I have been a business traveler around the world for a good 20 years now. Since I only eat kosher food, I have been restricted in my meal choices, especially when visiting some of the more exotic world locations. There are, however, two constants I have always found: Pringles and Special K. Many of my North American compatriots find it surprising when I point out that the venerable 57-year-old Special K is actually quite different outside the United States and Canada, and, in my opinion, much better. Special K has a fairly loyal following across the world.
Which is why it was very surprising to me that Kellogg’s decided to change their formulation back in late May.
Unsurprisingly, the blogosphere and social media are awash in indignation and anger. A major food industry Web site report show Kellogg’s is under fire, a change.org petition has been launched, and the reactions on their Facebook page have been strong. An Australian news Web site reports relief that the Australian formulation will remain unchanged. So why did they do it?
According to the UK Marketing Magazine site, as well as their own PR site, Kellogg’s has suffered a number of copycat and “me too” versions, both from name brand competitors and supermarkets’ own white-labeled cereals, a practice becoming popular in the UK. Since such brands are normally cheaper than brand names (such as Kellogg’s), it is inevitable that they will lose some of the lower, less brand-sensitive market share to those products. The new formulation – think “New Coke” – is a very closely guarded secret, with few employees knowing it all.
I can see it now. A marketing or product management executive sees the loss in lower-end market share (and revenue) due to copycats. In order to combat it, s/he orders a new formulation, kept secret, confident in the knowledge that it will be much harder to copy.
The executive made on common mistake: s/he assumed that competitors actually want to copy the new formulation. While it is unlikely a large consumer food products company like Kellogg’s would change the taste, look and feel of a major product without extensive consumer testing, everyone makes mistakes. I have looked and have yet to find any evidence of in-the-field testing of “New Special K”. Additionally, Kellogg’s is not Proctor & Gamble, with their legendary focus groups, field testing and overall product management.
My suspicion? This executive saw what was happening, was told to do something, and s/he surely found something.
Our unknown executive just failed miserably. First, this new product will not be that much harder to copy than the original; it is secret, but cannot be that difficult for another firm to copy. Second, and more important, if the consumer uptake is highly negative, no one will want to copy it. Third, and most important of all, if there are copycats, then Kellogg’s has just ceded the market to them. Kellogg’s went from losing 5-10% (or more) of its market due to low-cost replacements, to giving up 80-90% of its market voluntarily.
Apparently unknown to Kellogg’s, there actually are ways to deal with low-cost competition and knock-offs; walking away from the market is definitely not one of them!