Volume 13, 
April, 2015


Flakes and Loops vs. Yogurt and Eggs
What breakfast can teach you about your product portfolio


Sheila Mello

I don’t know about you, but my eating habits have evolved over the years.

Apparently I’m not alone among American consumers, especially in regards to breakfast, as described in a recent Bloomberg BusinessWeek article. The gist of the article is that, while consumers became more health conscious, more averse to sugar and carbs, and more interested in foods they can eat on the go, Kellogg continued to focus on its iconic brands like Frosted Flakes, Froot Loops, and Rice Krispies. This, according to the article, led to an eight-percent drop in net sales of the company’s U.S. morning foods “in the fourth quarter of 2014. It was the division’s seventh quarterly decline in a row.”

The bind Kellogg finds itself in is not a simple matter of failing to heed one’s customers. Rather, the challenge is one shared by many long-lived companies in mature markets. The ground has shifted. While Kellogg may technically still be in the breakfast business, it must radically rethink breakfast to match its offerings to consumers’ new concepts of what constitutes the first meal of the day. (There is some evidence that it might be trying: for example, this line from its 2014 Annual report, “Our new Kellogg’s Global Breakfast Food Beliefs were developed to inspire us to think bigger and act bolder regarding how we will lead and win in the breakfast occasion and create the future of RTEC [ready-to-eat cereal].”) It may be, however, that Kellog’s rethinking of its breakfast food beliefs is too little, too late.

Radically rethinking your core business may be necessary at some point, whether you’re an established company in a mature market or a relatively new company in an emerging market, but better not to be in a position that requires rethinking in the first place. Here are three essentials we’ve found for keeping your product portfolio fresh and, ideally, a step ahead—rather than a step or two behind—current consumer preferences.

1) Set up research programs and processes to evaluate market trends. Great market research doesn’t tell you just what’s happening now, but where markets and consumers are heading. It can be too easy to neglect this work since it often has no immediate payoff. But failing to prioritize it can leave you far behind emerging trends, like the shift away from cereal to other types of breakfast food.

You don’t need to conduct all of this research yourself. Many organizations, such as Trendsactive and Institute for the Future, can help with gathering and analyzing data about trends. But you need to make sure some part of your organization—whether the marketing department, innovation team, or a “future evangelist”—has responsibility for bringing these insights into your product development and innovation process.

Most importantly, you need to remember that this type of research does not involve feedback on specific products or even categories of products. You’re looking at how consumers live, behave, think, and feel, apart from any products or services they currently use.

2) Devote resources to understanding latent or unstated customer needs. Many companies depend heavily on gathering customer feedback through social media, insight panels, or surveys. On social media, anyone can say anything about any brand at any time. For example, here are a few recent comments that appeared on Kellogg Company’s Facebook page:

“Why are you discontinuing gluten-free Rice Crispies [sic]? Please reconsider!”
“Thanks for ruining fruit loops”
“LOVE Love!! New addition! [cranberry Raisin Bran]”
“Please bring back Just Right Cereal. We miss it terribly and want to buy lots of it.”

These, of course, are stated needs or desires. While such feedback may be helpful in the context of current offerings, it does little to tell you that consumers might soon abandon cereal altogether in favor of another breakfast option.

Even in interview situations, you need to ask the right kinds of questions. Probing questions—and lots of follow-up—yield insights into unstated customer needs. “What is the worst part of your morning eating experience?” followed by, “Why do you feel that way?” or “How does that affect your personal goals?” and “Please tell me more” will bring you insights into how your customers might feel about breakfast that go beyond their momentary dissatisfaction with a current product.

3) Establish a portfolio management process that allows you to evaluate products and product lines objectively—and easily shut down projects that don’t meet your goals.

Here’s where the tools of portfolio management come into play. It doesn’t do you any good to realize the world is heading in a different direction than your product offerings if you have no mechanism to evaluate your portfolio and terminate product lines that no longer fit. The biggest problem we see here is lack of empirical methods to evaluate the portfolio. Vociferous product managers, gut feelings, or groups of loyal customers are not adequate means of evaluating whether to keep or ditch a product line. You need a methodology, such as value-based portfolio management, that can tell you what your customers will value most so you can use those insights to evaluate your product offerings.

Best-in-class companies often avoid rethinking altogether because their processes allow for continuous readjustment. Having these three things in place won’t give you magical powers of prediction. But they may save you from being blindsided by a market shift you otherwise might not have seen coming—and give you the wherewithal to respond quickly and be ready with the eggs when breakfast eaters are no longer so interested in flakes.

Have you ever had to radically rethink your product offerings?

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