By John Revill And Annie Gasparro
Several years ago, Kellogg Co. discovered it had a problem with
its Corn Flakes brand in South Africa: Customers were boiling the
cereal and turning it into a soggy mess.
Many South Africans, accustomed to hot porridge for breakfast,
didn't know how to prepare Corn Flakes. So Kellogg switched gears,
rolling out a Corn Flakes Instant Porridge in 2012. It since has
expanded with new flavors, including a strawberry version launched
this year.
Fine-tuning products to meet cultural expectations is critical
to efforts by Kellogg and other multinational cereal makers to ramp
up sales in developing countries in Africa, Asia and elsewhere. The
giants are making the overseas push to offset lackluster sales in
the U.S. and parts of Europe as consumers increasingly shun
sugar-laden breakfasts in favor of fresher, faster and more
portable foods.
Emerging markets are growing in importance to cereal makers as
more residents in those countries move to cities and have less time
and inclination to make traditional warm breakfasts. As middle
classes emerge, consumers have more disposable income and want more
variety in their food, said Dave Homer, chief executive of Cereal
Partners Worldwide SA, a joint venture between Swiss food maker
Nestlé SA and General Mills Inc., the U.S. producer of Cheerios and
Wheaties.
"Globally, cereal-category [sales] volumes are flattish, but
they don't need to be this way," Mr. Homer said. Cereal Partners,
which sells cereal in about 130 countries, isn't giving up on its
traditional markets, but developing markets "can help a lot," he
added.
Cereal sales in the U. S.--by far the biggest market, with
around one-third of the $32.5 billion global business--have been
sluggish for several years as more consumers favor protein-heavy
meals they can eat on the go. U.S. dollar sales of hot and cold
cereals are expected to inch up just 0.6% annually over the next
five years, according to market-research firm Euromonitor
International. In contrast, sales in China and India are expected
to rise an average of 9% and 22% each year, respectively, over the
next five years.
To appeal to consumers in developing markets, cereal makers must
overcome many hurdles, including little-to-no appetite for dairy
milk in some regions and a cultural affinity for traditional hot
foods such as rice. Chinese, for instance, often favor a breakfast
of hot rice porridge, breakfast soups or steamed buns.
"It is one thing to get people to try Western breakfast cereals,
but it is another thing entirely to get them to adopt it," said
Marcia Mogelonsky, an analyst with market-research firm Mintel in
Chicago.
In many countries, consumers eat fewer than 100 grams of
breakfast cereal annually per person, or about 3.5 ounces,
according to cereal manufacturers. So the companies can make a
significant impact on their growth simply by getting consumers in
emerging markets to eat one or two more servings a year, said Mr.
Homer of Cereal Partners, based in Lausanne, Switzerland.
Cereal Partners has been making inroads into markets such as
Indonesia and the Philippines. It seeks in developing countries to
promote cereal as a source of fiber, vitamins and minerals,
focusing especially on the benefits for children. To make products
more affordable and convenient, it has introduced three-serving
bags in Indonesia, while in Thailand it rolled out a single-serve
Koko Krunch chocolate cereal that comes with a paper bowl and
plastic spoon.
In Indonesia, Cereal Partners employees attend informal women's
networking groups and discuss the nutritional benefits compared
with the traditional local breakfast of fried rice.
"Eating cereal is very new to them," said Nadia Devisa, a Cereal
Partners marketing executive. "The moms had a lot of questions,
like, 'Can I eat it with any kind of milk, or hot milk?'"
Mira Santi, an Indonesian mother of two, found her children
liked Western cereal during a tasting. "I don't mind giving it to
them because it gives nutritional value," said Ms. Santi, who
usually makes nasi uduk, a rice dish, or bubur ayam, a type of
porridge, for breakfast.
Cereal Partners, formed in 1991, posted $1.89 billion in sales
in the 12 months through March 31, down from $2.11 billion a year
earlier. It doesn't break out sales in emerging markets.
Kellogg expects a higher percentage of its cereal sales to come
from more culturally relevant varieties, with Corn Flakes flavors
like unsweetened mango and local dishes like savory pongal--a
mixture of rice, milk, cane sugar and coconut--in India. The
company also has been selling sugary flavors such as Chocos Crunchy
Bites in India, but it said they haven't sold especially well.
In Colombia, Kellogg is selling cereals in packs attached to
yogurt, because consumers there to tend to eat more yogurt than
milk.
Kellogg logged about one-third of its $14.6 billion in sales
from outside the U.S. last year, with at least $2 billion coming
from sales of cereal and other products in emerging markets. Its
cereal sales by volume are rising by double-digit percentages in
Asian emerging markets and in the 4% to 6% range in developing
countries in Latin America, according to an investor presentation
earlier this month.
Kellogg has found it must be vigilant in some developing markets
about communicating how consumers should eat cold cereal. "In
markets where milk consumption is a lot lower, educating consumers
how to eat cold cereal, with ads illustrating that, is important,"
said Doug VanDeVelde, senior vice president of global breakfast for
the Battle Creek, Mich., company.
The company drew lessons from its stumbles with Corn Flakes in
Africa--where it discovered it had targeted some consumers in rural
areas who had grown up eating mielie-meal, a ground maize porridge.
Those consumers thought they should use hot water to prepare Corn
Flakes, too. Making a change to a porridge product became "a
no-brainer" at that point, said Kara Timperley, Kellogg's marketing
director for sub-Saharan Africa.
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(END) Dow Jones Newswires
September 25, 2015 05:35 ET (09:35 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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