Kellogg shifts focus from volume to value
Sept. 12, 2016
by Monica Watrous
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Kellogg is reducing sugar and adding positive attributes such as protein and fiber to its products.
BOSTON — In shifting its operating focus from volume to value, the Kellogg Co. is betting on fewer, bigger launches to create impact in the marketplace and on margins, said Clive Sirkin, chief growth officer of the Battle Creek, Michigan-based company.
|Clive Sirkin, chief growth officer of Kellogg
“This calls for widening our lens not just in terms of product innovation but packaging innovation and commercial innovation,” Sirkin said during a Sept. 7 presentation at the Barclays Global Consumer Staples Conference in Boston. “And importantly… ensuring that we deliver the right product in the right format in the right channel to drive value that consumers will pay more for.”
This approach includes reducing sugar and sodium and removing artificial colors and flavors from products while adding positive attributes such as protein and fruit.
Kellogg added more berries to Special K Red Berries cereal and increased the price.
“We’re making great progress against sugar and artificial colors and flavors, and we’ve passed our goals that we set for ourselves in terms of sodium reduction,” Sirkin said. “And while the removal of negatives is important and fundamental… to get into our consumers’ consideration set, nothing beats the addition of positives. Ultimately, when you add back what consumers love, they’re willing to pay for it.”
For example, Kellogg added more berries to Special K Red Berries cereal and increased the price. Consumers have responded positively, Sirkin said.
“We were able to realize price, and we drove the business,” he said. “In the most recent 52 weeks, this SKU (stock-keeping unit) is up 3 percent.”
Kellogg recently introduced Cheez-It Grooves, a line of textured snack crackers in various flavors.
Another piece of Kellogg’s innovation strategy is developing products for new eating occasions. An example is Cheez-It Grooves, a line of textured snack crackers in various flavors.
“Three years ago we launched Grooves to get into a new consumption opportunity with meal accompaniments, something we weren’t playing in,” Sirkin said. “And over the course of the three years, we’ve continued to renovate against this platform, sustaining it and making it stick. And we’re in our third year now, and the franchise is up 15 percent.”
Kellogg recently unveiled resealable pouches for its MorningStar Farms veggie burgers, joining the packaging style of other MorningStar products.
Packaging innovation is another priority for Kellogg, which recently unveiled resealable pouches for its MorningStar Farms veggie burgers, resulting in a significant reduction in packaging material.
“And we’re providing consumers the convenience of resealability and a better consumer experience with less freezer burn,” Sirkin said.
And then there’s commercial innovation, such as the launch of a venture capital fund and the opening of Kellogg’s NYC, a cereal cafe in Times Square.
Kellogg's commercial innocations includes the company's new Kellogg's NYC, a cereal cafe in Times Square.
“Our launch of Eighteen94, a V.C. fund, provides us the opportunity to open up innovation, get a much more external view of innovation,” Sirkin said. “And we expect that to drive the agility and the culture of innovation in the organization…
“And similarly, in the New York cafe, great opportunity to drive real-time transactional learning, getting closer to our consumer with testing that's more proximate of the commercial outcome.”
Another recent project is BearNakedCustom.com, an on-line portal allowing consumers to order customized granola from a selection of more than 50 ingredients.
“Small footprint, but a way to innovate,” Sirkin said. “And the business model, direct-to-consumer, an emerging e-commerce channel where we’re gaining fast learning through transactional learning that drives our food design.”