Breakfast cereal market Global trends Essay Example for Free

Breakfast cereal market Global trends Essay Product segmentation The breakfast cereal market consists of two types of products: breakfast cereal and ready-to-eat breakfast cereals. For the year 2008, the ready-to-eat cereals dominated the market with about 88. 1% of the market share while hot cereals accounted for the remaining 11. 9% of the market. The corresponding figure for the year 2006 was 91% for ready-to-eat cereals (Marketline, 2009, p. 4). Following is the convenience market segment information for the breakfast cereal information. Fig – 1Consumer Market Segment Information (Costcutter, 2008, p.2) Following are the global market share of each of the following product segment. Fig – 2Market share by different product segments (Costcutter, 2008, p. 2) Market Value The global market for the breakfast cereal industry had a value of $ 22,209 billion which meant a growth rate percentage of 2. 9% from the last year. The compound annual growth rate for the last five years i. e. from 2004-2008 was also 2. 9%. The largest geographical market for the breakfast cereal industry is America which accounts for 63. 2% of the total market value (Marketline, 2009, p. 4). The complete market growth is mostly as a result of growth in premium products rather than the overall volume. As mentioned earlier the target market for breakfast cereal as baby boomers and children. Of this the children’s market accounts for as much as 42% f the entire ready-to-eat breakfast cereal market. The biggest selling children’s brand for ready-to-eat breakfast cereal is Coco Pops. This brand alone was responsible for as much as 43 million pounds of the total 501. 9 million pounds of sales in UK in the year 2007. This is astonishing because the market has been rife with warnings from food associations regarding salt and sugar content in breakfast cereals (Muddy Cook, 2008, p. 2). In terms of value, the industry has growth by 15. 7% between 2004 and 2008 with the figures being particularly strong for the year 2007. The figure below shows the trends for global breakfast cereal trade by value. Fig – 3Global Breakfast cereal trade, by value in US $ billions (USDA, 2005, p. 5) In addition to this, the figure below shows the increase in global export market for breakfast cereal. As can be seen an increase in the rise of both private label as well as foreign competition has hampered in the increase of US share in the exports. Fig – 4 Global export market for breakfast cereal (USDA, 2005, p. 6) United States is the third largest importer of breakfast cereal. This fact is also a cause of concern for the domestic manufacturers who contribute for the maximum market sales in the world. The import value is shown in the figure below according to which the market showed an increase of 30% over the 1998 figure. Canada and France remained the top importers followed by United States. The countries following this were United Kingdom with an import value of $126 million and Germany with an import value of $114 million. Fig – 5 Top global import markets for breakfast cereals (USDA, 2005, p. 8) The breakfast cereal market desperately needs new markets. The figure below shows the requirements for a few such markets. Fig – 6 Import demand for Breakfast cereal in select markets (USDA, 2005, p. 17) Market Volume The global market volume for the breakfast cereal industry was 3,536. 8 million Kg which was a rise of 2. 2% over the last year. The compound annual growth rate for the last five years i. e. from 2004-2008 was also 2. 2%. This figure is expected to reach a value of 3914. 1 million Kg in the year 2013 which would mean an increase in volume by about 10. 7% since 2008 (Marketline, 2009, p. 4). The figure below shows the trends for global breakfast cereal trade by volume. Fig – 7 Global Breakfast cereal trade, by volume (USDA, 2005, p. 6) Distribution The main distribution channels for the breakfast cereal industry are the supermarkets/ hypermarkets that account for 79% of the market’s value distributed. This is followed by independent retailers who account for 8. 4% of the market’s value distributed (Marketline, 2009, p. 4). Competitive environment The figure below shows the percentage share of the major breakfast cereal companies by volume for the year 2007. As can been seen from the figure, Kellogg dominates the market with 36. 4 % of the market share. Another interesting aspect is that the industry is entirely dominated by branded products with the three largest companies i. e. Kellogg, General Mills and Kraft Foods, accounting for 63. 3% of the total market value by volume (Marketline, 2009, p.4). In fact the top 20 brands in breakfast cereal market account for as much as 70% of the total sales. The household penetration of cereals is as much as 97%. Fig – 8 % share by volume of global breakfast cereal markets (Marketline, 2009, p. 4) In addition to these three companies some other popular companies of breakfast cereal are Quaker, Nabisco, Sunshine, Kashi, Health Valley, Malt-o-Meal, Mckee, Ralston, Unilever, Frito-Lay in North America, Cargill Inc. Tyson Foods, mars Inc. ConAgra foods Inc. , Weetabix and Cereal Partners (an alliance between Nestle and General Mills). Entry Deterrents The size f the breakfast cereal industry as per both the profits as well as the volume is immense as can be seen from the statistics above. The growth rate of the industry too has been fairly decent. The industry has been in existence for about 100 years, however save for the early entrants and the entry of the private-labeled brands, the industry has been relatively clutter free. In fact according to the marker share figures also it can be seen that not many companies could afford to enter the industry and make any significant impact. This is a rather unusual situation and the reason for the market deterrents can be seen from in the figure below. Fig – 9 Factors influencing the likelihood of new entrants in the Global Breakfast cereals market (Marketline, 2009, p. 3) Looking at the figure it becomes clear that the market entry is favorable for those companies who wish to diversify their operations in the breakfast cereal market. While the entry can definitely be made by an entirely new company it may encounter problems.