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Ready to eat breakfast cereal industry in 1994
Transcript of Ready to eat breakfast cereal industry in 1994
Why has RTE cereal been such a profitable business?
First- mover advantage (Pioneers)
Only 3 big players shared market for RTE
Barriers to new entrants (secured shelf space)
Why have private labels been able to enter this industry successfully?
Private labels offered better margins 15% (compared to branded products 12%)
Expansion of discount retailers into supermarkets
Couponing impacted consumer loyalty
Continuously increased prices
How do the cost structures of privatelabel and branded cereal manufacturers differ?
Basic packaging reduced packaging costs by 25%
Higher margins 15% (instead of 12% branded products
No advertising costs
Manufacturing costs 10%-20% less vs. branded products
What does General Mills hope to accomplish with its April 1994 reduction in trade promotions and prices?
Goal--> Improve profit performance
Consumers were saturated by coupons and promotions
Promotions had lost their attractiveness
What caused the crisis in 1994?
Private labels entered the market from 1991 to 1994
Sales of private labels grew to $500million (increase by 50%)
Too much diversification
No needs-based positioning
Private labels launched cheaper products
How do you expect General Mills’ competitors to respond? What should General Mills do?
differentiate by benefits, services or other elements --> Identidy strenghts
Need- satisfying benefits (brand loyalty)
Niche-markets or segmentation
Target marketing (over targeting)
Streamline marketing - adapt Marketing