If you want to know what kind of packaging demands Kellogg Co. faces, look at a tale of two cereals.
Exhibit A: Kellogg’s Corn Flakes. Starting well before World War I, America’s first major ready-to-eat (RTE) cereal has been in a plain, utilitarian flexible bag in a paperboard carton, the first of an eventual powerhouse lineup including Frosted Flakes, Rice Krispies and Froot Loops. At press time, Kellogg was wrapping up a Detroit-based test market of alterations to the carton’s shape (see “Short boxes get a long test market,”), but if any changes get made, they will be phased in gradually.
“Change is just hard in general for all of us, and changing an entire category is going to take a partnership [among] the manufacturers, the retailers and the consumers,” says Margaret Bath, vice president for research, quality and technology.
Exhibit B: Bear Naked, the natural product line Kellogg bought in late 2007 that is operated under its Kashi unit. Kellogg is expanding Bear Naked into RTE cereal, but is leaving the box behind.
“Even as we moved standard flake-type cereal into the Bear Naked portfolio, we did not put that in bag-in-box,” says Paul Pezzoli, senior director of packaging innovation and technology. “That would have been easy for us to do, because that’s our core competency, but that brand is known for its stand-up pouches with zippers on them.”
When you manage a diverse product portfolio, your packaging also has to be diverse-even for similar products. And Kellogg’s portfolio is as diverse as any food processor’s. It ranges from mainstream, iconic products like Corn Flakes to natural brands like Kashi, which operates as a wholly owned subsidiary of Kellogg. Kellogg products are present in all meal occasions, in freezers and refrigerators as well as pantries.
This success in managing the packaging for this spread of products is why Kellogg Co. is Food & Beverage Packaging’s Food Packager of the Year for 2009.
On a rollDiversity has been good for Kellogg, judging by results. In the second quarter of fiscal 2009, it saw a 13% increase in net earnings over the same period last year. This is the latest in a winning streak that has seen increases in both sales and profits in each of the last four years, culminating in operating profit of almost $2 billion on sales of $12.82 billion in fiscal 2008.
Mainstream food processors in general have been doing surprisingly well in the recession, in large part because consumers have become more cautious about eating out.
“Ever since the middle of last year, we are getting a lot of feedback from consumers that, in this recessionary environment, they’re looking for value,” Bath says. “So I think right now, value plays an awful big part in the decision-making that consumers go through. The good news is, products like cereal are still an exceptional value. If you look at approximately $3.59 pack, you’re going to get 10 to 12 servings out of that.”
However, just because a consumer wants (or has) to eat at home more doesn’t mean he or she will suddenly develop kitchen skills. That means good positioning for a company like Kellogg, which provides food that is both familiar and convenient.
“They’re also looking for convenience,” Bath says. “They may not be going out to eat as much, but they’re certainly eating on the go. To satisfy that, convenience is key....If you think about our wholesome snacks, like the Special K bars, that’s really a very convenient version of cereal.”
The right crossThe Special K bars are also a great example of another Kellogg strategy that’s highly dependent on packaging: cross-branding.
Cross-branding has been important to Kellogg since the first pan of Rice Krispies Treats came out of an oven. Most Kellogg products are grain-based, which makes many of them versatile enough to be used across multiple product platforms. Kellogg cross-branding efforts have included brands both within and outside the company, such as the new Cinnabon Bars that trade off the sweet-bun shop franchise.
“Through the R&D process, on both the food and the packaging side, our scientists work hard to make sure that what we do represents the Kellogg brand as well as whatever brand [we’re crossing with],” Bath says. “So we work hard to develop an intimate understanding of what that brand means to the target consumers.”
Special K has been in the forefront of such efforts, in large part because its long history as a dietetic/nutritional product. Special K Cereal Bars were rolled out in 2002, and the product is now the basis for Kellogg’s first venture into beverages. Special K Protein Water has been out since 2006, and Special K Protein Shakes were recently introduced.
“We do a lot of work on brand expansion across categories,” Bath says. “Special K has extended itself into many different categories because at the end of the day, what the Special K consumer is looking for is solutions to delivering the promise.
The promise might be drop a jean size or six pounds in two weeks. It is the emotive part of the promise in finding food or packaging solutions that deliver against that.”
The Special K waters and shakes are bottled by co-packers, but Kellogg had to decide on the packaging. The shakes are bottled aseptically, which is still a comparatively rare choice in the U.S. for rigid containers.
Kellogg considered hot-filling for the shake but couldn’t come up with a formulation with acceptable flavor, Pezzoli says: “Flavor issues and nutritional issues really dictated that it was a low-acid product.” Retorting was also considered, but they went with aseptic because of the gentler heating profile.
Packaging and brands
Of course, before you can cross-brand, you need to establish strong brand identities. And packaging also plays a role in that regard at Kellogg. Some Kellogg brands, of course, have passed down through generations, but others have been built almost from the ground up.
“If you look at what happened with Kashi, we purchased the company in 2000 when it was primarily a cereal brand,” Bath says. “As a result of the affiliation with Kellogg, Kashi now brings more high quality, tasty natural food to more people, including bars, crackers, cookies, waffles and even frozen entrees. It is a huge growth story, and obviously packaging is a big part of that, because the consumer is quite different than what has been a typical Kellogg consumer.”
Visual elements are important in creating brand identity, of course. Kashi uses a distinctive dark green logo and type, and most of the packaging has a white background, denoting the purity of a natural, wholesome product. That “purity” motif is common for natural/organic foods, but Kashi’s packaging emphasizes it within the context of grain-based foods.
“With all of the Kashi products, there is a common thread across categories,” Bath says. “There’s a common look, but there’s also a food design thread which is the seven whole grains and sesame. That blend was created 25 years ago and continues to inspire Kashi food.”
Establishing a brand identity through packaging extends beyond graphics to materials. The recently purchased Bear Naked line is a good example: Most of the bars and other products are in clear film, reinforcing the “bare,” nothing-to-hide motif. Kellogg will continue that strategy.
“Bear Naked is all about wholesome goodness and being able to see the product,” Pezzoli says. “As such, as we roll out packages for Bear Naked in terms of other [products], we maintain that same type of packaging equity. So as you move into wholesome snack bars for the first time, these are now in clear packages. As we roll out trail mixes and things of that nature...those are also in clear packages.”
Kellogg also uses Kashi packaging as a platform for sustainability. Kashi U cereal is even packaged in high post-consumer recycled content kraft paperboard and printed with soy inks by a printer that offsets its electricity use with wind power.
The effort with Kashi is just part of an overall sustainability drive with Kellogg packaging. As often happens, Kellogg’s sustainability initiatives combine high-profile ones with details that are unlikely (or impossible) to be noticed by consumers. In 2004, for instance, the company changed how it transports cereal between processing and packaging areas, going from bulk bag-in-box to a bag with a corrugated bottom sheet, saving almost 70% in material costs. More recently, Kellogg switched several of its snack multipacks from flexible film to standard paperboard cartons, which are not only easier to recycle but, for the larger club-store packs, can be palletized without corrugated cases.
As Kellogg’s product portfolio continues to grow, so will the diversity of its packaging.
“We used to be just a cereal company,” Bath says. “We had a standard bag-in-box that was cereal. We went into wholesome snacks. We then went into frozen entrees, into pizzas, beverages, all sorts of powdered drink mixes. These may not be new to the industry, but they are very new to us.”
SIDEBAR: Short boxes get a long test marketRegardless how adventuresome Kellogg can be with packaging for relatively new products, it has to tread lightly when it comes to fundamental changes in the package for its flagship RTE cereal.
“Any time you do something that’s a bit different, especially something like a cereal box, which has been the same basically for a hundred years, that change will not come easily,” says Margaret Bath, vice president for research, quality and technology.
Nevertheless, Kellogg recently wrapped up an ambitious test market that involves changing the shapes of the cartons for its entire RTE cereal line. The test, which began in January, comprises 40 Wal-Mart and Kroger stores in Detroit. The test cartons are shorter and wider than the norm, yet contain the same amount of cereal.
Sustainability is one of the major drivers. The company estimates that the new boxes will save up to 8% on material costs, and also will save on transport costs, because it will allow more product to be loaded onto a truck. The greater space efficiency could also appeal to customers, both in the trade and consumers.