Market View: The Real Reason Kellogg Opened a Cereal Store in Manhattan

Even if the cereal company loses money on the Manhattan rent, they've made cereal fun, relevant and maybe even new again.

By John Stanton, Contributing Editor

When food processors think about innovation, the first things that often come to mind are new products or new packaging. However, there are lots of different ways to innovate and create something new and even create some buzz for a legacy product. Kellogg is one company currently getting some buzz for opening a cereal retail store in Manhattan … selling what you would expect, bowls of cereal.

While Kellogg is getting attention, there have been others such as the M&Ms store, and more recently the Chobani yogurt store in Soho. A reasonable question to ask is, “Do I really expect Kellogg to make a lot of money selling cereal as a food service operator?” My answer is no, but I sincerely doubt that was Kellogg's intention.

The Kellogg store is a great way to show consumers that this tired old product can be fun and exciting. The store mixes not only different Kellogg branded cereals together but also fruits, spices, etc., into previously unknown cereal treats. Chobani similarly offers unusual combinations of its yogurt with fruit and nuts and what looks like my favorite yogurt with figs and walnuts.

I’m sure some of you have seen people walking around New York with M&M shopping bags, looking like Mars billboards. Sampling in the store to demonstrate new products can be effective but unfortunately very expensive. In this case Kellogg is getting people to come in and try something new and exciting.

The retail experience will not only give Kellogg the chance to demonstrate and sample the fun new ways to eat cereal (and people will pay for it) but it is also a way to create brand awareness. This makes good marketing sense. But business sense?

Some people speculate Kellogg will lose money on this Manhattan address. Probably true. However, the real question is will Kellogg get more consumer brand awareness, change attitudes toward cereal and allow consumers to have some basic fun eating cereal for a change? And do it all for less than it would cost to create a more traditional, non-innovative marketing program?

Marketing is much more than simply taking ads on television or in print. Marketing is communicating with consumers on why products are designed to be perfect for them. Peter Drucker said, “The aim of marketing is to know your customers so well that when your prospects are presented with your products, it fits them (their needs) so exactly it sells itself.” In this case, Kellogg is demonstrating to people that this product fits their needs. It’s fun, can be exotic, doesn’t have to be only at breakfast, etc.

I think the real lesson to be learned from watching Kellogg and Chobani is that communicating with consumers is going to be very different in the future than it has been in the past. So much attention has been given to using social media as the “new” vehicle to communicate with consumers that other innovative options have been overlooked.

I read recently that United Airlines is going to start serving Illy branded coffee on its flights. Having once been in the coffee business, my guess is that Illy is not going to make much money selling coffee to an airline. However, how valuable is it to Illy to have its coffee and its logo on the cup in front of all of United’s customers? Let’s say Illy loses a little money on the deal. How does that loss compare to an in-store sampling program? Again, based on my past experience, Illy being sold to the airlines is a marketing bargain.

I am convinced food marketers, more than any other category, all try to be first at being second. So if market leaders such as Procter & Gamble took a big-time stab at social media and online marketing, then everyone has scrambled to do the same thing. I find it ironic that before the big-time social media marketers made their impression, many of the people I spoke to thought this was just a passing trend, or they “didn’t want to sell products online.” Needless to say, the people who didn’t want to sell products online had no idea what social media was about.

How many other venues are out there for an innovative food & beverage company to better communicate with its consumers? I would advise that a group of employees meet and discuss other ways to get products in front of the target audience and show them how perfectly the product fits their needs. My advice would include having people from all sorts of different areas within the company attend, not just marketing people. The myopia of marketing people is truly amazing to me; many other employees in your company may have a vision of what can be done.

If you find new ways to talk to customers, you’ll find new sources of sales and profits.

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