Businesses Within The Cereal Industry

Published Date: 02 Nov 2017

For the purpose of this report, the industry of choice was the cereal industry. The cereal industry is highly competitive with numerous businesses competing for an increased market share. The cereal industry is influenced by customer spending and customer lifestyle. In recent years, consumer behaviour has altered with customers becoming more health conscious. As a result of this, business within the cereal industry have introduced new products and modified existing products to appeal to health conscious customers.

Based on research conduct, the following trends were identified within the cereal industry:

Consumer behaviour changes

Health conscious customers

The main businesses within the cereal industry are Kellogg’s, Nestlé, Weetabix, Flahavan’s and Odlums.

Breakfast apart from being a necessity for breaking the fast, it is also seen as a social ritual amongst the majority of cultures around the world. [1] 

Three main trends emerge from an analysis of the industry: Acquisitions, Automation and Consolidation. The nature of the cereal industry is oligopoly as there are just a few firms dominating the industry.

The key players were identified as Kellogg’s, Origin Enterprises (Odlums), Nestle, Weetabix and Finegrove Holdings Ltd. (Flahavan’s).The breakfast cereal industry can be divided into two categories; hot breakfast cereals and Ready to Eat (RTE). The key drivers to operate in this industry were identified as: Reformulation of nutritional ingredient, Product differentiation, Contracts for raw materials, Economies of Scale and Creative advertising.

The industry as a whole has an abundance external macro environment factors which are clearly seen in the PESTLE.

Porter’s five forces identified medium barriers to entry, threat of substitutions and supplier power, but highlighted high buyer power and competitive rivalry. From using strategic mapping it was emphasised that players in the industry modernised /changed their strategies to respond to key trends in the industry. From analysing the five key players in the industry, it is clear that all have similar product diversification, product development (Ansoff growth matrix) Strengths, weaknesses, opportunities and threats(SWOT Framework).

Introduction

INTRODUCTION – BASED ON UK & IRELAND!

Aims & Objectives

The following are the aims and objectives relating to the industry report on the Cereal Industry:

Examine and evaluate the cereal industry.

Outline the main businesses associated with the cereal industry.

Identify and comprehend the strategic activities associated with the main businesses within the cereal industry.

Conduct an analysis of the cereal industry in order to establish the present trends within the industry.

Conduct an analysis of the main businesses within the industry to ascertain the existing strategic situation of each business.

Outline the trends affecting the cereal industry and the market.

Outline the opportunities and threats present in the industry which could potentially affect the businesses.

In relation to the businesses and the cereal industry, recommend potential strategical directions which could be implemented.

Investigate and decide if the group would invest in any of the businesses and the cereal industry.

Industry Landscape

There were three key trends found from the players in the cereal industry. Kellogg’s have consolidated 42 business websites into one website in order to give a clearer brand identity and to enhance the customer experience. In relation to automation, these players currently use technological advanced machinery to aid them in production and packaging. Finally in May 2012, 60% of shares from the Weetabix Food Company have been acquired by China’s Bright Food Group while the remaining 40% is owned by Lion Capital.

From these trends, there are issues that affect these players, in terms of market saturation and fluctuating prices for wheat and oats. These are potential threats for this industry as reported by Business Insights which states; "cereal products have reached a level of saturation in many Western markets, so adding value and following consumer desires will be key to successful product lines". In order to combat this market saturation, businesses need to research, understand and acknowledge consumers requirements.

The fluctuating prices of oats and wheat could affect each business within the cereal industry. The price fluctuations are a result of difficulties experienced during the growing seasonal period.

Rising prices due to increasing costs for logistics and ingredients are primarily going to affect the breakfast cereal industry and its key players in the future. Cereal products could be sourced globally; however, there is a decline in international cereal production due to weather conditions [2] . If this continues, it could lead to cereal prices escalating and increases being passed down the distribution channel.

There is increasing pressure for new product development amongst the industries key players. This could potentially increase market share and enhance revenue for the niche players such as Flahavan’s and Odlums, while allowing market leaders such as Kellogg’s the opportunity to prevent smaller businesses from obtaining market growth. There is an increase in health conscious customers and in the future, this may define the product lines produced by the key players.

From the acquisition of Weetabix, Bright Food Group has vowed to globally expand the Weetabix business by entering the growing breakfast cereal market within Asia. Changes to food consumption patterns within Asia have resulted in businesses entering Asian regions and selling food and beverages to consumers.

Nationally, the cereal industry is worth €200 million per year with a profit between 40 – 45%.

In relation to the current market position of these players, Kellogg’s would be classed as the leader due to a 44% market share. With Nestle and Weetabix as the market followers, these businesses have a sizeable market share and remain competitive within this industry. The niche players, Flahavan’s and Odlums, are not as profitable as competitors, particularly Odlums who do not provide an extensive range of products.

Competitive rivalries could arise between these industry players, as all competitors have similar products aiming at similar target markets. The threat of substitutes is also an issue for these players; as there is a rise in own brand products, such as Dunnes Stores and Tesco. These products are being introduced into the market due to the changing consumer spending habits. As this industry could be seen as oligopolistic, the power over suppliers and buyer could potentially increase, however for the niche players, the competition could intensify.

Generally the cereal industry targets family oriented markets. In relation to Kellogg’s and Nestle, they could be seen to target children, as these players introduce characters to their brands in order for the children to be attracted to these products. Weetabix, Flahavan’s and Odlums target mature audiences which can be seen to be under the family orientated market.

For each key player, they must hold competitive advantage in order to sustain the market. The threshold resources that any player should have to operate within this industry include; finance, customer loyalty, brand awareness and a wide product range. Unique resources, such as Flahavan’s and Odlums, are particularly focused on the Irish aspects of the product. This involves the methods of producing the product and jobs that are created within the country. Irish consumers are value driven, however Irish products are important to these consumers.

In previous years, Kelloggs’s held a very dominant position within the industry, however this has changed substantially as more competitors have entered the market and have impacted the profit obtained by Kellogg’s.

In 2010, there was a net income rise of Kelloggs’s, which has since fallen from $1.2 billion to $961 million and emphasises a dramatic decrease. In 2012, the share price of the business was volatile as it declined to $46.33 in July, however increased to an acceptable price of approximately $60 in December. The size of Kellogg’s reduces the threat of a takeover occurring and exiting the market would not be foreseeable for Kellogg’s.

Kellogg’s use of Corporate Social Responsibility (CSR) is at the forefront when communicating with customers. This is highly evident in "Give a child a breakfast" campaign launched in October 2011 as this campaign highlighted the benefits of children eating breakfast. By highlighting this campaign, it improved the public perception of the company.

Financial reports released for 2012, illustrated that the Nestle group as a whole had a successful financial year. It shows an increase in profit for the year by $1.8 billion. The cereal range of the business is represented in this figure which displays a positive financial performance for Nestle.

Previously, Nestle has experienced a negative public image; "Nestlé attempts to divert criticism of its baby food marketing activities" [3] . Nestle continuously attempt to improve their CSR identity within the eyes of the public.

Bright Food Group generated revenues of approximately £7.5 billion last year which indicates it has a large resource base to expand the Weetabix brand into more foreign markets. The acquisition of Weetabix would indicate that there is a high demand for cereal products globally as well as within its existing markets.

The Weetabix brand has a long association with the British and Irish markets and has successfully reflected a positive brand image. However, the recent acquisition could have a positive and negative impact as it could be viewed as the loss of another indigenous company to a foreign multinational and may dilute the brand value.

As Flahavan’s is a privately owned family operated business and similar to Weetabix, is not listed on any stock exchange. Flahavan’s is an established brand and retains the majority of the market share in relation to hot cereal breakfast in Ireland. This brand has a positive image among Irish customers and assisted the expansion into markets such as the UK and US.

Flahavan’s is associated with Bord Bia and outlines the nutritional value of eating porridge as part of a healthy balanced diet. As the business is proud of its heritage and is a small player within the industry, the possibility of an acquisition may be unattractive to an established player.

Odlums is part of the Origin Enterprise Group, which is listed on the Irish Stock Exchange and experienced an increased share price within the last year.

The Odlums brand is well known within Ireland, primarily for their baking products. It could be perceived that the public have less recognition for the porridge range. The brand image is viewed positively and is also associated with Bord Bia.

Within the cereal industry, there are certain aspects which could affect key players in the future. In terms of Kellogg’s, they have primarily grown through merger and acquisitions. If all the key players follow this trend and grow like Kellogg’s, they could possibly maintain market share growth. Further brand building of key players, could allow for growth in new divisions, for example Weetabix introducing a new range of biscuits.

The majority of dominating businesses have a strong portfolio of products with great brand identity amongst its market share. If the key players continue to invest and grow their brand portfolio, it would be expected to have a positive long-term effect on those businesses.

There is a possibility of a new pecking order in terms of the hot breakfast cereal market segment. At present, Flahavan’s is the market leader in this category. However, Kellogg’s have developed a product, "Kellogg’s Corn Flake Porridge" [4] , to compete against Flahavan’s porridge. This product has not been launched in Ireland, but could potentially dominate the market in the future.

Currently, the key players are extending the life of their consumer recognisable products rather than removing them from the market place. [5] Customers would be willing to purchase familiar products and be more inclined to purchase new products launched by a trusted brand.

The key players have adopted an extension strategy of their products. From analysis of the Ansoff Matrix [6] on the key players, it was evident that they had the same strategy which included the retention of existing customers and attraction of new customers by means of product development and product diversification.

The key players are currently adopting marketing strategies to ensure that their brands are in the evoked set of their target markets while going through the decision making process and the customer chooses their product.

HRM Strategies

Nestle’s mergers and acquisitions provides the business with a wider selection of employees which can be used strategically to further develop the company’s competitive advantage. However, this method may not be feasible as employees may feel their opinions to be underappreciated and lack participation with front line decisions.

In the case of Weetabix, their use of motivational goals drives their use of HRM, which furthers their competitive advantage by providing a recognised and admirable work environment, which could be then used strategically to attract additional talented candidates.

In comparison to its competitors, Flavaghans is a considerably smaller company, mainly because of its family ethos. These sorts of companies generally limit new additions of staffing in order to reduce costs. However with the utilisation of their flat hierarchy which enables all departments to work together closely, this allows for a competitive advantage, which does not directly affect necessary recruitment and selection. In a sense Flavaghans has used their limit of recruiting for a more quality staffing experience which then follows through to competitive advantage.

Odlums have used their HRM strategies competitively in order to gain talented managerial staff in the company. This can be seen in their quality staff members, who have all had quality previous employment and education. This is a clear competitive advantage for odlums, and has formed them as an elite group of staff.

Kellogg’s, although they use extensive research and development which effectively provides solid results and provides a clear competitive advantage. It has been recognised that although management positions are favourable, their staff motivation and drives are low, therefore we can indicate that HRM strategies are not of concern to Kellogg’s.

· Are the Strategic HRM policies of the key players in alignment with its overall strategy?

In essence Nestle’s vision of "good food, good life" is very much in alligment with its strategic HRM policies. Through the use of mergers and acquistions, Nestle has managed to collect different types of talent, in order to provide quality behind its overall strategy of "good life, good food" in its product.

External Environmental Analysis

Porter’s Five Forces Analysis

Power of Suppliers:

In terms of Kellogg’s, Nestle and Weetabix, these businesses maintain a medium level of purchasing power from suppliers. This could be due to the variation of prices, for example wheat and corn, from suppliers as a result of extensive forces. These expenses could be filtered down the supply chain to the end user.

In relation to Weetabix, the business sources 90% of their raw materials within a 50 mile radius of their production plant in the UK. Although this can be viewed as a positive contribution within the local community, it may have a negative impact on production if weather conditions were to impact crop growth.

In regards to Flahavan’s and Odlums, these businesses only retain a certain level of power as a result of the varying prices of the oats. These varying prices could be due to a reduction in supply availability or difficult growing season. Also these businesses purchasing power would not be as high as that of competitor’s which would result in a moderate bargaining power.

Power of Buyers:

Buyers of breakfast cereals consist of grocery stores and supermarkets across Ireland and the UK. These buyers hold the power as the price is set on their terms. The buyers bargaining power would be considerably higher if there were only a small number of dominant buyers and a large number of sellers within the industry.

Supermarkets, for example Asda, Morrisons, Sainsbury's, Tesco and Dunnes Stores all stock cereal products within their stores in the UK and Ireland. Although there are multiple buyers within these two regions, it should be highlighted that these stores also stock competitor’s brands. Supermarkets, such as Tesco, also produce and supply their own brand breakfast cereals.

Based on research conducted, Odlums experience an 80% market share with their flour and baking mixes. However this does not include their porridge range. Due to the production of supermarket own brand cereals, there is high bargaining power for buyers such as Tesco and Dunnes stores.

Threat of Substitutes:

Although cereal consumption within the UK and Ireland is high, there is an increased threat of substitutes from competitors within the cereal industry. Other foods types such as fruits, bread/toast and yoghurts could be considered to be more convenient and less expensive for the average consumer.

For businesses, such as Flahavan’s and Odlums who only produce a certain selection of products, the threat of substitution could be high. This could be due to new, similar and cheaper brands entering the market. The introduction of own brand ranges could have an effect on the cereal industry as a whole, as customer lifestyles and spending habits have changed dramatically.

Threat of Entry:

Irish people are the largest consumers of breakfast cereal in the world. This raises the issue that there is a clear possibility for potential entrants to enter the Irish market and potentially gain market share.

Kellogg’s, Nestle and Weetabix are considered to be powerful market leaders. As a result of this, similar companies such as Flahavan’s and Odlums are continuously competing against each other to gain a wider market share.

The barriers to entry for this particular industry could be classed as high because potential start-up businesses may experience difficulty in entering the market. These new businesses may not have the relevant experience of the market and may lack the supply and distribution channels. Also the retaliation from the existing businesses may prevent the new entrants from achieving success within the market.

Although Kellogg’s is the market leader within the cereal industry, if American owned firms, such as Quakers and General Mills, decide to expand outside of the US it could lead to increased competition within the market.

Competitive Rivalry:

Competition within the cereal industry is high with businesses such as Kellogg’s and Nestle competing to be the overall market leader. The continuous introduction of new products helps to ensure that rivalry between all the companies remains high. In the case of Odlums, the business experiences a high amount of competitive rivalry due to competitors, Flahavan’s and Weetabix, having a wider product range.

Strategic Group Mapping Model

Strategic Group Mapping Analysis

Nestle is identified with having a high variety of products coupled with a high average price of €3.53per 500g Kelloggs is on par with Nestle however Kelloggs have a larger variety of products and slightly higher average price of € 3.54per 500g. Both breakfast cereal companies are positioned as having a large variety of products with a high retail price targeting the same market segments. Kelloggs target families with products such as cornflakes, rice crispies , frosties , all bran, crunchy nut and coco pops as well as the health conscious adult woman with their special k range [7] . Nestle target families with products such as nestle cornflakes, cheerios. Target kids and teens with nesquick, cookie crisp,cocoa puffs products and their adult with their fitness range. [8] 

Weetabix is more differentiated from Nestle and Kellogg’s. Weetabix primarily targets the health conscience consumer market segment whereas Nestle and Kelloggs target a proportion of that segment. Weetabix is identified with having a low variety of products combined with a high average price €3.49per 500g. Weetabix is a market leader with a 12% market share [9] (just behind Kellogg which leads brand sales with a 42% value share) [10] 

Flahavans is a market leader in the hot breakfast market segment with a 65% share of the hot breakfast cereal market [11] and a 7 % share of the overall breakfast market [12] .they have undertaken a hybrid strategy since 2008 by extending their product range and making their product more convenient to the consumer i.e quick oats. flahavans is identified with having a low variety of products (i.e hot oats) coupled with a low average price €1.25 per 500g.flahavans solely targets the health conscience individual/families.

Odlums holds a relatively small proportion of the hot breakfast cereal market and is identified with having a low variety of products combined with a low average price of €1.15 per 500g.

Kelloggs and Nestle are the most expensive of the companies, their higher price is justified by their larger variety of product offered. Weetabix, Flahavans and Odlums are the least expensive of the companies with is due to their low product range however their prices may increase in the further due to the perceived customer benefits of their products.

Internal Strategic Capability Analysis

Kellogg’s Company Background

The Kellogg’s Company was established in 1906 by W.K. Kellogg. By continuing to use the same technique in producing the product since this time, the Kellogg’s brand has grown successfully over the last 100 years with products reaching 180 countries worldwide. Kellogg’s primarily produce breakfast cereal products, along with toaster pastries and snacks, such as, cereal bars and winders.

In 1922, the Kellogg’s company arrived in Ireland with products being sold throughout the country. As Kellogg’s now is the leading brand in the breakfast cereal industry in Ireland and the UK, the business was one of the first to introduce nutritional labelling on their packaging, back in the 1930’s.

With their successful launch in the 1950’s of the cereal products Frosties and Special K, in the 1980’s new products, such as Crunchy Nut Corn Flakes, was launched into the Irish market.

The W.K. Kellogg Institute for Food and Nutrition Research was opened in 1997. This is where the engineers, nutritionists and food scientists would investigate the quality of the produce used. This facility also catered for the alternation in the reduction of salt used in breakfast cereals in 2010, along with vitamin D been added for children in 2011.

The Kellogg’s Company have various locations worldwide including North America, Europe & Middle East, Asia, Africa, Oceania and Latin & South America. The Headquarters for Kellogg’s is located in Michigan.

Kellogg’s SWOT & TOWS Analysis

Internal Strengths (S)

World leading producer of cereal

Market orientated

Large product portfolio

Attractive product

Brand extensions

Competitive advt.

Extensive market research

Corporate social responsibility

Mass media advt.

Promo activity

Internal Weaknesses (W)

Costly to develop new products

Customer focus on products that promote inner health

High price

External Opportunities (O)

Internet advertising

Internet selling

Baby boom

Gluten/wheat/dairy free products

People are heath food aware

Changing customer tastes

S - O Strategy

Expand snack catalogue to market to all age groups with dietary needs and wants

Sell favourable nostalgic cereals online

W – O Strategy

Expand product line to satisfy customer demands

Diversify into healthier convenience snacks

External Threats (T)

Home Brand cereals

recession

Healthier substitutes

Main competitor Weetabix

S – T Strategy

Create new promotional activity to engage customers

Extend product portfolio (30)

W – T Strategy

Create new healthier snacks range.

Kellogg’s Cultural Web Model

Kellogg’s Cultural Web Analysis

Paradigm:

Kellogg’s are internationally known for the quality products they produce. Kellogg’s pride themselves on providing a nutritional morning meal for all ages to enjoy. Product nutritional information is displayed on the packaging of the product. Kellogg’s provide this information due to implemented regulations and to help customers choose the appropriate cereals for consumptions.

Kellogg’s introduced a set of "K Values" into the workplace in order to guide how the business interacts with employee, suppliers, partners and communities. The values consist of passion, simplicity, integrity, humility, accountability, and success. These values have helped Kellogg’s to improve the business culture and allow for ideas to intensify, employees to thrive and success to increase.

Stories:

Based on research conducted in relation to the reputation of Kellogg’s amongst its employees, it was found that there was information of a mixed variety. Upon researching employees feedback, negative comments were discovered as one employee stated that the business had "short term focus and little employee development" while another employee stated that Kellogg’s was "a horrible place to work". Positive feedback was also reviewed with one employee stating that Kellogg’s created an "excellent opportunity to learn from brilliant minds and develop as a professional"

The reputation of Kellogg’s would appear to have a high influence on how the employees visualise the business and the leadership style. Employee feedback highlighted the abuse of management positions which can result in the employees being frustrated and unmotivated. Employee research indicated that most were satisfied with their wages but that it came as a result of working long hours.

Research was conducted in order to gain a better understanding of Kellogg’s reputation amongst its customers. The research revealed both negative and positive feedback. The positive feedback was in relation to how the customers enjoy the various products produced by Kellogg’s. The negative feedback highlighted how customers did not enjoy the products and how a number of the customers discovered foreign objects within their cereals.

Also some customers revealed they were not satisfied with the level of customer service they experienced. This customer feedback is not good for Kellogg’s and highlights how the business needs to improve their customer service.

Symbols:

As Kellogg’s is a multinational business, the brand image associated with the business is widely recognised and popular amongst customers. The logo identifies the business and its products while also being unique and standing out from its competitors.

The Kellogg’s logo has been modified slightly throughout the years but it has never lost its colour or shapely design. The introduction of the Kellogg’s Special K product range helped to better promote the business and placed better emphasis on the "K" aspect of the logo and business name.

Power Structure:

Kellogg’s has a hierarchical power structure with most of the manufacturing and product decisions being made by management and head office. The decisions are made as a result of discussion held between management. The employees are informed of the decisions and are expected to cooperate with the decision.

Organisational Structure:

Kellogg’s is a global business, located in 18 countries throughout the world. For Kellogg’s to remain successful within the marketplace, the business needs to ensure that each product is manufactured to the specification set out by management. Kellogg’s rely on the employees to work in teams in order to complete certain tasks.

Control Systems:

Kellogg’s has a tightly controlled environment with management and head office controlling the decision making. Kellogg’s also has employees who provide an organised environment and strive to produce quality products. Employees are trained for different aspects of the manufacturing process and a selection of employees are trained to interact with customers and suppliers. Employees also receive employment contracts which contain a specified length of employment. These contracts must be signed by each employee and the employee must adhere to the information set out in the contracts.

Budget and performance reports are controlled by Kellogg’s. The budget reports allow Kellogg’s to see the profits and other monetary information. The performance reports are completed on each employee and displays to Kellogg’s how these employees are performing their outlined duties.

Rituals and Routines:

Kellogg’s reviewed their training procedures in 2011 and developed a more intensive training process. Training is given to all employees in an effort to ensure that each employee has the skill and knowledge required to complete their daily tasks. Kellogg’s also provides employees with development opportunities by allowing these employees to experience learning from managers and from the work itself. These development opportunities are a way to encourage employees to work hard and aim to achieve a promotion. New employees are given induction training to ensure they are introduced to the work which they will be assigned. Also each employee receives training in relation to the safety measures which Kellogg’s have implemented in an effort to ensure the employees are safe within the workplace.

Kellogg’s Ansoff Product / Market Growth Matrix

Market Penetration

By utilising this strategy, this would benefit Kellogg’s in terms of continuing to remain competitive within the market and stabilising their position as a market leader within Ireland and UK. Over the years Kellogg’s have dramatically increased their product range to cater for a wider customer base. Kellogg’s provides cereals for children and adults to accommodate for their different lifestyle requirements.

By continuing to penetration this market at a relatively low risk for the business, Kellogg’s would need to implement a strategy in order to maintain their market share by using their existing products while retaining their current customers. This strategy would need to be developed by increasing brand awareness of their products, for example charity events or competitions, in order to remind customer their products.

Product re-launch could be another penetration for Kellogg’s in terms of retaining their existing customers. Through customer involvement and push marketing strategies, these methods could help Kellogg’s to secure their market share or have the possibility of increasing their customer base.

New Products and Services

As the cereal industry is a competitive market and developing the ability to be distinctive from the existing competitors could be a challenge for Kellogg’s. In order to increase the customer base, Kellogg’s developed products in the areas if toaster pastries and snacks. These developments allowed the business to explore new products while retaining their existing customers.

Market development

Market development is an important aspect for Kellogg’s to grow within the cereal market. Currently Kellogg’s offer a porridge product which is available in South Africa however are not obtainable within Ireland and the UK. Gluten free products from the US are also not available within these countries. These products could have a dramatic effect if Kellogg’s introduced these products into the Irish and UK market, as it could heighten the competition amongst competitors and attract new customers to their products.

Conglomerate Diversification

In order for Kellogg’s to diversify into an unrelated market would be a difficult challenge for the business. A market that Kellogg’s have diversified into is the snack food market. This is evident from the acquisition of Pringles in early 2012. This market could be seen to be difficult to operate as it does not relate to the cereal industry and the business may not have the necessary knowledge of the snack food industry.

Nestle

Nestle Company Background

Nestle was founded in 1866. As the company began to grow, it merged with another established company, Anglo-Swiss Condensed Milk Company in 1905. From this merger, Nestle acquired Rowntree’s of York in 1988.

Within Ireland and UK, Nestle is one of the key players in the food industry with 19 locations employing over 7000 staff. Nestle is also one of the key exporters for these two countries, with exporting products over £300 million worth to 50 countries worldwide every year.

With the mergers and acquisitions previously mentioned, this gave Nestle the ability to diversify their product portfolio to cater to a wider target audience. Nestle Ireland and UK expanded to sister companies such as Nestle Professional, Nestle Waters, Nestle Nutrition, Nestle Purina Petcare, Lactalis Nestle Chilled Dairy Company Ltd, Cereal Partners UK, Nespresso and Jenny Craig.

With these sister companies, Nestle was able to produce popular brands such as, breakfast cereals Shreddies and Cheerios, Go Cat pet food, Nescafe, Kit Kat and beverages Nestle water and Nesquik.

Nestle have Headquarters in Ireland and UK, with their factories primarily in the UK. Globally, Nestle are located in Africa, Oceania, Europe, and Asia and North and South America.

Nestle SWOT & TOWS Analysis

Internal Strengths (S)

Effective logistics – exports products worldwide

Brand image – easily recognisable and known throughout most countries

Informative website

Large selection of products

Environmentally friendly

Sponsorship

Cash position

Internal Weaknesses (W)

Competitive pricing

Wheat prices

Exporting costs

Criticism about cereal ingredients

Advertisement issues

Poor product display on website

External Opportunities (O)

Ensure continuous availability of products to satisfy customer needs

Effective target marketing

Social media usage

New product range for Ireland & UK

Advertising

S-O Strategy

Introduce gluten free products to broaden product range

Improve usage of appropriate social media tools to maintain brand image – twitterfeed and offers

W-O Strategy

Improve advertising & adhere to guidelines

Design cereal webpage on the Irish website to highlight and display all cereals available

External Threats (T)

Availability of products to buyers

Recession – declining retail market

Demanding environment – people want more for their money

Competitors

Substitute products

Own brand products e.g. Tesco

Health conscious customers

S-T Strategy

Increase brand awareness through sponsorship in order to sustain retail sales

Enhance product selection to customers to prevent switching to substitutes

W-T Strategy

Promote nutritional benefits of products through advertising to health conscious customers

Focus on quality of products than price in order to compete with competitors

Nestle Cultural Web Model

Nestle Cultural Web Analysis

Paradigm

Nestles ethos "Good food, good life" is a clear indicator of where nestles drive originates. This can be clearly defined as Nestles collective experience which is applied to situations in order to make sense of strategy. For example nestles acquisition of Alcon Laboratories Inc. provided an increase of food technology competencies behind their foods thus confirming their initial ethos of "good food, good life".

Stories:

Nestlé’s is regarded as the largest food business company in the world; this has been experienced through the use of mergers and acquisitions and primary food nutrition values. Nestle acquired Crosse & Blackwell in 1950 and Rowntree Mackintosh in 1988 to name a few. It operates in 86 countries and is the largest shareholder of L’Oreal. It has also been ranked at 1 in the fortune global 500.

However, Nestle cereals received bad press in 2011, with the accusations of incorrect nutritional information on their cereal products. This apposed their believes of nutritional value in good food.

Symbols:

Nestle is a Swiss made multinational country which strives in power and direction. It is a professional company, which has used mergers and acquisitions to its advantage in its early years and continues in this fashion today. Nestle receives great admiration publicly.

Power:

Nestles power structure is very hierarchical, many field employees feel like progression is limited and not balanced for all employees. However when we consider their previous paths to this power (mergers and acquisitions) we can interpret their power drive as continuous and dedicated. Also another interesting fact is that Nestle is primarily a Male dominated organisation, which creates the concerns of the "glass ceiling" effect for women, which can be regarded as discouraging and an imbalance on gender equality.

Organisational structure:

Nestles Organisational structure is revolved around innovation and expansion. Innovation through their ethos of "good food, good life", this can also be seen in their portfolio of innovating products such as baby formula and instant coffee. Their constant collaboration makes their company quiet segmented, however this approach has proven to be successful. In addition to this organisational structure, employees felt that quick decision making is not a competency of Nestles senior managers. This could potentially bring up the issue of potential lose in employee involvement, which can in most circumstances be valuable.

Control systems:

Nestle offer attractive pension plans in order to control employee systems. This is a lot more attractive for long term employees who are in the office. However, a majority of employees expressed that there is no work life balance plans to keep employees motivated and balanced in home and work activities. In contrast to their attractive pension plans, it can be assumed that Nestle is clearly monitory focused with employees.

In addition we found that Nestle do not micro manage their employees, although this is more enjoyable for the employee, it can be interpreted that nestle need to grasp control systems in order to keep employee focus in activities.

Routines & Rituals:

On a day to day basis, Nestle offer flexible working schedules for their staff. This communicates a laid back working environment, however due such hierarchical stances, strategy and direction is driven from headquarters. This tells us that on field employees are not driven on performance, as that type of belief is left to the senior managers in the company.

It can be widely assumed of how advantageous it is for all employees to have access to Nestlé’s international training centre in Switzerland. This can be seen as a prestigious opportunity for all Nestle’s employees to excel in. "Creating Shared Value and meeting our commitments" is Nestlé’s view on expansion into different countries and reaching further customer segments globally.

Nestle Ansoff Product / Market Growth Matrix

Market Penetration:

Like all cereal brands, Nestle is no different in wanting to expand further within markets such as the UK and Ireland. In order to do this they face a major obstacle in that they are the second largest behind Kellogg’s who have a 45% market share of the breakfast cereal market. However, as revealed late last year, the company is looking to expand its brand further within the region of Northern Ireland and in order to help achieve its objectives they have enlisted the services of GM marketing to help expand the brand through the use of online technologies and refined marketing strategies. The first phase within the marketing strategy will see the core brands used to help identify the Nestle brand as well as using pre priced cereal boxes which may be cheaper or the same price as their competitors.

Even though this is a low risk strategy the level of success of such a strategy can also be miniscule. If this strategy vastly increases the market share of Nestle it will have an impact on the market share of their competitors but at the same time it may not increase the market share of Nestle sufficiently to have a major impact on their competitors. It may take a considerable amount of time and may cause an impact within other areas that Nestle focus time and resources on. This strategy should be taken with a prudent approach in mind so as not to harm other categories that Nestle positions its brand.

New Product & Services:

Research and development is an integral part within the Nestle company as they look to introduce product development within all of the categories that it positions its brand. This is clearly evident within the company as they employ 4,500 people globally within its R&D departments as well as using external research provided by scientists, doctors who work within world renowned universities. This aspect of building bridges externally allows the company to further innovate within the area such of nutritional and healthy foods as well as numerous other categories.

A core belief that exists within the Nestle group is to "think global – act local". When looking for new ways in which to introduce new products within existing markets they place the customer at the core of the product. This is recognisable in the way that they cater to various customer groups with breakfast cereal brands such as Nestle Multi Grain Cheerios focusing on all members of the family, Nesquik for teenagers and children and Nestle Fitness for people who place a high importance on keeping in shape. Nutrition is a vital element within the Nestle core beliefs and values but they also put a lot of effort into ensuring that good quality taste is never sacrificed in the cereals that they provide.

Product development is a strategy that Nestle have continuously looked to improve upon since it identified that nutrition, health and wellness was to be the core strategy that it developed its products upon. Although it is a costly strategy the financial benefits on a global scale seem to outweigh the costs for Nestle.

Market Development:

"Organisations would ideally like to operate as if the world were one large market, ignoring superficial regional and national differences but still making sure that marketing activities fit to the practices and cultural characteristics of genuinely different markets" (Lee and Carter, 2008)

The Nestle brand is recognised on a global scale and has a vast portfolio as it does not primarily focus on cereals which can be identified due to its large divergence into similar but also unrelated areas such as baby food, chocolate bars, beverages and many other various categories. However, they do not focus each of these categories on a global scale as not all of their products would be successful within each of the segmented markets.

Even though each of the categories are not launched on a global scale it does not mean that they would not be successful within different markets as alterations could be made in relation to;

How the product is packaged and designed

The type of marketing communication strategy adopted to identify the brand within different markets and the people within those markets

What values are important within the different market

Given that Nestle is already a recognised brand name on a global scale and offers different categories of products in most domestic countries it would suggest that logistical structures are already in place which would be a major saving in terms of time, money and risk would be reduced due to existing structures within the global market.

Diversification:

Diversification is a strategy that an organisation can use to help influence the growth of the organisation on a large scale platform. It is a strategy that Nestle has closely adhered to as they have diversified into unrelated markets such as pharmaceuticals, beverages, pet care, health care in order to cover losses sustained within other parts of its portfolio while also growing its market share within these markets.

Nestle has depended heavily on diversification to sustain its market leadership as the world’s largest food company. Another reason for Nestle choosing to diversify throughout different markets is identifying what customers want now as well as in the future. By engaging within markets that are in an introductory stage it allows them to save money from been involved at the start than entering a market when competition is highly competitive. Early entry into unrelated markets also allows them to gain a higher market share now than they would at a later stage.

Within the cereal industry Nestle has had to significantly alter the products which it provides to its customers. This was highly evident in October 2012 when they vowed to reduce the proportion of sugar and sodium content that exists within the cereal category aimed at children and teenagers. Nestle say they are taking into account what their customers are saying and that this is a strategy which they have focused on within the last decade. This is evident in that they have removed 9,000 tonnes of sugar and 900 tonnes of salt that previously existed within its previous cereal formulas.

Weetabix

Weetabix Company Background

In the 1928, a product called Weetbix was produced in Australia by Bennison Osbourne. The product was introduced to Australia, South Africa and New Zealand. It quickly became a popular breakfast product. Osbourne went to the UK, in 1932, with his business partners and made modifications to the Weetbix product recipe. These modifications resulted in the creation of Weetabix.

In 1932, the Weetabix Food Company was integrated under the name British and African Cereal Company. A Weetabix factory was set up in Burton Latimer, Kettering in Northamptonshire and the production of the products began. In 1936, the business name was altered to Weetabix Limited.

Weetabix Limited expanded into the Canadian market in 1967 and then into the American market in 1968. With the expansion into foreign markets, Weetabix turned its attention towards creating more products for breakfast consumption. In 1971, the business launched Alpen Muesli and in 1991, Weetabix acquired Ready Brek from Lyons Tetley.

In order to remain competitive within the market, Weetabix introduced a new range of Alpen products in 2002. The new Alpen Bars allowed Weetabix to access the existing market while also trying to attract new customers.

Weetabix was a family owned business until Lion Capital purchased the business in 2004

In 2006, Weetabix further improved the breakfast bar range by introducing Alpen Light Bars. 2006 also saw the introduction of new breakfast cereals called Oatibix and Oatibix Bites.

From 2007 to 2010, Weetabix expanded their product range by introducing more breakfast cereals such as Oatiflakes, Ready Brek Chocolate, Weetos and Oaty Bars. Weetabix has won a number of awards for their products.

In 2012, it was announced that China Bright Food had purchased a 60% stake of Weetabix. This purchase gives China Bright Food a controlling share of Weetabix.

Weetabix SWOT & TOWS Analysis

Internal Strengths

Positive brand image

High nutritional products

Highly informative website

Successful Brand extension e.g. cereal bars & Oatabix

Best-selling cereal brand in the UK

Readily availability in all supermarkets

Positive customer satisfaction

Internal Weaknesses

Easily substituted for other breakfast items e.g. fruit, toast, yogurts or a traditional fry

High competition within the cereal market e.g. Kellogg’s & Nestle

Unattractive packaging for children

Categorised as a high price product

External Opportunities

Expand the market

Increase revenue

Health conscious consumers

S-O Strategy

Target health conscious consumers domestically and internationally

W- O Strategy

Increase product range in order to expand the market domestically / globally and obtain market leadership.

External Threats

Competitor Kellogg’s is the market leader with 40 % share of the breakfast cereal market

Own brand labels trying to imitate Weetabix cereal

Increase of substitutes for consumers such as toast, fruit, yogurts etc.

Recession - consumers have less spending power

S – T Strategy

Minimise substitution of product by increasing brand extension of the parent product further to obtain larger market share

W – T Strategy

1. Increase customer awareness of the benefits of eating Weetabix compared to competing nutritional brands

Weetabix Cultural Web Model

Weetabix Cultural Web Analysis

Paradigm:

While Weetabix do pride on sourcing locate produce for their product, protecting the environment is a key factor in how the business operates. Through working with professional schemes in meeting targets, for example carbon footprint, water and waste usage, Weetabix strive to achieve these goals with minimal impact on the environment.

Stories:

From the research conducted in relation to Weetabix’s employees, it was evident that the employees have positive experiences from working with the business. Weetabix state that working with the business is "more than just a job". Employees find that working in Weetabix is "rewarding" and a "great place to work". Employees also state they receive "good pay and pride of being a part traditional branded company".

Customer feedback is also an element that affects the culture of Weetabix. Negative feedback could potentially affect how employees operate and preform within the business. However, Weetabix obtained positive feedback from customers online, outlining their satisfaction with the nutritional benefits of the product.

As well as these positive aspects, Weetabix have various manufacturing plants, which attracts current and new employees to work with the company as accessible to these plants are greatly beneficial.

Symbols:

As the logo for Weetabix is a clear indicator of the product the business uses, it also focuses on the aspect of the suppliers. The relationship with the suppliers, for this core product of wheat, is the essence of the businesses operational function. The balance between this relationship is vital for the business to progress and grow for the demanding environment.

The brand image of Weetabix illustrates how the business is primarily family orientated and recognises that nutrition is an important part of the household’s daily dietary requirements.

Power:

The Head Office of Weetabix controls the operations of the departments within the businesses. These departments include sales, marketing, finance, operations and human resources. With the recent acquisition, the power structure between these companies may alternate as both companies will have different operational views for the business.

Structure:

Weetabix is a formal multinational organisational structure. This format focuses on the global coordination in the geographical areas, with the aid of the Latimer Group manufacturing plants, in Canada, South Africa and the US. Distribution of these products is available in eighty countries from South East Asia, South America, Middle East and Europe.

With this structure in place it allows Weetabix to localise their products to suit the relevant cultures and responsible respond to the laws and regulations of that culture.

Team work is another aspect that helps to develop the Weetabix brand. As one line operator employee stated that "working together in a small team in a high pressure environment" was key to success for the company.

Finally, as stated previously, the collaboration of acquisition of Weetabix would have a dramatic effect on how the business would operate on a daily basis, as both companies would have different managerial styles in running the business. The effect could damage the culture of the business if these managerial styles are filtered down the organisational structure.

Control:

In order for Weetabix to meet their target of production, the following are some controls which are in place to facilitate in making this target; audit procedures, performance management, production speed control and risks assessments. These controls are utilised to ensure that the business remains consistent with their production line and that the employees are catered with an efficient work place.

Routines and Rituals

The culture of Weetabix is focused on working hard and achieving goals; however though promotion and advertising helps to diversify the culture in focusing on the community surround the business. Promotions through online, advertisements and events create brand awareness for Weetabix while involving their key target audience of families.

Weetabix also prides itself in providing the best employment opportunities for their employees. Weetabix seeks to understand their employees and their ambitions to develop within the company. Weetabix offer their employees the chance to re-train or obtain a promotion for a specific role. This displays that Weetabix, with their employees, are highly motivated and goal orientated in achieving set targets for the business.

Weetabix Ansoff Product / Market Growth Matrix

Market Penetration:

This strategy would involve Weetabix aiming to retain or increase its existing market share through achieving an increase in sales by continuing to produce and sell its current products. This strategy can be implemented as a way to secure dominance of the business in a growth market. This can be done by removing the competition from the market.

As Weetabix now compete against businesses such as Nestle and Kellogg’s, it must increase its efforts in securing a high market share. Achieving a higher market share may prove difficult for Weetabix as a result of strong competition within the market. An increase in market share will allow Weetabix to have an advantage over its competitors.

Weetabix have increased its product lines in recent years which will assist the market penetration. The wide variety of products offered by Weetabix means the business can target a wider customer base. Weetabix could also specifically attract customers associated with its competitors which would result in Weetabix gaining an increase in market share at the expense of these competitors.

The use of advertising can help Weetabix to attract customers who normally do not purchase its products. Effective advertisement campaigns can target and encourage new customers to purchase the Weetabix products. Advertising can also encourage its current customers to increase the frequency in which they purchase the products.

The risks of implementing this strategy are relatively low but the success level can also be low if Weetabix do not establish a growth increase within the market.

New Product & Services:

Product development would involve Weetabix developing new products for its current market. Weetabix could introduce innovative product ranges which would replace the existing products. Weetabix could make improvements to existing products. The business could also introduce newer products which complement the current products on offer.

As a result of competitors, such as Kellogg’s and Nestle, continuously introducing or changing their products, Weetabix need to partake in product development in an order to have a better selection of products available for customer consumption.

The continuous changes and growth within the breakfast cereal market have resulted in the need for Weetabix to compete against popular branded businesses and to keep up to date with the rapid adjustments associated with the market. All businesses must conduct research and development in relation to their market and customers. Weetabix must ensure to conduct research and development in order to gain valuable customer input regarding the products offered by Weetabix. Valuable customer input could also be gained in relation to competitors and Weetabix could attempt to discover why customers purchase products from competitors.

Based on the research conduct on Weetabix, it was identified that Weetabix do not provide gluten free cereal. Introducing gluten free products would be advantageous to Weetabix ad it would allow the business offer new products to its existing customer base. These products could improve Weetabix competitive advantage and increase the market share.

For Weetabix, product development would involve an element of risk as the business would incur expenses but the information gathered could be beneficial to the business in developing products, competing against popular branded competitors and satisfying customer’s wants and needs.

Market Development:

Market development would involve Weetabix aiming to enter a new foreign market and sell its current products to a new segmentation of potential customers. The purpose of this is to attract potential customers who would like to purchase products from the Weetabix range. This would assist Weetabix in gaining customers and allow the business the opportunity to become dominate within a new market.

As a result of entering a new foreign market, Weetabix will have to amend its current strategy for marketing. The amendments would be in relation to areas such as pricing, distribution channels and promotional campaigns. Weetabix may decide to expand into a previously unexploited market where there is potential for the business to be successful. Also Weetabix may decide to enter a market where the distribution channels are sufficient to ensure the products are available for purchase within the new market.

As a result of Bright Foods, a Chinese business, recently purchasing a share of Weetabix, the business may wish to expand to the Chinese market in an effort to increase its global standing. With Bright Foods now having a significant input in Weetabix and its product ranges, the business might gain access to the appropriate channels required to enter the new market.

For Weetabix, market development would involve an element of risk as the business is unfamiliar with unexploited foreign markets and the customers. However, Weetabix would have exceptional knowledge of their products and could use this knowledge to attract new customers and be a success within the market.

Diversification:

Diversification in regards to Weetabix would entail the business developing innovative products for markets which the business has not entered to date. It would also involve developing these innovative products for new potential customers. If Weetabix were to partake in diversification, it would have to ensure that the products and the intended market are selected with the opportunity of market growth for the business.

Diversification can be either related or unrelated. In relation to Weetabix, related diversification has proven to be a recent development for the business. In January 2013, Weetabix introduced a new range of breakfast biscuits in an attempt to attract customers who do not eat a traditional breakfast daily. The introduction of the biscuits is also a way to remain competitive with Kellogg’s who also released breakfast biscuits within the last year.

For Weetabix, diversification would involve a high level of risk as the business will be operating with unfamiliar aspects of the market.

Flahavan’s

Flahavan’s Company Background

The business was founded by the Flahavan family in the late 1700’s. The history of the family has been traced back to 1785. Flahavan’s is believed to be the oldest privately owned family business in Ireland. The business operated from a mill in Kilmacthomas which was powered from the Mahon River. The Mahon River also supplied power to another four different mills.

Originally, the business used the mill to process oats from farmers for a fee. The mill was expanded, in 1935, to include a facility for oatflaking and helped the business to produce a flake that cooks more rapidly.

In 1995, Flahavan’s made their products available to the Northern Irish market. In 2003, Flahavan’s products were introduced in the UK market. In 2005, as a result of Flahavan’s continuous exporting, the business won an award for exporting from the Irish Exporters Association. In 2006, Flahavan’s won two more awards for their products, the Waterford Chamber Award and the Cork Environmental Forum Award. In the following years, Flahavan’s continued to win numerous awards for their products. In 2010, Flahavan’s introduced the new oatmeal product range into the US market.

To this day, Flahavan’s still use the same mill which houses the different equipment the business uses to produce a range of products. Flahavan’s produce a variety of products, for example porridge oats, ready to eat cereals and biscuits.

Flahavan’s SWOT & TOWS Analysis

Internal Strengths (S)