Troubled Kellogg pressurises JWT

Kellogg’s review of its 188m media planning and buying across Europe (MW March 28) is the latest stage in a global re-appraisal of its marketing effort, according to sources close to the cereal giant.

Last month, Kellogg shifted its 25m Latin American media buying from JWT to Leo Burnett. Last October, it moved the last vestiges of UK media still remaining at Leo Burnett into JWT, giving it the whole 75m buying business. And in 1995 Kellogg realigned $30m (19m) of North American business out of Leo Burnett and into JWT. JWT holds the lion’s share of Kellogg’s European brief, except in Germany.

The pitch, against Carat which handles Kellogg’s German media buying, significantly does not involve the client’s other main roster agency, Burnett. Though JWT had the UK Kellogg account for decades, in the US Burnett is virtually synonymous with the red cockerel’s advertising.

The review comes at a vital time for JWT as it is in the throws of putting together a global media merger with WPP-sister network Ogilvy & Mather.

Sources close to WPP say holding on to Kellogg would be vital to the future of the media merger planned by WPP’s chief executive Martin Sorrell. Other clients are understood to be less enthusiastic because of the potential for conflict, such as that between Warner Lambert and pharmaceutical rival Smith-Kline Beecham.

It is not hard to see why the Kellogg pitch is important to JWT. It accounts for a large part of JWT’s global media billings and over a quarter of profits.

The decision to include Carat in a pan-European media review seems to have been prompted by the agency’s success in Germany. Carat’s appointment there was something of an experiment.

Sources say Kellogg has been stunned by the results in what is traditionally a hard country to crack – discounts are few and far between. Some ascribe this success to Carat’s strong investment in technology. Others put it down to the “gorillas with calculators” culture within the agency, which is one of the largest in Germany.

However, sources point out that there is no natural synergy between Carat and Kellogg. JWT fits in neatly with the company’s image of safe, middle-American values, whereas Carat tends to be more of a hip-shooting radical.

But tried and trusted ideas are not what Kellogg needs right now.

It is under threat from own-label in the UK and from Cereal Partners, the joint venture between Nestlé and General Mills.

Kellogg is desperately searching for ways to halt the spiral of decline in mature markets.

In the UK, Kellogg still produces half of the top ten selling cereal brands by volume, but its UK market share has dropped from 49.5 per cent in December 1993 to 44.7 per cent in 1996.

During the same period, own-label cereal volume grew from 18.3 per cent to 23.9 per cent. The trend is continuing.

Between 1995 and 1996, Kellogg’s Corn Flakes’ market share by volume fell 10.5 per cent, Frosties’ share by 5.6 per cent, Rice Crispies’ by 4.8 per cent, and Crunchy Nut corn flakes’ by 4.2 per cent. Only Special K grew – by five per cent.

The malaise can be seen on a wider scale. The company has recently announced the slashing of 2,000 jobs in the US. Kellogg says the move will save $120m (75m) over two years. It is also known to be increasingly aggressive in its advertising, especially to support new products like low-fat Pop Tarts in the US and Nutri-Grain breakfast bars in this country.

In the UK, Kellogg managing director Tim Mobsby has been reviewing all supplier arrangements and has even called in the help of ideas consultancy What? If!

This move would once have been unthinkable and indicates a change in corporate culture at the company. One source close to Kellogg says the shock of this cultural change is having repercussions in its marketing department, and that disillusion has set in. Departures are expected.

Kellogg spends 75m in the UK on media buying. Last year, of the ten most heavily supported cereal brands, nine were Kellogg products. The company spent 11.7m advertising Corn Flakes last year.

Mobsby is known to be keen to find fresh marketing approaches. The company has already tried direct response advertising and is understood to be actively considering following Heinz’s move into direct marketing, which could have significant repercussions for roster agencies.

When Kellogg does eventually reach a decision – to stay with the tried-and-tested JWT or to take a chance with a media independent – one thing is certain, the agency will be pushed to cut costs and if it fails, then it will come in for a very hard time from Kellogg.