United Cereal

United Cereal is a company in the United States that was established in 1910. UC as they are commonly called started with producing breakfast cereals but later added more products such as snack food, dairy products, beverages, frozen foods etc. Breakfast Cereal accounted for a major part of their revenue and profit.

UC had a strong set of values that guided their operations and their watchwords which were commitment, diligence and loyalty. Among its managers, UC instilled their processes, policies and practices embedded in iconic phrases. For example, listen to your customer was a deep belief into the use of customers research and focus groups. Spot the market, make the trend was another company phrase talking about performing extensive market research before launching new products. Honoring the past while embracing the future is a phrase about continuous innovation and product development thereby ensuring the continuity of the life cycle of their products.

The breakfast cereal market is a big one as it was worth about $21 billion as at 2009. The US had about 30 companies in this industry that had a joint revenue of $12 billion. About 5 key players accounted for 80% of this.  In the fight for market share, continuous product introductions occurred every year. Developing a new brand was very expensive and required a lot of time but product extension was more feasible. 

UC entered the European market by acquiring an established company with local market distribution and growing it by introducing products from their US line. By 2009, Europe contributed 20% to united cereal’s worldwide revenue. The European market was rather different because each country had their preferred taste and breakfast tradition for example- cold meats and cheese in Netherlands, pastries in Greece, bacon and cheese in Britain etc. This resulted in varied consumption rate and sales channel of cereal in Europe.

Due to this, UC established subsidiaries in the country which was led by country managers CM who would pick UC’s line of products and develop it in order to adapt it to the local needs. The subsidiaries are built exactly like the parent company and is structured the same way, in developing and modifying products, the country managers still do it the UC way. These local custom products made eventually led to a wide difference in product profiles and marketing strategies. What this means is that a particular product can be sold as a high-end product and perceived to be for a certain user persona in one country and it could be entirely different in another country. For example, Mother Hubbard’s pies was a high-end dessert in Germany but a convenient every day treat In Uk.

After some time, the cereal market in Europe became very competitive and market growth slowed to less than 1% annually. This resulted in smaller margins and SG&A costs increasing. Developing products for single country  markets became more expensive and country managers had to do more of product extensions. In order to maintain profit, CM found ways to cut costs. It was a situation that raised alarm. 

To be Contd.