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III. Kellogg’s &Cultural Issues
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- Kellogg’s in India
- Cultural Issues in Europe
- IV. Political and Legal Environment Political Influence on Firm Operations
- Legal Environment Impacts on Firm Operations
- Intellectual Property Issues
- Regulatory Issues
III. Kellogg’s &Cultural Issues As a large multinational firm with operations spanning the globe, Kellogg’s must consistently cope with cultural differences within the markets in which it offers its products. In each of these markets, unique cultural forces influence business practices, marketing standards, as well as consumer wants and needs, causing a need for the firm to effectively adapt its offerings. One market which has necessitated substantial shifts amongst the firm’s marketing plans has been India. Kellogg’s has had to cope with several cultural attributes causing the firm to change its offerings to better meet consumer desires. When Kellogg’s tapped into the Indian market, the firm faced several challenges and experienced many issues along the way. Kellogg’s in India When first entering the market, Kellogg’s used its common product model for the Indian market instead of specifically catering to the needs and demands of the Indian population. The firm’s initial strategy claimed that it was focused on long-term success, and that the firm was not overly concerned with profit in the beginning stages. To survive and achieve credibility in the Indian market, Kellogg’s was forced to reevaluate the positioning of its products, boost marketing initiatives to improve exposure, adjust the price point, add new products, and to increase distribution capabilities. The struggles Kellogg’s has faced in India emphasize the importance of thoroughly researching a market before selling products in foreign markets. Kellogg’s mentality in India was to sustain a consistent level of quality and service, and thus, the firm decided to sell its product only at middle-level and premium retail stores- a decision which yielded the firm’s products unavailable for the majority of the Indian population. Another one of Kellogg’s initial mistakes in India pertained to the firm’s positioning. Advertisements and promotions utilized by the firm focused heavily on the nutritional and health benefits of its products, instead of the combination of the “fun-and-taste” perspective which the Indian consumer desired. Cereals were portrayed more as a health product and did not emphasize the aspects of fun and health that the brand and products denoted. Indian consumers did not value the level of iron and vitamins in the cereals as western consumers did, and Indian consumers preferred quantity rather than quality of food. Kellogg’s soon made the distinction between nourishment and nutrition and re-positioned Chocos and Frosties. Instead of focusing on the health platform, they were promoted as “fun-filled” brands. A new product, Chocos biscuits, was also introduced to help create more awareness and infiltration for the Kellogg’s brand (IMCR, 2001). 
Image 5: Chocos biscuit Package, as sold in India. (http://www.alibaba.com/product-free/10104241/Kellogg_s_Chocos.html)
Image 6: Additional Package of Kellogg’s Chocos, as sold in India. (http://www.slstop.com/index.php/kelloggs-chocos-700g.html)
Image 7: KarismaKapoor as the model for advertising Chocos cereal in India. (http://indiafoodnews.com/wp-content/uploads/2011/02/kellog.jpg) Kellogg’s also decided to introduce two of its successful cereal brands into the Indian market. Kellogg’s highly successfully brands Chocos (wheat clusters coated with chocolate launched in September 1996) and Frosties (sugar frosted flakes launched in April 1997) were both launched in India, with hopes of repeating the global success of these brands in the Indian market. The products were quite successful, and the Indian population even began eating the cereal as a snack, a development which led to the creation of Chocos Breakfast Cereal Biscuits. The success of Chocos and Frosties also led to Kellogg's decision to focus catering to the flavors of the Indian culture. In August of 1998, the Mazza series was introduced into the market. This was a crunchy, almond-shaped corn breakfast cereal offered in three local flavors, ‘Mango Elaichi,' ‘Coconut Kesar' and ‘Rose.' Kellogg’s was cautious as not to repeat its previous mistakes and thus invested substantial research into the development of the Mazza cereals(IMCR, 2001). Kellogg’s also began launching multiple initiatives to further increase its presence and acceptance in India. “The Kellogg Breakfast Week,” a program launched in April 1997, was designed to increase awareness about the value of breakfast in one’s day and anemia prevention, as well as to create various workshops regarding nutrition for individuals and families. Kellogg’s also partnered with the Indian Dietetic Association (IDA) in order to raise national awareness about iron deficiency problems. In Calcutta, nutritionists and dieticians congregated to take part in a symposium and to discuss causes of anemia due to lack of iron. This served as a facet of Kellogg’s global marketing strategy, which includes various nutritional promotions, educational programs, and opportunities for research sponsorship. In summarizing Kellogg’s efforts in India, Denis Avronsart, the Managing Director of the breakfast food-manufacturer of Kellogg’s India remarked, “product modification, particularly the addition of iron fortification in breakfast cereals is how Kellogg’s responds to the nutritional needs of the consumers. In this spirit, Kellogg’s India is taking a major step to improve the nutritional status of consumers in the country, the specific opportunity being iron fortification for which we have undertaken major initiatives to promote the awareness of the importance of iron in the diet” (ICMR, 2001). Kellogg’s in its marketing efforts also began strengthening its presence in schools across India, and by mid-1995 the firm had covered 60 schools to promote its products. The firm staged free giveaways at select retail stores in Delhi and also utilized giveaways of door-to-door samples. Promotional materials such as pencil-boxes, water bottles, and lunch boxes were given away for free as promotional products. Kellogg’s also utilized schools across the country while increasing its focus on promotions that sought to induce people to try its product. Dispensers were also placed at gas pumps, super markets, and airports across India, which sold the firm’s cereals at discounted rates (ICMR, 2001). After Kellogg’s reevaluated its products, positioning, and distribution techniques within India, the firm experienced a substantially increased market share. In 1995, Kellogg’s possessed 53% of the  150 million Indian breakfast cereal market, and by 2000 the firm’s share had increased to 65%(ICMR, 2001). The shift resulted from the firm’s new positioning, increased promotions, and an increased budget for media expenditures. Developing products specifically for the Indian market rather than following the typical Kellogg’s mold helped make the presence of products known and accepted by the Indian population. It should be noted, however, that Kellogg’s still struggles with the image of a premium brand which continues to target the more affluent Indian population. Changing the food culture and eating habits of the Indian people proved to be a challenge. In 2000, Kellogg’s decided to introduce more products into its product mix in India, including Crispix Banana, CrispixChocos, Froot Loops, Cocoa Frosties, Honey Crunch, All Bran and All Raisin cereals. Kellogg’s also began selling “Krispies Treat,” a snack targeted at children and priced competitively to compete against other “impulse snacks.” Analysts viewed Kellogg’s introduction of various snack products as a means for the firm to regain its position, due to the lackluster and below expectation performance experienced with cereals (ICMR, 2001).
Beyond such developing markets as India, Kellogg’s also maintains a substantial presence within such developed, European markets as the United Kingdom. While the cultural issues present in such markets are often not as pronounced as those witnessed within developing Asian and Latin American nations, the firm must still adapt products to meet the unique needs of British and other European consumers. In the UK, Kellogg’s continues to make strides in order to adapt to cultural trends which stretch across nations, but also to the changes occurring specifically within the British market. In this market, the firm recently launched its first new children’s cereal since 1989, Mini Max. The new brand is projected to surpass Frosties, with estimated top sales at $30 million (The Drum, 2011). Kellogg’s, in utilizing this product, is attempting to solve the issues faced by many parents when attempting to have their children regularly eat breakfast. As Kellogg’s describes, “many parents know that getting their kids to eat breakfast each day can be a struggle…That’s why we developed Mini Max and our studies show the cereal delivers for both parents and kids” (The Drum, 2011). 
Image 8: Mini Max Cereal, Kellogg’s New Offering (http://static.talkingretail.com/wp-content/uploads/2011/08/24/kelloggs-shakes-up-kids-cereal-range/minimax.jpg)
Image 9: Choc ‘n’ Roll Cereal- Kellogg’s new British offering. (http://www.fdin.org.uk/wordpress/wp-content/uploads/Coco_Pops_Choc_n_Roll.jpg) As one can gather from these various examples, Kellogg’s, in its operations across the world must adapt its marketing mix to meet the unique needs and desires of customers dictated by cultural differences. Kellogg’s, though it has struggled in certain markets to recognize and properly adapt to these cultural forces, has over recent years shown a commitment to improving its performance through introducing new market-specific products, shifting marketing plans, and utilizing new initiatives. As Kellogg’s moves forward, it will need to be wary of both global and regional cultural shifts, and how these changes will influence firm performance. IV. Political and Legal Environment Political Influence on Firm Operations As a firm that maintains operations in many nations across the globe, Kellogg’s is subject to risks relating to the political environment of the countries in which it manufactures and distributes its products. As the firm describes in its most recent 10-K, Kellogg’s performance is “materially affected by the changes in general economic and political condition in the United States and other countries.” More specifically, such factors as “political unrest and terrorist acts in the United States or other countries in which we carry on business” have a potential to cause notable impacts upon the firm’s operations (Kellogg Company 10-K, 2011: 8). In no market have the impacts of political risks been felt more saliently by the firm than in Venezuela, where both the government of Hugo Chavez and high levels of economic stability have led to several issues. As previously discussed, in 2010 exchange rate controls put in place by the Venezuelan government made it highly difficult for the firm to import goods in a cost effective manner, resulting in a substantial decline in sales, particularly in snacks. (Kellogg Company 10-K, 2011: 14) In addition, due to the Venezuelan government’s elimination of the parallel market, the firm faced issues in 2010 while attempting to translate the earnings of its subsidiaries within this highly inflationary economy. As the firm describes, Kellogg’s previously made use of the parallel rate to convert the financial statements of its Venezuelan subsidiaries into U.S. dollars for the purposes of financial reporting. In 2010, however, following the elimination of the parallel market, commercial banks in Venezuela shifted over to use of the Transaction System for Foreign Currency Denominated Securities (STIME). In order to accommodate this shift, beginning in 2011 the firm began translating gains and losses amongst its Venezuelan subsidiaries using the STIME rate. In addition, the firm actually witnessed a foreign exchange gain in 2010 within this volatile political market, gaining $3 million in total during the year (Kellogg Company 10-K, 2011: 26). Legal Environment Impacts on Firm Operations As a major producer and distributor of food products, Kellogg’s is understandably subject to a wide variety of product health and safety regulations in each of the markets in which it operates. In order to operate successfully across the globe, the firm must remain vigilant in complying with relevant laws and regulations concerning product health and safety, marketing, and in the protection of its intellectual property. In recent years, the firm has been making significant strides in improving its compliance with product health and safety regulations in the 180 nations in which it operates, through both the development of “extensive systems and processes” related to ensuring product quality, and through strengthening its requirements of suppliers in relation to food quality and safety. By performing audits of suppliers and the firm’s own manufacturing processes, as well as through seeking out partnerships with suppliers and other firms who share similar standards related to product health and safety, the firm attempts to minimize the legal risks involved in producing and distributing products subject to a wide variety of governmental regulations (Kellogg Company Corporate Responsibility Report, 2011). Beyond product quality, the firm must also comply with “an array of region specific regulations related to product marketing.” As the firm describes, Kellogg’s routinely works with foreign governments and regulatory agencies in facing such issues as “consumer messaging and the validity of health claims on product packaging” (Kellogg Company Corporate Responsibility Report, 2011). Furthermore, the firm has also made strides to better comply with foreign laws regarding marketing to children. As a producer of multiple products known for its appeal to children, it is especially important for Kellogg’s to comply with relevant regulations regarding child marketing and recognize where its youth-focused advertisements could possibly violate a nation’s laws. In 2009, the firm made progress in Canada in particular, reducing the amount of advertising expenditures directed toward children by 44% from the preceding year. Also in 2009, the firm adopted a global policy of not marketing to children under 12 any products which fail to meet the firm’s new nutrition standards, or the Kellogg Global Nutrient Criteria (KGNC) (Kellogg Company Corporate Responsibility Report, 2011). By utilizing this set of standards when judging which products it can market to children in different countries throughout the world, the firm should be better able to avoid possible costly litigation related to the marketing of unhealthy products to children. Intellectual Property Issues Another area in which the firm is subject to significant legal risk is that of its “valuable” intellectual property, as Kellogg’s relies heavily upon its formulas, brand names, and trademarked logos and slogans in successfully producing, distributing, and marketing its products. As the firm describes, Kellogg’s intellectual property rights, and especially the firm’s trademarks, serve as a “significant and valuable aspect” of its business. Due to this, firm makes a significant effort to protect its trademarks, patents, licensing agreements, copyrights, and trade secrets by utilizing a “combination of patent, trademark, copyright and trade secret laws, as well as licensing agreements, third party nondisclosure and assignment agreements,” as well as through monitoring for third party “misuse” of intellectual property (Kellogg Company 10-K, 2011: 10). The firm also acknowledges that litigation stemming from disputes related to intellectual property could be expensive and require substantial time and effort from top management. Such instances of litigation would hurt the firm’s performance by diverting funds and focus away from business operations, and through causing the firm to enter into costly legal proceedings (Kellogg Company 10-K, 2011: 10). Kellogg’s has also experienced struggles in protecting its brand trademarks and logos. In August of 2011, Kellogg’s claimed a non-profit organization, the Mayan Archaeological Initiative, was responsible for a legal infringement based on a toucan logo that resembles the famous branding of the Froot Loops cereal. The legal claim later involved the World Free Press Institute, which argued that the non-profit organization educates Mayans on cultural history and works toward preserving Mayan archaeology and cultural heritage. In defense, the bird logos were claimed to have differences that include “coloration, beak shape, and the fact that MAI’s bird is based on birds that actually exist in nature. Also, MAI’s logo includes a Mayan step pyramid and is egg-shaped, so it is more than just the bird” (Cereal Maker Claims Non-Profit’s Bird Infringes on “Toucan Sam,”2011). MAI also notes that the two birds have little reason to become easily confused, as the two logos serve very different purposes. Dr. Estrada-Belli, a world-renowned expert of Mayan culture, stated that Kellogg’s logo statement was “a bit like the Washington Redskins claiming trademark infringement against the National Congress of American Indians” (Cereal Maker Claims Non-Profit’s Bird Infringes on “Toucan Sam,” 2011). Kellogg’s is suspected of taking a strong stance against logo infringement for the purpose of creating a powerful corporate reputation, instead of intentionally stopping the MAI’s use of a toucan logo. Evidently, the two parties are working on a settlement deal surrounding the legal dispute. As Kellogg’s flexed its corporate muscles in this recent legal dispute, the company showed its intention to retain a strict interpretation of its trademark and logo policies not just internationally, but also in non-profit environments. It is expected that Kellogg’s will keep a wary eye on corporations across borders in the future for legal infringement of trademarks and logos. 
Image10: MAI Logo vs. Kellogg’s Toucan Sam Logo (http://www.ipbrief.net/2011/09/17/no-toucan-for-you/) Recently, Kellogg's backed off its aggressive stance towards MAI, claiming that conversations with MAI helped Kellogg's to better understand how the non-profit organization would use the toucan image. Furthermore, Tim Knowlton, Kellogg's vice president of corporate social responsibility for Kellogg's stated that Kellogg's is "pleased to support the MAI in its mission to protect and extend the rich history and culture of Mayan people" by contributing $100,000 to help launch several MAI's projects and "will also be featuring major Mayan accomplishments...on Kellogg's Froot Loops cereal boxes next year" (Miller, 2011). Regulatory Issues Despite the firm’s efforts to avoid the risks inherent in the legal environment, primarily in relation to government regulations concerning product quality and marketing practices, the firm has faced a variety of issues in producing food items conforming to health and safety standards. In the fall of 2009, inspectors from the Georgia Department of Agriculture discovered Listeria, a dangerous bacterium which can cause infections, particularly amongst children and pregnant women, within a sample of Eggo waffles at the Atlanta plant. In response, the firm promptly announced a recall of 4,500 cases of Eggo waffles, and shut down production for nearly two months to allow for proper sanitization (Hartman, 2009). While the firm reacted properly to the outbreak by shutting down operations voluntarily, this regulatory-related issue did cause significant repercussions for Kellogg’s in terms of public relation and lost sales stemming from Eggo waffle inventory shortfalls, which lasted through 2010 (Hartman, 2009). If the firm hopes to better manage its brand image and avoid similar crises in the future, it must strive to consistently meet regulations related to product health and safety. By doing so, the firm would better avoid such issues which, if not properly caught prior to product distribution, could result in serious health impacts and costly litigation for the firm. At the end of 2009, Kellogg’s was hurt by a Pop Tart recall in the United Kingdom. Kellogg’s received complaints from customers concerning, “a very low level of mold found in a small, isolated batch of some of its Chocotastic Pop Tarts” (Kellogg Recalls Chocotastic Pop Tarts, 2009). Fortunately for Kellogg’s, the recall only involved one Pop Tart flavor, for those packaged and labeled as “Best Before 6/30/2010.” Kellogg’s promptly offered to reimburse consumers with the affected products. In Britain, the Food Safety Administration usually acts as the intermediary to make sure the responsible corporation handles the recall appropriately and provides national press announcements so the consumers are aware of the product issues. Kellogg’s runs enormous risk if the firm ignores even minor product issues, including losing its large share in a market, facing future legal battles from consumers, and breaking federal health safety administration policies. By dealing swiftly and thoroughly with each product affected in a recall, and communicating effectively with consumers, the recalls can be successful and efficient(Kellogg Recalls Chocotastic Pop Tarts, 2009). Kellogg’s must also consider the fact that future consumers will be lost if there is a loss of trust in product quality and corporate responsibility. The major corporation must balance the trade-off between consumer awareness surrounding recalls, while limiting the mass media attention that frustrated customers may warrant. Kellogg’s appears to have handled its negative product issues with tactical press releases and a careful awareness of legal implications. In 2010, the firm faced further issues in relation to product safety and quality. On June 25th of that year, the firm announced a recall of 28 million boxes of such ready to eat cereals as Apple Jacks, Corn Pops, Froot Loops, and Honey Smacks, citing a “waxy” smell that had been discovered within several boxes. The smell, and accompanying flavor, were said to be caused by substances found on the package liners, and according to a Kellogg’s spokesperson, nearly 20 individuals came forward with cases of nausea and vomiting related to the tainted cereals (Associated Press, 2010). The recall extended to boxes sold primarily in the U.S., and was believed to be caused by resins present within the aforementioned packaging liner (Kellogg Company 10-K, 2010: 54). Though the firm faced no litigation at home or abroad related to this incident, similar instances involving products which fail to meet health and safety standards could cause the firm to be subject to considerable legal risk both in the United States and abroad. Kellogg’s has faced constant pressure from the Food Safety Agency (FSA) in Britain and comparable agencies in the United States in various forms of food regulation. In order to do so, and comply with such pressures, the firm has been active in adapting its products to better meet health and nutrition standards.The firm’s aforementioned changes in the CoCo Pops cereal in the U.K. included “a reduction in sugar, the addition of vitamin D and the launch of Coco Pops Choc N’ Roll cereal, with nutrition credentials that pass the stringent Food Standards Agency’s nutrient profile” (Kellogg’s Coco Pops Cereals Get Revamp, 2010). The focus on Coco Pops Cereal reflects the fact that an estimated 29 million Brits eat the cereal and 4 out of 10 children have a box of the same cereal on their shelves(Kellogg’s Coco Pops Cereals Get Revamp, 2010).As Kellogg’s faces food health standards across the globe, the company must learn to tailor the cereal brands to be subsidiary specific. New cereals must be developed in order to surpass food regulations in sodium and sugar, while also keeping a low cost and quality taste for the market. According to another press release in early 2010, Kellogg’s faced significant pressure from FSA to lower sodium intake across all cereal brands in Britain. Kellogg’s large market in Britain means that the shift should reduce the sodium intake in Britain by 300 tons (or approximately 660,000 pounds). Meeting this legal requirement should allow Kellogg’s most popular cereals in Britain to be removed from the Food Safety Agency’s Traffic Light list of cereals high in sodium. The sodium reduction eliminates approximately 30% of sodium in cereals such as Rice Krispies and Corn Flakes. Additional rice and corn products, reducing calories and providing a more nutritional form of each cereal, are replacing a large portion of sodium(Kellogg’s Reduces Salt Across Its Iconic Brands, 2010). 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