Businessmodel of Kellogg Company

Customer Segments

Kellogg offers a broad portfolio of products to a diverse customer base, principally commercial operators in the consumer retail sector. The Company’s customers can be organised broadly into the following categories:

• Retailers, including specialist food retailers, drug stores, club stores, mass merchandisers, discount and dollar stores, and supermarket chains;
• Convenience Retail, including vending machine operators, convenience kiosks, mobile retail units, and other alternate retailing outlets
• Distributors and Wholesalers, including food wholesalers, consumer foods distributors, and other specialist distributors;
• Foodservice Customers, including cafes, coffee houses, and other foodservice outlets; and
• General Consumers, including general consumers across multiple demographics. In 2015 Kellogg’s top five customers collectively accounted for approximately 34% of the Company’s consolidated net sales and approximately 47% of US net sales. The Company’s largest customer was Walmart, which accounted for around 21% of consolidated net sales during 2015. The Company also serves large retail chains such as Target.

Kellogg serves a global customer base. Its largest single market remains the US, however, the Company also serves a network of customers across the Americas, Asia Pacific, Europe, and parts of Africa.

Value Propositions

Kellogg provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company established as one of the largest manufacturers of consumer food products in the world, serving a number of high-profile retail clients, and having a reputation for offering high-quality products;
• Its extensive brand portfolio, with the Company controlling a range of popular, well-known brands across multiple product categories, including Pringles, Coco Pops, Pop Tarts, and Rice Krispies;
• Its global reach, with the Company offering its diverse product range to customers across its home market of the US, as well as more broadly across the Americas, Asia Pacific, Europe, and parts of Sub-Saharan Africa;
• Its diverse sales channels, with the Company reaching consumers with its products through various retail channels, including major supermarkets chains, vending machine operators, and certain food service businesses; and
• Its broad infrastructure network, with the Company operating an extensive network of manufacturing and distribution facilities around the world, enabling it to serve its customers quickly and efficiently, regardless of their geographic location. ### Channels

Kellogg operates a website at website www.kelloggcompany.com, through which it provides information on its various brands, product lines, and operating units. The Company does not operate an online sales channel for its core products. It does, however, operate an online store at www.kelloggstore.com, through which it sells Kellogg-branded merchandise, such as apparel, homeware, and collectibles. It also operates an online customer portal and rewards program named Kellogg’s Family Rewards.

Kellogg principally sells its products through its own in-house direct sales force, which is organised by operating segment and geographic region. These sales personnel deal directly with the Company’s clients, operating out of the Company’s international network of offices across the Americas, Asia Pacific, Europe, and Africa. The Company also sells a portion of its products under broker and distributor arrangements, working with a range of third party intermediaries. Kellogg’s products are generally resold to consumers in retail stores, restaurants, and other food service establishments.

Kellogg operates its own network of manufacturing, warehousing, and distribution facilities across the US, as well as in locations across its various operating regions, including in the UK, Poland, Malaysia, Australia, Brazil, Colombia, Ecuador, and Canada.

Customer Relationships

Kellogg does not sell its core products to customers on a self-service basis. It does, however, sell branded merchandise to consumers through an online store, which allows customers to place order, arrange deliveries, and make payments without interacting directly with members of the Company’s sales and service personnel. The Company also offers certain tools and services to customers on a self-service basis through its customer portal.

Kellogg sells its products to retailers, distributors, and food service customers through its direct sales force, which consults with customers over a period of time in order to establish the details of each individual sale sand supply contract. These contract often run into multiple years, with the Company seeking to establish longstanding relationships, in particular with its major retail clients.

Kellogg provides ongoing support to its customers, with major clients that account for a significant portion of the Company’s business, such as Walmart, having their own account management teams, which maintain close contact with the customer. Commercial customers and consumers can also contact the Company’s relevant departments and offices over the phone or online in order to receive personalised responses to queries and enquiries.

Additionally, Kellogg operates a number of social media accounts, including with Facebook, Twitter, LinkedIn, and YouTube, through which it is able to interact directly with customers and post updates on company developments.

Key Activities

Kellogg is a manufacturer and marketer of ready-to-eat cereal and convenience foods. The Company produces and markets a broad portfolio of consumer-focused products, including cookies, crackers, savoury snacks, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles, and veggie foods.

It organises its operations into seven core business segments: US Morning Foods, US Snacks, US Specialty, North America Other, Europe, Latin America, and Asia Pacific. The Company’s US Morning Foods segment manufactures and sells cereal, toaster pastries, health and wellness bars, and beverages, while the US Snacks segment manufactures cookies, crackers, cereal bars, savoury snacks and fruit-flavored snacks.

The US Specialty segment operates the Company’s food away from home channels, and the North America Other segment operates the Company’s US Frozen, Kashi and Canada businesses. The Company’s other segments relate to its operations across specific geographic regions.

Key Partners

Kellogg works closely with a broad network of partner companies and organisations across its various operating segments. These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, including suppliers of raw materials, ingredients, tools, and equipment used in the manufacture of the Company’s products, as well as suppliers of services and technologies that are utilised more broadly across the Company’s operating segments;
• Channel and Distributor Partners, principally comprising the Company’s network of distributor and broker partners that assist in extending the Company’s sales and marketing reach, and facilitate sales in various foreign jurisdictions;
• Industry Partners, including a number of industry bodies and trade organisations with which the Company collaborates on promoting and maintaining industry standards;
• Community and Sustainability Partners, including various non-profits and charitable organisations, with which it collaborates on social and sustainability projects around the world; and
• Strategic and Alliance Partners, including various market leading companies across multiple business sectors, with which the Company works on joint branding, marketing, and other projects. Kellogg has numerous strategic industry alliances, including with the National Business and Disability Council, the Society of Women Engineers, and the National Minority Supplier Development Council. The Company also has partnerships with Feeding America, and the US Olympic Committee.

Key Resources

Kellogg’s key resources are its brands and intellectual properties, its raw materials and equipment, its supply chain, its manufacturing and distribution facilities, its IT and communications infrastructure, its sales and marketing channels, its partnerships, and its personnel.

Kellogg owns a number of patents and proprietary technologies that it uses in the production of its various products. Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in Kellogg’s name, including applications entitled ‘Bowl bag with utensil’, ‘Food cup packaging assembly’ and ‘Drive system and method for forming a transportable container for bulk goods’.

Kellogg also owns and or leases a number of physical properties that are key to its operations. This notably includes its network of manufacturing, warehousing, and distribution facilities across its various operation regions.

Cost Structure

Kellogg incurs costs in relation to the development of its products and intellectual properties, the procurement of supplies and services, the operation of manufacturing and warehousing facilities, the maintenance of its IT and communications infrastructure, the operation of its sales and distribution channels, the implementation of advertising and marketing campaigns, the management of its partnerships, and the retention of its personnel.

In 2015 Kellogg recorded total cost of goods sold in the amount of $8.84 billion and selling, general, and administrative costs totalling $3.59 billion for the year. This included $193 million in research and development expenses and $898 million in advertising expenses.

Revenue Streams

Kellogg generates revenue through the manufacture and sale of a broad portfolio of cereal and convenience food products. The Company derives its revenue primarily under sales and distribution contracts with various commercial customers.

In 2015 Kellogg recorded total net sales for the year of $13.53 billion, down on the $14.58 billion recorded by the Company in 2014. The Company’s largest revenue generator was its US Snacks segment, which recorded $3.23 billion for the year. This was followed by the US Morning Foods segment with $2.99 billion, and the Europe segment with $2.50 billion. None of the Company’s other segments recorded sales of more than $2 billion.