Using cereal strategy: Kellogg bulls its way into fruit snacks

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New products and heavy marketing investments have turned around Kellogg Co.'s cereal sales and now the marketer is planning to apply the same strategies and tactics to a new category: fruit snacks.

Kellogg has been on a tear in cereals recently, with food analyst reports showing sales growth of 9% during Kellogg's recent fourth quarter due to what Prudential Securities' John McMillin cited as "a steady stream of new products plus a higher pool of marketing dollars." Now, while still pushing ahead with four new cereal entries and a variety of new ad campaigns on existing cereal brands, the company is looking to apply its winning formula to beat its cereal foes in fruit snacks.

"Fruit snacks is a good fit with what we do well-developing characters, leveraging partnerships and promotional programs-and if we're going to go into fruit snacks, we're going to get it right," said Jeff Montie, president of Kellogg's Morning Foods Division, North America. Looking back four or five years ago, he said, "you could have described us as opportunistic and reactive. ... Now we have a more cohesive plan."

The bravado of reaching into the fruit snacks category, sales of which Information Resources Inc. data show grew 5.6% to $544 million last year (led by heavy hitters General Mills and Kraft Foods), is something Kellogg doesn't underestimate, Mr. Montie said. But recent marketing success stories such as Special K Red Berries have encouraged the Morning Foods division to try to tackle the entirety of the cereal/wholesome snacks aisle-the most highly-trafficked and marketing-responsive aisle in the store-and the steadily-growing fruit snacks arena seemed a good fit.

Advertising for new Fruit Twistables launches this week with a "sizeable" kids' media buy that Mr. Montie describes as "at the high end of what we spend to advertise kids' cereal brands." Kellogg spent $18 million in media on its new Tony's Cinnamon Crunchers during the first 10 months of last year, according to TNS Media Intelligence/CMR.

The Twistables animated TV campaign, from Publicis Groupe's Leo Burnett, Chicago, features a fruit camp where single fruits go to turn themselves into the braided three-fruit-flavor snacks with the help of Sergeant Twistable. Millions of samples of the new brand will be carried in Kellogg's own kid cereals beginning in May. Meanwhile, Kellogg has worked its long-term partnership with Walt Disney Co. to competitive advantage, convincing Disney to transfer to them the license in fruit snacks formerly held by rival General Mills. Kellogg will broaden the line to include a new Lion King Bug-Alicious variety (playing off the success of its best-selling Disney cereal, Mud & Bugs, and tying into the DVD release of "Lion King 1 1/2") and plans to rotate in Disney's hottest properties over the next 18 months.

sticking with cereal

Meanwhile, Kellogg is not veering away from its cereal push, a focus on innovation and a shift from price promotion to consumer promotions that have "helped them truly differentiate their brands," according to UBS Warburg food analyst Evan Morris. Kellogg is just now launching nationally with the Smart Start Soy Protein line it has tested regionally, a new Banana Corn Flakes, a Disney Princess cereal and a full lineup of Nickelodeon-licensed SpongeBob SquarePants items that spans cereal, Pop-Tarts, Eggo and Cheez-It brands.

Other efforts include a repositioning of Disney Hunny B's cereal with less sugar, a promotion that offers Disney-themed Bendin' Friends inside kids' cereals and new advertising for baby-boomer targeted Smart Start cereal that features celebrities Olivia Newton-John, John McEnroe and Lauren Hutton as examples of the cereal's new "start aging smart" theme. As if that's not enough, Kellogg is also said to be looking at introducing a low-carb cereal to match a General Mills launch (see related story, P. 3).

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