Kellogg turns red to remedy Special K woes

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Kellogg Co. is replacing its ailing Special K Plus extension with a more flavorful variety featuring dried strawberries. The discontinuation of Plus is the latest in a string of new-product disappointments for the cereal marketer in the last two years.

An estimated $15 million in marketing will support the rollout in March of Special K Red Berries, packaged in pink-hued boxes that will supplant the milk-carton-style packages that contained the calcium-fortified Special K Plus. While the innovative Plus variety debuted with much fanfare in mid 1999, excitement over the product's novel packaging and on-trend fortification quickly faded when consumers did not respond.

One Midwest retail executive said he initially gave the cereal less than a year on the shelf when it failed to sell despite extensive sampling in 22 corporate stores as well as heavy promotion. "When it comes to a new cereal, I do everything I can to give it a head start, but I just don't think the food was very good," he said. Sales support that theory. Plus garnered only $12 million in sales for the 52 weeks ended Dec. 3, according to Information Resources, Inc. Worse, sales for the base Special K brand fell 4.7% to $118 million.

The Red Berries extension has already been a hit for Kellogg in the U.K, and is said to be far tastier than its predecessor. That's an important difference if Kellogg hopes to lure new, younger consumers and overcome perceptions that Special K-while good for you-is not big on flavor.

"There are a lot of dedicated Special K consumers, but others out there may not have tried it because it hasn't had the taste profile they're looking for," said a Kellogg spokeswoman. Special K Red Berries is a better fit with the brand's new positioning, she said, which asserts that "Looking good never tasted so great."

The new theme for the franchise recently appeared in a TV spot from J. Walter Thompson, New York, the first from the agency since it won the business from Leo Burnett USA, Chicago, last June. In the commercial, a man questions if his wife is really "sacrificing" to stay in shape if she gets to eat delicious Special K, which he tries to grab.

Creative for the Red Berries launch campaign, expected to break in late April along with extensive promotions and sampling, has yet to be finalized, but will emphasize the fresh fruit flavor of the cereal as well as mention that it contains a mere 110 calories per bowl.

Kellogg has struggled over the last few years to determine how to position Special K to its female target, briefly using Cindy Crawford as a spokeswoman for the brand last year. But getting it right this time around is crucial to CEO Carlos Gutierrez's stated plans to build core brands through increased marketing spending, even at the expense of earnings.

Data for the four-week period ended Dec. 3 showed that Kellogg has made some headway in its battle against General Mills, with sales up 3.4% vs. a decline of 3.2% for the category and a 10.3% decline for General Mills, according to Credit Suisse First Boston analyst Dave Nelson. But 52-week data shows Kellogg's cereal sales are still down 1.8% for the year to $2.3 billion vs. its rival's 0.5% decline to $2.5 billion.

"Kellogg has had a couple of successes this year, including its mileage tie-in [with American Airlines] and its Pokemon promotion, but they haven't stopped the misses," Mr. Nelson said. In recent years, Kellogg has been forced to discontinue or scale back on lines including Breakfast Mates, Country Inn Specialties cereals and Ensemble, a functional food line including cereal.

However, General Mills hasn't had much innovation in cereal of late, and its Sunrise organic offering, with little more than $14 million in sales, is likely to get a revamp, Mr. Nelson said.

Ongoing management changes at Kellogg reflect continued efforts to prevent marketing missteps. In preparation for the impending acquisition of Keebler Co., Kellogg earlier this month named former general manager of cereal Jeff Montie to the new position of president, Morning Foods Division for Kellogg USA. Michael Allen, recently named VP-Ready-to-Eat Cereal, will report to Mr. Montie as will Mark Baynes, new VP-Convenience Foods (including Eggo and Pop-Tarts) and Ethnic Business Development. Paul Norman, former VP-cereal, is now president of Kellogg Canada. In addition, Steve Benoit, president of Kellogg's Natural & Functional Foods Division, resigned last week but plans to stay on until a replacement can be named.

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