Page 4: Extending the Nutri-Grain cycle - identifying the problem
Kellogg's had to decide whether the problem with Nutri-Grain was the market, the product or both. The market had grown by over 15% and competitors' market share had increased whilst Nutri-Grain sales in 2003 had declined.
The market in terms of customer tastes had also changed more people missed breakfast and therefore there was an increased need for such a snack product.
The choice of extension strategy indicated by the matrix was either product development or diversification. Diversification carries much higher costs and risks.
Kellogg's decided that it needed to focus on changing the product to meet the changing market needs. Research showed that there were several issues to address:
- The brand message was not strong enough in the face of competition. Consumers were not impressed enough by the product to choose it over competitors.
- Some of the other Kellogg's products (e.g. Minis) had taken the focus away from the core business.
- The core products of Nutri-Grain Soft Bake and Elevenses between them represented over 80% of sales but received a small proportion of advertising and promotion budgets. Those sales that were taking place were being driven by promotional pricing (i.e discounted pricing) rather than the underlying strength of the brand.