Ready to Eat Case Study
cereals.
- Price-promotion spiral drove RTE cereal up 15.6% from 1990 to 1993.
- The demand for natural cereals surged unexpectedly, where the Big Three introduced brands in this segment.
¨ Why have private labels been able to enter this industry successfully?
- Low price was the primary appeal of private label cereals, where it averaged $1.90 per pound at retail, 40% less than the Big Three.
- Private label did little advertising and made few attempts to differentiate their products.
- Private label offered better margins to the retailer, which contributed to a willingness of grocers to promote private labels enthusiastically.
- Increased technological competence raises product quality.
- Brand loyalty was seen to have been further eroded by failed extensions of popular brands.
¨ How do the cost structures of private label and branded cereal manufacturers differ?
- Manufacturing cost private labels manufacturing cost per pound was 10-20% lower than branded cereal manufacturers.
- Advertising cost private labels engaged in little advertising to promote their products, and they did little to differentiate their products and competed solely on price.
- Distribution cost branded manufacturers owned regional distribution centers, and the private labels relied on wholesalers and third-party distributors by giving them 10% margin on the wholesale price paid by the retailer.
¨ What are the key core competencies and success factors needed in this industry?
- Creativity, food engineering, keeping the right product in the marketplace, process expertise, knowledge of the consumers, technology, product innovation, and quality improvements.
¨ How do you see the private label cereal manufacturers with respect to the key success factors in this
- Price-promotion spiral drove RTE cereal up 15.6% from 1990 to 1993.
- The demand for natural cereals surged unexpectedly, where the Big Three introduced brands in this segment.
¨ Why have private labels been able to enter this industry successfully?
- Low price was the primary appeal of private label cereals, where it averaged $1.90 per pound at retail, 40% less than the Big Three.
- Private label did little advertising and made few attempts to differentiate their products.
- Private label offered better margins to the retailer, which contributed to a willingness of grocers to promote private labels enthusiastically.
- Increased technological competence raises product quality.
- Brand loyalty was seen to have been further eroded by failed extensions of popular brands.
¨ How do the cost structures of private label and branded cereal manufacturers differ?
- Manufacturing cost private labels manufacturing cost per pound was 10-20% lower than branded cereal manufacturers.
- Advertising cost private labels engaged in little advertising to promote their products, and they did little to differentiate their products and competed solely on price.
- Distribution cost branded manufacturers owned regional distribution centers, and the private labels relied on wholesalers and third-party distributors by giving them 10% margin on the wholesale price paid by the retailer.
¨ What are the key core competencies and success factors needed in this industry?
- Creativity, food engineering, keeping the right product in the marketplace, process expertise, knowledge of the consumers, technology, product innovation, and quality improvements.
¨ How do you see the private label cereal manufacturers with respect to the key success factors in this