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Capturing and creation of value in the cereal industry

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Please see my notes, below. Just looking for an overview. Additional research will be required on my part to provide a good case study.

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The expert examines capturing and creation of value in the cereal industry.

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Since the beginning of the cereal business, companies have relied on the domination of a market through tremendous marketing and promotion budgets supported with high-priced products. Barriers to entry through these promotional wars have made market share virtually unattainable for smaller companies. This environment has caused the evolution of four dominant firms in the breakfast industry: Kellogg, General Mills, Phillip Morris (Post), and Quaker Oats. For years these companies have literally swamped supermarkets with different cereal brands in search of profits. The substantial profit margins realized by the four firms has been criticized and questioned in the past. Particularly because of the fact that by 1983 branded cereal prices had increased at twice the rate of other foods, and profit margins were twice as large as the food industry's average. By the 1980's, however, a force emerged within this once secure industry that continues to be a threat to these companies' market share today. Generic and private-label brands have captured consumers' purchases because of significantly lower priced products that are comparable (in the eyes of an increasing number of consumers) in quality and taste.

If we look at the cereal products in the box versus the price at the counter in a superstore
we may believe that the cereal have a very high profit margin. But in fact almost all the money goes into marketing to differentiate one box from the next on a crowded shelf, and that's what ...

Solution provided by:
Umut Oltulu, MBA
Education
  • BSc, Dokuz Eylul University
  • MBA, Texas A&M University-Kingsville
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