Although the breakfast-foods manufacturer has grown the market, it still has a long way to go.

By Chhaya

It was a bitter-sweet Diwali for Denis Avronsart, the 49-year-old Managing Director of the breakfast food-manufacturer, Kellogg India. After 3 years at the head of the breakfast table, Avronsart is relinquishing charge at the fully-owned subsidiary of the $6.80-billion Kellogg Co.. His successor, K. Venkatachalam, has flown in from Kellogg Australia. After a brief period of hand-holding, Avronsart will yield control to the 45-year-old Venkatachalam, who will be the first homegrown CEO at Kellogg India.

But Venkatachalam will certainly inherit a more upbeat Kellogg than his predecessor did. Says Avronsart: ''We have established the company, the brand, and the Kellogg equity. We are ready to take off now,'' adding, ''I am very satisfied and proud with what we have done in India.'' With reason: in 1995, Kellogg had a 53 per cent share of the 1,000-tonnes per annum (tpa) breakfast-cereals market, which was valued at just Rs 15 crore.

Three years later, ORG-MARG says that the market has grown by 300 per cent in volume to 3,000 tpa, and 400 per cent in value to Rs 60 crore. Moreover, Kellogg's marketshare has increased to 66 per cent by volume, and 80 per cent by value. Says Sushmita Panda, 29, a Research Executive with ORG-MARG: ''There is no doubt that the breakfast cereals market has grown well in the last two years, and we believe that Kellogg has been the growth-driver.''

This increased crackle in Kellogg India was brought about by its shift in positioning from nutrition to fun-filled flavours, consumer promotions that accompanied a Rs 25-crore media-spend, constant free-sampling exercises, and an on-going process of developing price-volume packages. Now, the company is betting on products specifically developed for the Indian market-like Mazza cornflakes and Chocos biscuits-to drive volumes. BT examines how the Kellogg rooster is eating into the 4 formidable barriers it is up against:

THE HABIT BARRIER. The closer Indian food-habits are to the heart of the meal, the harder it is to change them. Admits Avronsart: ''People believe that we want to change habits. Nowhere in the world have we done that. Our approach, instead, has been to offer an alternative to the many options that consumers have for breakfast.'' At present, cornflake accounts for 50 per cent of Kellogg's sales volumes while the sub-brand, Chocos, takes up 20 per cent, and the rest is met by variants like Frosties, Wheatflakes, and Basmatiflakes.

While Kellogg argues that it is not looking for volumes for its variants, the search for a product to break down the taste-barrier may force the company to increasingly rely on sub-brands. After all, cornflakes are meant to be had with cold milk, in which sugar does not dissolve easily. However, the Indian consumer prefers sweetened milk, which results in the unsatisfying experience of soggy cornflakes in hot, sweetened milk. To counter this, Kellogg launched Chocos chocolate-coated cornflakes in September, 1996, followed by Frosties sugar-encrusted cornflakes in April, 1997. Says Kamini Banga, 43, Managing Director, Dimensions Consultancy and Quality Research: ''Chocos and Frosties are big sub-brands for Kellogg today, and are probably the growth-engines.''

Now, after extensive market research and test-marketing, Kellogg has launched Mazza in August, 1998, with flavours like mango-elaichi, coconut-kesar, and rose. While it is early days yet, Kellogg clearly believes that Mazza will drive volumes. Says Avronsart: ''Mazza will satisfy most of what consumers expect from Kellogg: local flavour, crunchy, fortified with vitamins and iron, and, also, cheaper than cornflakes.'' Agrees Ashok Sethi, 40, Director, Sofres-Mode, a Mumbai-based market research firm: ''In a country like ours, where traditional food-habits prevail, adapting to local tastes is the right approach.''

THE PRICE BARRIER. At an average cost of Rs 21 per 100 gm, Kellogg Cornflakes sells at a premium of 27 per cent over its main competitor, Mohun's Cornflakes (Rs 16.50 for 100 gm). Says Vinay Mohan, 27, Managing Director, Mohan Rocky Springwater & Breweries, which makes Mohun's Cornflakes: ''Kellogg is able to cater only to the A-Class towns or the more affluent consumers whereas Mohun's caters to the mass market.'' Avronsart admits as much: ''Price is the biggest element of consumer resistance.''

Kellogg has increased the price of its products by an average of 28 per cent over the past 3 years. Warns Banga: ''The Indian consumer is not that discerning about quality when it comes to looking at the whole price-quality package.'' But Kellogg will continue to defend the price-line, and has, instead, adjusted the packsize to suit consumption patterns-and wallets. In 1997, it introduced the 500-gm family pack, which brought down the price per kg by 20 per cent. And Mazza has been introduced in 60-gm pouches, priced at Rs 9.50.

THE POSITIONING BARRIER. Hammering home the nutritional benefits of its products, Kellogg has spent more than Rs 25 crore on advertising over the past 3 years. However, research shows that the average Indian consumer rarely attaches importance to the level of iron and vitamin intake, and instead looks at the quantity, rather than the quality, of the food consumed. Affirms Avronsart: ''The Kellogg mandate is to develop awareness about nutrition.'' But he also admits: ''There is a lot of confusion between nourishment and nutrition. That is something that we have to handle.''

The confusion is compounded by Kellogg's two recent successes, Chocos and Frosties, which do not rely on the health platform but, instead, put forward a more fun-filled image. In fact, while retaining its health positioning, Kellogg's new product-range, promotion-schemes, and sampling-exercises are now clearly aimed at a younger audience. Explains Banga: ''At one end, they are seducing the children with promotions. On the other, they are talking to them about health. So, the child can go home and persuade the parents to get Kellogg because it is a healthy product.''

THE PENETRATION BARRIER. Three years ago, Kellogg had 30,000 outlets across 60 cities. Currently, the rooster visits just over 40,000 outlets in a little over 60 cities. Concedes Avronsart: ''We have increased our reach only slightly, but we are now enlarging our coverage.'' Kellogg has cleverly begun doing that by launching Chocos biscuits, and marking its presence in the Rs 1,345-crore biscuit segment. Kellogg's reasoning: market research revealed that 50 per cent of biscuit consumption takes place in the morning. Says Sofres-Mode's Sethi: ''As cereals is a narrow category, the foray into biscuits will create wider awareness for the Kellogg brand.''

Adds Avronsart: ''We are ready to develop any food based on grain and nutrition that will satisfy consumer needs.'' On the other hand, consumer promotions have served Kellogg well. In 1997, Kellogg had 7 such promotions, where freebies like pencil-boxes, waterbottles, and tiffin-boxes were given out with every pack. In fact, at least 25 per cent of Kellogg's marketing spend will in 1999 go into consumer promotions. Moreover, the company-which has distributed free samples of cornflakes to over 5 lakh homes and 3 lakh schools in the past 3 years-will continue that effort. Acknowledges Vinay Mohan: ''The high level of media exposure and value-added consumer schemes have certainly created immense brand awareness for Kellogg.''

There's a long way to go before Kellogg can turn the corner in India. If it took 25 years in Mexico, Kellogg has set a stretch target of 10 years for India. Now, with a phased change-of-guard at the top, Kellogg is transferring that urgency to a homegrown Indian CEO: Venkatachalam, a chemical engineer, spent 11 years in Hindustan Lever before joining Kellogg India in September, 1992. Which means he has been brought up on a breakfast of idlis. That's just the sort of fellow a crackling Kellogg needs to eat into the mind of the Indian customer.

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