year-old brand was in question. Quaker was among the top major brands mentioned when consumers were asked to list the healthiest, most nutritious foods, so the “brand equity was bullet-proof nutritionally and evoked wonderful memories, but it was a little old-fashioned, and everybody thought they already knew all about it,” Kawalek explained. (See Exhibit 1 for consumer perceptions of brands’ nutritional value.) Faced with dozens of substitute breakfast products, consumers were not loyal to oatmeal, and Quaker struggled to breathe excitement into the category to attract buyers and keep current customers. In defining a strategy for selling oatmeal, Kawalek had confronted fundamental questions faced by the company as a whole. Who was Quaker’s core consumer? What did he or she value about Quaker brands, and how could those values be served by Quaker Oatmeal? “How can Quaker get a breakthrough message that provides a reason for consumers to eat oatmeal?” she wondered as she trudged back to her own office. Kawalek had been promoted to corporate senior vice president and president of Quaker’s hot breakfast division in November 1996. The following year, Quaker hired a new CEO, Bob Morrison, who immediately eliminated all executive vice presidents, the only layer between Kawalek’s position and the CEO. Invigorated by her greater level of authority and by the challenge of taking the reins of a mature

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