Ready To Eat Breakfast Cereal Industry Essay

inhibit competition amongst themselves through unwritten agreements to limit the in-pack premiums (free toys, gifts, e tc) -Refrain from trade dealing- rearing discounts to retailers for spare treatment or special promotions -Refrained from widespread fortification of their brands because it was believed to not be in the long run interests of the exertion (vitamin fortification)FTC also argued the tumid three took specific actions to make new entry ventures unprofitable-prevented entry into the RTE caryopsis industry by encouraging super markets and other retailers to adopt a shelf seat plan that ensured the big threes products received the most valued center aisle positionCaught off guard with the introduction of natural cereal brandsIndustry environment in the 1990sTechnologyProcesses utilized in creation of many childrens cereals took substantial engineering expertise and production experience to master.-Standard plant was estimated to req. a capacity of 75 one thousand th ousand pounds per year to achieve minimum efficient home base -employed 125 people-req. capital in overabundance of 100 million-a singly plant could produce many brands of cereal because the main sourceof scale economies was in bagging -Spent about 1% of gross sales on R&D (slightly high than the nutrition industry bonnie)2 PROBLEMS that have persisted over the 100 years of making cereal1. It was awkward to keep cereal crispy in milk, and in cereals like Raisin Bran, the flakes tended to become soggy in the recess because they absorbed the moisture of the fruit2. NOT easy to combine things with varying water activity characteristicsa. A typical solution to this problem was to coat the fruit with a thin layer of fat to pickle the moisture thus preventing the flakes from getting soggy in the boxEven tried to alter the hurl of the cereal to prevent mild absorption and preserved the crispinessDistributionPrime shelf space and its importance-Slotting Allowance securing shelf spa ce for a new brand required pmt to grocers -larger cereal firms had to a greater extent flexibility than new entrants in shuffling their allocation of space among brands(sometimes replacing a failed brand with a new introduction)Introduction of supercenters-Large 125,000 sq. foot stores that combined a supermarket, a general discount retailer, and specialty retailers under(a) one roofThey really increased non-supermarket sales of nutriment from 5% in 1993 to 20% by 2000Supercenters helped shelf space Significantly less entrenches than in supermarkets and thus allowing start-up value oriented brands to obtain a market presence AND..DID NOT require slotting allowancesINTERESTING FACT- Big three accounted for 75.6% of sales in food stores, they only had a 41.3% mkt share in mass merchandisersAdvertising, Promotions and PricingAdvertising/ sales ratio vicious from 1960s. Especially intense though around a new product introductionRTE cereal industry historically had rounds of price in creases usually initiated by Kellogg and then followed by other manufacturers of branded cerealsKnown as the process of price up and spend backIn addition to being amongst most publicize intensive industry, the RTE cereal industry was the top issuer of coupons -Coupon use grew a lot, by 1994 the average value of redeemed coupons had climbed to 87 centsIn addition to coupons, other forms of trade promotions were become prevalent such as-per sheath discounts to retailers and cash payments for special in store promotions and cooperative advertising, -Buy One Get One promotions-one of the most dearly-won-Might gain 2-3% market share with aggressive price promotion for value sensitive customers -Neither coupons nor forms of trade promotions were believed to own the total cereal demand dramatically -mostly led to stock piling and brand switching by customers-price promotion spiral drove RTE cereal prices up 15.6% From 1990-1993 -development of new brand took 2-4 years on average and expenditure of 5-10 MM -Brand extensions perceived to be more likely to succeed than new brands and thought to offer economies of scale in advertising and were technologically simpler to develop and produce because the basic process was already in use-Rapid innovation and introduction of new cereal brands led to increased product failureCo-branded cereal in 1994 was very popular-Several companies also attempted to extend the reach of RTE cereal into snack foodCompetitionKellogg was the clear leader with 35.2% mkt share in 1993-Had great diverse assortment of products (toaster pastries with pop tarts, frozens waffles with eggos, and granola forbid