Once a Week. Have a correction or comment about this article? Please contact us. Technology and Culture, Vol. Join Our Newsletter. More Stories. Social History. Quirky History. John Harvey Kellogg was not really interested in business, but in reforming American eating habits.
The taciturn, austere W. In W. What you got was a free sample of W. In Kellogg finally found a permanent president, Watson H. Vanderploeg, who was hired away from a Chicago bank. Vanderploeg led the company from until his death in Vanderploeg expanded Kellogg's successful advertise-and-grow policy, adding new products and taking them into new markets. The company also added new plants in the United States and abroad.
As always, this expansion was financed entirely out of earnings. The company also continued to add new products, but it never strayed far from the ready-to-eat cereal business. In more than 85 percent of sales came from ten breakfast cereals, although the company also sold a line of dog food, some poultry and animal feeds, and Gold Medal pasta. Barron 's noted that Kellogg's profit margins, consistently between 6 and 7 percent of sales, were more than double those of other food companies.
The company produced 35 percent of the nation's ready-to-eat cereal and was the world's largest manufacturer of cold cereal. Kellogg's success came from its emphasis on quality products; high-speed automated equipment, which kept labor costs to about 15 percent of sales; and substantial foreign earnings that were exempt from the excess-profits tax.
By the early s an estimated one-third of those sales were outside the United States. In the early s Kellogg's continued success was tied to two outside developments: the postwar baby boom and television advertising.
To appeal to the new younger market, Kellogg and other cereal makers brought out new lines of presweetened cereals and unabashedly made the key ingredient part of the name. The company created cartoon pitchmen to sell the products on Saturday morning television. Tony the Tiger was introduced in following a contest to name the spokesperson for the new cereal, Kellogg's Sugar Frosted Flakes of Corn.
The company continued adding new cereals, aiming some at adolescent baby boomers and others, like Special K and Product 19, at their parents. Kellogg's Corn Flakes still led the cereal market and got more advertising support than any other cereal on grocers' shelves. In Kellogg finally made a significant move away from the ready-to-eat breakfast-food business, acquiring Salada Foods, a tea company. The following year Kellogg bought Fearn International, which sold soups, sauces, and desserts to restaurants.
Kellogg added Mrs. Smith's Pie Company in and Pure Packed Foods, a maker of nondairy frozen foods for institutional customers, in Kellogg also bought several small foreign food companies. The diversification may have been motivated in part by increasing attacks on Kellogg's cereal business. The FTC said the companies used massive advertising 12 percent of sales , brand proliferation, and allocation of shelf space to keep out competitors and maintain high prices and profit margins.
There was no disputing the profit margins, but the companies argued that the advertising and product proliferation were the result of competition, not monopoly. The cereal companies won their point following a lengthy hearing.
During the same period, the industry's presweetened cereals and related advertising also took a beating. The American Dental Association accused the industry of obscuring the sugar content of those cereals, and Action for Children's Television lodged a complaint with the FTC, saying that the mostly sugar cereals were equivalent to candy. Kellogg flooded consumer groups and the FTC with data playing down the sugar content by showing that only three percent of a child's sugar consumption comes from presweetened cereals.
This publicity caused sugared-cereal sales to fall 5 percent in , the first decline since their introduction in the s. The biggest threat to Kellogg's continued growth wasn't criticism, but rather the aging of its market. By the end of the s growth slowed dramatically as the baby boom generation passed from the under age group, which consumes an average of 11 pounds of cereal a year, to the 25 to 50 age group, which eats less than half as much cereal.
Cereal-market growth dropped, and Kellogg lost the most. Its market share fell from 43 percent in to 37 percent in While Wall Street urged the company to shift its growth targets into anything but the stagnating cereal market, Kellogg continued to put its biggest efforts into its cereal business, emphasizing some of the same nutritional concepts that had given birth to the ready-to-eat breakfast business.
And Kellogg was less unwilling than unable to diversify. Despite its problems, Kellogg believed the cereal business still represented its best investment opportunity. LaMothe, a onetime salesman who became CEO in In Kellogg bought about 20 percent of its own stock back from the W. Kellogg Foundation, a move that increased profits and helped defend the company against future takeover attempts, while satisfying a legal requirement limiting the holdings of foundations without giving potential raiders access to the stock.
Meanwhile, the company's response to generally sagging markets in the late s was much like W. Kellogg's during the Depression: more advertising. Kellogg also boosted product research and stepped up new-product introductions. In the company rolled out five new products and had three more in test markets. Kellogg added almost as many products in the next two years as it had in the previous four. The deal was Kellogg's largest Latin American acquisition ever. It represented a key strategic move into an emerging market space where the cereal market is far less saturated than it is in the U.
Founded in , Kashi is an organic breakfast cereal company with a focus on nutrition and ethical sourcing practices. Since then, the Kashi product line has grown to include healthy meals, snack bars, and waffles.
Worthington was best known for its veggie burgers. Together, these two purchases represent some of the earliest and most significant forays into health food brands for Kellogg, creating a healthier image for the company.
The final entry on our list is not exactly a company owned by Kellogg, but rather a significant joint venture for the company. Tolaram Group is a Singapore-based holding company founded in As with many of Kellogg's acquisitions, this one expanded its footprint in less-saturated, rapidly growing markets. The below chart illustrates how Kellogg reports the diversity of its management and workforce.
This shows if Kellogg discloses data about the diversity of its board of directors, C-suite, general management, and employees overall, across a variety of markers. Kellogg Company. Accessed July 10, Accessed June 10, Wall Street Journal.
Supermarket News. Los Angeles Times. Accessed June Tolaram Group. Kenyan Wall Street.
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