Secondly, the hot cereals sector, which consists of cereals that require some kind of preparation, such s porridge, which, will be the main focal product for Outside The Box (OTF) cereals at the start of its operation. Since the mid-nineties, consumption of breakfast cereals has shown steady growth, although In 2008, the UK economy was hit by the recession, which saw the sale of breakfast cereals alongside other food items slowdown. However, the consumption of hot cereals, which had been in long-term decline, has risen over the past 5 years.
The cold weather experienced at the beginning and end of 2010, coupled with an awareness of the cholesterol-lowering properties of oats, has helped increase their popularity. This therefore, creates a gap in the market for OTF cereals to gain a good share of this market as Its cereals are low In sugar, salt and saturated fat and rich in fiber, vitamins and iron. Within the cereals market, the main growth has come from niche products, such as organic cereals and adult Indulgence products, whilst growth In the hot cereals sector Is being driven by ; instant’, microwaveable varieties, which have attracted new users.
Using the FRR technology, OTF hopes to gain a good percentage of this growth. Sales of organic cereals grew dramatically In 2000, as the products became more mainstream and ell-known manufacturers entered the market. Whitebait, for example, launched its Nature’s Own range of wheat biscuits and malted wheat squares, while The Enjoy Organic Company, backed by RUM, Introduced a range of five organic versions of mainstream cereals. Own labels have also grown in importance, with new suppliers launching better-quality cereals which, opens the door for TOT to enter the market as the precedence has been set by these manufacturers.
The breakfast cereals market is well established and has been dominated by three main companies Kellogg, General Mills and PepsiCo for many years as these impasses are able to invest huge resources into marketing, building brands and new product development. Owing to growing health concerns however, particularly regarding child obesity levels. Smaller companies such as Outside the Box have had considerable success in recent years targeting niche markets, such as organic, premium and gluten-theta-free products.
Given its healthy image and the convenience of most products, the breakfast cereals market should continue to prosper in the long term. In percentage terms, however, it has been projected that the largest growth will come from hot cereals especially the instant varieties, which notations. Key Note estimates that market growth in the breakfast cereals industry will increase by 15. 2% in the next 5 years as consumers continue to priorities healthy eating. 2.
Brief description of OTF cereals and strategic focus of the Company OTF will be based primarily in United Kingdom at the start of its operations with its focus being mainly to market its cereal within the UK at the start. This will however, be reviewed at it grows in order to expand to different regions and outside of the UK. Outside the Box cereals will be a ready-to-eat porridge and will be positioned as the only cereal available on the market using the FRR technology, which offers unrivalled convenience for the on the go consumer.
The cereal’s main ingredients will be oats, wheat, rice, barley and corn with optional extras of varied fruit and fat free yoghurt. The product will bring an entirely unique cereal to its consumers, who are concerned with healthy heating due to it being are low in sugar, salt and saturated fat and rich in fiber, vitamins and iron amongst others. This is an opportunity for our company as I-J consumers are the biggest spenders on breakfast cereals in Europe being ahead f countries like France, Spain, Italy and Germany (Minute Global Market Navigator, GEM, 2011).
The strategic role of Outside the Box cereals will be centered on 3 main objectives: To stay at the forefront as the market leader of innovative and healthy cereals, offering different varieties through successful product launches. To strengthen and satisfy the needs of the on the go consumer through the convenience approach of the FRR technology. To become a market leader in the functional and convenience segment of cereals with increased market shares. 3. Vision and Mission
The vision and mission of Outside the Box is to be the healthy breakfast cereal of choice. The mission is therefore, to provide Britain with the finest healthy cereal range, by satisfying the needs of the on the go consumer, through innovation and creativity. 4. Market Analysis A market analysis was compiled to find out if there is a demand for Tab’s product and also who within the market, the organization are catering for. Market size: In 2010, the hot cereals sector recorded its highest annual value growth in at least four years with a 12. % Jump to IEEE million . This indicated to Tab’s management that there is potential and a huge demand for hot breakfast cereals in the market, such as porridge showing the sales increased rapidly in the last four years, and has continued to grow even further. According to Denominator, hot cereals sales generated approximately $201. 1 million in 2010, equating to about 8. 7% of the markets aggregate revenues . Product segments: The market can be segmented into two main categories which are ready-to-eat and hot cereals, I. . Hot and cold cereals. The hot cereals include both correlates with the recent winter temperatures we have been experiencing infirming that porridge sales benefit from particularly cold winters. ” As the be seen from (graph 1), porridge and granola cereals have performed very well with a 58% share of cereals consumed between the 2008 and 2011 winter months. This helped OTF in re-enforcing its cereal concept as it indicates that hot cereals are in demand, especially during the winter months.
This also indicates that OTF cereals have a good chance of becoming popular in the winter as forecasts indicates that temperatures in winter months will continue to plummet and as such, people will refer to have something warm for breakfast in the morning especially when it’s cold. As we have already started to see signs of this growth, it is one of the main reasons why Tab’s management is confident that it h cereal has a good chance of being successful. Market share: A competitor recorded sales increase of 51. 5% between 2008 and 2010.
This shows that competitor sales have increased over the two years with a high percentage over 50%, which gives the brand a good chance of performing well if OTF targets the correct consumers. New product developments within the cereal market ill continue to focus on the convenience and health content of cereal. It is expected that in the future, manufacturers will pay more and more attention to healthy cereals, as eating healthy food and living a healthy lifestyle will be pursued by many. This places OTF in a strong position of gaining a good market share as its cereal encompasses both quality and numerous health attributes.
In percentage terms, however, the hot cereal segments are expected to have the largest growth, especially within the instant varieties. Market forecasts: Looking ahead, value sales of hot cereal are expected to remain positive. Minute reports indicate that in the next five years, hot cereals are expected to grow by 11% to IEEE million . If the market continues to grow for hot cereals, this placed OTF in a good position as it will drive sales, create the opportunity for the business to expand its product range and long term wise, expand to different counties within Europe.
Industry structure: The three food giants in the industry are Kellogg, General Mills and Philip Morris, which indicates an oligopoly. These main competitors demonstrate who OTF should aspire to compete against from an overall but not immediate perspective, in order to make he brand recognizable in the market. The breakfast cereals industry has managed to retain its position over the past five years despite operating in a very difficult trading climate. The I-J market is one of the largest consumers of breakfast cereals in Europe and the second-largest in the world, with about 87. % of households consuming a breakfast cereal at least once per day. While this is an encouraging trend, the industry’s operating environment has been affected by commodity price volatility, falling consumer spending and the global economic crisis, which have put pressure on prices and volumes. However, cereal manufacturers have been very proactive and able to respond to changing markets by releasing innovative products, extending their brand ranges as well as advertising aggressively. 5. Competitor Analysis On a general scale, the breakfast cereal market is heavily saturated with numerous different competitors.
The main competitors of our cereal have many products which will initially be focusing on manufacturing and distributing only in the UK and its main stockiest will be high-end supermarkets such as Waitress and Marks and Spencer whilst also trading within the I-J to other luxury outlets such as Holland and Barrett. It is anticipated that on a general scale, OTF will face firm competition from internationally familiar and reputable brands such as Kellogg and Nests as well as competition from its direct and indirect competitors.
Direct competition: Tab’s most fierce and immediate competition will be from similar products and brands such as Cordon’s, Quaker Oats and Gallo Foods cereals. These competitors manufacturer similar cereals to Tab’s intended range and their retail prices are also very similar to Tab’s. To succeed in this competitive field, research has been conducted on these main competitors and analysis drawn on how OTF is going o compete with them, and what has made those organizations so successful in commanding the market share that they currently have.
Indirect competition: The identified indirect competitors are cereals that differ on price predominantly but offer a similar type of cereal to Tab’s in term of content but at a much lower quality. These are mainly supermarket own brands such as Deco’s Scottish porridge oats, Sad’s Good for you porridge range and Kingsbury porridge oats range etc. They all sell their products at relatively low prices accepting that the quality will not be as sigh as products such as Tab’s, whilst retaining a similar aesthetic.
From investigating the leading products sold in the breakfast cereal market, it is clear that four of the five top selling cereals belonging to Kellogg as indicated on (graph 2) below, which shows that they are a market leader. Graph 2 – Market share of breakfast cereals by brand Kellogg have several differ brands , one being the market leader Special K, which has never been the best tasting of breakfast cereals, but Kellogg have created its own brand for Special K, which targets an individual market (Women aiming to ‘drop Jean size’).
This strategy for targeting a specific market is an strategy that OTF could look to adapt when marketing a new product and in doing so create a brand of its own. Kellogg are also represented in the top 5 selling cereals by ‘Crunchy Nut’, ‘Corn Flakes’ and ‘Coco Pops’, all of which are associated with mass target markets and families sharing a box for breakfast.
It is clear that Outside the Box will look to adopt the strategies of Kellogg but should look to follow the ‘Special K’ route of marketing as it provides the consumer with a unique aspect of individualistic, as opposed to everyone round the table sharing the product, thus losing the appeal of the product being seen as high-end and niche. In stark contrast to Kellogg, Nestle are only represented in the top eight breakfast cereals by one product, which is ‘Cheerios’.
This shows their lack of innovation and adventure in the breakfast cereal market over they are yet to make it into the top 10 market leaders. Nests have looked to rectify this problem by building an ‘Innovation Centre’ which intends to focus on nutrition, health and wellness, in the hope that it will accelerate the company’s development of innovative and nutritious breakfast cereals’ (Marketing Magazine, 2010). Government- backed healthy-eating campaigns have helped boost sales of breakfast cereals, and particularly benefited the ‘better-for-you’ options such as porridge oats (Minute, 2010).
This is a positive initiative for OTF, as its cereal is a very healthy choice which promotes the intention of providing a healthy start and expects this will be acknowledged by the government as appropriate and a good example. A competitor who can be seen to make use of the ‘better-for-you’ policy is Whitebait with their slogan of ‘Fuel for big days for the whole family. Combined with this policy and the recent cold winters/summers, Whitebait have discovered that consumers are looking for that warm healthy start that will ‘power them on’ throughout the day.
A similar competitor to Whitebait is Quaker Oats, another porridge based producer of breakfast cereal who could be seen as Outside the Box’s main rival. In January 2011 Quaker Oats released a product similar and packaging to the one that Outside the Box is intending to market. The product is called Oats So Simple as indicated in (graph 3) shows and this is based on the same idea of ‘Just add water/milk. Although it does not possess the same innovation and technology as Outside the Box’s product, Oat So Simple do have the upper hand in the manner of reputation and market share, with a possession of 4% in 2010 as indicated in (graph 2).
To make sure Outside the Box competes with this new Quaker Oats product, the organization will need to show intellectual marketing to lure consumers away from the trialed and tested already successful brands such as Quaker Oats. As a high-end product it is unlikely that Outside the Box will be competing directly against the market giants such as Kellogg and Whitebait. Among the fierce competitors, are likely to be companies such as Cordon’s who offer a luxury cereal product in the form of Muesli.
In a world of healthy cereal that covers such staples as muesli, granola and porridge oats, Cordon’s are trying to have a ‘point of difference’ a reason to purchase. They do this through a 10% land commitment to wildlife habitats. This seems to be their brand promise, so much so that the logo states ‘Caring for the British countryside’. Outside the Box could look to adapt this strategy and make it their own, I. E. The promise of responsibly sourced ingredients’ ND ‘caring enough about the environment to replace/regret any habitats that have become diminished because of production”.
Other competitors for Outside the Box could come in form of health and organic shops, such as Holland and Barrett. These shops may not provide the largest quantity of sales, but will improve the image of Outside the Box’s product as healthy and good for you, Just by being sold alongside other health products. Among those products is Gallo Foods cereal, a gluten free organic product, a market that OTF could look to exploit if branching out into other areas of the cereal market in the future.
As you can see from the graph (graph 2) own label cereals possess a market share of 21%, which shows the power that supermarkets and health stores can create in the form of their own products. From the Box needs to go from here in order to be successful in the cereal market. OTF can learn from mistakes by some organizations, and adapt their strategies to compete with the successful products. The general consensus is that the cereal market is a fierce market to break into but with the right approach and product, the platform is there for Outside the Box to be a successful organization for years to come. 6. Porter 5 Forces Analysis 6.
Threat of new entrants Entry into the cereal market is relatively possible either through Companies diversifying or through an entirely new venture such as OTF. In order to help the market, Government regulations have set a certain number of rules and regulations for breakfast cereal manufacturers to follow to meet the correct guidelines. For example, they require cereal packaging to display nutritional information; this is so the customers know exactly what the cereal brand contains so that consumers are not misled in anyway. It must be labeled correctly displaying what it contains and the amounts of each type and its nutritional value.
There is also the possibility for new entrants to achieve relative success through targeting a niche segment such as health and fitness cereals however, this could be prove to be very challenging for new entrants as potential entrants would face difficulties in matching industry- specific knowledge and nutritional guidelines especially with the porridge being a luxury product. Further to this, due to cereals shelf spacing in outlets, some retailers may be reluctant to trial new brands in favor of well-known ones which, could pose a difficulty for new entrants in breaking into the market.
Therefore, threat of new entrants is moderate. 6. 2 Threat of substitutes Threat of substitution is also a very important aspect to consider as this will have a huge impact on the breakfast cereal industry. The substitutes for the breakfast cereal brands are the types of food that are consumed instead of porridge. This will include many types of traditional foods such as toast, different variety of fruit, bakery products, cereal bars, yoghurt as well would substitute porridge, because if consumers prefer eating alternative foods, then the sales of porridge will decline.
An advantage to Tab’s porridge is that it is a healthy breakfast cereal which contains tats and healthy vitamins, which is beneficial for those consumers who like eating healthy and the afore mentioned substitute foods do not offer the same nutritional benefits. This is a positive aspect for Outside the Box’s breakfast cereal as it can help boost sales, especially as it is a luxury product which is very convenient and less time consuming with the technology it provides.
Overall, the threat from substitutes is also moderate. 6. 3 Buyer Power Supermarkets, hypermarkets and health food shops will be the principal stockiest of Outside the Box’s breakfast cereal, and according to Denominator account for “77. 6% f the market share” . Furthermore, breakfast cereals are one of many products sold by most retailers, which illustrates that retailers are not wholly reliant upon breakfast cereal sales and this, increases buyer power.
End-consumers however, are likely to display brand loyalty, which will exert some pressure on retailers as they are forced to stock the most popular brands in order to meet end-consumer demand. This potentially decreases buyer power to an extent. Overall buyer power is moderate. 6. 4 Suppliers to the breakfast cereals market include farmers and grain traders who grow and trade in wheat, oats, corn and barley crops etcetera. These are mostly independent operators with little influence over the market. However, there are a significant number of further inputs that are necessary for certain brands of cereals.
Taking Kellogg as an example, the company lists its principal ingredients as corn, oats, rice, cocoa, soybeans, fruits, dairy products and other filling ingredients, which are obtained from a number of different sources. Again, the most common suppliers of these additional inputs are farmers. A further input is packaging which can preserve and protect cereals. Manufacturers of carton-board and plastic will be key appliers, as these are the principal materials that Outside the Box will require for the cereal. Due to the number of potential inputs to this market, the relative influence of the supplier on the market varies.
Overall, supplier power is moderate. 6. 5 Industry Rivalry The I-J breakfast cereals market is mainly dominated by Kellogg, General Mills and Pepsi Co with their different brands, indicating an oligopoly. Breakfast cereals are one of their main categories however, these market players have diversified into other categories e. G. Snack and cereal bars as well as geographical markets, which asses rivalry. This reduces the reliance on the breakfast cereals market to generate revenues and effectively reduces rivalry.
Within the breakfast cereal market, product differentiation is relatively broad and furthermore, manufacturers attempt to meet changing consumer demands by distinguishing themselves by appealing to a particular niche segments e. G. Kellogg with its Special K brand, aimed at weight loss seekers. Overall, there is a moderate degree of rivalry in the I-J breakfast cereals market. 7. SOOT Analysis Each company has many strengths, weaknesses, opportunities and threats identified awards or within their business, however it is how these are analyses which give the company the added edge when competing in the market place.
As a result of this, Outside the Box has decided to analyses the three most important, and immediate factors which will directly affect the company and product. 7. 1 Strengths Product promotes healthy eating: It is important to acknowledge that healthy eating is an integral part of modern society today. Thus, Outside the Box believes that it is important that the product is identified as healthy would be good in order to attract the target market, and appeal to the wider general public.
By using fresh and organic ingredients Outside the Box can market the product as healthy, which will make the product desirable to not only the target market, (the busy professional, who is time poor, cash rich and health conscious) but may also appeal to the general health conscious individual as well as consumers who are looking to become healthier. A report by suggests that the cereal and breakfast market has seen an increase of 35% since 2005, partly due to the slowing inflation rates in foods, but also due to cereals marking their products as healthy.
This directly relates to the fact that having a lately product, allows it to compete with the market whilst building a positive brand and company image. Eating patterns and how things have changed (see Appendix 3. 2), showing how consumers improved awareness of healthy eating has resulted in a rise in the health aspect of the food market, which is where Outside the Box will aim to be in the coming years. OTF Believe that by combining the health aspect of the created product, with its innovative technology, recyclable packaging, exclusivity factor and pricing strategy will allow the product to perform against any direct competition.
Product saves times appealing to busy individuals. The technology used in the product, Blameless Rationing Heating (FRR), , allows the consumer to save time in a way that no other competitor offers. There are other time saving breakfast products on the market such as a crunch Kellogg on the go cereal, and there are even other quick porridge such as Quaker Oats, however where Outside the Box differentiates is in the innovative technology.
As a result of the product been completely ready made in a sealed foil container, it means that no other ingredients need to be added, and due to the technology even the energy is already in the packet due to the (FRR). As a result of this, the packs can be made anywhere, whether it be in the car, on the train or out visiting a site, unlike competitors the product requires no power, no electricity and has no need for any extra ingredients. As a result of these factors the target market, which is the busy person on-the-go, should see value in the product on sale.
High quality product with high quality ingredients: Due to the nature of the target market, high quality ingredients and high quality packaging will both play a major role in whether or not the Tab’s cereal is purchased on a mass quantity. The general public have become a to more health conscious in terms of both the quality and contents of foods, especially within the breakfast market. This has come under tense scrutiny from both the government and other bodies as indicated in numerous reports such as the one published The Guardian .
Facts for the report show how high levels of sugar and salt have been discovered in many breakfast products, calling for a change to the products to encourage healthier eating. One of the strengths of OTF is that it aims to use locally sourced ingredients that are fresh and organic and of a premium quality. This will in effect mean that the ingredients are the best they can be. In addition to the quality of the oats the customizable aspect of the product and the packaging would also require a premium look and quality, in order to stay true to the concept of the product and targeted market. . 2 Weaknesses Luxury product: The reasoning behind placing products in the market as both premium and luxury could be why OTF will be successful, but also could hinder its performance through aspects such as price, the marketing of the product or because it is seen as a luxury therefore only a treat; not an everyday purchase. It is important to acknowledge that the busy person on the go may be wealthy, but he/she may have rinds who are not so .
The article relates to the fact that even the rich restrain from buying lavish goods if their peer groups are financially stricken by the business houses however, the principle applies further down the chain. The target market will in theory be comfortable financially, and see value in the product, however somebody on a lesser income may think the product is overpriced and a waste of money, therefore potentially deterring the targeted market from purchasing the product. Company reputation unknown: The fact that the OTF has no reputation, and is unknown to the general public is a big weakness of both brand and product.
Findings from research within a product management Journal, show the importance of brand loyalty and the strength a well-known brand can have on a product. This is a problem and could be detrimental to the success of OTF cereals however; the strength and innovation of the product could help to overcome the lack of brand awareness. The afore mentioned report also suggests that the modern consumer has become more fickle and on most occasions, will change buying habits because of boredom or perceived benefits.
This creates a great opportunity for OTF, as when this happens, consumers will often look for something different and new I. . New cereal range, possibly, once such as OTF cereals. Breakfast is Just for breakfast (window of opportunity): Breakfast is only a short period of time during the morning and widely considered by most to finish no later than 11 o’clock. This is an issue that the product faces due to the fact that it may only appeal to consumers for a small amount of the day.
Outside the Box could however, address this in the long term by brand diversifying into areas such as the cereal bar as well as an all-day-breakfast range. These further options will offer the potential for acquiring more of a market share ND this will appeal to a larger target audience whist still maintaining the quality and health benefits of the cereal range. 7. 3 Opportunities Ethical visibility to enhance profitability: Ethical consumerism is now practically as trendy as it was in the sass in many parts of the world, especially in the United Kingdom.
A general awareness of environmental issues such as recycling, food miles, carbon footprints, the impact of pesticides on food and the environment amongst others are influencing shopping habits, particularly among middle and high-income consumers who are the target market. Outside the Box aims to source ingredients locally in order to support local farmers and transported, thereby ensuring that all ingredients are natural and fresh, as well as organic and not harmful to the environment.
Outside the Box believe this approach will appeal to the segment of consumers who have adopted a more ethical approach towards shopping, and are constantly increasing their spending on such products. This approach will be part of the advertising campaign in order to ensure that the target market and all potential consumers are aware of the organizations ethical standpoint, with the aim of gaining good percentage of their spend on breakfast cereals.
Emerging health consciousness will drive the demand for the Company’s products: Over the past few years, there has been profound emphasis and initiatives by the October 2009 on healthier eating and in particular, about consumers opting for cereals that have reduced salt and sugar content. The high sugar and salt content of certain cereals has attracted negative attention from the press, creating negative perception among consumers in general, more especially within health conscious consumers.
In a report compiled by Felicity Lawrence of The Guardian, Watchdog analyses 275 different cereals using the Food Standards Agency proposed criteria and “more than three-quarters of cereals were found to have high levels of sugar and a fifth had high levels of salt”. Also, due to changing lifestyles, people are becoming more and more aware of the negative effects of unhealthy eating and in some cases, are taking active steps to change this. This has led too higher demand for more healthy breakfast options, I. E. Low fat, organic, low carbohydrate and calorie foods, which the breakfast product mainly consists of.
In a recent study conducted by Minute, it was reported that “there s evidently a consumer demand for healthier cereals” and that most of the consumers studied, listed the health- related benefits of cereal as one the most important factors as well as the sugar and salt content. This creates an opportunity for us to enter the market with a strong position of taking a good market share as the breakfast cereal will be low on sugar, salt and saturated fat amongst other health benefits which, will be clearly labeled on the cereal packs.
The same afore mentioned article also stated that the crispy nut four combo by Cordon’s, one of the erect competitors was the “least healthy breakfast” something which Outside the Box aim to capitalist on, and using the advertisement campaign. Differentiation through convenience and optional extras: The main differentiation strategy will be through the use of FRR technology, which is both innovative and convenient, and as an on- the-go cereal no other cereal manufacturer uses this same technology.
Outside the Box believe that this will distinguish the product from the other competitors. The cereal will also be packaged in a ready to eat bowl, which can be prepared and eaten anywhere I. E. On the train. Another differentiation strategy will also be through offering a choice of healthy optional accompaniment extras of different types of fruit, milk or fat free yoghurt, which will be displayed next to the cereals and again, no cereal manufacturer offers this.
As viral promotion will be a main strategy used, once the cereal has been launched, Outside the Box will also aim to differentiate the cereal, by offering consumers the opportunity to vote for their favorite flavors, and the chosen flavors will be based on the most popular choice. 7. 4 Threats Intense competition and well established market: Outside the Box are entering a arrest that is well established and from a general perspective, dominated by Kellogg, PepsiCo and General Mills, who have already established their presence with their brands, and have substantial financial and marketing power.
Outside the Box will therefore, not be competing with these brands for the foreseeable future and will mainly focus on its immediate competitors as identified in the direct competition analysis. As the brand will be virtually unknown compared to the above, consumers may be reluctant to purchase the cereal. Therefore, Outside the Box aim to focus a majority of attention on gaining entry by focusing on the strategy of
