Chocolate Cereal Products in Kuwait

January 14, 2013Global Markets

Market Review

The current cereal supply market is dominated by Kellogg’s and Nestle providing a wide range of product flavors and portions while dominating the biggest shelf share in retail and wholesale outlets. There are other smaller players such as Weetabix, Country Farm, General Mills, and Heaven Birds but they lack the shelf presence and variety in many outlets. The analysis divided competing supply in the market based on product composition which constitutes of cereal with chocolate filling and/or filling. Direct competition to the proposed product has been introduced recently into the market by Kellogg’s with its Trésor brand which comes in two different flavors; milk chocolate and chocolate hazelnut. Indirect competition has been also considered in the analysis by covering chocolate cereal of all other shapes such rice toasted chocolate cereal, shells chocolate cereal, and coco pops.

Market Segmentation

Supply Segmentation

The study covered 16 outlets in the different areas of Kuwait. The variety of outlets selected covered different consumer characteristics vs. the available selection of products and prices in their areas. The areas covered are:

Area

Governorate

Shuwaikh

Asimah

Al Rawda

Hawally

Salmiya

Hawally

Mishrif

Hawally

Jabriya

Hawally

Qurain

Mubrak Al Kabeer

Addan

Mubarak Al Kabeer

Abu Fateera

Mubarak Al Kabeer

Hadiya

Ahmadi

Al Rai

Jahra

Table 1 Exhibits the areas covered in the analysis

Private supply outlets such as Sultan Center, Lulu Hypermarket, and Géant offer wider range of chocolate cereal products than government owned cooperatives. Table 2 exhibits the diversity of competition in chocolate cereal flavors, shapes, and weights in private and public outlets.

Brand

Private

Public

Carrefour

–

Cepro’s

Country Farm

Diamond

–

General Mills

–

Heaven Birds

–

Kellogg’s

Mornflake

–

Mr. Kanny

Nestle

Poppins

Sultan

SweeToon

Weetabix

Table 2 total number of chocolate cereal variations by type of outlet

Table 2 indicates that there is demand generated by expatriates for diversified chocolate cereal products in private outlets than cooperatives. The higher selection of products in the private supermarkets indicates that there is a better chance for consumers to test new products than other locations. Additionally, newly introduced products in the market have a better chance to be recognized in the private supermarkets than in cooperative due the bigger consumer portfolio.

Competition

Direct Competitors

Direct product competition to the chocolate cereal products with chocolate filling has the following product characteristics:

Products that weigh between 300-399 grams
Cereal with filling

Product Name

Private

Coops

Kellogg’s

KWD 1.450

KWD 1.590

Coco Pops Rocks

KWD 1.450

KWD 1.750

Krave

KWD 1.850

Tresor Blue

KWD 1.590

Tresor Red

KWD 1.690

KWD 1.590

Mornflake

KWD 1.100

Chocolaty Squares

KWD 1.100

Table 3 direct competition minimum price comparison in private supermarkets and cooperatives

Product Name

Private

Coops

Kellogg’s

KWD 2.050

KWD1.760

Coco Pops Rocks

KWD 1.790

KWD 1.750

Krave

KWD 2.050

Tresor Blue

KWD 1.590

Tresor Red

KWD 1.860

KWD 1.760

Mornflake

KWD 1.100

Chocolaty Squares

KWD 1.100

Table 4 direct competition maximum price comparison in private supermarkets and cooperatives

Product Name

Private

Public

Kellogg’s

KWD 1.734

KWD 1.684

Coco Pops Rocks

KWD1.686

KWD1.750

Krave

KWD1.983

Tresor Blue

KWD1.590

Tresor Red

KWD1.759

KWD1.726

Mornflake

KWD 1.100

Chocolaty Squares

KWD1.100

Table 5 direct competition average price comparison in private supermarkets and cooperatives

It is clear that companies have different strategies when it comes to pricing their products in private supermarkets vs. cooperatives. For example, KRAVE by Kellogg’s is imported and priced by Sultan Center but the product in Sultan Center Jabriya is sold 200 Fils less than Sultan Center Salmiya. Additionally, some Kellogg’s product lines are sold cheaper in coops than in private supermarkets.

Indirect Competitors

Indirect product competition to the proposed product includes:

Products that weigh between 300-399 grams
Any chocolate cereal products

Brand

Origin

Av. Price

Country Farm

FranceGermany

KWD 0.865KWD 0.890

General Mills

USA

KWD 1.800

Heaven Birds

Egypt

KWD 1.130

Kellogg’s

GermanySpainUK

USA

KWD 1.744KWD 1.502KWD 1.850

KWD 2.050

Mornflake

KWD 1.100

Mr. Kanny

Italy

KWD 0.980

Nestle

FranceTurkey

KWD 1.243KWD 1.189

Poppins

Lebanon

KWD 0.922

Sultan

Egypt

KWD 0.692

SweeToon

Lebanon

KWD 1.280

Weetabix

KWD 1.314

Table 6 price comparison of indirect competitors based on brand and country of origin

It is clear that brand name is the key benchmark factor for pricing chocolate cereal product in the market but not country of origin. Mr. Kanny and Country Farm products are EU products but priced at lower category than popular brands such as Kellogg’s and Nestle.

Both Kellog’s and Nestle dominate the cereal shelf space in the private supermarkets and cooperatives with wider range of cereal flavors, shapes, and weights.

Product name

Private

Public

Country Farm

KWD0.990

KWD0.865

Choco Flakes

KWD0.865

Choco Shells

KWD0.990

KWD0.865

Choco Snaps

KWD0.865

General Mills

KWD1.800

Cocoa Puffs

KWD1.500

Reese’s Puffs

KWD2.100

Heaven Birds

KWD1.130

Choco Pops

KWD1.130

Kellogg’s

KWD1.427

KWD1.382

Coco Pops

KWD1.349

KWD1.364

Coco Pops Chocos

KWD1.265

KWD1.135

Coco Pops Jumbos

KWD1.708

KWD1.650

Mr. Kanny

KWD1.200

KWD0.870

Choco Crunch

KWD1.200

Choco Smile

KWD0.870

Choko Goal

KWD0.870

Nestle

KWD1.216

KWD1.225

Chocapic

KWD1.178

KWD 1.188

Crunch

KWD 1.298

KWD 1.300

Nesquick

KWD 1.176

KWD 1.210

Nesquick Duo

KWD 1.192

KWD 1.183

Poppins

KWD 0.965

KWD 0.893

Choco Bits

KWD 0.975

KWD 0.880

Choco Bumps

KWD 0.975

KWD 0.935

Choco Flakes

KWD 0.935

Choco Pops

KWD 0.975

KWD 0.865

Sultan

KWD 0.692

Choco Flakes

KWD 0.693

Choco Pops

KWD 0.690

SweeToon

KWD 1.280

Fulla Chocolate

KWD 1.200

Choco Cereal

KWD 1.320

Weetabix

KWD 1.304

KWD 1.375

Disney Cars

KWD 1.270

Weetos

KWD 1.321

KWD 1.375

Table 7 indirect competitors’ prices in private vs. public outlets

Product Positioning Scheme

Based on the market review findings which can be summarized as follows:

There is no correlation in price between chocolate cereal product sold in private super markets and in cooperatives.
Product brand is the key factor in pricing chocolate cereal products rather than the manufacturing origin
Competition offer wide range of chocolate cereal products in shape, origin, weight, and price.
The average price of a direct competing product in private supermarkets is KWD 1.700 and KWD 1.685 in cooperatives
The average price of an indirect competing product in private supermarkets is KWD 1.245 and KWD 1.180 in cooperatives

Product Name

Private

Coops

Minimum Price

Maximum Price

Minimum Price

Maximum Price

Mornflake

KWD 1.100

Chocolaty Squares

KWD 1.100

Kellogg’s

KWD 1.450

KWD 2.050

KWD 1.590

KWD1.760

Coco Pops Rocks

KWD 1.450

KWD 1.790

KWD 1.750

Tresor Blue

KWD 1.590

Tresor Red

KWD 1.690

KWD 1.860

KWD 1.590

KWD 1.760

Chocolate Cereal with filling

KWD 1.690

Krave

KWD 1.850

KWD 2.050

Recommended Pricing Scheme

It is worth to note that selling above average retail selling prices is not recommended to newly launched products and brands. Price sensitivity is the dominate consumer attitude in Kuwait. Consumers weigh prices over quality. This is witnessed in the market survey where high quality products from Europe but limited consumer awareness of the brands forced the companies to sell them at lower than average market prices for the chocolate cereal category.

We recommend phasing out the product launch into the following phases:

Phase 1

Unit Cost

KWD 0.918

Unit Price to Outlets

KWD 1.273

Unit Price to Consumer

KWD 1.400

Profit Margin

KWD 39%

Phase Duration

6 months

Phase 2

Unit Cost

KWD 0.918

Unit Price to Outlets

KWD 1.536

Unit Price to Consumer

KWD 1.690

Profit Margin

KWD 67%

Launching the product at below average the market price while marketing the product as high quality Swiss product would attract both the price and quality sensitive consumers.

It is important that approvals for the pricing scheme is obtained based on the phase 2 prices to avoid battling a price increase approval from the Union of Consumer Cooperative Societies (UCCS).

Definitions

UCCS is Union of Consumer Cooperative Societies
Unit Cost = is total cost of the product unit sold by source including transportation, taxes, customs, and other charges carried by the product until received by local agent’s warehouses.

Disclaimer

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Managing Director

ali@globalmarkets.com.kw

Global Markets

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