RTE CEREAL

Topics: Big Three, Marketing, Breakfast cereal Pages: 2 (434 words) Published: December 4, 2013
What are the barriers to entry in the RTE (ready to eat) cereal industry? •Market concentration and big players extremely powerful and profitable. •Restrained competition by the big three by unwritten agreements to limit in pack premiums; tread dealing (one brand at a time for each company); and vitamin – fortification •Economics of scale in production and advertising

Slots in the supermarket and negotiation by volume and discounts

Three big cereal companies: Kellogg, General Mills and Philip Morris •When: 1994
What: for the first time decrease of sales. Before this avoided destructive head to head competition. •Used to be a very closed market and even considered monopolistic. •Big margins, easy to negotiate and volume for retailers among other things made it difficult for new companies to enter the market. •1% of gross sales (80 millions) used for R&D.

Distribution to centers. Buy space at retailers (could go up to 1 million) when introducing a new brand. •Expansion from 96 – 2000 20% by entering superstore centers (Walmart with discounts) •Advertising and use of coupons… cereals seen as a luxury item with the high prices according to consumers. •New products developed (expansion of brands or new creations). Also co-brand deals •Kellogg: 35% of market share, leader. It has cereals, waffles (eggo), toaster pastries (pop-tarts) and granola bars. •General Mills had 24.3% of market share (food company). Cereal division was its largest division (30% of revenues) followed by restaurants, packaged food goods like frozen see food. •Philip Morris: 60 billion consumer packaged goods company (half from food and half from beer). Acquired Nabisco •Quaker Oats: leader with 65% of the hot cereal industry. •Ralston: pet food, batteries manufacturing (everyday and energizer), soy protein, operator of ski resorts, polymer products, etc. Produced 50% of the private label cereals.

Private Label Thread
Grew 50% from 91-96 (9.2% of all...
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