In 2015, Kellogg's announced it would form a joint venture with the Tolaram Group to expand operations in West Africa. This presentation tackles the Nigerian breakfast cereals markets and presents a strategy that focuses on increasing market share through improved distributions and product diversification research was conducted by Herbert Ferguson-Augustus, Austin Bush and Austin Bock, undergraduates in the Applied Economic Department. Dr. Metin Cakir advised.

1. Kellogg’s in Nigeria: A Joint Venture for Success
By AustinBock,HerbertFerguson-Augustusand AustingBush

2. Contents
1. Background on the Kellogg’s Company
2. Firm Financials
3. Kellogg’s Strategy in Nigeria - the Case
study
4. Industry Analysis - Porter’s Five
Forces
5. Firm Analysis - SWOT
6. Summary
7. Recommendations
8. References

3. Background
• Founded in 1906 as “Battle Creek
Toasted Corn Flake Company” in
Battle Creek, Michigan after the
invention of the Corn Flake
• Enacted 30hr work week during
great depression & WWII to allow
for an additional shift of workers
during tough economic times.
• First company to print nutrition
labels on cereal boxes
• Today one of the largest
multinational food companies in the
world

4. • Declining ROE and ROA – with
breakfast cereal markets
plateauing, Kellogg’s has
recorded limited growth in the
United States and Europe.
• Declining net margins – the
proliferation of private label
breakfast cereals at large scale
retailers has undercut Kellogg’s
prices, eroding profitability.
• Increasing Financial Leverage –
Kellogg’s has leveraged debt to
finance market development
abroad.
Kellogg’s:
Key Financials
Key Financial Ratios

5. Kellogg’s Strategy in Nigeria
Kellogg’s will target expanding middle
class by:
• Creating regional partnerships with
experienced local production company
Toleram and its distribution subsidiary
Multipro.
• Partnership allows Kellogg to leverage
their assets to produce high quality, low
cost products in the region as well as
develop new breakfast products for the
nigerian palate.
• Leveraging brand recognition to gain
market share in the mid-range and
value channels

6. • Suppliers are not concentrated
- Suppliers are highly
fragmented in the packaging,
agricultural productivity,
chemical manufacturing and
paper products industry
facilitating low switching costs
• Supplier face declining margins
- suppliers for packaging,
industrial equipment and most
commodities face declining net
margins
• Challenging Logistics - Nigeria
has an uneven and disparate
road system, despite 90 percent
of freight being transported via
trucking, navigating these
challneges requires an effective
route to market system
Industry
Analysis:
Supplier
Power
2011 2012 2013 2014 2015 2016
Grain Prices
Corn (Usd/BU) Wheat (Usd/BU) Oats (Usd/Bu)
2011 2012 2013 2014 2015 2016
Softs and Oils Prices
Cocoa (100 USD/Mt) Sugar (Usd/Ib) Soybean Oil (Usd/Ib)

7. Competitive Landscape
• Market is concentrated-
Majority of breakfast cereals
producers compete for high
income consumers
• High Demand Growth in the
Hot Cereals Market - RTE
Cereals subcategory growth
(3.00%), Hot Cereals
subcategory growth (5.57%)
• High Price Elasticity of
Demand - Consumers are
extremely price sensitive.
• High Exit Barriers - Huge sunk
costs associated with Nigerian
Business Environment.
ProductCategories
Kellogg’s
Nestle
Weetabix
BubbleSizeisMarketShare
Industry
Analysis:
Internal
Rivalry
RTECerealsHotCereals
Low Income Middle Income High Income
Consumer Segments
QOC
Kneipe
Sun Oil Ltd
Ranona Ltd
CPW
Pioneer Foods
NASCO

8. Route-To-Market by Market Share
• Open Air Markets dominate
retail sector –Grocers and
Kiosks have the highest
market share
• High number of brand
susbstitutes: Nasco, Kneipe
and Pioneer Foods all have
their own brands of corn
flakes
• Segments reflect rural-
urban divides – Progressive
Affluents, Trendy Aspirants
and Wannabe Bachelors
represent urbanites
interested in foreign brands;
struggling traditionalists,
female conservatives and
evolving juniors conversely
value affordability and
accessibility
Industry
Analysis:
Buyer Power
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Retailers Income Brackets Consumer Segments
LowMiddleHigh
KiosksGrocers
S
M
Progressive
Affluent
Trendy
Aspirants
Conservative
Women
Wannabe
Bachelor
Evolving
Juniors
Wannabe
Bachelors
Struggling
Traditionalists
Route-To-Market by Market Share

9. • High Demand growth for
packaged baked goods -
Baked Goods (3.7%) versus
Breakfast Cereals (3.6%)
• High Demand Growth for
Snacks and Biscuits - Snacks
and Biscuits (8.5%) versus
Breakfast Cereals (3.6%)
• High Price Elasticity of
Demand - Consumers are
health conscious and
extremely price sensitive.
• Breakfast Culture - Medium
to high income consumers
prefer breakfast cereals, low
income consumers prefer
traditional meals.
Professionals prefer hot
cereals and fast food.
Industry
Analysis:
Substitutes &
Complements

10. • High Duties and Import Taxes
- Import Duties (20%), Food
Sales Tax (5%)
• Difficult Business
Environment - Nigeria Ranked
170 out of 189 countries on
the ease of doing business
• High Fixed Costs - Nigeria
ranked 187th on access to
electricity, 185th in registering
property and 171st in dealing
with construction permits.
Industry
Analysis:
New Entrants

11. SWOT Analysis
Kellogg’s
• Existing sourcing and supply chain
• Local partner
• Experience moving into foreign
markets
• Experienced partner
• Nigeria is an emerging market
with a growing new middle class
• Launching new products - low
price hot cereal
• 5 cents – 25 cents impulse
purchases in open air markets
• New products must be
developed for the Nigerian
market
• Nestle? Unilever? Competition
• Capital intensive?
• Lower profitability in recent years
• Loss of market share to General
Mills
• New products must be developed
for the Nigerian market
STRENGTHSWEAKNESSES
OPPERTUNITIESTHREATS

12. Summary
• Currently Kellogg’s only imports products
into Nigeria; this strategic partnership
positions them to produce and distribute
locally.
• Kellogg’s falling market share stems form
a limited product mix of hots cereals and
snack items for middle and low income
consumers.
• Kellogg’s experience with entering new
markets paired with partnerships allow for
strong distribution channels and high
quality products tailored to consumers
needs in terms of price and quality.

13. Recommendations
• Learn from missteps made by nestle who
tried to implement current product mix and
target high income consumers.
• Develop a Hot Cereal Product and
introduce more of its established snack
products to the Nigerian market.
• Leverage partners’ knowledge of local
markets to help develop low-price brands
to be sold in open air markets rather than
in grocery stores.
• Implement a micro distribution model in
partnership with the Tolaram group to
develop stronger relationships with small
scale retailers, thereby increasing market
penetration.

14. References
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15. Questions?