Kellogg Positions Special K as Megabrand

Extends $500 Million Business Into Protein Bars and Waters

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NEW YORK (AdAge.com) -- In hot pursuit of the next megabrand, Special K is slapping its scarlet letter on everything from water to watches.
Special K, a dieting cereal that has become Kellogg's top brand, is now expanding into meal bars and water products. |ALSO: Comment on this report in the 'Your Opinion' box below.
Special K, a dieting cereal that has become Kellogg's top brand, is now expanding into meal bars and water products. |ALSO: Comment on this report in the 'Your Opinion' box below.

Diet strategy
In the five years since Kellogg Co. and its agency, Leo Burnett Worldwide, devised the Special K Challenge diet plan, it's blossomed into the company's No. 1 brand, with an estimated $500 million in global sales. Now Kellogg is poised to push its diet credentials even further.

It plans this month to nationally roll out a line of protein waters and protein bars for the diet section already on the shelf at Wal-Mart. It will also launch Special K Chocolatey Delight to help assuage dieters' cravings come diet season this January (see sidebar). Special K Personal Trainer watches which calculate calories burned and are already sold in the U.K., could also find their way across the ocean.

Health and wellness VP
To mastermind this aggressive expansion, Kellogg named Alan Gravely, a former marketing executive in its frozen-foods division, to the new position of VP-marketing of health and wellness. As one executive close to Kellogg noted, Mr. Gravely's position was created "in recognition of the largess of the brand, to put a more coordinated effort against it."

As Special K has expanded in recent years to include new flavors, such as the 2001 hit Special K Red Berries, and new forms, including bars, snack bites and waffles, spending has also increased. Kellogg laid out about $45 million in measured media for the brand in 2005. In January through June of this year, it had already spent $31 million, TNS Media Intelligence/CMR figures show.

"Kellogg has done a great job by not just focusing on overall health and wellness but by segmenting the market within that for different need states, for example touting All-Bran for digestion and Special K for weight management," said Credit Suisse analyst David Nelson. In terms of the expansion of that weight-management area, Mr. Nelson noted that, of course, extensions "have to be consistent with a brand's positioning, but Kellogg has credibility in not taking things too far in the last five years since they've been back on track."

Sales up 16%
In the mostly declining cereal category, Kellogg managed during the year ended Sept. 6 to drive sales of Special K up 16% to $286 million in food, drug and mass merchandisers excluding Wal-Mart and, in the highly competitive bars business, to build its Special K bars up 67%to $96 million in those same outlets, according to Information Resources.

Those numbers have given senior management the confidence to bet in a big way Special K can survive and even thrive in new categories, including the ultracompetitive water arena, with its Special K20 Protein Waters, and in the pharmacy and diet and nutrition aisles, where consumers are not used to seeing the brand.

Retail buyers are bullish on Special K cereal and are confident as well about the protein bars. Water they're not sure about. "You never know with these things. It could be the flavor of the month and only click for a while, or it could be the next big hit," said one. "It's hard to know."

Shelf space commitments
With the Special K name and Kellogg's backing, though, retailers are certainly going to give the new products the shelf space Kellogg is asking for. Advertising for the lines will hit in January, touting their ability to help consumers stay on track with their weight-management goals throughout the day. Observers said that if the initiative is successful, Kellogg will gain a legitimate footprint in the diet arena and stronger credentials to take the brand even further.

Asked during Kellogg's second-quarter earnings call about how far Special K might be expanded, President-Chief Operating Officer David Mackay said: "Wherever we can find ways to bring to consumers things that help against a particular need state and work off our current brands, that's exactly what we're going to do."
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