Reference no: EM133036893

Kellogg has been the leading and largest cereal maker in the U.S. market for some time. It once had 45 percent of the U. S. cereal market. Thus, for a number of years, Kellogg was flying high with its "Tony the Tiger" advertisements, and its leading cereals of Frosted Flakes, Frosted Mini-Wheat's and Special-K cereals, among others. That is no longer the case, especially with the changes in the breakfast food market. In fact, cereal, which at one time composed approximately 38 percent of the breakfast foods in the U.S., currently accounts for about 28 percent of the breakfast food sales. The U.S. consumer is moving away from processed foods and carbohydrates, to fruit, yogurt and protein such as eggs, for breakfast meals. As a result, Kellogg's sales of its cereals are slumping, profits are slipping and its stock price is declining. A recent survey of analysts found that 90% recommended selling or a hold on Kellogg stock with only 10 percent recommending that investors buy it.

In 2014, sales for 19 of Kellogg's top 25 cereals declined. While other major cereal makers also struggled, General Mill's (e.g., Cheerios, Lucky Charms) sales were 50 percent better than Kellogg's. Obviously, Kellogg is losing market share to its major rivals in the cereal market but also to other firms providing different breakfast foods that are increasingly desired by the U.S. consumer. Kellogg seems unable to make the major changes required to respond to the new demands in the breakfast food market. Its competitors are responding more effectively than it is suggesting a dark future for Kellogg.

1.Evaluate Kellogg's competitive behavior. Have they made the right choices and what can they do to regain market share?

2. Describe Kellogg's competitive rivalry with General Mills and Post.