Subject: Report on United Cereal

Recommendation Summary: My recommendation is to launch Healthy

Berry Crunch initially in France as broader Eurobrand strategy takes shape in
the due course of time. As consumer tastes are evolving and people are
becoming more health conscious, there is quite a good probability of its
success especially in light of the test market survey results showing 64%
consumer intention to repurchase. I am recommending for controlled/stage
wise launches though as there were still concerns of recession & no retail
shelf space in some subsidiaries besides the initial market test sample
survey being too small to conclude anything. And thus before investing
outside France, test other markets with bigger sample size before executing
the strategy. Also centralize even more the launch and marketing decisions
given the problems and issues that UC historically faced when CMs had too
much autonomy. I thus also recommend new org structure.
Situation Analysis/Problem Identification: Since UC already had a
footprint in Europe, my analysis of the situation is based on the Porters five
forces than the PESTLE analysis. In the European market several examples
demonstrate that entry barriers are not high enough to stop new entrants
like Weetabix that could challenge UC on price points. Relating to the
bargaining power of suppliers, the higher their power is, the higher is the
cost pressure for UC. In the European market, UC faces increasing prices,
which indicate that the bargaining power of supplies cannot be ignored since
there are only few suppliers for the cereal market. Although raw materials for

cereal food production are very standardized products, they strongly depend
from the agricultural policy and local opportunities and data of regions. The
same applies for the bargaining power of customers. The profit potential is
very limited when customers have great bargaining power on the price of the
products or services. Due to the European economic crisis of the recent years
and the development of consumer expectations, the price consciousness of
customers has increased. Additionally the threat of substitute products from
companies like Weetabix added further pressure and competition. The
competition within an industry is an important feature with regard to the
profit capabilities. In UCs case, the two biggest corporations UC and Kellogg
control a total of 46% market shares, with the biggest four players reaching a
total market share of 70% of and numerous smaller companies sharing the
remaining 30%. Accordingly, the cereal market in Europe can be seen as
highly competitive. In addition UCs focus on local products and markets, had
led to a situation where SG&A expenses were 25% higher than the U.S
operations which further made it difficult to test and launch new products.
CMs has historically enjoyed too much autonomy in making product and
marketing decision for their subsidiaries which recently didnt yield good
results for the company. In summary, lower margins, increasing competition,
old strategy, and convergence of food habits had necessitated a change in
gear to come up with a new strategy.
Recommendation Pros/Cons and any Implementation Concerns: Even
though it is $20 million expensive launch strategy, UC could save between

10 to 15% in product development and market costs over three years in the
highly competitive market place. The strategy would give UC a huge
competitive advantage with respect to its competitors and make it difficult
for a new competitor to enter this market since the brand strength will
increase immensely in the long run. The strategy to launch doesnt have the
full support of the entire leadership team though. CMs historically have had
more freedom and standardization of the product and control on their
autonomy could back fire and result in corporate culture clash. The lead
country idea could create some animosity between subsidiaries. Survey
sample size to initially test market was small & result could be misleading.
UCs decision to rely on product extension is a shift away from its perception
of constant innovation & launching new products thus impacting its brand
perception. The launch decision has the buy-in from most of the leadership
which is a big positive.